Financial and Consumption Habits

Part of building a strong financial recovery is understanding how daily decisions and spending habits affect your finances.

Here are some spending and borrowing tips that can help you make financial decisions that will help you remain debt free long after your insolvency is completed:

• Skip this, get that. Looks for ways to cut back on small dollar items that add up by finding cheaper alternatives. Rather than buying a coffee or two every day, make a bigger pot at home and bring your coffee in a thermos. If you wonder how much those daily habits cost, try this handy daily habits calculator.
• Make smart decisions about what you buy. Understand the difference between what you need and what you want. Postpone purchases until you can afford them and weigh the benefits of buying luxury items against having extra money in the bank for the future.
• Use digital tools to save money. There are many online couponing and savings sites and apps like Flipp.com or SnipSnap that can help you save money. Another good site, Squawkfox.com provides practical tips on how to live well but frugally.
• Don’t use credit cards for every day purchases. If you pay for everyday items like groceries, gas, clothes and entertainment with cash or a debit card, you are much less likely to find yourself with credit card bills you can’t pay.
• Use credit cards for payment not debt. When you are able to once again get a credit card, only charge what you can pay in full every month. If you don’t pay off your purchases in full each month, the interest charged on your account will make purchases cost even more. As little as $100 on a credit card when you pay only $10 a month towards that purchase will cost you more than $15 in interest. To find out how much your purchase on credit will cost, try this cost of credit calculator.
• Read your bill statements every month. One benefit of looking at your bills each month is you may find errors or charges that are not yours. Even more importantly, knowing how much you owe every month will help you be aware of how much you owe and make sure you don’t miss any payments. This is very important if you are trying to repair your credit.
• Don’t use debt to pay off debt. When you use one credit card to pay another or take out a payday loan to make payments or pay for groceries because your credit cards are behind, you are not reducing your balances. Instead, you are making things worse because you are paying even more money in interest.
• Build a bigger down payment. Borrowing money for a car or house is often considered good credit. The larger your down payment, the more likely you will be able to negotiate a good interest rate. A larger down payment will keep your monthly payments lower and save you money in the long run making it much less likely that you will turn to credit because you run short of funds.