budget plan

What Is the Connection between Money and Psychology?

January 4, 2014 by penn

Many people believe that the way that we react to our finances can have specific ties to both money and psychology. You can look at your financial situation several different ways, No single way can be offered as a blueprint. Money offers a complicated relationship than any person wants to accept. However, there are some places that you can see the connection between money and psychology. It is speculated that our own sabotaging can cause an individual’s financial situation.

Biases

Biases are those opinions that we create based on how we view the world. From the beginning of our lives, we are around individuals that help to shape our opinions of individuals and situations. Our experiences and our environment are another thing that can add to the development of the biases we will have.

Biases can sometimes be the driving factor that is behind our decisions, including those financial ones. Many times friends can help us to convince us to make financial decisions even if they are not the best for us.

The opposite of that situation is the status quo. When a person gets into a routine and does not want to change their financial habits, even if changing is better just because you are used to it this one way.

It is important that in this situation money and psychology are mixed together. The more informed that we are, regarding financial situations can help us to not depend on your psychological biases.

Beliefs

The belief system that a person has often stems from the beginning of their life just as biases did. Beliefs are also influences by the environment we are in as well as the actions of those around us. It is important to know where our beliefs come from.

If money equals stress then it might have come from when our parents felt stress over their financial situations. Those people in our lives that helped shape our beliefs also are the people that we took our financial guidance from.

Our core beliefs help us to make decisions everyday that are surrounding money. These beliefs will affect how we make our money decisions. One thing to remember is that avoidance of situations can cause a person to become in debt. Debt can cause credit problems, calls from collectors, and a continually failing financial outlook.

These situations either positive or negative have helped to shape our way of handling money and psychology.

Money is only Money

The idea that money is only money is not the way that most people live. It is not something that we use to exchange for goods and services. It is the only way that we are able to gain any of the things that we need like food, shelter, and even water.

As we get older it isn’t only worth the exchange for goods, but it is also something that we intertwine into the core person that we are. It can define our success, status, and even our self worth. Since it is so intertwined into our being money problems are not just problems, but they are a much deeper situation.

Financial decisions can often be undermined by the feelings that we have control or no control over them. It is often complicated to try to separate a person’s money from a person’s worth. Money is not something that has to define you, it can be important to show that you are you, and that you do not have to keep up with everyone else.

Change

There are consequences for not following through with change. You can see this with most resolutions or other wishes you make. We desire them so greatly, but do not always know the reasons that they never work out.

So many people believe that if you cannot see a return there is no point worrying about changing. If you think about all those times that we search for pity from others regarding some situation we are in, we are looking for reasons not to change our situation. This is also true with money situations. When we feel that we are loved and supported, our financial troubles are no longer worth changing.

Same Obstacles

One thing that you will notice is that no matter whom you are when it comes to money and psychology everyone is similar. It does not matter if you earn a lot of money, or only a small amount.

Those who make large amounts of money are not immune to the financial troubles that those who make less money have. Everyone can be in debt, have a home in foreclosure, or even have to file for bankruptcy.

Money is not always the problem in every situation, however in almost all situations your connection with money is the problem. Money and the psychology behind our decisions are the basis for almost all financial situations.

What To Do After Completing Debt Consolidation

May 27, 2013 by penn

Have you ever imagined how life would be like after you have sent that last payment on your debt consolidation program? If you are just starting your journey now, this will be around 5 years in the future. Did you ever think about what you will do then?

The exact details are different based on the debt relief program that you will use to get out of debt. That is because their effects are different from each other. However, you can expect that some of them will be quite similar.

One of the common things that you have to accomplish, and the first, is to confirm that you are truly debt free. If you used debt consolidation loans, you have to get a certification from your lender that your debt had been completely paid off. If debt management is your choice of debt relief, then you need to get a report from the company you hired to manage your debts. It is either they will help you acquire the certification from your creditors or you will request it yourself.

You should also look at your credit report to see if the changes in your debt status had been recorded. If it is not yet there, call your creditor or lender and ask them to revise your status. You want to proclaim to the world that you are already debt free.

While you are looking at your credit report, see the current status of your credit score. With debt consolidation, the chances of that being too severe is unlikely to happen. But still, it pays to know if you need to work on increasing your score. If not, then you can proceed to the next task.

At this point in your career, you should have a big chunk of your usual expenses removed. That means it is time for your to change your budget plan. Since getting out of debt is done, you will work on staying out of debt. One of the best tools to make this happen is your budget plan. You need to keep living on a budget to ensure that you will never be in debt again. If your current budget works for you, think about putting the freed debt payment money into your savings. It is best to grow it so you can stay out of debt.

Here’s how that will work. When you have savings, any emergency situation will not have to compromise your current budget. If your extra money cannot afford the immediate need, you don’t have to borrow money just to afford it. You can easily finance that need. Even if your main source of income is compromised, you can be assured that you have the means to feed your family for the next couple of months. Even if no emergency need happens, you can enjoy that savings well into your retirement. Or, you can opt to buy an expensive item (like a home), in cash. It is more enjoyable to own a home that you did not put yourself in debt for.

Lastly, you need to start making the right spending choices from now on. Even if your money is in abundance, choose if every expense is really necessary. A low cost of living with a huge reserve fund is more appealing than a life full of vacations and trendy possessions but a mountain of debt.

When you have all of these in place, this is the time when you can celebrate and congratulate yourself. Once you are sure that your chances of landing in debt is minimal, that is a real cause for celebration.

What To Do After The Approval Of Your Loan For Debt Consolidation?

May 24, 2013 by penn

There are many pitfalls in debt consolidation loan. This article is not meant to bash this debt solution. In fact, we’re here to help you make sure that you avoid all those pitfalls. If you got yourself in debt, that means you are not in the best position to manage a huge amount of money.

Debt consolidation loan is all about getting a huge fund to help you pay off what you owe. The idea is to combine your debts by paying off the others with this one loan. That will leave you with only one debt to deal with.

One of the temptations that you will encounter in this debt relief program is when you get that loan approval. Since it is a big amount some people are tempted to use it on something else – at least a part of it. This is not right. So to help you override this feeling, here are the things that you must do once you get the approval on your loan.

Before you can even think about the temptation of using the loan to buy something expensive, go to your bank and pay off the debts that you intended to close. Whether they are credit card companies or lenders, you should settle what you owe immediately.

But after that, there are a couple of things that you have to do.

First of all, keep your credit cards. This is one of the temptations that you have to avoid. Once you have paid off your cards, they will all have zero balances. You want to keep yourself from spending through these cards and thus increase your debt.

Next is to arrange a payment plan. This should have been done before you applied for the loan. However, there is no harm if you haven’t. But you have to do it now. Start with your budget plan. Indicate your income and expenses. When you are plotting your expenses, identify the wants and the needs. You need to rank your priority expenses to ensure that you are putting money into your priority list. Make sure this single debt payment is included in your budget so you will never forget to pay it. Put up reminders that will ensure this payment will always be met.

Lastly, you may want to build up your reserve fund. Growing your savings is a very important part of staying out of debt. Sometimes, people do all the right decisions when emergency strikes, they are simply not prepared for it. Any immediate and sudden expense will have to be borrowed if you do not have the savings to finances it.

Increasing your income maybe a good idea to help make this possible. If you have just enough for your expenses and your debt payment, then you need to do something to increase your income. The option of cutting back on expenses is there but that is only limited. Increasing your earning may be more appropriate to quickly grow your savings.

Follow these steps and you are sure to make debt consolidation loan a success in your financial life.

Create A Debt Management Plan For Debt Relief Success

March 22, 2013 by penn

A well constructed debt management plan (DMP) can help you achieve financial freedom. It is actually a bit similar to what a budget plan can do for you. It will provide you with an overview of your debts and how you plan on paying it off.

The best way to create a DMP is with the help of a debt counselor. After all, it did originate from the debt management program that includes a counselor. But if you want to create one for yourself without bothering with the minimal $30 – $50 monthly service fee, then here are some tips to help you create your plan.

You begin by knowing your budget. Ideally, all debt relief options should include a budget plan that will help teach the debtor the right financial management skills that will get them out of debt faster. It will also help them develop the right skills and practices to keep them out of it. But the major benefit of this plan is to give you an idea of how much income you have and where every penny goes. As you create your income and expense list, you will have an idea just how much you can afford to pay off your creditors. An important entry that you should never forget to include here is your savings. It is vital for your financial security to build up at least 3 months of your reserves. Later on, we will discuss why.

A debt management plan will aim to control your debt payments so every debt is satisfied. Even if your disposable income is not enough to cover the monthly minimum payments (e.g. credit card debts), you try to assign a certain amount and stretch it out over 2-5 years and see when you can finish off the payments. If the time is not enough because you can only contribute so little for each debt, you should probably look for a debt relief option that can reduce your overall debt balance. But if this is unnecessary, you can proceed to the next step.

As you identify the payment term for each debt, muster the courage to contact your creditors to negotiate this with them. Mention that you have every intention of paying off your dues but your limited resources cannot afford it. Show them your debt management plan and the term by which you intend of completely paying off your debts.

If they agree to lower your monthly dues in exchange for a longer term, start paying off your debts based on your DMP. It is very important for you not to miss any payments. This is where your reserves will come into play. Since we have no control over the future, it literally pays to have a backup fund that will help you reach your goals. It will help you keep up with payments even if the car suddenly broke down and it needs fixing or someone got sick in the family. These immediate and unexpected expenses can ruin your DMP and thus lose your chance of completing it if you ever miss a payment.

You should also keep yourself from growing your debts as you pay off what you currently owe. At least, do this if you do not want to extend your DMP further.