In order to stay out of debt, youll need a contingency plan. Include:
– An emergency fund which you try to never, ever spend (only in case of severe emergencies).
– A for sure savings for your occasional large expenses (e.g. repairs, Christmas, taxes, etc).
– A buy stuff savings just to buy things that cost more than your monthly disposable income.
– An overdraft protection line of credit to protect you from returned check fees. Dont use it for anything other than to avoid bouncing checks.
– An empty credit card (one that you rarely if ever use keep it only for emergencies zero balance, zero interest).
Get into the habit of paying off your credit cards each month to avoid interest charges.
The greater the rate, the higher the risk. Get a safe return on at least part of your savings.
Dont co-sign on others loans. They may intend to pay, but you may actually pay. Too often, co-signers end up paying off loans they are unprepared for, and financial hardships follow. Numerous co-signors now have negative credit ratings because a primary borrower paid late. Many lenders do not notify the co-signor before reporting delinquencies or repossessions to the credit bureau.
Nothing is risk-free. If anyone claims a risk-free use of your money, they are lying, or they just dont understand that there is always risk involved if only opportunity risk.
Remember, when you borrow you are still spending future earnings, and eliminating future options. When you borrow, even at low rates you are still paying to use someone elses money.
The tax advantage of keeping a mortgage loan: You pay me $10,000 this year, and Ill get my Uncle Sam to let you deduct $2,000 from your taxes next year (if you are in the average tax bracket of 20%)
Tags: Bouncing Checks, Contingency Plan, Credit Bureau, Credit Cards, Delinquencies, Disposable Income, Earnings, Emergencies, Emergency Fund, Financial Hardships, Habit, Interest Charges, Lenders, Mortgage Loan, Overdraft Protection, Repossessions, Safe Return, Tax Advantage, Tax Bracket, Uncle Sam
Take advantage of the possibilities to get help. It is great to have a live person to talk to about this kind of problems. You can find them in your bank and there are also public officials to turn to. A search on the internet will help you find them.
