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How to Change Your Debt Mindset

When it comes to being in debt, we all have a lot of preconceived notions surrounding the situation. After all, nobody wants to be in debt. But, in today’s society, it is very common to start out adulthood in debt right out of the gate. And even if you get to a point where you are able to get out of debt, it can be so easy to slip right back into it. So, if you are currently in debt, there are some great ways to change your debt mindset to help you finally get out of debt. And hopefully stay out of debt, while you are at it.

How you got into debt in the first place

The first step to changing your debt mindset, is to take a very hard look at how you got there. After all, if you don’t know how you got there to begin with, you can easily fall right back into debt.

So, begin really taking a deep dive into your financial past. This includes not only how you have been spending money, but how those money habits and beliefs formed in the first place. Ultimately, our perception of money begins at very early ages and grows from there. So, if your parents didn’t have a great relationship with money, or they didn’t talk to you about it, then it stands to reason you developed a similar mindset.

Beginning with your money story and/or beliefs that have currently shaped your perception of money is what can really help you get to the crux of the issue. Once you have figured out where you came from, and why you believe what you believe, then you can begin to change.

Change takes time, for all of us. But, if you don’t want to repeat the same harmful patterns, change must occur.

What’s your why?

In order for that change to not only occur, but be a permanent change, you have to have a strong why. What this means is that you need to have a very good reason why you want this change to occur. Living in the same damaging cycle over and over again can be very exhausting. It can wear you down and cause all sorts of mental breakdowns. Some of the most common include:

  • Depression
  • Anxiety
  • Lethargy
  • Insecurity
  • Anger

In order to break these cycles, a strong why is necessary. Having a strong why is not only important to break harmful financial cycles, but it can be seen a lot when people want to change their health for the better. Many people say they want to live stronger, healthier and skinnier, but when it comes down to actually doing the work, they fall short. This is because they haven’t determined their why yet.

So, determine your why to begin really reshaping how you think about money and finances. Some great reasons “why” people might want to change their debt mindset are:

  • Don’t want to live paycheck to paycheck anymore
  • Want to be able to travel
  • Dreams of retiring early
  • Want to change careers
  • Aspirations of a better living situation
  • Want to be able to go through day to day life without the constant stress of money

Even if none of the aforementioned speak to you, it’s important to find your driving factor in order to create the change. So, what is your why?

communicate openly

At this point, you have already determined how you got in the debt mess in the first place and your why to get out of it permanently. Which is awesome! However, this new mindset needs to be communicated openly with everyone in your world.

Whenever we change something foundational about ourselves or our lives, it has a tendency to throw those around us for a loop. A good example of this is when somebody who has smoked most of their life, suddenly decides to quit. This is already an extremely hard habit to break. But, if you don’t have the support of those around you, it can become exceptionally easy to fall back into old habits. Especially if anyone around you still continues to smoke.

The same can be said when people are trying to lose weight, work out more or just trying to change their eating lifestyle. Misery loves company and most people don’t want you to change because it’s familiar the way it is.

Therefore, you need to be comfortable and confident enough to communicate exactly what you are changing about your life and why you need their support to make it happen. If the ones you love can’t support you on this healthier financial journey, then that might be a bigger issue all in itself.

debt mindset summary

Overall, changing your money story and your debt mindset can be a difficult road to travel. In order to really be effective with changing your mindset and your money story, you have to start at the beginning. Dig deep into how you got where you are and why you believe what you believe about money and finances.

Then move onto your why. Why do you want to change your perception of money? What is the bigger picture you are trying to accomplish so that you can live a happier and more well balanced life?

And last, but not least, then you must communicate this information to your loved ones. Explain why you want to change your perception of money to get out of debt and what you want to gain out of it. Ask them to help you stay on track and motivate you.

Take this deep dive and begin the journey to make these changes. If you do, and are willing to put in the work, the rewards can be outstanding.

Have you ever considered changing your debt mindset to change your financial life? If so, how did you do it and what were the results?

How We Bought Two New Used Cars With Cash

We have been hitting the road towards debt freedom pretty hard for the past three years now. The car loan on one of our cars was the last big thing we had to get rid of before we could start throwing more at the mortgage. How to get rid of the car loan faster was something that had been vexing me since the beginning of the year. I was getting close to an answer to pay it off faster, when it suddenly happened. We were finally able to get rid of the last car loan, and buy two new used cars, with cash only. This was a miracle! Read more

5 Financial Truths You Need to Face Up to NOW

This post isn’t for all of you, but I’d be willing to bet that if it’s not for you, you know someone that it is for. If you’ve got your finances together but know someone who desperately needs to get theirs together, please consider sharing this post with them if you think it will help them. 

Every once in awhile I feel a desperate urge to issue a wake-up call with those struggling with paycheck-to-paycheck living. Today is one of those days. Read more

How to Find the Best Home Equity Loan Rates

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We’re pleased to share this guest post (with my thoughts) from our friends over at The Simple Dollar. No compensation was given for this post.

A home equity loan can be a convenient ways to get cash, whether you’re looking to make improvements to your home, consolidate debt or even start a small business. But a home equity loan’s costs can vary significantly based on the rates that you get. The better your rates, the cheaper your loan — the cheaper your loan, the more money you can actually borrow. The team at The Simple Dollar dug into the industry to make sure you understand how these loans work and what to look for. They put together a lot of great information and research on everything you need to know about getting the best home equity loan rates. You can also consider a reverse mortgage.

What Impacts Your Home Equity Loan Rates?

The Current National Averages

Home equity lenders tend to have a base rate for their equity loans, which can vary depending on the current economy and the federal interest rates.

The Lender

Online loan companies tend to have lower rates than brick-and-mortar companies. Likewise, lending companies, banks, and credit unions will all have different rates, calculated based on the amount of risk that they personally are willing to take on. Riskier lenders will have higher rates but lower requirements.

The Borrower

As with any type of lending, your personal credit score and credit history is going to have a significant impact on the rates that you can acquire. For that reason, it’s usually best for you to improve your credit as much as possible before you even apply to loans.

Get As Many Quotes As Possible

You should be comparing multiple loans before you consider any particular lender; the rates and terms vary so significantly throughout lenders that you won’t be able to know whether you’re getting a “good” rate without a comparison. One of the fastest and easiest ways to get multiple quotes is to fill out an online request form. There are many companies such as Lending Tree that will connect you to a variety of lenders, each of which will tell you how much you can borrow and what your interest rate will be.

Improve Your Credit Score

As mentioned, your credit score has a significant impact on your borrowing rates. Begin by pulling your credit reports and correcting any mistakes — a common mistake is misreporting the limit on your credit cards. Once you’ve corrected any mistakes, you should take action to improve the amount of credit you currently have out. Pay down your credit cards and other loans, but don’t close any lines of credit. Closing your lines of credit can actually have an adverse effect.

Your debt-to-income ratio matters. If you can’t improve your income, you need to improve the amount of debt that you presently hold. Something as simple as paying off your car beforehand could have an impact on a substantially larger home equity loan. Remember when you calculate your income to include things such as projected over-time, retirement fund matching, and scheduled or projected bonuses — all of these things do matter to a lender. Pulling your old tax returns may be able to help you if you’re concerned that you might be forgetting any form of income.

Watch Out for Gimmick Rates

When shopping for a vehicle, you may have noticed that sometimes car dealerships have very low introductory rates that then increase to unusually high rates. The same can go for a home equity line of credit. There are certain companies that may advertise teaser rates, but the rate is adjustable. You always want a flat rate loan — no exception. A payment that is comfortable to make now may increase to a payment that is completely untenable otherwise. This also highlights the importance of comparing apples-to-apples when you compare your quotes.

Compare Fees In Addition to Interest

It isn’t enough to just look at interest. Many lenders have hidden fees related to loan origination and loan maintenance — or even the payoff of the loan itself. Make sure that you go through a list of all of the costs associated with the loan so you properly understand how expensive each loan will be. A loan that looks like a good deal on the surface could prove to actually be fairly expensive long-term. As an addition to this, you should always stop to reassess if the lender that you’re currently working with starts adding on more fees — it could indicate that the lender you’re working with is about to become a more expensive option.

Look for Fixed Rate Portions

If you can’t get a fixed rate loan, you can also look for loans that lock a certain amount of the loan in at a fixed rate. This is far preferable to having an entirely adjustable rate loan, though still not quite as preferable as having a fully fixed rate loan. When using an adjustable rate loan, pay attention to how much the lender is able to adjust that rate; some loans may actually give the lender leeway regarding the amount the rate can be increased, thereby making it so that you can’t even anticipate the potential increase.

Remember, home equity loan rates will fluctuate from day to day, in addition to being influenced by your credit. If the current rates are too high, just keep checking — you may find them going down sometime in the near future. You can also always consider refinancing an expensive loan later on, though this can be a risky proposition.

My Personal Thoughts on Home Equity Loans

It’s always important to be careful when you’re borrowing money against your home. I do NOT recommend borrowing additional monies against your home if:

  • You’re using the money for consolidation of credit card and other debt and have not gotten your spending under control or are not serious about paying off debt forever
  • You’re using the money for a businesses and will have more than a 75% LTV after you take out money for the business. You don’t want to risk losing your house for the sake of a business. Most businesses fail, and you need to take that into consideration when borrowing against your home to start a business.
  • You’re using the money to make improvements to your home that will not equal a greater increase in value should you go to sell. For instance, swimming pools. Swimming pools do not add value to a home, so it’s risky to borrow against your home to install one unless you’re in a seriously secure financial situation.

12 Things You Need to Know About Your Money

So, I’m confessing off the bat that I’ve ripped off this post idea from Rockstar Finance. The short, but thought-provoking post needed an expansion – at least in my mind.

The fact of the matter is that too many people don’t have as much of a clue about their money as they should. They have no idea how much debt they have, when they’ll be able to retire or what they’d do if the financial SHTF in their house.

This post today is designed to help you answer those questions. Read more

Should I Cosign on a Loan?

Cosigning on a Loan: To Be, or Not to Be?
Cosigning on a Loan: To Be, or Not to Be?

This is a question many people ask themselves on a regular basis. Or, rather, a question that others ask many people on a regular basis.

Given the fact that fully 47% of Americans don’t have enough cash to cover a $400 emergency, this is no big surprise.

We’ve become a nation that has gotten comfortable with living off of credit. With not having an emergency fund. With not building wealth or contributing enough to retirement funds.

“It’ll all work out eventually,” they tell themselves. I know this because we told ourselves that for years. Until we got to the point that it couldn’t “work itself” out anymore and we had to start working it out and taking responsibility for our financial situation.

So then, when the screws get tightened, when they run out of available credit, when the payment amounts start to get too uncomfortable, they come to you for help.

“Will you cosign a loan for me?” they ask.

And you start to get that icky feeling in your stomach. Read more

Balance Transfers and Consolidation Loans: Yes or No?

Balance transfers and consolidation loans can be powerful tools to help people eliminate debt faster. They can also be a train wreck leading to the accumulation of more debt.

How can you be sure that using one of these options to get debt under control is best for you?

Personally, we’ve used balance transfer and consolidation options that have saved us a ton of cash. We’ve also used these options and have had them lead to more debt and bigger financial trouble than we had in the first place.

I want you to avoid the mistakes we made using balance transfers and consolidation loans and to learn how to use them wisely as you pay off debt and build wealth – IF that is the right choice for your individual situation.

Here are some questions you can ask before you sign on the dotted line and reroute your debt somewhere else. Read more

two chickens next to the side of a red barn

Finding My Frugal Farmer in Spain

two chickens next to the side of a red barn
Finding Love and Farming Joy in Spain

Greetings, my frugal friends! Today we’re featuring a fun and heart-warming post from life coach Lisa Hoashi. Lisa shares about the hard work and also the inevitable joys of living life on a working farm. Her words will bring a smile to your face and warmth to your heart. Enjoy!  

 

How I Met the Love of My Life

I didn’t set out to find love. Truly.

The reason why I quit my job and gave away most of my possessions was because I’d long had the dream to travel for at least a year, unfettered and carefree. Sure, as I talked about my plans with my other single friends, they often looked at me with a twinkle in their eye. “You’ll be sure to meet someone when you’re traveling,” they said. Read more