Author: Chillmaadi Admin

Americans are facing an ever increasing pile of debt however not all debt is bad. Debt is a financial tool and like all tools it can make our lives easier if used correctly but can be dangerous if used incorrectly. It’s important to be able to tell good debt from bad debt.

Good Debt

Good debt is debt that is of more use to you than it costs.

I think everyone could agree that if we could borrow money at 7% and invest it at 10% then we should be borrowing as much money as possible. In a similar train of thought it sometimes makes sense for us to borrow money to invest. Many people get a student loan to attend collage. They repay the debt from their salary after school. Generally people the more education you have the more you earn so paying for education is a form of investment.

Many people also borrow to buy a house. Traditionally house prices have risen over long periods of time in many countries. If the interest rate on your mortgage is less than the percentage increase in the price of your house then borrowing the money to buy you house was a good decision. Of course the trick is you never really know what your house will be worth in the future.

Another type of good debt is debt that makes purchasing some types of goods easier. Imagine trying to purchase a $50,000 car in cash. Most of us would have to wait a very long time before we could drive such a car. It might be worth paying the interest rate to lease the car and enjoy it today. It doesn’t make sense for use to spend all the money for a car in one day but enjoy it’s use for the next 3 to 5 years. Debt helps us spread the cost of expensive, long-lasting purchases over the life of the good which makes purchasing these goods easier.

Just be sure to compare rates to find the best deal and be careful not to borrow so much that the monthly payments are difficult to make.

Bad Debt

Bad debt is debt that costs you more than it’s worth. It’s like borrowing money to invest and paying 10% to borrow the money but only getting 7% return on your investment. Clearly you’re loosing money.

If you’re borrowing money to pay for inexpensive items you consume regularly then you’ll find yourself in trouble quickly. Don’t buy meals or vacations on credit if you can’t afford to pay it off immediately.

Final Word

The next time you consider using debt remember to ask yourself if it’s good debt or bad debt.

If you are laden with a lot of consumer debt, traditional wisdom says that you should pay off your higher interest rate debt first. But, an alternative method incorporates a psychological element which may keep you motivated.

Here’s how it works…

First, make a list of all of your consumer debt: credit cards, car payments, loan payments – even your house payment.

Now, here’s where you deviate from the traditional school of thought about debt reduction: arrange your list according to THE DEBT WITH THE SMALLEST OUTSTANDING BALANCE.

Begin paying minimum payments on all outstanding debt EXCEPT the debt with the SMALLEST balance. Scrape up as much extra income as possible and begin paying as much as you possibly can towards paying off THIS debt.

Wait a minute? Aren’t we supposed to pay off the higher interest debt first? Some would say so – and if you are looking at it from a purely monetary viewpoint – yes. Paying off higher interest debt first will result in the lowest total amount paid after all is paid off.

However, it may take several years to pay off your higher interest rate debt and many people will lose motivation. The beauty of paying off your LOWEST BALANCE instead of your highest rate first is that you get to see 1 or 2 debts disappear very fast. And then, of course, you begin taking those payments and applying them to the next debt with the smallest balance.

Seeing your debts drop off quickly like this may help motivate you to stick with your debt-reduction plan as opposed to waiting for years to see your first debt drop off.

Here’s an example:

• Debt A: balance of $4000, and a minimum payment of $75.00.
• Debt B: balance of $2000, and a minimum payment of $50.00.
• Debt C: balance of $6000, and a minimum payment of $100.00

Okay, let’s say you have $300.00 of extra income you can put towards debt reduction each month.

Start with Debt A and apply all $300.00 toward that debt. Note that the minimum payment is only $75.00 so this debt is going to pay off very quickly.

Once you have paid off Debt A, take the $300.00 AND the $75.00 you were paying on Debt A AND the $50.00 (minimum payment for Debt B) and apply all to Debt B for a total of $425.00. Paying $425.00 towards Debt B as opposed to $50.00 is going to result in this load getting paid off very fast.

Once Debt B is paid off, you are going to pay all ($300 extra income + $75.00 form Debt A + $50.00 from Debt B + $100.00 for Debt C) towards Debt C for a total payment of $525.00!

By “snowballing” your debt payments according to PAY-OFF TIME as opposed to interest rate, you are going to have the satisfaction of seeing some early debt pay off quickly which will motivate you to keep going.

Whichever method you choose, get on the road to financial independence now.

Remember, “…the borrower is slave to the lender.” (Proverbs 22:7)

Do you make frequent trips to the store to replenish household items or groceries? Do you even realize how much gets wasted on a daily basis? Most of us don’t. We live in a wasteful society. Food is thrown away every day while people lie starving in parts of the world. We spend money on items we don’t even need. We waste instead of trying to conserve. Maybe we can’t change the world but we can start by trying to eliminate waste in our own lives and save a little money in the process.

Do you cook every day then end up with leftovers that never get used and eventually get thrown away? Do you find yourself purchasing a multitude of cleaning products that cost more than you intended to spend? There are a few simple ways to cut down on grocery and household expenses. If you make one large purchase of groceries when you go grocery shopping keep track of the items you use most frequently and run out of most often. When you go to the store buy only those items on your list. If leftovers rarely get eaten in your household try to make smaller portions when cooking a meal.

By eliminating unnecessary waste you also save money not to mention the obvious benefits for our planet and the environment. If you’re like most people, you probably buy one cleaner for glass, another for the bathroom, another for the floors, etc. Although we feel these items are necessary such multiple purchases can become costly. There are several products that can do the work of costly cleaners for a fraction of the price.

For instance, vinegar can perform the duties of many expensive household cleaners. Most of us are familiar with the many benefits of vinegar. It is truly a versatile product. Vinegar is great for cleaning windows and glass appliances. Use it on floors and carpet to clean pet stains or milk and other spills. It is good for flushing out drains, cleaning and deodorizing garbage cans, hampers, litter boxes and other areas around the house. It is also quite effective for removing odors caused by pets, cooking, smoking and more.

Vinegar is good for removing stains such as coffee and tea. Many people soak the glass pots of their coffee makers in a solution of vinegar and water to remove the unsightly brown film that is left by brewing coffee. A solution of vinegar and water can also be brewed through the coffee maker, just as if you were brewing a pot of coffee, to clean and deodorize it. There’s no need to worry about the strong odor of vinegar since it dissipates quickly. There are other inexpensive items such as lemon and baking soda that work effectively for multiple purposes. There are several resources online or at your local library that can provide you with information on making your own natural cleaning supplies.

Cutting down on unnecessary consumption by cooking smaller meals or purchasing fewer items can help to reduce waste and save you money in the process. We live in a society of waste that is driven by consumerism. If everyone would just take a few minutes to re-think their spending and purchasing habits, plan meals more effectively, donate used items and recycle the amount of waste could be reduced substantially. So stop wasting and start saving. Our combined efforts can make a world of difference.

While gas prices are slowly falling down to a more bearable price, the high cost of gas is still playing havoc in the pockets of the American public.

Two of the most obvious ways to cut gas consumption are to combine trips and carpool. But there are other ways consumers can save money on gas.

1. Use a dashboard window sun cover to help keep the sun’s rays out of your vehicle. These are fairly inexpensive (about $15). Leave your windows cracked just a tiny amount to allow some air flow in the vehicle. When you crank up on a heated summer day, the air conditioner will not have to run as hard to cool the vehicle, thus saving gas.
2. If you are in the market for a new car, consider purchasing a hybrid such as a Honda or a Toyota. These types of autos are more environmentally friendly and get great gas mileage. If you travel a lot, such as to work or traveling, a fuel efficient hybrid auto can save you a lot of gas money every year.
3. Avoid driving during rush hour. Starting and stopping uses more gas than driving at a steady speed. When on the open road, use the cruise control to allow your auto to maintain a steady speed.
4. If possible, don’t make trips during the hottest part of the day in the summer. Driving during the hottest part of the day causes the air conditioner to be run more, thereby causing the need for more gas usage. Make trips early in the morning or later in the evening.
5. Keep your vehicle’s tires properly maintained. Tires that are do not contain enough air will cause your auto to use more gas. It’s a good idea to check the air pressure on your tires about once a month, particularly if you drive daily. Check your tires before traveling, when the auto has not been driven for a few hours. Rotate your tires regularly, and be sure to have your vehicle checked for proper alignment by a mechanic.
6. Unload your auto! Avoid keeping items in your auto that you don’t need in it. Unnecessary weight causes more gas consumption. The heavier the vehicle is, the more it takes to move it, thus costing more in gas. Hauling items in your auto and using it for a storage container only adds to your gas bill.
7. Change the air filter and fuel filter regularly. Changing the oil and checking the transmission fluid are also good choices for keeping your vehicle running smoothly and helping to save money on gas.
8. Don’t buy gas when the gas tanker truck has freshly filled the reserve tanks. When the tanks are freshly refilled, any sediment in the tank is flushed throughout the entire tank of gas, and some of that sediment is sure to find its way into your auto tank. Use another gas store or wait a few hours to refuel, allowing time for the sediment to filter back down to the bottom of the tank.
9. Fill your tank before major holidays and the first of the month. Gas prices in some areas are higher during the holiday season and on the first through the third of the month.

When it’s payday time and we realize that we don’t have enough money to pay for our expenses, we normally blame the rising prices of commodities and the monthly income that we think are not always commensurate to our hardwork.

But, the truth is, we should all find ways to cut corners and reduce expenses to make sure that we live comfortably and well.

Record, record, record!

For a month, record all your expenses in a small notebook, everything, from gasoline expenses, transportation expenses, meals in the office, toll tickets, cups of coffee during breaktime, expenses for the school projects of your kids, and a lot of expenses which you thought are negligible. This way, you can track down where exactly your money is going.

Create a Budget

It is always said that in creating a budget, you should pay yourself first. But for me, I believe, you should give back to God first part of what He has given to you, after which, you can then save some part of your income for yourself.

I use the envelope method in budgeting. I allocate all the expenses and put each of them in their own envelopes. This system is effective although sometimes some envelopes are short, but I know that if I stick to my budget, I will be able to fill this up from other expenses that I am able to save from.

Ways to Save Money

• Don’t bring your car to the office everyday. With the rising cost of gasoline, it’s really a good idea to just commute. Aside from saving on gasoline expenses, you will also save on parking fee. Of course, there are exemptions to this, like, when the weather is really bad, it’s better to bring a car than to get soaked and waddle your way through floods.
• Bring a packed lunch to the office. Eating out is very expensive. Save this for a once a month bonding with your office-mates.
• Reduce your dining out expenses. When my family goes to the Mall, we eat our lunch first at home, this way, we reduce our entertainment expenses. A family of five these days spend a bit when eating in a restaurant or fast food joint.
• Make a list of the things that you need to buy before going to the grocery. Better yet, ask your husband to do the grocery. Weird? According to some studies, men are fast shoppers and only buy the things they had set out to buy, while women, on the other hand, take a longer time in groceries or shopping malls and practically stop at every aisle. This is the reason why women end up with more products in their cart instead of just leaving with the items on their grocery list. I’ve proven this in the case of my husband. When I ask him to do the grocery, he really strictly follow what’s on our list, and his expenses are always within the budget.
• Identify and reduce non-essential expenses. I really love to read books. So, to reduce expenses here, I got a membership in the Book Club in our office. For a very minimal fee  a year, I get to read as much number of books as I can. But what I cannot sacrifice is my monthly expenses on Good Housekeeping and Working Mom magazines. I feel justified in having these extra expenses because I really get a lot of ideas and inspirations from these magazines.
• There are many unnecessary expenses that total to a fairly large amount of money. For example, in our office, we have a coffee boy who brings us coffee and snacks during break-time in the morning and afternoon. But since this is a special service to staff, the cost is also slightly more expensive than when we go to the cafeteria by ourselves. So, what I do is, I just buy my biscuits and chocolate drink from the supermarket and just bring my own snacks in the office.

  The key to reducing our expenses is really within us. Everything really depends on self-discipline. This is what’s important and this is what we can very much apply in our everyday struggle to stick to our family budget.

If an enormous wealth was suddenly acquired then there would be many benefits, however, there would also be many disadvantages. I intend to give a brief overview of these advantages and disadvantages.

The most obvious benefit would be a new level of financial freedom; this would lead to the ability to make yourself and your family comfortable and to treat any friends or charities. You would be able to purchase most things you crave and a few you don’t!

The problems would also be just as powerful. How would you know who your real friends were? How would you know what you really do want? These would be questions that would creep up after a short period of time. Who really wants to be given everything on a plate with no need to work? There would be no aims or motivation to move up in there lives either at work or at home and it would be difficult to keep focused on every day activities that shape our personalities.