How Your Confidence Affects Your Finances, Part Two

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For part one of this series, go here.

In our earlier post, we talked about how debt can seem insurmountable to some, as documented in the movie, Maxed Out. Unfortunately, some people feel their debt is so overwhelming that they take their own lives. That includes a college student who owed $12,000. While $12,000 is not a small sum, it’s not worth taking your life.

Debt and Your Self Worth

Our culture recognizes that many people identify their worth by their jobs. When we meet someone new and tell them what we do for a living, we say, “I am a teacher” or “I am an engineer.” We literally take on the identity of the job that we do.

What is not discussed is that we often measure our worth by our debt, also. If you’re in debt and struggling to make your monthly payments, it’s easy to feel worthless and hopeless. When my husband and I finally faced our nearly $57,000 in credit card and student loan debt, I felt embarrassed and stupid. After all, how did I let myself get in this position?

Your Thoughts Can Determine How Quickly You Can Get Out of Debt

Keep Calm Payoff Debt 2You may begin your debt pay off journey as I did–chiding myself and feeling like it was hopeless. How would I pay off this debt that was greater than our annual income? The whole process felt hopeless, and I wanted to give up before I even started.

But through our two year long journey thus far, I learned some things that make paying off debt easier.

  1. Be confident. When I stopped chiding myself and instead decided to encourage myself, the weight caused by debt was lifted. Instead of thinking, “I’m so stupid for being in this much debt,” I thought, “We’ve made mistakes financially, but now we’re on the right path. We’re making strides in our debt repayment plan, and eventually we’ll be out of debt.” This encouraging self-talk increased my confidence and reduced my anxiety. I felt empowered.
  2. Look at the little picture. Sometimes looking at the big picture–the total debt that you owe–can be overwhelming. Instead, focus on the smallest debt. If you put your extra money on the smallest debt, you’ll see progress more quickly. If you owe $60,000 but your smallest debt is $5,000, focus only on that one. Don’t look at your total debt load. You’ll feel elated as you watch your progress paying down the smallest debt.
  3. Celebrate small victories. Encourage yourself every step of the way. Praise yourself when you’re able to pay more off in a month than you typically can pay. Celebrate when you pay off one debt. Shout in your house that the debt is gone. Share it with your friends if they know of your debt struggle.

If you’re in debt, you can either hurt yourself mentally and physically by berating yourself and wallowing in self-pity. Or, you can heal yourself mentally and physically by praising and encouraging yourself through the long journey of paying down debt. Which would you rather do?

How do you encourage yourself when paying down debt?

The Millennial’s Guide To Making Ends Meet

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For a few months now, we’ve seen a resurgence of generational conflict arising from a series of articles written in defense of one generation or in celebration of another. These pieces indicate that baby boomers have lied to millennials, millennials are lazy, all generations are destined for failure. There’s amusing, certainly and perhaps thought provoking—but none of them are right.

The truth of the matter is that the millennial generation is faced with a different set of problems—a generation told that college was the only option for a financial future has left them with mountains of student loan debt and a job that will barely cover the cost of rent. They’re a generation that is well spoken and well educated, but not well employed.

But they’re getting there. In fact, roughly 60% have no desire to climb a corporate ladder in search of the American Dream. As many as 71% have plans to quit existing jobs and work for themselves. The “you can do anything” mentality that has been criticized by older generations is resulting in young people who are willing to take a chance and invest on themselves.

If this sounds like you (or a child or a niece or a family friend), take note—it’s a long and difficult road, both mentally and financially. Fortunately, there are a number of ways to make ends meet as you prepare to be your own boss. By ditching bad habits that might be emptying your bank account and scoping out the passive income options available to you, you’ll be able to pursue your entrepreneurial dreams while paying your bill in time—and maintaining your all-important credit score.

Social Lending

As crowdfunding gains popularity, so does the idea of social lending networks. Such sites (Like Lending Club) provide a platform where the individual is the bank doing the lending. This means that you offer your current money to individuals in approximately $25 increments and charge interest. Some are high risk investments, but others offer a low risk way to make a little bit of extra money with little to no effort.

Real Estate Investing

If you’re already a home owner or in a position to become one, this might be a great option for you. Real estate investment and management is an especially good opportunity if you’ve got a bit of time on your hands. Most landlords make around $500 profit each month, which can really add up.

If you’ve got the property and home, but not the time, there are companies that will manage your real estate for you. For a fee, they’ll take care of maintenance, etc.—leaving you to collect a bit of extra cash.

Work For It

Of course, the easiest way to earn extra money is to simply earn it by performing a job. This is easier said than done, especially if you’ve got a traditional nine to five job. Luckily, there are a few jobs that a person with a college education and a persistent attitude can grab to increase their income.

Many people find plasma donation an easy way to make approximately $200 per month. Though it is considered a donation, plasma donation centers pay you for your time (about an hour each time you visit, excluding the first). Typically, the first donation of the week pays around $20, while the second offers $30. You can donate up to two times every week, assuming there is a day in between.

You might also consider getting some extra work as a freelance blogger. Many sites hire independently contracted people to write for them. Assuming you are able to make deadline, these types of jobs are great because you can perform them at any time from a variety of places. You should expect to make around $10 per entry.

Working for yourself will be no easy task, but millennials will find company in the experience of one another. Whether you’re a budding entrepreneur or a parent to one, let’s celebrate the diverse business experience each generation has to offer!

 

Heidi Andrews roots for the LA Dodgers and the freedom to eat chocolate for breakfast. When she isn’t teaching herself to make those cool designs on espresso drinks, you can find her advocating for financial literacy at The Jason Hartman Foundation, a nonprofit dedicated to improving knowledge across the globe. 

January Financial Reset

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You’ve had your fun.  You spent the holidays with your loved ones, did some frugal gift giving (right?), and probably ate way more than you should have.  But, the new year is upon us, and it’s time to get back to business.  It’s time for a January financial reset.

With tax season right around the corner, there’s no better time to get all your financial books from the last year in order, take a good look at the balance sheet, and decide on the directions you’re going to take your finances in the coming year.  For some of you, that will mean finally getting a handle on your debt.  For others, it will mean finally paying off your debt.  And for more of you, it will mean finding the best ways to make your money work for you as you build your net worth and make strides towards financial independence.

For those in that last group of people, this post isn’t likely to help much, but you might want to take a peek at my Lending Club page for a great way to keep your money working for you.  The rest of you, stick around.

Reformulate your debt

January Financial ResetIf you’ve still got debt hanging around, a new year financial reset is a great time to investigate reformulating it. What the heck does that mean?  It means taking a good look at the debt that you’re carrying, and considering the options you may have to pay it off earlier.

  • Reduce the rates: The worst feature of credit card debt is the interest rate that they like to charge.  12%, 15%, 22%, or more.  The interest payments eat into any payment you make on the debt quickly, and make it that much harder to make any meaningful progress.  If’ you’ve got good credit, consider finding some good 0% balance transfer cards to transfer your existing balances to.  You should be able to find something with a 12 to 15 month 0% rate.  Be aware of the balance transfer fee when you do this, but otherwise it can be a good way to help you make some good progress on your credit card debt repayment.
  • Refinance: In some cases (mostly secured debt) you may want to look into a refinance of the loan.  If you can reduce the rate on a loan and extend the length of it, it can free up some of your debt repayment money to go towards loans with higher rates and speed up your debt snowball.

Recalculate your debt snowball

Now is also a really good time to update all the numbers on your debt snowball plan.  (or debt avalanche if you’re so inclined) Unless you’ve been keeping it updated throughout the year, the numbers are probably pretty out of date, and need to be freshened.  Take the time, while you’re doing this, to determine if you need to move one debt ahead of another, or if you can afford to increase the snowball payment to speed it up.

Seed your budget

Your budget can be the lifeline for your financial life.  It’s a blueprint for how you’re building your financial house.  Even a simple budget can help tremendously, and the beginning of the year is a great time to give your budget a full inspection (or just to start one) and make sure that it’s got all the categories you need, that it’s still balancing, and for planning out where you’re going to focus your efforts in the new year.

Examine your bills

We all get bills throughout the month.  In many cases, we throw them in a pile, then enter them into bill pay, (or, gasp, write checks) and then forget about them until they show up the next month.  While you’re going through your finances from the previous year, pay attention to the bills that you’re paying.  Are there bills that have increased?  How about ones that you meant to cancel the service but didn’t?  Or maybe there are some that you just haven’t called to try and get a better rate for?  Know what time it is?  You guessed it.  It’s time to cancel that service. It’s time to call and see why the rate increased, and if there’s a change you can make to get a better rate.  It’s time to compare your services with their competitors and see if there isn’t a better rate/service available out there.  You may think it’s a waste, but you could end up saving hundreds a month.  And that can quickly make your debt snowball grow!

Keep on your financial path

Here’s the most important thing you have to take away from this post.  You’ve got to keep on that path.  Once you’ve done the things above, you’ve taken some really solid steps on your path to being debt free, but they’ll only work if you keep working with them.  Keep that budget going, keep a close eye on your bills, keep your snowball updated, and know how much debt (and at what rate) you have left.  Whether your debt feels like a mountain, or just a molehill, knowing the what/when/where of it make the climb that much easier.

Will you take the time to do a January Financial Reset?