Introduction to Debt

It is almost inevitable that we’ll run into debt at some point in our life; whether that’s on credit cards, loans, overdrafts or any other item of credit. Debt shouldn’t be feared; in fact without it we’d never be able to establish a good credit score.

The only time debt can become a problem is if you let it run out of control. For example, having large outstanding balances on credit or store cards while attempting to repay car loans and arranged overdrafts is likely to cause financial problems. This is why it is important that you take action as soon as you feel your debt is becoming unmanageable.

Face the facts

Often the core reason people get into heavy debt is because they’ve buried their head in the sand and continued to spend in the same way they always have. Your first step to financial freedom is facing the facts and subsequently working on a recovery plan. Naturally, you will have to make some cutbacks, meaning for the foreseeable future luxuries will be out of the question.

Draw up a spending plan

Drawing up a budget that breaks down all sources of income and outgoings will help you to understand your current financial situation. It will also highlight areas where you’ve been overspending thus giving you a chance to make cutbacks and increase your level of disposable income.

Set Financial Goals

Having drawn up a budget you can then start to set some financial goals. We always recommend setting a list two different types of goals; short-term and long-term. Your short term goals should include things like clearing all loan arrears, clearing your overdraft or paying off the outstand balance on a credit or store card. Naturally your long term goal should be getting debt free; however it’s important that you set a date of when you want to be debt free by. By being both ambitious and realistic with your timescales you will ensure you’re never short of motivation.

Frequently reassess your situation

Throughout your journey to financial freedom it is likely that your finances will be consistently changing, this is why it is important that you continually refresh your budget. For example, if you pay off a credit card balance this is likely to leave you with some extra cash each month that you can churn back into something else e.g. overdrafts or loan repayments.

Ensuring that your budget is always fresh should also give you some idea of your progress. Initially it may be tough, but sticking to your budget is the best way to financial freedom. In order to motivate yourself you could offer incentives or rewards in conjunction with your financial goals. For example; treat yourself to a meal out when you pay off your first item of credit.

Seek Help

If at any point you feel like you’re struggling to stay on top of your finances then seek advice. There are loads of ways in which you can do so; the internet is a great way of doing so if you’re not confident with speaking face to face regarding your problems. Many debt charities will also have trained agents at the end of the phone who help people like you on a daily basis. Try to avoid public forums, these are generally full of people who simply offer their opinion rather than trained advice.

Borrowing money is something that’s hard to avoid, both for individuals and large organizations. Even if you have an ample budget, some investments require more. In a large scale, the government and companies issue bonds to aid in borrowing large sums of money. They receive these funds by issuing bonds, which investors purchase. Most bonds have a maturity date, which is when the issuer must pay the investors back. When this occurs, the investor is awarded additional compensation on top of whatever their initial investment was.

The concept of bonds is fairly straightforward, but identifying the different kinds of bonds available today in the US can be daunting to someone with little bond and investment experience. Yet it’s certainly something to look into, with two primary advantages: purchasing bonds can strengthen one’s financial portfolio, and help them stay knowledgeable about market trends. Substantial income can be earned through investing in the right bonds. In general, the types of bonds are grouped by the type of organization or individual that issues them. There are four primary types of bonds that one can purchase in the US:

Municipal bonds are issued by local government, often to provide funding for local projects like improving school districts, sewage systems, publicly owned airports, and rehabilitation centers. Any capital gain from a municipal bond is taxable, and may be counted as income if sold at a profit prior to maturity. Still, many municipal bonds are exempt from interest via state and/or federal income tax, though this tax advantage does result in lower interest rates.

Your tax bracket is important to keep in mind when deciding to purchase municipal bonds. Use the Taxable Equivalent Yield – which is Tax-exempt yield divided by (1 – your marginal tax rate) – to help identify the yield on a taxable municipal bond. There are tools that calculate Taxable Equivalent Yield, as well. In general, tax-free municipal bonds are not useful for low income brackets, as the taxes they are saving may not compensate for the lower interest rates.

Corporate bonds are issued by corporations in order to expand their business. Its maturity date is often after a year from its issue date, with the occasional “commercial paper” corporate bonds having a shorter maturity span. Standard & Poor’s, Moody’s, and other rating services provide an estimate on whether a corporate bond issuer will be able to meet scheduled payments, with the ‘AAA’ rating having the lowest risk and ‘D’ having the highest risk. Using these ratings can help investors avoid high-risk investments.

Mortgage Backed Securities is a security that involves mortgages, often many mortgages. The multitude of mortgages involved makes it perhaps the most high-risk form of bond investment, but it can also result in some of the highest yields. This is how it works: mortgages are sold to either an investment bank or government agent that combines these loans into a tidy security, which investors can purchase. Unlike other bonds, which have a maturity date, mortgage-backed securities are paid off periodically.Ginnie Mae and Freddie Mac are the most common entities that issue mortgage-backed securities.

U.S. Government Securities present some of the most diverse types of bonds. They are issued by the US Department of Treasury, and exist in periodic additional payments to the bondholder, in addition to the principal amount being reimbursed at the maturity date. The government is the largest issuer of debt securities, and as a result these are considered some of the safest fixed-income investment opportunities. Different types of U.S. government securities include a T-Bill, U.S. Treasury Note, U.S. Treasury Bond, Savings bonds, and zero-coupon bond, the latter of which pays no interest but is issued at a discount that depends on the maturity length. You can purchase U.S. government securities directly though the US Department of Treasury.

The monetary system works well, which is why people all over the world have used money for thousands of years. Money has an agreed upon value, a standard by which worth is judged. Our standard is of course the dollar, and no one better than a young person knows the value of a dollar. Why? Because for you, dollars are hard to come by, easy to spend, and difficult to replenish.

Here is how a young person can stack these dollars by acting smartly

Start saving

Saving money is just plain easier if we’re saving for something. The thing we’re saving for is our goal. Our goal can be short-term or long-term, depending on the nature of the purchase. Generally speaking, short-term goals are easier to achieve because our aim is shorter. Long-term goals take years to achieve, but we all have to start somewhere.

Getting Credit

If the companies you want to borrow money from find out you’re negligent about paying your bills, if you’re always late, or always short, you’re going to have to pay more to borrow the money you want. That makes sense, doesn’t it? If you’re considered a risky bet, you have to pay more to borrow money. If on the other hand, you’re always on time, people will trust you more and you won’t have to pay as much for that car loan as the person who’s always late.

Automatic Savings/ Direct Deposit

Banks and other institutions know exactly how hard it is to save money. So they’ve come up with a tool to make it much easier. I’ve used automatic savings for years, and there’s no doubt that it’s helped me achieve some major financial goals. The only thing you need is a job and a bank account.

Here’s how it works:

• Decide how much you want to save
• Decide where you want this saved money to end up
• Save money without worrying about it!

Every month, I have money deducted from my paycheck and deposited into a variety of accounts. The money goes its way without my ever seeing it, in other words, it never makes it into my paycheck, so I don’t have to face the pain of writing a check, or even worse, depositing cash. You sign up in one of two ways. You can contact your human resources office, who should be able to send the money where you want it to go. And if you go from the direction of where you want your money to end up — say you want to open an online savings account and also fund your Roth Individual Retirement Account, then set up the accounts and have those institutions contact your bank account.

Value Investing

Your aim should be to buy good solid companies whose prices are within your budget. You are to then hold those companies until investing in them no longer makes sense. When does investing in a company make no sense? When their fundamentals — how they run their company — are not good, or when a company’s stock price is so expensive that it’s simply too late to count on any further upward momentum.

Look for impressive dividends

Some companies’ dividends are impressive indeed, and if their fundamentals are sound, I suggest that you own a piece of those companies. If it’s a great stock, like Apple was once upon a time, when it cost less than $20 per share, then you hold onto it and don’t ever let it go. Things that make us rich are a blessing, and I say that without one bit of hesitation. Having money in abundance is something to be grateful for, and if we’re able to earn money even while we’re sleeping, we’ve got the right idea.

So, what’s your investing motto? Buy good companies cheaply. If the company offers you the option of re-investing your dividends, act like you’ve got some sense and re-invest them. Buy and hold. Buy and hold.
Here’s what you look at carefully when you’re considering whether to buy shares of a company:

• What is their market capitalization; i.e., how much is the company worth?
• How much debt do they carry?
• Who runs the company? How long has this person been on board?
• What is their price to earnings ratio?
• What do they produce, and is their future outlook rosy or bleak?
• How many employees do they have? Are the employees treated well?
• How long has the company been in business?
• What is the outlook for the future?

How do we as individuals and nations keep up with rising prices when our incomes aren’t keeping pace? We can’t. Not as long as we don’t make a decent amount of money with our investments. Life is scary, unless you just sit around in an easy chair all day. We have to get out there. We have to take risks.

Any person, who has ever undergone a major surgery or was forced to spend several nights in a hospital bed, will likely remember the mountain of paperwork they had to fill out, in order to ensure their insurance coverage would be effective at the time of the procedure. At the same time, health insurance policies can be very complicated, and it is not uncommon for many individuals to be confused by their insurance provider’s explanation of benefits. Oftentimes, it is not until several weeks – or even months – later, when all medical bills are forwarded to the patient, that paperwork errors are finally discovered. Unfortunately, it usually also becomes more challenging to correct these errors after the bills have already been processed by your insurance provider. However, you may still be able to fix any discrepancies, as long as you keep a good record of all the procedures, tests and other medical services that were provided. In addition, there are several great tools that can make the process of managing all of your medical bills a lot easier and far less time-consuming.

• Managing your Medical Bills: Errors, Clerical Mistakes and other Discrepancies

According to the Medical Billing Advocates of America, as many as 80% of all medical bills contain errors and mistakes that ultimately lead to higher bills, as well as higher insurance premiums. The mistakes can range from double-billing for individual procedures, charging for exams with contrast when none was used, and even decimal point mistakes that convert a minor $100.00 dollar charge to a major $1000.0 expense. Furthermore, these mistakes will very rarely occur to the advantage of the patient, and hospital accounting staff members seems to be far more diligent when it comes to catching errors that go against their employer’s best interest. Consequently, checking the bills for clerical errors is the first, and the most important step of managing your medical bills.

• Claims, Billing Statements, and Explanation of Benefits: What is the Difference?

Currently, when any medical service is provided to a patient that has health insurance, the billing is usually forwarded directly to the insurance provider that settles the claim, and the patient may – or may not – receive a billing summary from the insurer. However, the summary will only serve as the explanation of covered benefits, and will not be the bill itself. For example, if your insurance decides not to cover certain procedures, they may notify you about it, but you will not be liable for any remaining balance until you receive another bill directly from the medical provider. However, it is still important to check the bill received by your insurance company for any errors, and you should request a statement listing all of the services provided on the specific date in question. You should then compare this list against the report you receive from your insurer, checking for any discrepancies in terms of care received or dollar amounts charged. It is also important to keep these statements together with your personal medical record, in case you need to dispute any claims several months after the medical services have been rendered.

• Taking Advantage of Online Services Provided by your Health Insurance Company

Many health insurance providers in the United States including all the major providers, now offer online services to their clients that allow them to check the status of their claims from their home computers. In most cases, you will first need to make an online account using the insurance information from your card. Once that is all done, you will be able to access the list of currently pending claims, as well as those that have already been settled with the medical provider. However, you must realize that it can often take several weeks for the provider to notify your insurance about any services you have received, and the claim information will not be immediately available.

• Other Management Tools Available Online

In addition to the services provided directly by your medical insurance company, there are several apps that can help you manage your medical bills. One of the more popular ones is Simplee – a free online service that can act as a database of medical records, claims and other insurance information. The service is also able to automatically spot errors such as duplicate entries, or eligibility issues, as well as predict your insurance coverage for specific treatments. Although the service was introduced only two years ago, it has rapidly grown in popularity, and – especially considering its automatic error detection – its number of users is only expected to further increase in the future.

Buying a house is an incredibly exciting step in your life, however it can also become a financial nightmare if you rush into it before you are truly ready. The commitment of a mortgage and the costs associated with bills and general maintenance can be far greater than you expect, leaving your budget severely compromised. Here are some important things to consider when asking yourself whether or not you are financially ready to buy your first home.

Assess Your Budget

One of the most important steps in working out whether you can afford to move forward and buy a home is to assess your budget. Spend some time getting to know your financial capabilities, and understand how much you have on hand to cover possible mortgage repayments. It’s a good time to do a review and work on your budget to make it as clear and comprehensive as possible. The better your budget is, the greater chance you have of being in a strong financial position to buy a home.

Future Stability

It pays to always think towards the future, and try and envisage some of the tricky situations that life could throw your way. Consider what would happen in the event of reduced income, being unable to work, or losing your current employment. If you have a strong financial base and could cover your repayments through your existing savings, chances are you are in a good position to buy. If you would struggle to meet the repayments under these circumstances, then perhaps you should work on creating a stronger savings base to assist when times get tough.

Know Your Limits

When applying for a home loan, it is essential that you stick to your limits. Know what you would be comfortable with in regards to mortgage repayments, and resist the temptation to buy a house that will be beyond your means. If you find that you are consistently being knocked back by the banks, you may be trying to borrow too much, or you may not be in a strong enough financial position to buy a house just yet.

Consult an Expert

It can be hard to honestly appraise your financial situation and decide on whether you are ready to buy, so why not take it to the professionals. By consulting the team at Fox Symes, you will be able to access expert advice on your financial position, and whether or not you will be able to adequately cope with the financial strain of buying your own home. The added advantage is that on top of being qualified debt solutions specialists, you will also have the opportunity to access a Fox Symes home loan which has been individually tailored to best suit your needs.

It’s easy to get in above your head when buying a house, especially if you take the plunge and buy too soon. By keeping these important points in mind, you can ensure that you get an honest assessment on whether or not you are truly financially ready to buy a house.