If a person is ever to be a successful investor it is essential that they first eliminate credit card debt. Interest rates charged on credit cards are very high and absorb money that could otherwise be invested
In order to eradicate a credit card debt it is first necessary to ascertain the exact size of the debt. To evaluate the size of the debt all financial documents should be gathered together and the outstanding balances should be recorded together with the minimum amounts require to service the debt and the annual fees charged on the credit card should also be noted.
Attention then needs to be given to determining the total income after tax and the outgoings also need to be compiled and subtracted from the income to determine what is available to service the debt and any remaining cash should be used to reduce the outstanding balance on a chosen debt.
Should it appear that there are insufficient funds to meet debt repayments and reduction then it is necessary to look at two things?
Firstly it would be important to track spending accurately to see it would be possible to reduce spending in order to free up extra cash such as reducing spending on dining out. Secondly it may be necessary to earn extra income in some way.
There are two principal ways to use the surplus cash to work to debt eradication. Disciplined people can get ahead faster if after making all necessary monthly payments on all debts the surplus funds are then used to reduce the debt which has the largest interest rate and continue to do this each month until the debt has been paid off in full and then the same method applied to the second highest rate.
The snowball method is very popular and works in a converse way. With the snowball method after paying all monthly debt payments the surplus cash is used to repay the smallest debt and once that small debt has been eradicated the next smallest debt is paid off. There is a psychological benefit to employing the snowball method.
A budget is a plan of what money you expect to receive and how you expect to spend it. Everyone can benefit from having a personal budget
To make a budget you must first calculate your total income, and then add up your total expenditure and then work out the difference between the two. The result is either money left over (a surplus) or not enough money to cover your spending (a deficit).
The aim is to try to make a surplus to have spare cash to save for goals or to reduce personal debt. To make an accurate budget it will be necessary to have a note of all day to day spending. Keeping receipts off all expenditure will help with this.
All bank statements and bills will indicate where money is being spent on payments such as rent, hire purchase and power. It will also be necessary to include a list of any annual costs such as vehicle licensing, insurances, holidays and gifts. A list of all monies received such as wages, allowances, interest and benefits is essential.
If there is a surplus then a decision can be made on a percentage of the income that is to be saved to improve the financial position. If there is a deficit then it will be necessary to see how spending can be reduced or if it is possible to increase income.
There is a great deal of advice available on how expenditure can be reduced and this can be readily obtained free of charge from libraries and voluntary budgeting advisory services.
Extra income can be obtained by extending the number of hours worked if that is possible or obtaining a better paid position.
If neither of those is possible then ways could be found to achieve a passive income such as taking in boarders or home stay students. A most important thing to remember when drawing up the budget is that budgets which are too tight are less likely to be maintained well.
Whilst it may seem like a chore and also rather frightening perhaps the simplest and most basic thing that we should all do is organize and maintain our own financial budget. This will enable us to eliminate debt and also to produce a surplus to surplus of cash for investment purposes
Diversifying your investment portfolio is essential. Seek help from financial advisors to do this properly to be able to protect your assets. It is important to find out your personal credit score. It may cost to make use of the services of a credit bureau but it is essential to find out how you stand.
Your credit score affects your life in so many ways such as your ability to be able to borrow and the rate that you will be charged to borrow, to be able to rent or to even win a job.
Once you know where you stand you can make informed decisions about how to improve your credit score. You must also fix any mistakes that are found in your credit history. You should negotiate a better credit card deal. Variable credit rate is now 15%; if you are paying more you should negotiate with your credit card company for a better deal and be prepared to change company if they will not adjust.
Individuals should ensure that they are protected with the most affordable and effective insurances.
In these times of financial uncertainty and global financial crisis It is crucial that individuals are able to manage their own financial affairs to a degree and have an understanding of their own affairs so that they can make informed decisions about how best to protect their own financial assets. We must all educate ourselves to be able to be knowledgeable about our own finances and if do not understand we must be prepared to seek help.