Paying off Your Debt
People borrow money for many reasons. Sometimes it is for a necessity like an emergency car, medical bills or home repair, other times it is for something frivolous like a new tv or a piece of jewelry. It is understandable when you have to borrow money for an emergency, but boring money for luxuries like trips, electronics or expensive toys is never a good idea because that money will have to be paid back. Many times when someone takes out an emergency loan, or a loan for something they want but don’t need, they have a hard time paying it back. This leads to even more debt due to interest rates and penalty fees. When this happens, borrowing money and taking loans like LendUp can be helpful, if done correctly.
Emotions and Money
When you find yourself in the situation of owing a lot of money to various creditors, you want to step back and check your attitude. What kind of things drive your mentality when it comes to making big financial decisions? What makes you spend your money the way that you have been spending it and why have gone into debt? Were you thinking about the future , knowing that the money you spent now was important to your basic necessities (health, home, work) or were they impulse purchases that you didn’t put much thought into except for the fact that they would be fun and exciting in that moment? Many times, people's purchases will be a combination of those two things. Most people don’t want to be in debt and try to make responsible and good financial decisions, but then have a moment (or moments) of weakness where credit is relied on too often for things that aren’t important.
Setting up Your Budget
Once you have figured out why you make the financial choices you’ve been making, it is time to make a budget that focuses on the important things. You should try to make a budget that you will closely follow that will dictate how much of your money goes to certain things every month. These things should be rent/mortgage, utilities, car payment/transportation, insurance, food, cell phone, other bills, and savings. You should aim to save at least 5 percent of all your income each month. This will help you build up an emergency fund. While you should aim for a minimum of $1,000, it is really a good idea to have a savings account that holds the equivalent of 3 - 6 months of your living expenses. This will provide you with a great cousin in case something were to happen and you lose your income.
Time to Save
Once you have met your savings goal, you should start taking some of the money that you had set aside in your budget for savings and apply that to paying off your credit cards and loans early. This will help insure that you are not only caught up on bills, but will be avoiding paying any more interest then you have to.
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