3 Times You Think You’re Saving Money That Actually Cost You

Saving Money That Actually Cost You

Creating a healthy saving system is an essential step towards achieving true financial stability. However, life is riddled with examples of times when you think you’re saving money, but you’re actually setting yourself up for a financial loss. 

Below is a collection of such examples. Take note of the following points and keep them in mind the next time you’re debating a purchase or investment: 

1. Impulsively Shopping at Sales

Shopping for essential items when they’re on sale is an excellent way to save up! However, the trouble begins when people start buying nonessential items solely for the sake of availing a discount, which gives them the illusion that they’re saving money just because they’ve spent a lesser amount than the original price. Tip: You may use a shopping app to list down essential goods to buy.

Sales cost money, too! So, just because an item was purchased on sale doesn’t necessarily mean you’ve saved a significant amount of money. You still had to let go of some amount, albeit a smaller one, to purchase the product. This results in them unnecessarily spending money they could have otherwise saved.

2. Compromising on Product Quality to Save Money

Although cheaper alternatives to certain products will help you save money in the short term, there’s a high chance they’ll end up weighing your wallet down in the long run. 

This is because cheaper products are typically of lower quality than their pricier counterparts, resulting in them breaking down or malfunctioning sooner than you’d have expected them to. 

Investing in a cheap product usually means you’ll need to replace it much sooner than its pricier alternative. In the end, you end up spending more money trying to either repair or replace the damaged, low-quality product than you would have needed to spend had you bought the higher-quality product in the first place (despite the latter’s heavy price tag). 

So, be smart and buy the expensive, high-quality option. Yes, it will cost you more at the start. Try looking at it as a smart investment that’ll help you save money in the long run.

3. Compromising on Medical Visits

Doctor’s visits sure do cost a lot of money, but the good part is that they help you avoid spending even more money in the future on curing diseases that were caused due to negligence on your part. 

In other words, although skipping your doctor’s visits may seem like a smart, money-saving idea right now, this decision could end up taking a toll on your health, leaving you with massive medical bills to pay in the future for conditions that could have easily been avoided had you not skipped your doctor’s visits in the past (for the sake of saving a few extra bucks in the short-run)

The key to achieving a healthy, balanced approach to saving is to spend money on investments that will benefit you in the long run instead of trying to save a few extra dollars in the short run. Build an emergency fund in case you need to have medical visits.

Saving money doesn’t mean you cut off all your expenses (even the sensible ones!) Instead, it suggests that you cut down on inessential purchases and redirect that amount towards your savings jar. 

4 Steps to Avoid When Trying to Get Out of Debt

Get Out of Debt

Making the decision to get out of a debt is the first step in your journey to financial freedom and security. However, paying off all of your debt isn’t something that happens overnight. It takes careful planning, smart decisions, and commitment.

Here are steps you’ll want to avoid so that you can be successful regaining control over your financial health.

1. Not Changing Your Spending Habits

Humans are creatures of habit, and you’re no exception. We tend to repeat our actions. Why? Because it’s comfortable and what we have become accustomed to.

However, if your goal is to pay off financial obligation, you can’t continue with the same spending habits. This means you’ll have to work extra hard to stop doing things you’ve been doing for months, if not years.

Some of the best ways to improve your spending include:

  • Cooking meals at home
  • Not making impulse buys
  • Separating wants from needs

You don’t have to stop spending on things you enjoy. However, it’s important to make better choices with the money you do spend.

2. Not Creating a Budget

One of the most important tools you’ll need in order to pay off financial obligation is a budget. Without a budget, it’s impossible to gain control of your finances.

Most people don’t create a budget because it “takes too much time.” But the reality is that creating a budget doesn’t require hours upon hours. Getting started is simple.

Start by writing down all of your income. Then write down all of your bills, such as your car payment, mortgage, and utility bills. With the money you have left over, save as much as possible, while also saving some funds for a rainy day.

In the age of swiping cards and mobile payments, it’s all too easy to lose track of how much you’re spending.

3. Trying to Pay Off Too Much Debt at Once

Many people make the mistake of trying to put an end on your debt by paying everything off at once. If you have multiple credit cards and loans, you may put all of your money towards them each month, leaving nothing left to account for emergencies.

Instead of trying to tackle all of your financial obligation at once, prioritize your debt. Start by:

  1. Listing all of your debt
  2. Ordering debt from highest to lowest interest rate
  3. Paying off any small balances (i.e. $200)

Start by paying off the highest interest debt first. Once this debt is paid off, go to the next card or loan with the next highest rate.

You may also want to consider debt consolidation. If you have several credit cards and loans, you can combine them into one loan that is paid at a single interest rate.

4. Not Getting Help

Tackling debt on your own can become extremely overwhelming. Even if you’ve created a budget and prioritized your debt, seeing such large numbers can send you into a mental tailspin.

Don’t hesitate to ask for help and support from those around you. There are also non-profit credit counseling agencies, financial courses, debt counseling, and credit counselors available to help you every step of the way.

Stop Letting Debt Weigh You Down

Carrying around years’ worth of debt gets quite heavy. The good news is that debt isn’t a life-long sentence. With a plan, commitment, and willingness to change, you can finally dig yourself out of your financial hole. Dont make unnecessary money mistakes.

Make financial freedom your future by not making these four common mistakes when getting out of debt.

3 Types of Debts You Should Focus on First

Types of Debts

You’re having a laugh with a friend when they mention that they’ve paid off their mortgage loans or that they’re finally done with college student debts. Your mood instantly turns dark as you realize your situation is the exact opposite. Knowing these types of debts can help you organize your plan how to pay them faster.

You go home, whip out your calculator, and there’s a dizzying list of numbers and figures and percentages and dollar signs. Your debts are crippling, and so are you. So how do you begin paying off these debts? Well, there are a couple of ways to arrange your debt payments in order and achieve your financial goals. Here you go:

1. Secured vs. Unsecured Debts

As you know, while signing a debt contract, there are two types of debts. The ones that have collateral against their monetary value, otherwise known as secured debts. The others are unsecured debts, against which there are no collaterals. The collateral maybe your car, your business, your stocks, or even your residential property.

So while arranging a debt repayment plan, you have to choose between secured and unsecured debts first. In secured debts, something precious to you is actually at stake. You might lose your possession if you do not pay the debt in time, so it makes sense to just clear the secured debts with whatever you can arrange. 

On the other hand, your unsecured debts can become pretty troublesome if you delay them for too long. The pressure will just mount higher, and late payment may also affect your credit score. 

Both are risky, and both are urgent. You just have to keep a balance between the two sets and figure out a repayment method with the least losses incurred.

2. Debts with the Highest Interest Rates

This category is also pretty crucial in figuring out which debts you have to pay back first. The debts with the highest interest rates, such as those on a credit card or a mortgage loan. Other debts, such as student loans or other personal loans, have lower interest rates, which do not accumulate as fast as the higher interest ones.

In this way, it’s usually beneficial to pay back loans in their elevating interest rate. The higher the rates, the sooner you should try to get rid of the debt. This way, you’ll be able to reduce the more significant debts quickly and will be able to focus better on the smaller ones.

3. Small Debts

Many people follow the total opposite of the highest interest rate. They use the debt snowball method by starting paying off their debts with the smallest ones right up to the largest one. This way, you can get rid of the number of debts on your credit sheet and focus much better on the larger ones. In this type of debt arrangement, you don’t have small debtors nagging you for repayments every single day, which is a great benefit in itself.

Conclusion

Debts are terrifying. They keep us up at night. However, paying debts back is not impossible. You just need the right strategy to arrange how you will pay back the different debts you have under your name. From debt, you may then start thinking about how to build your emergency fund.

5 Easy Steps to Build Your Emergency Fund

Emergency Fund

The unexpected can happen at any time, which could leave you without an income, a job, or at another type of disadvantage in life. When this happens, having access to some sort of emergency fund can be a significant advantage. An emergency fund gives you access to finances in dire times. In turn, you gain an opportunity to get back on track, while being sure that financials are covered by this fund.

Following a telephonic interview, one report shows that a mere 23% of adults in the US have an emergency fund. This means the remaining 77% are left at a disadvantage should they be struck by misfortune. If you are looking for some solid advice to get your own emergency fund going, then simply follow the five simple steps we share.

1. Understand Your Goals

One of the most important factors when it comes to saving plans and funds is to understand the financial goals you have. Before you build an emergency fund, set clear goals that are easy to follow – then break them down into smaller ones. Perhaps you want to aim for an emergency fund that can care for your entire family for a period of six months. Consider how much would be needed. You should also determine how long it will take you to achieve the goal.

2. Open the Right Account

The type of account you use for your emergency fund is important. Certain account types come with several fees that need to be paid on a monthly basis. This can reduce the amount of money you end up saving in the fund. Talk to your bank manager and make sure you use an account that is suitable for an emergency fund.

3. Create an Automated Deposit Plan

In an interview, 32% of people who are aged between 18 and 29 reported feeling more secure about their job security. Even though secure, unexpected events do happen. Once your account is up, be sure to configure an automated monthly deposit. This way, you’ll never forget to add more funds.

4. Cut Expenses or Increase Income

To build up your emergency fund faster, consider getting a side hustle that brings in some extra cash. Alternatively, see if there is any way to cut on some of the expenses you currently have.

5. Add Manual Payments

If you are able to create a second income or cut down on expenses, then you give yourself an opportunity to get to your goals faster. As you obtain extra income, be sure to make a few manual payments into the savings fund. This ensures you build-up toward the goal amount faster and that you will be sufficiently covered in those unexpected events.

Conclusion

When struck by a misfortunate event, such as a job loss, or a serious disease, having an emergency fund can save the day. Unfortunately, many Americans do not have any type of emergency fund at their disposal. To get started with yours, be sure to follow the five steps we shared in this post.

How to Choose Your Student Loan

Student Loan

Choosing the right student loan can seem like a daunting task. In order to get the right amount of money, and the best interest rates, you need to do a bit of shopping around instead of just choosing the first one you see. Student loans come in all shapes and sizes. Let’s take a look at some of the key things to consider when choosing student loans.

1. Interest rates

The first thing to note about interest rates on student loans is that they can either be fixed or variable. If they’re fixed, the interest rate won’t change over time. But if they’re variable, they can. This is important as you could end up paying different amounts of interest each year.

If you choose a subsidized federal student loan, with a fixed interest rate, the federal government pays the interest while you’re still in school. If it’s a Direct PLUS loan, you will pay interest while you’re in school. The rate is fixed until you pay it off too, between 2.95% and 9.15%. For private loans, variable interest rates can range from 1.02% to 12.37%.

2. Fees you might have to pay

Along with interest rates, there may be other fees associated with your chosen student loan. These are usually quoted as a percentage of the total loan amount. The fee usually comes off the amount of money you receive per payment, so you pay the fees automatically.

For federal loans, fees can range from 1.057% to 4.228%, depending on whether it’s subsidized or not. Loan arrangements may also have late payment fees to think about when it’s time to start paying it back. So, it’s vital that you always repay your student loans on time!

3. Maximum loan amount

The third thing to consider when choosing between student loans is the loan amount itself. The maximum amount of money you can borrow depends on a number of factors. These include your credit score, your degree type and which year of school you’re in.

With a federal loan, most undergraduates can borrow between $5,500 and $12,500 per year. Postgraduates are generally able to borrow up to $20,500 per year. Loan amounts for private options vary just as much. There are options for as little as $1,000 up to the full cost of your tuition, so they often offer more flexibility at the cost of higher interest rates.

4. Repaying your student loans

While the above factors will contribute to how you repay your student loan, it’s also important to consider the repayment terms. Most loans, both federal and private, will offer a 6-month grace period for undergraduate loans.

While private loans tend to be less flexible in terms of repayments, federal loans offer a bit more wiggle room for those facing financial hardship. If you’re in the world of teaching, military service or other public services, there may be debt forgiveness options available to you. So, it’s always worth checking if you’re eligible to have some of your student loan debt forgiven and make sure you clean up your credit report.

8 Affordable Ideas for Your Patio Makeover

Patio Makeover

With summer coming up, you might be looking forward to spending time outside with your friends and family. It’s always lovely to sit and enjoy the sun with your loved ones on your patio. Buying a home is an option, but patio makeover can be more sustainable.

If your patio is looking worn-out, here are eight affordable ways to give it a makeover just in time for summer.

1. Paint it

A coat of paint can make all the difference to the appearance of your patio. It‘s an affordable way to give your patio a makeover. You can paint over its existing colour or choose something different to give your garden a new lease of life.

2. Add Some Lighting

Lighting is a great way to give your patio a makeover. You can add small spotlight across the edges of the decking to illuminate your garden. This is particularly helpful if you want to host evening garden parties when the sun has set. You can also go for some hanging string lights to add a magical touch to your garden.

They add atmosphere and character to your patio, and there are several lighting options available, most of which are affordable and great quality.

3. Update Your Patio Furniture

Old furniture can leave your patio feeling outdated and drab. Replace your tables and chairs with brand-new ones to give your partial an immediate makeover. There are hundreds of variations available, ranging from small to large, and modern to contemporary. This is perfect for those summer BBQs you host with your friends and family round!

4. Add Some Greenery

Your garden is the perfect place to add in some colourful flowers and plants. You can opt for some hanging baskets around the fence above the patio, or place some filled plant pots around the edges.

5. Repair Any Damage

If your patio is worn or cracked, it can make your time out in the garden less enjoyable. Repairing any damage is a cost-effective way to get rid of any signs of wear and tear without having to replace the whole patio. Avoid wasting money on necessary purchases. You can buy weed killer to get rid of any unwanted growth too!

6. Get a Large Umbrella

For those hot summer days, an umbrella is a necessity to keep you cool in the shade. They also protect your skin from the sun’s harmful UV rays. Get yourself a bright umbrella to place above your table, ready to enjoy your time outside on the patio.

7. Lay Down a Rug

If you don’t want to repaint the patio or buy new furniture, consider laying down a rug. Whether you choose a bright, patterned rug, or a more neutral option, this is an easy and inexpensive idea to give your patio an immediate makeover.

8. Add Some Candles

Candles are amazing to add atmosphere to your patio area. They are super relaxing and provide a beautiful low light for the evening time. Plus, the scented candles smell great!

Is Now a Good Time to Buy a House?

a Good Time to Buy a House

The real estate market is a bit complicated given the current climate and if you’re not financially prepared for the process, it can be a hassle. Surprisingly, home sales are at their highest right now and have risen by 23% compared to last year.

However, prices are sky high and it’s safe to say that there are a lot of people ready to pay any offer laid on the table.  Even though prices are rising, it’s still important to consider all the factors before deciding that it’s a good time to buy the house.

The Good

Let’s first take a look at what advantages buyers can expect in the current real estate market.

Mortgage and Down Payment

Estimates by industry experts indicate that mortgage rates are likely going to remain low. However, the also claim that, even though the interest rate remains low, homeowners should not try to save on the down payment.

It can be very tempting to try and put down a minimal down payment while relying on the interest payments. However, by putting 10% down, paying the interest payments becomes a lot more manageable.

The Bad

Here are some of the challenges that buyers face under the current market conditions

Risk-Averse Banks

While the conditions may seem favorable for buying a house, banks are being extra cautious in this moment at time. Their cautious nature means that they’re becoming a lot more stringent with mortgage approvals.

It can be a tough time for people wanting to buy a house with smaller down payment as most buyers are coming in with ready cash. Banks will also tend to favor clients that are making a larger down payment as it’s a risk averse strategy.

High Competition and Prices

Not only are banks being stingier, the current market is one where the demand for homes remains high and the supply is low. That essentially means that the market currently favors seller.

The difference in demand and supply, also mean that the price of the homes goes up significantly. Not only are there very few houses on the market, the ones that are for sale will cost quite a significant sum!

What to Consider Before Buying a Home

It’s important to take into consideration your own financial situation before making the leap and buying a home. There are three key questions that every homeowner needs to ask themselves before investing in a house.

Are You Ready To Put Down Your Roots?

Buying a house essentially means that you’re going to settle down and live in the place for a live. Take into consideration your current lifestyle, relationships, and goals before moving into a new location. The ideal situation is you’ll live in a house long enough for the value to increase and offset the costs of buying and selling.

How’s Your Current Financial Situation?

Before making the major move, it’s essential that you asses your current financial situation. That means taking a look at your savings, credit score, and debt. Find ways to generate extra income. If they’re all in a healthy position, then you’re in the right position to buy a house.

Is Your Job Secure?

Lastly, once your mortgage application is approved there’s no going back. You’re going to need to make the monthly payments otherwise you’d default. That’s why it’s crucial to assess your job security before making any attempt at investing in a house. If you can see yourself working comfortable for the next couple of years, only then it’s a good idea to buy a house!

Summary

Buying a house during this time isn’t impossible or a big deal if you plan smartly and organize your finances in a proper way. You shouldn’t only look at the market but analyze your own financial situation objectively before trying to buy a home.

Related Reading: 5 Tips for Budgeting Together as a Couple