10 Bad financial habits to stop today!

 

Top 9 ways to repay debt

People and businesses take on private debt because they want to buy something today and pay for it in the future. For example, buying a home or factory with a loan gives people access to a property before they generate the income to pay for it, and in this case the building itself can be used as a security to be seized if the borrower does not repay the lender. People on low income needing to borrow for current consumption, like food can rarely offer any security, and with such a high risk of bad debt. The rates of interest on so-called loans can be massive.

Debt often gets a bad name but nearly all innovation, art, medicine and food production requires upfront spending before income can be achieved. And it's debt that can help people without wealth to create some. 

Today we discuss top 9 ways to repay debt:-

Create a budget:-

The very first step to solve the debt problem is to establish a budget. This gives you a clear-cut idea about your income and expenses. You need to start segmenting each expenses and zoom it further to identify where all you can cut expenses. This will favor you to scale back on your spending and organize extra funds which can be used to clear your debt.

List out all your debt:-

Second step is to point out all your debts in an order. It could be based on the size of the loan (balance principal payable) or the cost of the loan (interest rate) or on the basis monthly commitments (EMI). This will give you an overview on how to prioritize your repayment

Apply different repayment strategies:-

Once you point out all your debts, you can follow different repayment strategies to pay off your loan. The common ones are:

Avalanche method

In this method point out your debts from highest to lowest by interest rate. You may pay the minimum monthly commitment on each, then allocate as much extra as you can each month to the one with the highest interest rate. This method favors you to save the most money on interest. 

Snowball method

In this method, you need to make it a priority the smallest debt first irrespective of interest rate and initiate clearing the smallest one first. You need to pay the bear minimum monthly commitment on each one, except the smallest. Next step is to go on to the next smallest debt. By this way you are likely to gain momentum and seeing the loan basket disappear for good.

Use Balance Transfer:-

This feature will help you gain the benefit of switching into a low interest rate market from an existing high interest rate loan. Some financial institutions even give the feature of free balance transfer which will favor you to reduce the cost of loan and save more, which can be allocated into principal of the loan for a faster loan closure.

Dedicate your company bonus:-

If you are an employee who receives yearly bonuses or on half yearly basis, you can allocate that for your loan closure plan. You need to be also careful about your impulsive temptation to spend those bonus on luxury items or vacations. You are the one who has to weigh your financial situation versus impulsive spending.

Sell unused household items:-

One tends to have lot of household items which is hardly used. For example gifts received during birth of your children as children have outgrown or gifts received during your marriage and has become old etc. These can be sold and the amount can be allocated for paying off debts. You could use quikr.com or olx.in for that.

Review and change your habits:-

If you have taken loan and deep diving in that, identify that it is your spending habits or impulsive buying that got you into this situation. Whenever you feel like following the same habit and wants to do an impulsive buying, think again and realize whether you really need it now or not? Or is there an alternative to it?

Set benchmarks and gift yourself:-

You need to set a target for paying off your loan and whenever you have achieved the milestone set by you, reward yourself with a gift like sign up for a hobby that you like etc. This will motivate you to set higher benchmarks and follow your debt pay off strategy as per your plan. 

Discipline :-

Of all the above, this is the key thing which needs to get you going. Once the plan is set, you should follow it rigorously and review your plan at regular intervals to make sure that you are on track.

10 tips for a budget travel

It’s easy to get carried away with spending money while you’re on vacation. 

With all of the temptations at every corner, here are a few ways you can make sure you don’t overspend while on your vacation.

Teach your child about money!

 

Do you wish to pass on the basic lessons of money to your kid? Then this video is for you.

Starting a Business - Tips to help you Succeed

If you are a want to be entrepreneur, odds are you already have the drive, but, you might not know how to start building it. This video will help you with the tips to succeed.

Buying home for the first time? Guide to it

 

Today, I am excited to share with you the first time home buyers step by step guide, whether you are a first time home buyer or you have not purchased a house in a while, or the last time you bought a house it just wasn’t a very smooth process, you are in the right place.

Let’s break down from beginning to end exactly how the home buying process works. We will break it down into four parts.

a)      Applying for a mortgage – You have got to have a partner in the process if you are going to buy a house.

b)      Making an offer – Engaging with the seller

c)       Closing – The period of time where you actually purchase the house

d)      Break the loan payment down into parts

Your loan payments obviously are going to be with you for a while. This write up is going to help you if you are absolutely clueless and just know that it’s a good idea to purchase a house and simplify the process of buying. So let’s get started.

You might think that the very beginning is going out and looking for houses. May be you are driving around town looking for houses now. You know that it is fine but the real beginning of the process is knowing whether you can buy a house at all! You may have got the money to purchase the house and if you do this part is not as important for you but for the majority of people does not have finances right there to pay for the house. So you are going to need a financial partner, someone to invest it in this house with you and banks that provide home loans are the ones that are generally going to do that for you.

So the step one in the process of buying a new home is applying for loan. You are going to apply for a loan so that you know what you have available and what kind of house you can purchase. Generally, you will get pre-approved loans to borrow a certain amount of money. But one thing to remember is that pre approval is not 100% sure but a financial institutions way of saying that it looks to us at this point that you could borrow this amount of money. Later on in the process they are going to consider if any job scenario changes that have happened and preapproval is unlikely to go through.

Now the second step is once the loan is preapproved, it is time to truly go house shopping! Now you have a sense of how much money you can borrow, how much money banks are willing to invest in your new home. Once your dream home is found, you are going to make an agreement with the seller on some last minute renovations to be made before owning it. One needs to look at house insurance as well as part of the agreement.

The third step is making the agreement official and agree on the contingencies mentioned by the buyer and seller agrees or makes a counter and both the parties go through and agree on the same and the purchase of house happens. So now you have purchased the house and you are ready to move into house that will provide you tons of joy, maybe grow your family etc. whatever your future interests are in life.

The final step is to break down your equated monthly installments. There are 2 parts to it and that is principle and interest. The principle is the part of your monthly EMI that goes towards paying down your debt. You borrowed 25 lakhs and every month you are paying a little bit to pay that down in 15 or 30 years as per the agreement with your bank. Principle is not the main part of your payment. It depends on how your loan is set up but often times at the beginning of the loan, the main part is actually interest. Interest is part of your monthly payment that goes toward paying the bank for the privilege of borrowing their money. As you know, banks don’t do this for free.

Alright, what we learned: we applied for a loan, we navigated all the different parts of the home buying process. Now you understand how these things work, exactly as to how buying a house works from beginning to end.

 

Free Financial Goal Setter and Planner

Here is a free resource for you to set your goals and plan for it. 

Mail me @ apurushothamancfp@gmail.com to send you a free financial goal setting and planning tool.

 

Financial Preparation for Millenials