Learning to Live within your Means without Debt

With more people in debt than ever before, living within your means is a concept well worth exploring. First, what does it mean to “live with your means without debt”? Living within your means signifies being on top of your finances. It means knowing at the drop of a hat exactly how much you can afford. It means a low-stress financial outlook and lifestyle where you don’t stay up late into the night trying to figure out how to pay for that new jacket, car, vacation or whatever your weakness may be. Here are some tips for adopting the philosophy of living within your means and learning the joy of living without debt.

Spend less than you earn

This is a simply mantra that you should adopt in your quest to live within your means without debt: spend less than you earn. It really is that simple. Most of us, however, do the exact opposite. Spending less than you earn means you have to sit down and face the cold hard facts of your current financial template. Sit down and do some simple math: how much gross income do you take in a month. Next, subtract how much you need for life essentials. Life essentials include putting a roof over your head, food in your body and clothes on your back. Some financial gurus have come up with specific numbers on how you should ideally be spending your money each month.

How are you spending your money?

Here are the numbers on how the experts say you should be spending your hard-earned money each month. You should be spending 35% of your monthly income on housing and housing related costs. Transportation costs should equal around 15% of your monthly income. Shopping, food and entertainment should come in around 25%. According to financial experts, around 15% of your monthly income should be directed at quashing any lingering debt. Finally, don’t forget to pay yourself. Roughly 10 % of your monthly income should be directed into a savings account.

Study your numbers

Now that you have the numbers, do the math and see how your monthly spending stands up. Are you spending way more than you can probably afford on your monthly rent or mortgage payment? Are you splurging on your entertainment budget or spending half your income on shopping sprees? Are you paying off enough debt each month to really make a dent on those credit cards, or are you merely paying off interest? Are you saving anything for emergencies and the future? These can be hard questions to answer, especially if you have a sinking feeling that the answer is a resounding “no” on all accounts. But this is also a very important step to take if you are serious about living within your means without debt.

Secrets to living within your means without debt

These are not really secrets—most people who are debt-free or serious about becoming debt-free can find these out for themselves. The true secret is to live below your means. That is, spend less than you make. A lot less. How can you do this? Try to attack the problem from the angle that you already know needs attention. For instance, if you are a shopaholic, work on curbing your shopping sprees by making a written list of only the items you need before stepping out the door. Cross off each item as you shop. Also, consolidate all of your shopping needs into one trip, rather than smaller shopping trips spread throughout the week. Always buy the store brand, which is usually just as good as the name brand and a lot cheaper.

Get Back to Work with these Money-Savings Childcare Options

There’s no doubt about it: finding affordable and trustworthy childcare options is one of the biggest challenges facing many working parents today. What can you do in order to reduce your childcare costs? Having a baby can be a huge financial stain on first-time parents, and many don’t realize how many affordable childcare options there are out there. Here are some tips for finding ways to save money with different childcare options. Some of these may seem like common sense, while others may force you and your partner to make some hard decisions.

Financial aid can help you subsidize childcare costs

There’s no getting around the high cost of child care in the United States. In some cases, you may find yourself paying more for child care than your rent or mortgage. There is some help to be found with financial aid. Take advantage of flexible spending accounts offered by your employer, such as the dependent care account. These accounts allow you to save pre-tax dollars specifically for such things as day care and elder care. You can save thousands in taxes each year by taking advantage of these flex spending accounts. If you pay for child care expenses with your after-tax dollars, you can take advantage of the Dependent Care Tax Credit on your income tax return. You can claim from 20% to 35% of up to $3,000 for one child.

Check with you child care center for ways to offset costs

Some child care centers are willing to work with their parents to help offset costs. If you are having trouble keeping up with payments, talk to your child care center before things get worse. Let them know your financial situation and see if there are things you can do in order to offset your child care costs. Volunteering, donating goods or other kinds of contributions are sometimes an acceptable way of offsetting your child care bill. Some child care centers have the resources and information to refer you to government agencies that can also help with grants and financial aid.

Offset costs with family help

Traditionally, extended families have always been around to help offset the cost and responsibility of child care. If you are fortunate enough to have caring and supportive family members, see if they can help you with child care. Many couples or single parents work with their relatives to coordinate a child care schedule that works for both parties. Of course, you should do your best to compensate your relatives for this care.

Do you have a flexible work schedule?

Many parents rearrange their work days in order to take care of their children. With some finagling and juggling, many parents can reduce their day child care costs significantly by flexing their work schedules.

Start a home business or telecommute

With today’s advanced technology, it is easier than ever to work from home. If you or your partner has the option of working from home, take advantage of it. Even if you can only finagle a couple of days of telecommuting a week, this will still give you a great advantage. If there is simply no way that you can bring your work life home, consider starting a sideline business that can help you cope with the high costs of day child care.

Use student child care

If you are located near a college or university, there is a good chance that you can find adequate child care close to home. Many students charge less for their services than a professional day care business. If you are looking for a nanny, consider hiring from an au pair service.

Avoid These Major Money Missteps and Stay Out of Debt

What you can do to avoid getting into debt? Experts say there are certain money missteps that many of us are likely to make. Here are the major money missteps that can easily land you in debt. These are very common missteps that many of us fall into without even knowing it.

Buying a new car

OK, this is not so much a money misstep (unless you really can’t afford a new car, or finance it with a high interest rate) as a preference that can easily get you into debt. Sure, you love that new car smell, the feeling that you are the one adding up the miles, but it is a known fact that new cars depreciate several thousand dollars as within the first year. Save yourself all that money that you’re paying for the privilege of the new car smell and buy a high quality pre-owned vehicle. Many used cars still carry the original warranty—even more incentive for buying a quality used vehicle.

Borrowing from your 401(k) or 403(b)

In most cases, you won’t get a great deal at all. Your 401(k) deals are pre-tax, which means that eventually the money that you put in will get taxed when you withdraw it. Taking out a loan from your 401(k) or 403(b) means that you will be borrowing from pre-tax dollar which will eventually have to be repaid. When you eventually retire and begin your withdrawals, you will be taxed again. If you borrow money from your 401(k) or 403(b), you will effectively be getting taxed twice. Did you know that you are also required to repay the loan in only a few months? If you don’t happen to have the money for repayment, your loan will be treated as a withdrawal. You can expect a whopping 10 percent early withdrawal penalty.

Using your home equity line of credit to pay off your credit card debt

You can lose your home if this doesn’t work out. Credit card debt is often described by unsecured debt, because there’s no real collateral that the credit card company can force you to sell in order to collect on the debt. A home mortgage and home equity loan is known as secured debt because your home is the collateral. But if you fall behind your payments, the lender can easily require you to sell your home in order to collect on the debt.

Avoid buying a variable annuity

When you buy a variable annuity you are making a contract with the insurance company and the money is used to buy mutual funds. Salesmen may try to pitch this kind of investment as a way of buying and selling funds inside the annuity without the tax bills as long as the money is invested. But did you know that you will have to pay income tax on any withdrawals? Plus, if you withdraw any money from your variable annuities before you are approximately 60 years of age, you will also be penalized with a 10 percent fee. So watch out for what may seem like a great deal on that tempting variable annuity. There are often many buried fees that are attached to variable annuities. Make sure to read all the fine print.

Do not finance your new home purchase with a variable interest loan

Avoid those low initial teaser rates for financing your new home. If you can’t afford the home otherwise, you should probably not buy the home. Avoid option adjustable rate mortgages too. This will usually cause your loan balance to become bigger each month as the lender adds the unpaid interest on the balance of your home loan. Watch out for those great introductory rates—they can often turn out to be not-so-great.

Freecycling a Great Way to Avoid Accumulating Debt

If you are in need, "freecycling" may be the option for you. In fact, there is actually an official organization (The Freecycle Network, or TFN) that bears this name.

Freecycling Defined

Freecycling is the act of recovering items to be thrown away for future use. Unofficially, freecycling is called "dumpster diving" when done in informal settings. Both freecycling as an action and as an organization has been created to prevent useful items from being thrown away.

The History of Freecycle Network

This organization was officially as a RISE, Inc. project in Tucson, Arizona about 2004. It was slow-going at first but then this company and concept grew to become a worldwide effort. The Freecycle just launched its website this year (2008).

However, since its launch it has expanded to mean much more than that. It is now a helpful service to those who want to recover perfectly good furniture and other household items that others throw away.Currently Freecycling Network is home to over 4,702,000 members from every continent. In all this organization has thousands of local chapters stationed around the globe. Local groups are moderated by a volunteer. Benefits of Freecycling

You can find quality household and personal items for far less money. Sometimes you can even obtain them for free-whether you join an official Freecycling organization or not. People have saved hundreds and even thousands of dollars per year by obtaining free items in this way.

Many people have avoiding going into debt as they prepared to start a family using Freecycling services. Instead they are not saving money instead of spending it. All in all everyone wins when they take advantage of this program, and environmental resources are preserved.

Where to Find Freecycling Chapter Location Information

This particular phenomenon has become a worldwide effort. Therefore, Freecycling organization locations are likely to be available relatively near you. You can visit this organization's official website and you can find local freecycling groups within your immediate area via Yahoo groups.

You can also browse your specific location within the Freecycle Network official website. There is a site serving persons in the U.S., UK, France, Germany, and many other countries of the world. Items Recovered from Freecycling

Besides furniture items, you also acquire items such as a piano, an old door, a fax machine, and other items still useful. Just about anything imaginable has been made available. Of course, there is no guarantee that you will find exactly what you are looking for. However, if you stay alert you will save money on many items you need.

How to Register

It is free to register for an online account. You can post items you want to give away as well as post for requests of items you need. Each local chapter or group may have its own specific requirements, such as your first posting must be an item that you are willing to give away that someone can use.

You can also become involved actively as a moderator in your local area. If you are, you will become a part of an organization that is working to make a difference. In doing so, you will be doing more than just helping yourself. You will be providing a great service to your community.

Similar groups to Freecycling

Since the founding of the first Freecycle Network, smaller organizations have been started. You can search for these with the word "freecycling" in your favorite web browser. You may also want to start up a group in your area if there is not one present.

Keep in mind that each group may have its different standards. Also, that you use various freecycling groups at your discretion while posting, contacting, and exchanging.

Negotiating your Way to a Better Deal without Breaking your Budget

You probably have seen the commercials about the harassing creditors and have thought that is you. Some days you may not even want to answer your phone. Why is that?

It usually is because some of the creditors you deal with are not very negotiable. If you encounter a problem like this it is best to find a professional who is qualified to help you receive lower interest rates, settle on a reduced amount to be paid in full, or help determine reasonable monthly payments.

That is an extreme situation, however. Most creditors are happy to at least get you on the phone, and all they really truly want is an answer.

How to Talk to Creditors Who Call

If a creditor phones you to ask you when you will be able to pay a bill do not say "I don't know." Saying "I don't know" is the fast track to an unpleasant argument. Instead, if you are on the phone with them say you will pay it on a specific date-even if you do not know if you can.

The only exception would be if you are required to put in writing when you will pay your debts. In this case tell them something such as you will call your accountant. Then, set a date when the creditor can call you back.Dealing with Different Types of Creditors

Of all the types of creditors to deal with, student loan companies are probably the easiest to negotiate with. You have several options before you even become near being in default.

You can obtain a forbearance, receive a deferment (no-interest grace period extension), or simply send in an amount you can afford. They usually will work with you and usually these type of lenders are easy to negotiate with and usually do not require a professional.

The hardest creditors to deal with usually are the credit card companies. They usually are very rigid-even if you are a faithful customer who has paid every month for several months. However, it is usually the high-interest credit card companies.

About Debt Negotiation Help

Different types of debt negotiation help include credit counseling, dept management plan, and debt consolidation. Bankruptcy is another option, although in most cases is a last resort. Please see the definition list below for further explanation:

Credit Counseling: One or more consultations scheduled in order to discuss your financial situation as a whole. Credit counselors will usually ask you some questions about the amount of money you make and help you be accountable as you devise a reasonable monthly budget. Your new financial plan (budget) usually will involve the allocation of money toward repayment of past debts.

Debt Management Plan:Â This is a specific system used by professionals to help people calculate how much of their debt they can pay back per month. This system is usually based on a certain block of time, such as two, three, or five years.

Using this type of repayment plan your financial counselor usually will handle all of your money. All you need to do is deposit it in an account set up by your debt manager (financial counselor).

This system of repayment can be costly, as you need to pay the person who manages your debt for their time. However, often non-profit organizations and churches offer reduced-fee plans for low-income people.

Debt Consolidation: This is the process of combining all your debt together (usually unsecured ones like credit cards and quick loans) in order to only have to make one monthly payment. Financial counselors will usually calculate the anticipated payment schedule of consolidated loans in order to determine if it is worth it for you to consolidate.

If your new interest rate after consolidation will be lower then it would be worth it to combine all your bills. If not, then you probably should not consider this option.

Further Debt Negotiation Information

You can perform a local Internet search to find available creditors in your area. You can also check your local phone listings or ask your friends or family who they would recommend. You can also check the government section of your phone book to see if your state, city, or county offers special low-income debt negotiation programs.