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Sep

2022

3 Quick Tips to Managing Your Debt

Reading Time: 2 minutes

Not all debt is bad or hopeless. After all, some debts you have now are your investment for a better future. Of course, part of managing your debt is to track your expenses, budgeting your monthly income and boosting your savings and emergency fund. Whether you are struggling with a personal loan, a bank loan, or credit card debt; here are 3 quick tips that will help you manage your debt.

1. Know Your Numbers

Knowing the total amount of our debt can be an overwhelming experience. The huge amount can make it seem impossible to pay off. Add to that the added interest amount and you’re almost going to cry. However, knowing these numbers is helpful so you can break down your debt’s total amount. You should also figure out your payment due dates and late payment fees. This information is easily found on your credit card statement and your other loan documents. This way, you can plan how much to pay each month and when to pay so you don’t incur additional penalties and interest charges.

2. Be Consistent and On Time

Once you have made your debt payment plan, then stick to it. Pay your monthly dues on time and don’t miss out. Dedicate a portion of your income to debt repayment and be dedicated in paying it on or before the due date. It will be difficult at first so do what you need to do, even set an alarm, so you don’t forget the due date. Also, try to pay more than the amount due so you shave off more of your debt as you continue paying it off. This will become a good habit which will become less stressful as time goes on.

3. Pay It Faster

If you are struggling with several debts then you should plan on which one to pay off first. You may decide to pay the one with the smallest amount or the one with the biggest interest rate. The method you use will depend on how much you can pay each month. In turn, this will determine your priority on which to pay off first. This does not mean that you don’t pay off your other loans. Instead, it means that whatever extra money you have, you put it all to the debt that you want to pay off first. Once you’re done with the first one, then you do the same to the next one on your list.

With these tips, you should be able to plan and prioritize your monthly debt payments. You may miss your payment dues once or twice because life happens. But as along as you get back to your plan and adjust accordingly; then you will still be on the right track to being debt-free. This is one of the requirements to gaining financial wellness.

Feature Image: Original Photo by Towfiqu barbhuiya on Unsplash.

Oct

2021

What To Do If You Can’t Pay Your Mortgage

Reading Time: 3 minutes

Defaulting on your mortgage is not the same as not being able to pay rent. If you miss your rental payment, you can easily talk to the landlord for an extension. If you really can no longer pay, worse scenario is you pack your things and look for another property to rent that is well within your budget. Not being able to pay your mortgage is much more complicated than that. You will not only be putting your property in jeopardy but also your credit score or standing with the bank (or any other financial institution). Thus, as much as possible refrain from defaulting on your mortgage. So, what to do if you can’t pay your mortgage?

Why Your Credit Score Matters

Before we go into that, it is important to understand first why your credit score matters. Your credit score is a rating of your creditworthiness. It indicates whether you are trustworthy enough for the financial institution to pay your debts. It is important because it is a deciding factor each time you borrow money from a bank. The amount of money that you can borrow including the interest rates are affected by your credit score. And the credit score does not only apply to real estate loans but covers all other forms of loans such auto loans, student loans, personal and even credit card loans. Thus, it is important that you take care of your credit reputation by paying your dues on time.

What To Do If Your Capacity to Pay Has Diminished

So what if you are put in a situation wherein you can no longer afford to fulfill your obligation? The first thing that you need to do is to get in touch with the bank long before the due date. Although lenders normally have a grace period for late payments, it is best to get in touch with them before they charge the late payment fee. For record purposes, it is best to put your concern in writing. Indicate your loan reference number. State your reasons or difficulties. And ask them what your options are. There might be programs available to help you.

If your capacity to pay has been diminished, options normally include the following:

1.Forbearance Plan

With this option, the lending institution will agree to temporarily suspend or reduce your monthly mortgage for a brief period of time. It will give you a short term relief to your financial woes until you recover. But once the forbearance period is over, there should be an agreement on how you are going to repay the suspended dues.

2. Debt Restructuring Plan

In a debt restructuring plan, the terms of your loan will be modified. The monthly payments will be lowered but the term will be extended. The purpose is to make your mortgage more affordable.

What To Do If You Already Missed Payments

3. Repayment Plan

A repayment plan is designed to help you pay back your missed payments. In a repayment plan, the lender normally spreads your overdue amount in a specified period of time. The amount is then added to your monthly payment until the overdue amounts are repaid; thereby increasing your monthly payment. Once the said period is over, your monthly payment will then revert back to normal.

What To Do If You Can No Longer Afford to Continue with the Mortgage

5. Short Sale

A short sale is a sale of an asset that a seller does not own. If a property is mortgaged, technically, the seller does not own the property yet. In a short sale, the lender sells the property below the mortgage value. It can forestall the foreclosure but the lender loses all profit from the said property. But the good thing about it is that it does less damage to your credit score than a foreclosure.

6. Voluntary Foreclosure

Voluntary foreclosure is done in the event that you can no longer afford to continue with your mortgage. A voluntary foreclosure is initiated by the borrower who can no longer continue with the monthly payments. It is done to prevent involuntary foreclosure. A deed in lieu of foreclosure is an example of a voluntary foreclosure. It can release you of your obligations. A deed in lieu of foreclosure is an agreement where you surrender the deed to your property to your lender. Although you will lose your property, you can avoid a foreclosure report on your credit rating. Although a voluntary foreclosure is harmful to your credit rating, it is not as harmful as involuntary or forced foreclosure.

Feature Photo by Karolina Grabowska from Pexels

Aug

2020

Assets and Liabilities in Personal Finance

Reading Time: 2 minutes

Do you know what an asset is? How about a liability? Many probably have an idea on what they are but how many actually understand these terms? True, it might sound boring for many. Unfortunately, these terms are part of the basic terms that everyone should know about personal finance. A deeper understanding of these two terms can lead to drastic improvement on the current stage of your financial life. So, what is the importance of assets and liabilities in personal finance?

Assets vs Liabilities

An asset is any resource that has monetary value. In short, in personal finance, an asset is anything that you own that has value. Your car, house, investments, cash and items such as antique furniture, artworks, watches, jewelries and even some luxury things are all considered assets.

On the other hand, liabilities are everything that you owe. They can be in the form of mortgages, loans, debts and any money that you owe others.

Net Worth

Your total assets minus all your liabilities is your net worth. Knowing your net worth will help you understand your current financial situation. If it is positive, then good for you. If it is negative, then it is a warning sign that you are living beyond your means. In addition, your net worth can serve as reference point in your financial goals.

Launch Challenge

Compute your personal net worth now. Knowing your current state of your finances will help you improve your financial life. Your current net worth will be your starting point in your financial journey.

1. Compute all your Assets

Start by making a list of all your assets. Your assets include the following:

Real Estate Properties
Automobiles
Cash deposits
Investments on businesses, bonds, stocks, funds, etc.
Insurance
Watches and Jewelries
Other items such as antiques, art works and luxury items

Then, place a monetary value on each one. Record the estimated current market value not the purchase price.

Add then add them all up. The total value is your assets.

2. Compute all your Liabilities

Real estate mortgages
Auto loans
Credit card balances
Student loans
Other personal loans

Add up all the outstanding balances to get your total liabilities.

3. Calculate Your Net Worth

Now, subtract your total liabilities from your total assets. Then, that’s your net worth.

Do this every month to monitor your progress. Your goal is to slowly increase your net worth.

Now that you know your net worth, it helps to keep this in mind each time you spend your hard earned money. Knowing your net worth will help you make good financial decisions.

Feature Image by Bruno /Germany from Pixabay Images

Mar

2020

How To Improve your Finances During a Crisis

Reading Time: 2 minutes

The current crisis has not only negatively affected the people’s health and wellbeing, it has also affected the world economy. Many industries are now falling. Companies, factories and stores are closing. People are losing their job. Unless this crisis will end soon, many people might find themselves with money worries in the near future. Although income might stop coming, household expenses will not. Debt and mortgages are piling up. Thus, it is important for everyone to how how to improve your finances especially during a crisis.

Here are some things that you can do right now on how to improve your finances during a crisis:

1.Review your budget

Take a good look at your monthly budget. If you don’t have any budgeting plan, now is the perfect time to start having one. The money jar budgeting system is a good way to start creating your survival budget in this tough time. If you are already having a rough time, then you need a budget more than ever. A budget will help you track down where your money is going. It will also help you plan on your future spending.

2.Cut Expenses Immediately

Take advantage of the times. Refrain from going out unless necessary. Focus on the basics. Nutrition and health should be the main concern of everyone. Do not buy non-essential items. Stop eating out. Your main goal right now is to cut down on expenses. You don’t know how long this crisis will last so it is important to have as much emergency money as possible.

3.Talk to Creditors

It is almost impossible to keep up with bills if you are being quarantined especially if you have no savings. The best approach is to talk to your creditors and explain your situation. Ask about your options. The good news is that since you are not alone in this crisis, many governments already issued indefinite moratorium for those affected. Banks and insurance companies have started implementing assistance programs. Utility companies are following suit by waiving fees and postponing disconnections.

4.Look for Other Sources of Income

If your income has already been affected, now is the time to look for other sources of income to boost your cash flows. There are many ways to earn even from the comfort of your home. Search online. Look for something that you are good at.You can be someone’s virtual assistant. You can do online tutoring.You can start creating your own blog or vlog. You can create webinars. The possibilities are endless.

5.Improve your Financial IQ

If you are worried about your finances during this pandemic, that is an indicator that there is a need for you to improve your financial IQ. To be financially literate means having the ability to manage personal finance matters. That includes having an emergency survival fund in times of crisis.
It is not yet too late to start now. Take advantage of your time at home. Read about personal finance on books, magazine and the internet. Listen to podcast. Study the lives of millionaires and other highly successful people. Educate yourself and apply it in your life. Start by setting financial goals.

6.Don’t Panic

If you are already an investor; Warren Buffet, the most successful investor in the world, advised investors not to panic. It is best to stay invested and look at the long-term outlook of the stock market. Although it is only natural for investors to be fearful, it is never a good idea to buy stocks based on headlines.

Be fearful when others are greedy. Be greedy when others are fearful. – Warren Buffet

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