Why Taking Responsibility Could Be An Important Start To Addressing Your Debt

A majority of Americans are carrying some form of debt; approximately 77 percent of them according to Northwestern Mutual’s 2018 Planning & Progress study.The average debt per person has surpassed $37,000 in the last year and more people are finding it difficult to face their increasing debt. While having there are a host of debt management tools and apps available to help you on your journey, the key to resolving it begins with taking responsibility both for your past spending habits, and your future. If one is to become debt free, it takes a good amount of sacrifices, cost-cutting, and self-reflection. The sooner you accept responsibility, the earlier you can begin to make progress in your debt journey. Here are a few ways you can face your debt problems; and why it works.

Change The Narrative

The first step in conquering your outstanding bills is to change the way you view it. Debt can impact much more than your financial health; debt can affect your mental well being as well. Therefore, changing the way you approach it is important for many more reasons than simply being free of repayments or rebuilding a credit score. While it is a financial obligation and can be a source of financial stress, focusing on the end result can be much more motivating than looking at the current problems it presents. So instead of focusing on how little disposable income you currently have thanks to debt repayments, try considering what you would like to do with the cash once it is no longer pledged to repaying debt. Changing your view also means embracing responsibilities for repaying your debt.Being accountable allows you to better yourself and the decisions you make when it comes to your finances; allowing you to truly move forward and become debt free (and remain that way).

Get Comfortable With Your Means

Often, the reason that many of us end up in debt is that we purchase or spend on items that are not within our current means or income bracket. As a result, we end up using credit cards or other financing options and having high-interest charges compounds it further. Instead, get comfortable with your income without any reliance on savings, credit cards or other financing sources. Can you afford your current lifestyle on your monthly income? If not, this is a sign to examine the different aspects of your spending and get to budgeting. It can also pinpoint the problematic areas for you when it comes to debt. Knowing your triggers is a vital part of the battle against debt.

Take The Emotion Out Of It When Dealing With Money

Money worries are the number one trigger when it comes to stress in America. Being emotionally invested when making financial decisions can cloud or influence our judgment. As a result, you may end up choosing not the best option financially. One good example is cutting costs to put extra money towards repaying your debt. Often we may be hesitant to reduce money spent on items or activities simply because it has a meaning to us but it is not necessarily a need in our daily lives. Taking the emotion out of it means being objective and a great way to do this is writing everything down on paper. Focus on the numbers and your debt plan; this will help you stick to your resolve.

Chrissy Helders

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Are you Suffering from a Debt Hangover?

Yup, the holidays are the time when you can get overboard (in every sense of the word). Who can resist shiny bobbles, Christmas markets and an adorable pair of shoes you’ll wear to a holiday party?

Next thing you know, you’ve swiped your credit card too many times and gone into debt. AKA a debt hangover — when you have trouble sleeping, aversion to checking credit card statements, and even snapping at your loved ones.

It’s not exactly a fun topic, but it’s an important one. Instead of saying bad things about yourself (none of that around here!), grab a cup of hot chocolate, curl up on your couch, and read on to find out what you can do to fix the situation and prevent it from happening again.

What is a Debt Hangover?

Let’s say you go out with a bunch of friends to celebrate the fact you got a fancy new job promotion — you have a new office overlooking the city! You’re so elated you end up buying a round of drink for your friends, then they return the favor. The next morning, you’re a bit sick and wondering what the heck happened last night.

A debt hangover is much like the story above, except that you spent too much money instead of going overboard on drinks. What typically happens is that you’re so caught up in holiday cheer (or another big moment) you go spend-crazy. We’re talking about presents, travel, activities, and food.

It doesn’t stop there. After Christmas shops are notorious for tantalizing deals and sales. Besides, if you received gift cards, you may spend more than the amount on the gift card. New Year’s resolutions can also make you swipe that card more than you should. Like declaring you’ll implement an exercise routine, so you buy new outfits or a yoga mat. Or you’ll eat healthier, so you go and buy a blender to make smoothies.

Come January, your financial ends up suffering. The credit card bills reveal the consequences of your actions, and it may not be pretty.

But you’re not alone. Statistics from the Federal Reserve in October this year show that credit card debt went up over 10%, the highest in 16 years.

No Shame in This Game

If you’re in debt, there is no shame around it. It’s understandable you got caught up in the moment. There’s something about holiday displays, delicious food, and Lifetime holiday movies that can turn anyone into a credit card swiping monster.

The important thing is how you deal with the situation. Allow yourself to feel whatever it is you need to feel, then start working on an action plan. If you got yourself into some hot water with your money, there is a solution to get yourself out of it. The first step is to recognize you have debt and refusing to ignore it.

How to Cure Your Debt Hangover

No matter how much holiday-related debt you picked up, acknowledge how much debt and make a plan. As in, tally up all your credit card statements and see how much you owe. It’s OK, take a breath if you’re shocked by the number.

Now you’re ready to take some action:

Start Paying Your Credit Cards

It’s pretty obvious you should pay down your debt (duh!). It’s important to remember that you need to make at least the minimum payments on those credit bills, more if you can. Paying the minimum payments gets you out of trouble with your creditors and paying more will get you out of debt faster.

It’s also a good idea to figure out a debt-free date. The beginning of the year is also a pretty lucky time — you may get year-end bonuses, cash gifts, and tax refunds. (We’re not telling what to do, but you may want to take the extra cash to tackle your holiday debt!)

Enlist Help

We get it. Debt can be overwhelming. Instead of doing it by yourself, see if you can seek support — friends or personal finance tools — that can offer you suggestions to cut out unnecessary costs. Your budget may have seen better days, but now’s the time to see where you may be able to cut back to help pay off that debt.

Think of simple actions you can do like canceling subscriptions you never use or negotiating down bills. You’d be surprised at how a simple 15-minute call can save you hundreds of dollars. (Or, Charlie can do it for you!)

Take on a Side Hustle

If you don’t have enough money to pay down your debt, consider taking on a side job to earn more… There are lots of options — think grocery delivery services to mystery shopping gigs — all you have to do is find one that works around your schedule.

How to Prevent Future Debt Hangovers

As the saying goes: an ounce of prevention is worth a pound of cure. Take it as a lesson learned in that it pays to be prepared. It’s never too early to open a savings account to start your holiday spending fund for the upcoming year. And oh yeah, set a budget!

And when you do, make sure to take as much as you can into consideration. Think gifts, wrapping paper, and transportation costs — everything adds up!

It’s not sexy to think about preventing debt, but your future self will thank you when you leave the holiday unscathed and hangover-free.

This article was originally published at HiCharlie.com

 

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Debt And Digital Nomadism Are More Compatible Than You Think

In a world where we are overwhelmed by credit offers and related debt from college, the idea of selling off most of our physical possessions and having an adventure can be intensely appealing. Excluding home mortgages, the average American currently carries nearly $40,000 in personal debt, a crushing financial and psychological burden for many adults. Most studies do not consider the home mortgage when evaluating debt burden, but selling a property is actually one of the most effective ways to put a huge dent in your debt quickly.

Liquidating home equity usually results not only in the elimination of the mortgage payment but additional funds that may be put toward other debts as well. However, most homeowners argue the cost of rent will be equal to or greater than their mortgage payment. For the digital nomad, however, this is not the case. If you have the option to simplify your life by choosing to travel affordably and forego ownership of most of your larger, debt-carrying possessions, you could operate on a very reduced budget. This would allow you to allocate your “adventure savings” to paying down student loans or other debt instead.

Adventure Is Waiting

If buying a one-way ticket to a foreign country, loading up your backpack, and never looking back sounds like the adventure of a lifetime to you, you could be a digital nomad just waiting to find your true calling. While historically the “backpacking across Europe” phase of most adults’ lives happens in their early or mid-20’s, the internet has facilitated a digitally nomadic and fully sustainable professional lifestyle. That experience can last, literally, the span of their working life. In fact, many freelance workers find they can actually reduce or pay off their debts and travel the world at the same time by fully embracing this lifestyle. Most leave the lifestyle to “put down roots” eventually, but their lives are enriched and their perspectives immeasurably broadened by their previous nomadic existence.

This Lifestyle Is Fully Accessible

Many people assume that digital nomads either are independently wealthy and fund their travel in this way or are painfully impoverished and often have nowhere to stay other than an airport lounge while they wait for a standby flight home. The truth is far different. Most digital nomads are freelancers and work as much or as little as they want from anywhere they wish to stay. Software developers, writers, graphic designers, and even travel nurses find digital nomadism an appealing and viable option. There are a variety of customer-service oriented career options for digital nomads as well, and many companies, including loan consolidation organizations, offer online training programs tailored to the specific needs of service organizations.

Budgeting For Affordable Nomadism

Digital nomads traveling professionally quickly learn that it is not just affordable but also necessary to avoid hostel living. While cheap on the face, hostels can be noisy and usually are priced per-night. This makes them far more expensive for long-term nomadism than short-term rental options on platforms like Airbnb. These rentals usually provide a more affordable, all-inclusive stay that does not usually require separate payments for wi-fi, utilities, or parking. Many hosts will negotiate a discounted rate if you let them know how long you plan to stay.

Digital nomads should plan to live in walkable areas and utilize public transit rather than staying in a location that will necessitate car rental or even regular use of ride-sharing options. Of course, your food budget can be kept to a serious minimum by eating in and keeping that grocery list of local fare on the low end of the spending spectrum.

Income Expectations And Demands

Your income as a digital nomad will depend on the amount of time you dedicate to working, if you are paid hourly, and the rate of pay or scope of projects you take on. If it sounds a lot like working in an office, that is because this part of your digitally nomadic life will be largely unchanged. Do not be discouraged, however. This is a good thing. It will enable you to exert control over your income and create a predictable model for your living expenses, including paying down your debts.

If you are a freelance software developer, for example, you may earn an annual income of around $130,000. That is assuming you are working basically full-time. If you worked in any of the “best cities for software developers,” such as San Francisco, Seattle, or San Jose, then you would face living expenses that would dwarf your six-figure income. Living as a digital nomad, however, you could live in Lisbon, Portugal, and spend just about a tenth of your salary each month on living expenses. If tiny, exotic islands are more your style, then you might consider San Pedro, Belize. There, you would spend only about 9 percent of your monthly pay on living expenses!

Breaking Down “The Boring Stuff”

As a digital nomad, you have the opportunity to live a life of high adventure. You can take the time to see amazing and new things every time you shut down your laptop and close up shop for the day. However, there are a few “boring” details to consider, like paying taxes, dealing with healthcare, and handling insurance issues. As far as your taxes go, you may qualify for the foreign earned income exclusion that allows you to exclude certain income from your taxes and deduct some foreign housing amounts. If you are self-employed, you will still owe self-employment taxes, however. You should certainly consult a tax professional about your eligibility for these savings.

As far as healthcare and health insurance goes, it will be important for you to distinguish between travel insurance, which will not apply to you if you remain abroad long-term, and international insurance. International healthcare plans provide coverage and access to providers if you plan to live abroad for a year or more. These plans range in cost from a few thousand dollars to tens of thousands of dollars. Clearly, your health will play a big role in determining your digital nomad’s budget!

Putting A Dent In Your Debt

Digital nomads’ budgets are just like any other household budget; it’s just that your household moves from place to place. Also unlike a traditional household,  you can move your home to wherever meets your budgetary needs without putting a property on the market or breaking a lease. Your digital nomad lifestyle actually lends itself to extreme savings, so make paying down your existing debt a significant part of your monthly budget. Those savings can go toward a financially free future while your adventure funds the process.

Chrissy Helders

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