“Spending Diet or Spending Fast”- Either way a new concept to cut down your debt fast!

“Spending Diet or Spending Fast”- Either way a new concept to cut down your debt fast!

This is fairly a new concept applied by Anna Newells, a Denver-based blogger who paid off $23,605.10 of her student-loan and credit-card debt through this process within a couple of months. Sounds relatively unreal, but it can be achievable as long as you can differentiate your needs vs. wants.

Source

A real life experience of Anna Newells.
According to her,

“With the spending fast, I had no discretionary income."  This meant she would spend the money only on essential needs such as rent or mortgage payment, utility bills, groceries, transportation or vehicle costs.  If it was not absolutely necessary -- then she did not get it!   Clothes, coffees, dining out, movies -- forget it!  She did not get it!  Nothing!  Nada!

 With the spending diet, however, she gave herself a $100 non-need allowance per month, and would spend that on whatever she wanted. BUT the spending diet was way harder than the spending fast, she claimed. “Because with the spending diet, I would try to spend normally -- and then I would overspend!”

How can you apply these programs?

Let me give you an example. Your daily coffee from that high-end cafe is not an essential purchase. Seriously, ask yourself, do you really need to spend $5 to wake up every morning?  Instead, try making yourself a cup of green tea or black coffee or anything that suits your taste.

Always remember that your spending needs should only include necessary or must expenditures such as rent or mortgage payments, transport costs, groceries and emergencies. Always make sure you ask yourself, “Is this absolutely essential?” If it’s not, than you cannot spend money on it!  This takes discipline. Lots of it. Without discipline, you will never last in this program.  But if you do, the rewards -- paying off your debts - are huge!

Anna Newells’ tactics may sound too harsh for most us.  So here is one alternative version of spending diet program.

Give yourself a budget cap combining all of your essentials and non-essentials. This could be your monthly or weekly allowance depending on your pay day structure. You must survive within the budget that you give yourself every time. It is wise to start with the usual amount that you spend every week or month and then start to cut down a little portion from that budget as you progress.

For more money saving tips and financial advice visit www.prudentfinancial.net

Where to save money and start paying off your debts first?

When repaying your debt, first start with your credit cards and say no to minimum monthly payments. Then follow up with your car loans, personal loans and other kinds of debt.

Also, don’t forget to reward yourself after achieving your monthly financial goal, but remember the reward level must stay within your spending limit!

Overdue debts can lead to bad credit rating which will result having poor credit score, minimizing your debt will not only improve your financial condition but also your personal and family life.

LOTS OF LUCK!

Let us know if these methods can be helpful to manage your finance better. Are they practical? Are they durable?

 

 

 

Using your line of credit to pay down credit card balances? Good or bad?

Canadians are still chalking up debt, but there is some encouraging news on the credit front. Canadians are starting to pay down their credit cards. This is according to a recent report from Equifax Canada.

The report states that the average Canadian cut back 3.4 percent from their credit card debt this past year (2011).

But here’s the downside. Many Canadians are paying down that credit card debt using their line of credit, which is tied directly to the equity they have in their home.

Equifx spokesperson Nadim Abdo had his concerns. Paying off a higher interest rate credit card bill with a lower rate line of credit makes sense, however there can still be bumps in the road.

“We’re still at record high levels of debt. If there was to be an interest rate adjustment of 50 basis points . . . we’d see an increase in delinquencies and bankruptcies,” said Abdo.

According to The Equifax report, the average Canadian has $6,000 in consumer debt, a 4.5 per cent rise since the end of 2010. In addition, it was noted that the growth rate is slowing — between 2009 and 2010, the average Canadian’s consumer debt grew 7.7 per cent.

The drop in credit card debt is a sign that people are finally starting to think about how they’re spending, said Lewis Johnson, a finance professor at Queen’s University.

“It seems like there’s an outbreak of rationality. The more you can shift balances from a credit card where the rate is 24 per cent interest to a line of credit where it’s 3 or 4 per cent, the more able you are to pay,” said Johnson.

Consumer spending on “durable goods,” including everything from household appliances to automobiles, dropped by .4 per cent in the third quarter of 2011, according to Statistics Canada.

The world economy could also impact Canadian debt levels. The ongoing crisis in Europe and the slowdown in the Chines economy could also have an effect on Canadian debt levels.

If the Canadian job market is effected, the interest rates of your line of credit could be impacted too.

Is it worth it? Outside of finding other low risk sources of paying down your credit card debt, yes. For now at least, using your line of credit, which generally is prime plus 1 or a half, depending on the bank, still makes sense. And with this week’s announcement of a 2.99 3 or 4 year mortgage rate, it appears interest rates are going to be somewhat low for the foreseeable future.

For more valuable information, visit www.prudentcreditrepair.ca

What to do when you don’t have enough?

It’s a vicious cycle. We can never have enough money to satisfy our needs. The more we have, the more we spend so you should ask yourself, do you spend too much money or is it that you don’t have enough money?

What to do when you spend too much

When you have money but feel like you don’t have enough, you should consider cutting back. Do you really need the newest model cell phone available today? Stop impulse shopping. Cut back on any luxuries that you never use such as extra cable channels or eating out at the trendiest restaurant. What you want to do is cut out the things in your life that you can do without.

When you just don’t have enough

You may have lost your job or are working hard but just don’t make enough. This is the time where it’s crucial to make changes in your life. This is sink or swim time. You need to get yourself motivated and be aware that there are no limits except the limits you put on yourself.

You should start by reducing expenses. There are always ways to reduce expense. You may need to get a roommate or downsize your home. You may need to start taking the bus or carpooling. Cut back on your food budget. Cut down on electricity in your home. You definitely want to stop using any credit cards you may have. If you’re a smoker, take this as an opportunity to quit and become a healthier you.

Contact your creditors and see if you can work out a reduced payment plan of some sort. If you can prove economic hardship, you may find that some companies will reduce interest rates or extend a payment plan that’s suitable to your situation.

If you’re able to pick up extra hours doing side work such as babysitting, yard work, selling on ebay or tutoring for extra money then go for it. There are so many money making opportunities out there, all you need to do is expand your mind.

When you have the tools to save money whether you are employed or unemployed, it will always be a positive outcome.

For more valuable information, visit http://www.prudentcreditrepair.ca/