Why discretionary spending with debt is a bad idea


Never use debt to fund discretionary spending.” ~Roy Sutton

When you’re young you really want to enjoy life, right? That’s perfectly reasonable, surely? You’re fit, you’re healthy, you’re full of energy and there will never be a better time than now to enjoy yourself. If you can’t enjoy yourself when you’re young, when can you enjoy yourself?

If you’re lucky enough to have lots of money then good luck to you. Live life like there’s no tomorrow. The problem is most people are not quite so lucky. Most people are constrained financially, at least to some degree.

Equally for most young people, earnings are quite low when they start out on the road to independence and there are bills that can’t be avoided.

Everyone needs somewhere to live. We all need food to eat. We all need heating and lighting as well. Then there are all those taxes and municipal charges that must be paid too. So for most people there’s probably not a lot left at the end of the month for discretionary spending.

The temptation then is to borrow money so you can have a good time. Going into debt to fund discretionary spending is a really bad idea. So don’t be tempted.

Spend money you don’t have on anything that is not absolutely essential and you will be on the road to the poor house.

Some things you cannot live without. For instance if you want somewhere to live then you’ll probably have the need to buy a house. Unless you’re a millionaire, buying a house will mean a mortgage which is a form of debt. However that is good debt in the sense that you’ll be buying a home which is also likely to be an appreciating asset. So on that chances are you won’t lose.

Interest rates on mortgages are low because the mortgage provider will secure the debt against the property. You fail to pay and they’ll take the property. In this case risk for them would be low, so that is reflected in the interest rates charged.

Debt for discretionary spending is quite different. That will be unsecured debt and so interest rates on that debt will be very high. If the debt is on a credit card then chances are you’ll be paying in excess of 30%. If the debt is in the form of a ‘payday loan’ then interests rates can be anything from 1,000% to as much as 4,000% or even more. Even a small loan can quickly become a massive debt due to the effect of compound interest.

If you’d like to take a holiday or buy a car or have a party or buy the latest electronic gizmo, then save up for it first. For items like these, you only buy once you have the money in the bank to cover the cost.

Debt when it is unsecured is always very expensive and once you get sucked into a large debt hole it can be a real struggle to get out again. Debt enslaves you; it is stressful; and it will keep you awake at night. The pleasure you might get from discretionary spending can quickly turn into a nightmare if it results in debt.

Getting into debt is easy; getting out again can be both difficult and painful. Don’t allow your better judgement to become clouded by your desire for a little pleasure. Everyone wants to have fun but don’t make the mistake of getting your kicks with money you don’t have.

However big the temptation; you will regret it later. Debt is a burden.

That of course is one opinion. What do you think? Your ideas and stories might help other people, so feel free to comment.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

Dealing with debt and curbing your overspending

Do you struggle when dealing with debt? Perhaps you’re looking for ways to curb your overspending. Certainly the burden of debt can be stressful. Surely life would be easier if you could find a way to reduce your debt burden? The problem is where do you start?

If you’re serious about dealing with debt then a good start point is to take a close look at what you’re spending. There are things you must have like a roof over your head, heating and light, and food on the table. Then there are those things you buy that you really could live without. Even for things you must have you can often overspend on these items in you’re not careful.

It is a fact that overspending is one of the main reasons why people get themselves into debt. You’re in the shopping mall or on the internet and you see something that is so tempting and you can’t help yourself. Buying is so easy with your credit card and so you do without considering whether you really need it or whether you can truly afford it.

Well that’s a habit you must change if ever want to be in control of your money and your life. Yes, it is a hard habit to break if it’s been part of the way you live your life for so long. That’s understandable but it’s not impossible. It can be done and it’s an important step on the road to dealing with debt.

So here are a few simple steps to help you to stop spending, start saving and live a life geared toward achieving financial freedom.

1. Admit you have a problem

The first step to curb your overspending habit is to admit that you have a problem. You can’t eliminate a problem until you recognize you have one.

Once you admit to yourself that you have a problem then you need to understand where your money is going. Unless you make a point of identifying where your money is going then it will simply disappear without you knowing where it’s gone.

Keep a journal to record your spending on a daily basis to keep track of everything you spend. Write it down and at the end of each week review what you’ve spent and where your money has gone. You might find that this is a real eye–opener for you.

With this approach you will be able to see what you’re spending on stuff that may not be absolutely necessary. Then it will be easier to develop a clear and concise spending plan whereby you start living within our means. Having a plan can then be the basis by which you start developing the self-discipline to allow you to break your overspending habit.

2. Make financial goals

In developing your spending plan you must also set some realistic financial goals for you and, assuming you have one, your family.

One goal should be to ‘pay yourself first’. What does this mean? It means as soon as you get paid you set a small proportion of your income aside immediately. You could set aside say 10% of your income. That can be used to reduce your debt burden initially and later, when your situation has improved, for savings each month.

By setting money aside when you get paid, it’s a bit like taxes and other deductions against you pay. They all get taken off and you get used to living on what’s left. Putting something aside is an important part of any personal financial spending plan.

Keep your financial goals in mind each and every time you’re tempted to make an impulse purchase or overspend on something you can live without. This will encourage you to make better spending decisions.

And when you’ve reached one of your financial goals, don’t forget to give yourself a little reward. Don’t go overboard of course but achieving a goal will make the reward all the sweeter and it will encourage you in the development of good money habits.

3. Cut up your credit cards

Credit cards can be a convenient medium for making payments but they can also be weapons of mass wealth destruction. When you have a serious debt problem don’t take a credit card out shopping.

Yes, they are a big part of today’s culture and it is might seem hard to imagine life without one. However studies have shown that people spend a larger amount when using a credit card because it doesn’t register with them that they are spending real money. And that’s why they are dangerous.

Essentially using a credit card is simply postponing the inevitable. It is actually real money and eventually the bill for your purchases will have to be paid.

So take the impulse out of shopping and start planning for purchases ahead of time by saving up the cash. You will be surprised at how much you save by not using plastic.

4. Seek out support

When you’re trying to break a habit, it is important to surround yourself with good people who will encourage you and steer you in the right direction when you’re tempted.

That means when you’re going shopping make sure you take someone with you who’s not afraid to remind you that you don’t need whatever it is you’re thinking of buying. Someone you trust who will be your conscience, if you like. Someone who knows your aims and will help you achieve them.

If there is someone who will hold you accountable for your actions, who forces you to recognize your bad habits then this will make your financial goals much easier to accomplish.

5. Take up a hobby

Our shopping habits often stem from the fact that we are simply bored. This is particularly true with shopping online. You’re sitting at home bored so you pick up your iPad or similar tablet and start browsing. Sites like Amazon are very good at closing a sale once they’ve got you. It’s all so tempting. And we’re all guilty of impulse shopping on the internet, at least to some degree.

So next time you’re bored, find something else to do. You could take a walk, go to the gym for some exercise, watch a film, read a book, you could set up a blog and share your thoughts with the world or perhaps just volunteer to help a charity. There are plenty of other possibilities, so just do something other than shopping that appeals to you.

In short, take up a hobby or two and keep your money in the bank.

Conclusion

This is not an exhaustive list but these few tips should help you to curb your overspending and develop better habits with money. If you change your ways you can start winning with money.

Don’t try to ‘boil the ocean’ just take small steps on a daily basis and this will help you kick your impulsive shopping habits. You need to start thinking about where your money is going and where you’d like it to be.

Start today and you’ll be a smart shopper in no time. With a little self-discipline you can go from being a complete spendthrift to becoming a super-saver quicker than you ever thought possible. Become a super-saver and one day you will achieve financial freedom. Achieve that and your life will be a lot sweeter and a lot less stressful.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

How you develop a Millionaire Mindset: Self-Discipline and Money

Financial success and whether you can achieve it does depend on the way you think about money. How you think about money matters, including the way you look at the debt you incur. You need to develop a millionaire mindset if you want to enjoy financial freedom. Money is a precious resource and you should learn to use it wisely.

We are all brought up from an early age to view money in a certain way and the way we are conditioned by our upbringing tends to stay with us unless we choose to change our thinking. You may have been brought up with poor money habits but that doesn’t mean you can’t change them. You can but it takes some effort from you.

If you are to start winning at the game of money then it starts with getting rid of any false ideas you may have and which may be holding you back. Your mind is a powerful weapon and it can help or hinder you on the road to financial freedom.

So reflect honestly on the way you think about money. Figure out exactly what money means to you and how you want it to affect your future.

What are your financial goals? Can you visualize yourself as prosperous and wealthy? Alternatively do you focus more on the negative aspects of your life, perhaps thinking it will never change?

Negative thoughts beget negative thoughts:

Think negatively about money and you’re unlikely ever to have much of it. Essentially you think of yourself as lacking in value and therefore unworthy of having that pot of gold of your own.

Thinking negative thoughts about your future will result in a future for you that is unexciting at best. It doesn’t have to be but to achieve anything it all starts with positive thinking. No one ever got anywhere with negative thinking.

Money isn’t everything, of course. However it is up there with oxygen for a life worth living. It won’t solve every problem, of course, but it does make living a little more comfortable and agreeable. Money can cause more harm than good on occasions but it can also be a force for good too.

So what do you want for your financial future and what does money mean to you and your life? Figuring that out would be a good start.

You don’t have to be a financial whizz-kid:

Money might seem intimidating at times but it’s actually quite simple. It’s just the way we keep score. Money is the medium through which value is stored. It’s easier than a barter system. We do stuff for other people and we’re paid. We can then spend the money we receive at our own convenience to live our own lives.

Money comes into our lives and money goes out again. The trick is to ensure that money in always exceeds money out. In other words you live within your means. So pay attention to the numbers and check them regularly. This is not complicated mathematics. If you can master basic addition, subtraction and percentages that’s about as complicated as it gets. You don’t need to be a mathematics major.

Your success in managing your money and improving your financial skills will depend on you taking small daily steps to gain control and manage your finances carefully. You don’t need to be a city whizz-kid, you just need to care enough to want to improve your situation.

Just keep at it and don’t give up.

Financial discipline won’t necessarily happen overnight but slow and steady progress can be achieved which will improve your situation over time and help you progress down the road to wealth and financial freedom.

If you are consistent in improving your daily money habits then eventually good money habits will become a part of your routine.

Not allocating the time is certainly a crime:

Managing your money and planning for your financial future doesn’t require a lot of time but it does require some of your time and you must set some time aside regularly to ensure that you don’t lose sight of your second most important resource.

For the record; your most important resource is time. You can always get more money but you can never get more time.

Your financial success will be limited only by the amount of time, dedication, attention and hard work you put into to looking after your money and improving your financial education.

Many of the world’s wealthiest people will tell you they didn’t get rich overnight. Unless they were lucky enough to inherit serious money, wealthy people spent years giving it their all and managing their money wisely.

Achieving financial freedom is a worthy goal for everyone. However it you want to be wealthy you’re going to have to work hard to accomplish your goal and allocate time regularly to keeping track of what you earn, what you save, what you invest and the performance of your investments.

Even if you have more modest goals like becoming debt free or building a nest egg for your retirement, you can’t avoid allocating a little time to the process on a regular basis.

Fail to put in the time and you’ll experience very limited success, if any at all.

Everyone has a choice:

Never assume your situation cannot be improved. It can, albeit it will require effort and discipline from you.

Regardless of your situation now, you do have a choice. You can choose to say, enough is enough. Your life can be better if you choose to make it better.

It really doesn’t matter how many mistakes you’ve made in the past. Your past mindset in relation to money doesn’t matter either. The ability to create a better future for you remains in your hands. All it takes is firstly a vision that your future can be better than your past. Secondly you need the will to start making incremental changes and improving things slowly.

You don’t need to take giant strides and set the world on fire. Small incremental steps are fine as long as you keep heading in the direction of your financial goals.

Your mind is a powerful tool which can make or break your success. Wealthy people, particularly self-made rich people, use what is known as the millionaire mindset. This is simply a way of thinking in relation to money and the building of wealth.

Wealthy people don’t purchase items with unsecured and expensive debt. If they need something they usually save up for it first and then pay with cash for their purchases later.

Ironically they often give money regularly to people less fortunate than themselves too. Helping others can be a virtuous circle. Being kind to others can pay handsome dividends. Everyone really can be a winner.

Conclusion:

Develop a positive mindset in relation to money. You’re as entitled as the next person to create wealth from the value you add. Think positively and you will notice a huge change in your life and your finances. Work on developing a millionaire mindset.

Further Reading:

If you want to develop a millionaire mindset then three books you should read are as follows:-

The Millionaire Mind by Thomas J Stanley

This book explores the ideas, beliefs and behaviour that have enabled millionaires to build and maintain their fortunes. The author uncovers surprising answers, showing what it is that makes the wealthy prosper while others feel dejected and beaten by life. If you have an entrepreneurial mind you’ll find this book interesting. It will provide you with road maps on how millionaires found their niches.

The Millionaire Next Door by Thomas J Stanley & William D Danko

According to this book, almost anyone with a steady job can amass a fortune. The authors suggest that most people have it wrong about how you become wealthy. They suggest that wealth is the result of hard work and living within your means. This book identifies seven traits which people with wealth tend to possess. These traits can be learned it says and if you copy what the wealthy do then you can be wealthy too.

Secrets of the Millionaire Mind by T Harv Eker

In this book you will learn how your childhood influences have shaped your financial destiny. You will also learn how to identify your own money blueprint and revise it not only to create success but, more importantly, to keep and grow your personal wealth. Finally you’ll be introduced to 17 specific ways rich people think and act. These include specific action steps for you to practice in order to increase your income and accumulate wealth. The essential message of this book is that if you think like rich people think and do what rich people do then there’s a very good chance that you will get rich too.

If wealth and achieving financial freedom is your aim then you should read these books. If you’d like to take a closer look at them then click on each of the embedded links above. I strongly recommend that you buy your own copies. I did and they have all proved to be extremely useful to me.

And don’t forget; if you don’t have time to read these books then buy the audio versions from Amazon and listen to them when you’re driving or on public transport. Again, click in the link in this paragraph.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

How Debt Prevents You from Achieving Your Dreams

Have you ever wondered what you would do with your money if you didn’t have any bills to pay? Imagine that just for a second. How does it feel? It can be fun to imagine occasionally and dream once in a while but most people think achieving your dreams is something for other people and not them. Most people quickly return to their daily routine thinking it could never happen to them so why bother?

It is a fact that as long as you bear significant levels of debt you’re a prisoner within the walls that debt effectively builds around you. The only way to see outside those walls is to change your mindset and realize that getting rid of your debt is the only way to real freedom.

Have you ever found yourself wishing you could take a nice vacation, put more money into a savings account, or maybe just have the ability to use your money to help others? To have the freedom to use your money in any way you choose? Wouldn’t that be a nice feeling? It’s called financial freedom.

Dreaming is one thing but when reality kicks in and you realize you that can’t do any of these things because you’re actually broke then it probably feels like a big letdown, doesn’t it?

Debt is a dream stealer:

The problem with debt is that it can take control of your life. And once it has taken control of your life it can cause you to lose hope. And of course, once hope is gone, your dreams will start to die and you can experience a vicious circle of misery.

The question is how can you regain hope? How can you break out of the circle of misery? It is possible, of course, but only when you realize that you have a choice. Change can happen buy only if you are prepared to change. Decide you’re going to change and do something about your situation and that can be the beginning of when you regain hope.

The problem with personal debt:

Debt can limit your life options in all sorts of ways. For instance it may prevent you from pursuing a career path that you would otherwise be passionate about.

Work is merely doing stuff for other people in exchange for money. That money then allows you to live and pay your bills. However if you’re bearing high levels of debt, that money must also go towards servicing the interest payments you’re obliged to pay on that debt. So in order to keep financially afloat you must earn more. To put it another way, you must run faster just to stand still.

This is where debt limits options. Ironic perhaps but true, more options tend to open up when you aren’t constantly pressured to ensure you have a certain level of income each month. Debt has the ability to keep you stranded in a job you hate just because you cannot risk having insufficient income.

Why is that so? Well suppose you make a decision on your ideal career but you realize it will mean you re-training or taking another professional qualification. Perhaps it would mean you returning to full-time education for a period of time, say one year or two years.

In the long term that may increase your earning potential but when you’re carrying debt your focus is on the short term and making sure you can meet the interest and debt repayment schedule. So you can’t go in the direction you’d like to go because you can’t put your current income at risk.

Essentially debt is a form of slavery. It is financial slavery. Yes there are times when it cannot be avoided. Taking out a mortgage to ensure your family has a home in which to live for instance. However all too often people experience a significant debt burden for no other reason than they’ve spent far too much money they didn’t have on things they didn’t need or could have lived without. And in doing so they’ve used unsecured debt like credit cards with extortionately high interest rates.

Debt can be a source of stress:

Another way to think about debt is that the burden loads you down with stress and frustration. This can make it impossible for you to focus on those things that really matter in life such as spending time with family and friends. It can also mean you miss out on some of life’s more exciting experiences such as travel to interesting places.

Whilst carrying a debt burden, you’re not able to save, invest or give. It can be highly rewarding to give and help the less fortunate but with debt you will simply be further enriching people who are already wealthy.

Debt will steal your dreams and it can steal your life. It’s a form a bondage you can do without, so quit digging yourself into a hole and start a new chapter in your life.

Get out of debt as quickly as you can:

Whatever your mindset regarding the debt that surrounds you, remember it doesn’t have to be this way. You have the ability to change everything starting right NOW.

Don’t put it off until tomorrow. Get your act together, make a list of your debts (no matter how scary this is), and start working on a plan of action.

Discipline yourself. You will make mistakes, just don’t give up. Financial freedom and the ability to dream big can be within reach.

Further Reading:

At this point some further reading might appeal to you. If so, one book I recommend you read is The Richest Man in Babylon by George S. Clason.

This book is a very easy read and a timeless classic. It’s one of the most useful books I’ve ever read and essentially it contains the financial success secrets of the ancients.

This classic holds the secret to person wealth and financial freedom. This book holds the secrets to acquiring money; keeping money; and making sure your money is earning money. It will also provide you with a cure for empty pockets or a lean purse.

It’s well worth the cover price and you can check it out on Amazon if you CLICK HERE.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

 

4 Signs your debt is out of control

Are you burdened with debt? If so, do you worry about how you’re going to pay the interests payments, let alone reduce the debt? Would you say your debt is out of control? Then again, perhaps you’re not sure whether it’s out of control or not?

Certainly debt is becoming an epidemic leaving those in its wake feeling desperate. It is a fact that debt enslaves you and the burden of debt will keep you awake at night. And of course debt can be extremely stressful, particularly when it feels like everything is out of control.

There are few things more terrifying than waking up each day knowing you owe thousands of dollars, pounds, dinars or yen in debt. Whether it’s credit card debt, car payments, student loans or any of the various forms of unsecured debt if will take you a lifetime to pay off and that’s a terrible burden to bear.

It you have any concerns about the levels of debt you bear, you’re not alone dear reader. This is a problem which affects many people from single moms struggling to make ends meet to CEOs of major corporations. Debt affects people from all walks of life. And it’s easy to get into a situation where suddenly you realize that you’re in over your head.

Now you may be wondering if there are signs that will suggest whether you’re heading for disaster?

If you are to enjoy peace of mind and a lifestyle lived within your means, then you must first acknowledge that you have a problem. Which in turn means you must resolve to dig your way out of the hole you’re in before it’s too late.

So what are the signs you must consider? Here are four:-

1. Living Payday to Payday:

Do you find yourself having no money immediately after you’ve been paid?

Perhaps this is an experience you’ve had recently? Your money comes in and your money goes straight out again. The result is you left wondering where it all went and why.

A recent statistic suggested that around 76% of Americans live this way. Perhaps that’s an exaggerated figure but probably not by much and it’s the same in many developed economies, people living beyond their means.

Now you work hard for your money don’t you? In that case, doesn’t it make sense to take control back and start managing your money wisely? Perhaps having a budget and living within your means?

2. Creditors are calling:

Ever had that experience where you owe people money and they’re knocking on your door demanding repayment? It’s not a nice experience that’s for sure. Collection calls can ruin your day and your reputation too.

Creditors call at the oddest hours because they want to ensure they catch you at home. They can often be aggressive and nasty too. This is stress you really don’t need.

If you get to the point where your bill has been sent to a debt collection agency because you can’t or won’t even make the minimum payment then you have a serious problem. This is when you know your life is getting into a real mess. And you really don’t need this much stress do you?

When creditors are calling this is a sign that your debt needs reducing and your household needs a budget.

It means you’re in a financial hole and so when you’re in a hole your first action must be to stop digging.

3. Impulse Spending:

Retailers love impulse spending and they have lots of tricks to bounce you into buying things on impulse. They place some item they know you can’t resist in a place you just can’t miss. You see it and you buy it. Well it’s hard to say No to your inner child, isn’t it? We all do it, occasionally.

The problem is if you buy stuff you don’t really need on impulse that’s money that could have been used to reduce your debt.

Impulse buys can lead to a mountain of debt if you’re not careful. The problem is you usually buy with a credit card which comes with very high interest rates. When you get the bill for your credit card if all you do is make minimum payment then the magic of compounding will very quickly turn a small debt into a large one.

If you can have your money budgeted out each month this can reduce the temptation for impulse buys because you have already told your money where it is going ahead of time.

It’s a good idea to know what you’re money is committed to and it’s an even better idea to say No to your inner child. Well it is if you what to avoid the stress that accompanies a debt burden.

4. Money Fights:

Possibly the greatest source of conflict in marriage is money, or lack of it.

Money fights tend to happen when you and your significant other are not on the same page regarding the flow of money in and out of the household.

Naturally this is a source of stress and frustration in the marriage and is one of the biggest causes of divorce today.

You both need to be on the same page where money is concerned. You both need to discuss money and make sure you agree a spending plan that will work for both of you, whilst minimizing the risk of incurring unnecessary debt. You should both know what to expect where money is concerned.

Conclusion:

If any of these signs sound familiar to you then it’s probably time to start thinking about how you can cut down on your spending and start getting rid of whatever debt burden you may have.

Dumping debt is not as hard as it may sound. It’s not easy of course but with careful planning and discipline it’s not difficult either.

A written budget is a good way to start pulling yourself up from the depths of debt despair. And you needn’t worry because there are plenty of resources out there to help you get started.

The hardest part is the change of mindset you’ll need. See yourself not as a spendthrift but as someone who chooses to manage and spend money wisely. Someone who lives according to a proper spending plan

If you stick to your spending plan you’ll be on the first leg of the journey towards a lifetime of financial freedom.

Financial freedom means no stress where money is concerned and not having to worry about how you’ll settle the next bill.

Financial freedom is peace of mind and that is wonderful thing. Even if you’re not there yet I’m sure you’ll recognize it as the ideal place to be.

Of course this is one opinion. What do you think? Do you have any suggestions of other signs people might consider? Do let us know. You could be of great service to other readers.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

When is debt a bad idea? And does it matter anyway?

I hate being in debt. If I don’t have money, I just tighten my belt. ~Rula Lenska

Do you carry a debt burden? Almost certainly, we all do. Debt is just part of life, surely? Debt cannot be avoided, can it? Yes, that’s true, at least to some extent. However there’s good debt and then there’s bad debt. The obvious question is when is debt a bad idea?

All personal debt is a burden to some degree. It may be a burden you cannot avoid but it is no less a burden for that. However consider the good versus the bad.

Buying a house for instance requires that you take out a mortgage, which is a debt of course. As long as you don’t overstretch yourself, mortgage debt usually is manageable. With a mortgage the debt is secured against your property, so the risk for the lender is small. If you fail to pay, the lender simply repossesses the property and sells it to recover their money.

So because the associated risk to the lender is low, interest rates on secured debt are low. Coupled with repayment periods typically around 25 years, the monthly repayments are usually not significantly different to what you might pay if you rent a property. However a mortgage means that eventually you will own the property. So from your standpoint that is good surely? What you might call good debt.

You need a roof over your head, so buying with a mortgage makes good financial sense because at least you will own the property in the future. And you should enjoy some capital appreciation over time on the value of the property too. That’s not guaranteed of course but historically that has been the experience so far, certainly in Britain.

So when is debt a bad idea? When it is unsecured debt. And what is unsecured debt? It is debt against which nothing valuable has been put up as security. If you fail to pay then the lender has nothing it can sell on to recover the balance outstanding.

And because unsecured debt has no form of security then lenders charge high interest rates to compensate. They recognise that a proportion of their clients will fail to repay loans, so those that do repay essentially pay extra to protect the lender from any losses due to non-payment.

Occasionally even unsecured debt cannot be avoided. For instance young people just starting out might need some basic items of furniture for their homes, like bed, tables and chairs. These often come with hire purchase arrangements.

So when is debt a bad idea really? Well its debt incurred through the reckless use of credit cards, store cards or a payday loan. This debt is not secured against anything but it comes with very high interest rates.

Credit card or store card debt can have an interest rate up to around 30%. In the UK, payday lenders can often charge interest rates equivalent to 3000%, 4000% or even 5000%. It’s amazing that people fall for them but I guess if your desperate sometimes it’s a case of ‘needs must’.

The compounding effect of high rates of interest will quickly turn small sums borrowed into enormous sums owed. And that’s when people really do become enslaved by their debts. And that’s when it matters.

It seems to me that far too many people borrow money in the form of unsecured debt to purchase discretionary items. That is items they could live without, if push comes to shove. Now borrowing money is this way is a really bad move. Not just bad it’s plain stupid.

I recommend that you follow this simple rule: If you can live without it, don’t use debt to buy it.

Yes of course it’s nice to have the latest smartphone or the latest television or whatever but is it really worth the pressure of unnecessary debt? When high interest rates start pushing up the sum outstanding significantly, will the burden of this unnecessary debt still seem worth it? Probably not.

Wouldn’t it be better to wait until you’ve got the money instead? Wouldn’t it be better and cheaper in the long term to save up and buy the product with cash? You’ll appreciate the item so much more too.

Being indebted is just a form of slavery. It’s as simple as that really. And, once again, that’s why it matters.

For as long as you owe money you can never be truly free.

If you’re debt free then you’re stress free too. Wouldn’t you prefer to be debt free and stress free?

Good debt will help you but bad debt will make your life a misery.

Conclusion:

When is debt a bad idea? When it’s unsecured debt at high interest rates used to buy stuff you could live without. And does it matter? Yes, it does, because debt enslaves you. If you only take one message away from this article then that is it.

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How to turn your yearly income into your monthly income

Are you one of those people who feel you should be earning more than you do? Would you like to know how to turn your yearly income into your monthly income? To have enough money to enjoy the lifestyle you’d love?

Now you’d like a greater income but you don’t know how, right? Perhaps you feel big money never flows to people like you? Well don’t you believe it. With the right approach you too can have a lot more money than you have right now. You too can become wealthy.

The question is where do you begin? Well you can start be understanding the Law of Compensation. In the video included here the American, self-help guru Bob Proctor explains that income is earned according to the Law of Compensation.

The Law of Compensation

Bob explains that the Law of Compensation states that the amount of money you earn will always be in exact ratio to the following three points, namely:-

  1. The NEED for what you do.
  2. Your ABILITY to do it.
  3. The DIFFICULTY there would be in REPLACING YOU.

Now you have no control over points 1 and 3, so you must concentrate on point number 2. You must be constantly honing your skills and become a master of whatever you do.

That said, becoming a master of what you do is only part of the solution. To earn more you must decide on your strategy for earning money. In the video Bob Proctor explains that there are in fact only three strategies for earning money.

The Strategies for Earning Money

So what are they three income earning strategies? Bob Proctor describes these are M1; M2; and M3. In more detail that means:-

M1: Trading your time for money.

Essentially this is paid employment and it is the way that 96% of people earn an income. The problem is that, unless you’re a Wall Street banker, you’re unlikely to get rich this way. In fact it probably explains why you’re not rich right now.

M2: Invest Money to Earn Money

Assuming you’re working for the man as a salaried employee, you can start saving and gradually as your savings grow you can invest your money in stocks, bonds and property and over time your investments will start generating an income of their own. That’s great but you need to know what you’re doing and, if you have nothing now, it will take some time before you can start generating anything approaching a useful extra income.

Of course should you have a sizeable sum of money right now then this might be a solution but for most people it’s not really, which is why only around 3% of people make an income this way.

M3: Multiply your time with multiple sources of income

Establishing multiple income streams is where you can start making serious money. Even fewer people make an income this way, around 1%, but that has more to do with the fact that most people fail to recognise it’s potential.

Now let me make one thing clear, having multiple income streams does not mean working multiple jobs. It means having income streams that will earn money for you even whilst you’re sleeping. M3 is the income strategy that will help you earn far more than you earn now. Certainly it will if you do it right.

Bob Proctor offers the example of Network Marketing (also known as Multi-Level Marketing) whereby not only do you sell products but you also create your own network of sellers which means when they sell you get a part of the commission generated on those sales. The best network marketers have made a lot of money this way but it’s not the only answer to generate multiple stream of income.

The internet offers multiple ways of getting rich on line nowadays. For instance you can use Amazon as market place and sell products with fulfilment (delivery to customer) handled by Amazon. You can also generate commissions through affiliate marketing with Amazon, as well as others like Clickbank and Commission Junction (CJ). These can be great ways to make money whilst you sleep.

Blogging and Vlogging are other ways of producing income streams too. There are numerous ways for the ambitious and the determined. In fact it’s never been easier for people prepared to put in the effort.

So listen to what Bob Proctor has to say and be inspired to take action now.

Further Reading:

In the video, Bob Proctor makes reference to Think and Grow Rich by Napoleon Hill. Think and Grow Rich is a classic of the genre. Originally written in the 1930s but it’s still around today and still very popular. And it’s still around for a reason. It’s exceptional and definitely worth adding to your personal reference library. I have my own copy and you can take a look at the book if you CLICK HERE.

Bob Proctor himself has also produced some excellent self-help books too and you can take a look them if you CLICK HERE.

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How to get out of a financial mess

I have only myself to depend on for my financial stability. ~Marie Helvin

It’s very easy to get yourself into a financial mess. You want it all and you want it now. It’s not unreasonable to want some fun, is it? And you want to spend your money on lots of new clothes and exotic weekends away with your friends too. As a result, your money’s spent before it’s earned.

No worries. There’s always your flexible friend to pay for everything. Well there is until you hit your credit limit. Then your wardrobe is cluttered with clothes you never wear but you’re not sure how you’ll pay off your credit card debt. And soon a small debt becomes a large debt and you’re in the financial mess you were confident you could avoid.

Does this sound like you? If it does, you’re not alone. However if you’re in a financial mess and you’re not sure who to blame, take a good hard look in the mirror.

It’s not the fault of the government. It’s not the fault of your current or previous employers. Your parents are not to blame either.

You are captain of your own ship. Start taking responsibility for yourself and your financial well-being. Stop wasting your money. Being sensible with your money might be boring but it’s less stressful than the alternative.

If you’re in a financial mess, don’t moan about it. Do something about it instead. And that starts with paying off debts and spending your money wisely.

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Which infomercial course leads to the most money?

The safest way to double your money is to fold it over and put it in your pocket. ~Kin Hubbard

Looking for an easy way to make money? Join the club. We’re all looking for the easiest way to generate a good income, so we can enjoy a decent lifestyle. That’s reasonable surely? Perhaps but because there are people looking for the magic formula for generating effortless income there will always be people offering products supposedly with the answer.

How often do you see those ‘infomercials’ on late night television, particularly in the United States, promising great wealth which they say can be acquired without any real effort from you?

All you have to do is buy the course being advertised, follow a few easy steps and then the money will start rolling in faster than you can count it.

The sales pitch on these infomercials is always the same. They tell you that in the series of books and/or DVDs on offer lies the secret business formula that only the seller knows but from which you can benefit if you just phone the Freephone number included on the screen and give them your credit card details.

Presumably there are people who actually buy these courses and maybe some of those people do benefit from their purchase. However for most people I suspect purchasing such a course does not lead to riches. In fact I would bet money that once purchased mostly such courses are put in a drawer or on a bookshelf and quietly forgotten.

Even for those people who diligently follow the course right through to the bitter end it’s unlikely they’ll ever experience the promised riches. The only people who get rich are those peddling dreams in the form of these courses.

You see there is only one secret formula for business success. That is a lot of hard work providing great products at competitive prices which solve real problems for your customers and which are delivered with excellent customer service.

The idea that money can be made effortlessly is simply not true. It never has been and it never will be. If making money was that easy then everyone would be doing it and we’d all be multi-millionaires.

Don’t be fooled with promises of easy money. Don’t be persuaded to part with your own money by someone peddling a dream. Remind yourself that whenever it seems too good to be true then it usually is. Remember that and you won’t go far wrong.

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3 of the less obvious investment principles

If you’re working on your financial education then here are three of the less obvious investment principles you should always bear in mind:-

1. Fear is your friend:

As anyone with an interest in investing will recognise, financial markets by can be volatile and the extremes can be a challenge for even the most experienced investors. Volatility goes with the territory.

There are times when it all feels like a bit of a roller coaster ride. So if you’re going to profit from being an investor then you do need to have your wits about you. Feeling fearful occasionally goes with the territory too.

Fear is a natural emotion which keeps us sharp and it keeps us focused when our personal security could be at risk. So fear is a good thing. It serves to protect us against threats to our safety. Fear is our friend.

Even when it comes to your financial safety, fear is your friend too.

In troubled times we must be careful not to react in haste but remember that our instincts can be a powerful guide to when action is necessary.

That said, with investment, those times when others are truly fearful can be an excellent buy opportunity for the savvy investor. Calm will always return to the market and the savvy investor will have picked up some bargains amongst all the drama. As Baron Rothschild once said, the time to buy is when there’s blood on the streets.

2. It’s never different this time:

Whenever there’s a speculative financial bubble, how many times do you hear people say, it’s different this time? Somehow they think that the laws of financial gravity can suddenly be defied.

From property bubbles to the dotcom bubble people were keen to tell us all that those old laws of finance no longer applied. They believed that prices could keep going up and up and up without any reference to the point at which prices were no longer consistent with anything close to a sensible valuation.

Go back further to the day of the tulip bubble and the South Sea bubble and I’m sure people were still saying it’s different this time.

The nature of a speculative bubble is always the same. Something becomes fashionable and the price of that perceived asset starts to skyrocket, everyone goes crazy and people suddenly feel they must get in on the opportunity before they miss out.

The really savvy people who managed to get in early on the opportunity sense what’s happening, see the asset has become over-priced and they recognise that if they are to turn a profit they need to get out quick. Sentiment turns; early movers do turn a decent profit; and all the mugs lose their shirts.

The harsh reality is that when you spot a bandwagon on which to climb you’ve already missed the boat. I must apologise for the mixed metaphor but remember this; it’s never different.

Irrational exuberance drives prices beyond the point at which they are supported by any real financial logic. When that becomes obvious to everyone, the bubble bursts and prices coming crashing down.

As the great Warren Buffett once said, a pin lies in wait for every bubble and when the two eventually meet, a new wave of investors learns some very old lessons.

If you’re an experienced old hand at the investment game you might just have mastered the art of timing with these things. If not, you’ll steer well clear if you’ve got any sense.

3. Little and often:

Over time water can form great caverns in rock. It doesn’t happen overnight. It happens by the constant drip, drip, drip, effect of water over years and years and years. When it comes to saving much the same applies. It is those regular small amounts that over time can build into substantial wealth.

Regular saving is a good habit to develop and savings accounts provide a reliable place for your emergency fund and also a means for building capital sums for the purchase of other forms of investment.

No one has ever become seriously rich by investing in savings account alone of course. The gains from savings accounts will always be relatively small and over the medium to long term are unlikely even to keep pace with inflation. Nevertheless regular saving this way is a good starting point in wealth creation.

Once you start to build a decent sum you can then look at other forms of investment such as stocks, bonds and property.

Savings accounts are not risk free if that’s your only form of investment. Focusing only on a savings account would mean you miss out on better potential returns elsewhere.

However it is the starting point and by putting a slice of your income away each month it is the first step to take in building capital.

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Life is short and it’s later than you think

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.

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