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Avoid these 7 mistakes when trying to get debt-free

Avoid these 7 mistakes when trying to get debt-free

Financial freedom and debt-free living are attainable goals. To achieve these goals, it’s important to manage one’s finances, savings, and especially debts wisely. Paying off debt requires a thoughtful and disciplined approach. But some mistakes can not only prolong this journey but also get in the way of building essential emergency funds for a secure financial future. Here are some debt repayment mistakes and suggestions for better financial planning for lasting financial well-being.

Not changing spending habits
Maintaining the same spending habits can affect one’s financial stability and efforts to reduce debt. It’s essential to reassess and adjust one’s expenditure patterns, which involves curbing impulsive purchases or unnecessary luxuries like the latest gadgets or insistence on eating out every day. Simple changes in one’s spending habits and adding on a few ways to save and invest more can expedite one’s debt repayment and build a foundation for future financial well-being.

Not contributing to a retirement account
A retirement account is like a safety net for an individual once their income from a regular job comes to a standstill. These funds are often undervalued during the younger working years, but they build a solid foundation that gives an individual much financial stability and mental peace in old age. Those with a debt at times make the mistake of spending every dollar they earn towards repaying a debt. This can, in turn, lead to financial stress during later years. Since a retirement account grows slowly over time, contributing steadily is important. As per experts, one should always dedicate about 15% of their annual income towards a retirement account, irrespective of the debt amount.

Using retirement account money to pay off debt
One is allowed to take a loan off the 401(k) account, which is one’s retirement account. Using the retirement fund to pay off current debts may seem like a solution, but it’s not recommended. Early withdrawals often lead to hefty penalties. Additionally, many companies match one’s retirement contributions, which appreciates over time. So, one should avoid jeopardizing this long-term financial security and focus on other ways of paying off debt.

Signing up for debt relief programs
Many debt relief companies offer programs that allow debt-ridden individuals to negotiate with their lenders. These negotiations include reducing the overall debt amount, extending the repayment period, or even applying for bankruptcy. However, it might take up to 5 years for their solutions to bear results, and the debt relief companies also have their own fees and charges. On the other hand, the negotiations also come with inevitable repercussions. For example, debt settlement is known to negatively impact one’s credit score, while extending the repayment period may hike the amount one pays in interest. Lastly, filing for bankruptcy destroys one’s credit score and may require one to relinquish all assets. In addition, if the debt relief program is illegitimate, it can cause heavy financial losses. So, it’s important to research thoroughly before opting for these options.

Not monitoring credit
Another mistake people often make is not regularly checking one’s credit report. Three government companies, Experian, Equifax, and TransUnion, allow people to download their yearly credit reports for free. One is advised to use such tools, evaluate one’s spending habits, and check for any discrepancies in the report. These inaccuracies, if left unaddressed, can impact one’s credit and lead to financial losses.

Using cards with debt repayment
Trying to pay off credit cards while still using them is another common mistake. They can manage new charges and reduce the existing balance. These steps can be driven by certain rewards the credit card company promotes. However, this approach can cause one to accrue extra interest, which can balance out or even exceed the rewards. So, it’s advised to stop using the credit card when working towards paying it off.

Making extra payments
Some people may make extra money from side gigs or some businesses. To pay off debt early, they need to direct these new earnings towards repaying the down debt. This is often a mistake because it can leave one vulnerable to unexpected financial emergencies in the future. So, one is advised to have an emergency fund in place as it often creates a safety net for holistic financial well-being.

By avoiding these common mistakes and adopting sound financial practices, one can streamline their journey to financial freedom. One can also take professional guidance to manage one’s finances better. This additional support can increase one’s success rate in the pursuit of being financially healthy.

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Prepaid debit cards – Benefits and top picks

If you think prepaid debit cards have no value, you might want to reassess your theory and catch up with this smart budgeting tool. Prepaid cards can save you from overspending and help you budget without much hassle. You also won't have to worry much about transaction fraud or losing millions from the account in case of theft. That's not all. A prepaid debit card can come in handy in many other situations too. Easier money management Prepaid debit cards are an effective tool to curb unnecessary expenses. If you cannot help but go a little crazy on your retail therapy spree, this card might be the perfect solution. Once you load your card with a certain amount, you know without a doubt that there's no extra spending you can indulge in. Since the card encourages people to manage their money well, many have opted for it as a go-to payment method. Help with business budgeting If you're bad at tracking how much you spend or often fail to meet business expenses without spending out of pocket, prepaid debit cards can help organize your finances. Getting a prepaid card for business expenses means you no longer have to worry about either spending your personal cash or going over budget with business spending. At the same time, you can communally use the card for your startup without having to remind the team members to stay within spending limits. Reliable travel buddy One of the top reasons to invest in a prepaid debit card is that it makes for a nifty travel companion. Want to spend a weekend out of town partaking in adventures? Headed on a long vacation to another country? A prepaid debit card is an answer to your money-carrying concerns. Most prepaid or reloaded cards are accepted in various countries at payment points and ATMs. Some even offer payment options in local currency and USD. No account necessary Another great benefit of getting a prepaid debit card is that you might not need to sign up with a credit union or open a bank account. This is especially useful for people who don't want to go through the hassle of managing an additional account or already have to take care of a checking account. Since there's no bank account, prepaid cards provide the convenience of paying in plastic without bothering about the bank's processing fees. Moreover, you might be surprised to find out that transactions via certain prepaid cards cost less than bank debit cards! Besides providing the above benefits, prepaid cards are a fantastic source of rewards and rebates. Some even let you convert your rewards to cash, further contributing to your savings. But it's crucial to choose the right card. Some top prepaid debit card options you might want to look at are: Netspend® Visa® Prepaid Debit Card The Netspend® Visa® Prepaid Card works like any other traditional card, except it isn't linked to a bank account. If a poor credit history is in your way of getting a checking account, this might be the solution to your problems. By getting a Netspend® Visa® or Mastercard® prepaid card, you can access all banking features in the same place without hassle. In addition, you can load up $1,000 or more cyclically on the card without paying a monthly fee. Bluebird® American Express® Prepaid Debit With a monthly fee of $0 and free withdrawals from in-network ATMs, the Bluebird® card is among the sought-after prepaid debit cards. The cash loading limit for temporary cards starts from $1 and goes up to $500; however, when your card is activated, your reload limits range from $20-$1,999. In addition to these benefits, American Express® users can reload their cards a couple of days earlier than the originally scheduled date. Greenlight Debit Card With no ATM fee or reload fee, the Greenlight Debit Card is a great choice for parents looking to hand over the card to their kids. The card even comes with its own range of money management lessons to help children learn about responsible spending and saving behavior. However, you will have to shell out some money to pay the monthly fees, and it can't be reloaded with cash. Many banks offer cash cards as an alternative to debit cards. Cash cards can be used at ATMs to withdraw money, but unlike other prepaid debit cards, you won't be able to make payments in most cases.

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6 crucial debit card mistakes to avoid

Debit cards are convenient tools that allow one to complete a transaction easily. Since debit cards directly take money from the checking account, it ensures that a person only spends a limited amount. Plus, they do not even levy heavy interests like credit cards. However, despite all these advantages, one needs to avoid some mistakes when using debit cards; otherwise, they could end up losing money. Here are some common debit card mistakes to avoid. Using out-of-network ATMs As everyone knows, debit cards serve two purposes - making direct transactions (either online or by swiping) and withdrawing money from ATMs. What a lot of people might not know is that if they withdraw their money from an ATM that does not belong to their bank, they may be charged a fee for the withdrawal. Such ATMs are called out-of-network ATMs. The exact opposite of that is in-network ATMs, which are either owned by the respective bank or are within the bank’s partnered ATM network. By withdrawing cash from such in-network ATMs, one can avoid unnecessary withdrawal fees. Making big transactions with debit cards Debit cards do make shopping easier, but they also pose a slight risk. If an individual wishes to return an item that they purchased with a debit card, getting a refund for it won’t be so convenient. This is because when a purchase is made with a debit card, the amount can only be reversed when the merchant approves it. This is not the case with a credit card. Credit card holders can simply file a claim with the card issuer and get a refund on their returned items. This is why it is better to use credit cards than debit cards when shopping for expensive items. Not checking the balance regularly When using a debit card for shopping or other transactions, it is advisable to check the account balance before and after every transaction. The main reason is that payments made with a debit card sometimes take time to reflect in the account. So, if an individual only checked their account balance directly after they made a payment, they may not be aware of the amount remaining after that payment was deducted. Then, if they proceed to make a new payment without checking the prior balance, their transaction may get bounced if there is not enough balance. To avoid such a mishap, keep an eye on the checking account balance regularly. This also keeps one informed about any fraudulent transactions that could have taken place. Keeping the card’s PIN written Even though this is common knowledge, many individuals still make the mistake of keeping their debit card PINs written down. Since a debit card can give one direct access to all the savings and funds present in the account, their PINs must be kept secret. If someone gets hold of the written PIN along with the debit card, they may drain the entire account. This becomes an even bigger risk if a person prefers keeping a parchment with the PIN written on it in their wallet. If a thief manages to steal the wallet, they may get hold of the debit card PIN and steal one’s hard-earned money. Not confirming the cancellation of crashed transactions One may have faced this situation quite often when they try to pay at a store’s register and it crashes in the middle of the transaction. In such a scenario, the person handling the register may immediately initiate a new transaction after it starts working again. This is where a lot of individuals can end up losing money. So, when a register crashes, one must immediately confirm with the store manager if the amount got debited from their card before the crash. One can also call their bank to check if the transaction went through. If one neglects to do so, they may get charged double the amount as the money could have been debited with the first swipe. Making online transactions using a public Wi-Fi Public Wi-Fis are never safe to use, especially for making transactions. The reason is that, due to their low security, a hacker can easily attack and access the systems of other users logged onto the same network. So, if a person enters sensitive information like their debit card credentials, they risk that information getting stolen and their money getting robbed right out of their checking account.

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