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]]>Life can throw unexpected financial challenges our way at any time. It can be overwhelming and stressful, whether it’s a sudden job loss, unexpected medical bills, or other unexpected expenses. But there are ways to navigate these challenges and come out stronger on the other side. This article will provide some tips and strategies for coping with financial challenges and emerging from them in one piece.
Job loss is a difficult and often unexpected challenge many people face at some point. Coping with job loss can be a daunting task, especially if you were not prepared for it financially. However, with the right mindset and strategies, navigating through this challenging time is possible and coming out stronger on the other side.
The first step in coping with job loss is acknowledging your emotions and allowing yourself to feel them. Losing a job can be a traumatic experience, and it’s natural to feel a range of emotions, such as anger, frustration, and even depression. Give yourself time to process your emotions and seek support from friends, family, or a professional therapist if needed.
The next step is to evaluate your finances and create a budget. Take a hard look at your current financial situation and determine what expenses are essential and what expenses can be cut back or eliminated. This may require making some difficult choices, such as downsizing your living arrangements, selling unnecessary possessions, or finding ways to reduce your monthly bills. Creating and sticking to a budget will help you manage your finances and prevent you from falling into during this difficult time debt.
It’s also important to explore all available options for financial assistance. This may include applying for unemployment benefits, seeking assistance from charitable organizations or non-profits, or even borrowing money from friends or family members. Don’t be afraid to ask for help, as there are resources available to assist you during this challenging time.
In addition to addressing your immediate financial needs, it’s also important to use your time off to reevaluate your career goals and explore new opportunities. Consider taking courses, attending workshops to enhance your skills, or even pursuing a different career path. Take advantage of networking opportunities and job fairs to connect with potential employers and explore job opportunities that align with your skills and interests.
Finally, it’s important to take care of your mental and physical health during this challenging time. Job loss can be a stressful and emotionally taxing experience, so it’s important to prioritize self-care. This may include exercising regularly, practicing relaxation techniques such as meditation or yoga, and seeking support from friends and family.
Dealing with unexpected medical expenses can be a daunting and stressful experience, but there are steps you can take to cope with the financial challenges. Here are some tips for managing medical bills and expenses:
Remember, dealing with medical expenses can be overwhelming, but there are resources available to help you manage your bills and cope with financial challenges. It’s important to stay informed, ask questions, and seek help when needed.
Dealing with unexpected expenses can be a stressful and challenging situation for anyone. The first step to cope with unexpected expenses is to prioritize them based on their importance. Determine which expenses are absolutely necessary and which can be postponed or eliminated. This will help you create a plan to manage the unexpected expenses and avoid additional financial stress.
One way to cope with unexpected expenses is to create an emergency fund. An emergency fund is a savings account that is set aside specifically for unexpected expenses. Ideally, your emergency fund should contain enough money to cover at least three to six months of living expenses. If you don’t already have an emergency fund, start by setting a goal to save a certain amount of money each month until you reach your desired amount.
Another way to cope with unexpected expenses is to consider alternative sources of income. This could include picking up a side job or gig, selling unused items, or renting out a spare room in your home. Be creative and think outside the box when it comes to generating extra income to help cover unexpected expenses.
If you’re struggling to cope with unexpected expenses, it’s important to reach out for help. Don’t be afraid to seek advice and support from family, friends, or a financial advisor. They may be able to offer helpful tips and suggestions for managing your expenses and getting back on track.
It’s also important to remember that unexpected expenses are a normal part of life. While they may be difficult to manage at the time, they can also provide an opportunity to learn and grow. By staying positive and proactive, you can navigate financial challenges and come out stronger on the other side.
In conclusion, navigating unexpected financial hardships can be difficult but not impossible. By taking a proactive approach and developing a plan, you can minimize the impact of unexpected expenses and emerge with your financial health intact. Whether it’s coping with job loss, medical bills, or unexpected expenses, remember to stay positive! Taking advantage of resources available to you and exploring creative solutions to overcome the challenge will payoff. With the right mindset and a bit of perseverance, you can overcome any financial challenge that comes your way. As always, you got this!
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]]>The post Debt as a Wealth-Building Tool: A Philosphy for Success appeared first on Affording Freedom.
]]>Debt is a word that often carries negative connotations, but it doesn’t have to be that way. In fact, I believe that debt can be a powerful wealth-building tool that can assist you in achieving your financial goals as long as it is used strategically and responsibly. In this blog article, I will outline my philosophy on debt that enhances wealth and provide some practical tips for using debt to your advantage.
First and foremost, it’s important to understand that debt is a double-edged sword. When used wisely, debt can help you build wealth and achieve your financial goals. But when used recklessly, debt can quickly spiral out of control and lead to financial ruin. The key is to use debt strategically and responsibly and to only take on debt that has the potential to enhance your wealth over time.
One of the most common ways that people use debt to enhance their wealth is by taking out a mortgage to buy a home. For many people, a home is the single largest investment they will ever make, and a mortgage can help them get there. While taking on a mortgage means taking on debt, it can also be a smart investment in your future. Not only does homeownership provide a stable and secure place to live, but it can also appreciate in value over time, allowing you to build equity and increase your net worth.
Of course, not all debt is created equal, and not all mortgages are good debt. It’s important to shop around for the best interest rates and terms and to only take on a mortgage that you can afford to repay. This means taking a hard look at your budget, your income, and your future earning potential, and making sure that you can comfortably make your mortgage payments each month. Your home has the ability to catapult you to financial freedom if you treat it as an investment.
Another way to use debt to enhance your wealth is by investing in assets that appreciate in value over time. This could include stocks, mutual funds, or real estate, among others. By taking on debt to invest in these assets, you can potentially earn a higher rate of return than the interest you’re paying on the debt, allowing you to build wealth over time.
Of course, this strategy comes with risks as well. Any time you invest in the stock market or real estate, you run the risk of losing money if the market takes a downturn. It’s important to carefully evaluate the potential risks and benefits of any investment, and to only take on debt that you can afford to repay even if the investment doesn’t pan out as planned.
Another way to use debt to enhance your wealth is by investing in your own education or business. By taking on student loans to pursue a degree, or borrowing to start a business, you are making an investment in your own earning potential. Of course, this strategy only works if you have a clear plan to repay the debt and a realistic expectation of the return on investment. But for many people, investing in their own education or business is a smart way to build wealth over time.
One of the keys to using debt to enhance your wealth is to understand the difference between good debt and bad debt. Good debt is debt that is taken on with a clear purpose and has the potential to increase your net worth over time. Bad debt, on the other hand, is debt that is taken on without a clear purpose or is used to finance things that don’t have long-term value. Examples of bad debt include high-interest credit card debt used to fund unnecessary purchases or personal loans used to pay for vacations or other non-essential expenses.
Of course, not all types of debt are black and white. For example, a car loan could be considered good debt if it allows you to commute to work and earn a steady income, but it could be bad debt if it’s for a luxury vehicle that you can’t really afford. The key is to carefully evaluate each type of debt on its own merits, and to only take on debt that has a clear purpose and the potential to enhance your wealth over time.
Another important consideration when using debt to enhance your wealth is to make sure that you have a solid plan for repayment. This means taking a hard look at your budget and making sure that you can comfortably make your debt payments each month, while still covering your other expenses and saving for the future. It also means having a clear plan for paying off your debt over time, whether that’s through regular payments, lump sum payments, or other strategies.
One of the most effective strategies for paying off debt and building wealth is the “debt snowball” method. This involves paying off your smallest debts first, while making minimum payments on larger debts. As you pay off each debt, you can then roll that payment into the next smallest debt, creating a “snowball” effect that helps you pay off your debts more quickly and efficiently. Similar to the debt snowball, the debt avalanche method is also highly effective and works to minimize the total amount of interest paid.
The debt avalanche is a debt repayment strategy that involves prioritizing high-interest debts first, and then paying them off in order from highest to lowest interest rate. By focusing on paying off high-interest debts first, this strategy can help to reduce the overall amount of interest paid over time and enable faster debt repayment. With the debt avalanche method, borrowers make minimum payments on all debts, while any extra payments are applied to the highest interest rate debt until it is fully paid off, then the next highest interest rate debt is targeted, and so on until all debts are paid off.
Another important consideration when using debt to enhance your wealth is to keep an eye on your credit score. Your credit score is an important factor in determining your eligibility for loans and other types of credit, and a high credit score can help you get better interest rates and terms. By making your debt payments on time, keeping your credit utilization low, and monitoring your credit report for errors, you can help build and maintain a strong credit score over time.
Finally, it’s important to remember that debt is just one tool in your financial toolkit. While it can be a powerful tool for building wealth, it should never be your sole focus. It’s important to also focus on building your savings, investing in assets that appreciate in value, and developing a strong financial plan that takes into account your long-term goals and priorities.
In conclusion, my philosophy on debt is that it can be a powerful tool for enhancing wealth, but only if it is used strategically and responsibly. By taking on debt with a clear purpose and the potential to increase your net worth over time, making a solid plan for repayment, and keeping an eye on your credit score and overall financial health, you can use debt to your advantage and achieve your financial goals over the long term.
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]]>The new norm in America is being buried in debt, whether from mortgages, credit cards, personal loans, student loans, or business loans. The amount owed has risen dramatically. The average American in 2021 has an average personal loan debt of $16,458. Due to this, it is very easy to understand why Americans feel overwhelmed and anxious when it comes to their finances. The problem with debt and stress, in general, is it blocks us from seeing the options in front of us. We often feel trapped and paralyzed by the situation. If we genuinely want to get out of debt, we need to start by digging our way out, one shovel load at a time. There is no shortcut to getting out of debt. It takes hard work, dedication, and sacrifice, but it is absolutely worth it. The great news is being in debt does not have to become your identity. Here is a proven 6 step method to get out from under debt and begin to financially thrive.
Simply put, you can’t beat what you can’t define. The stress of debt can be crippling, and a very normal reaction to that stress is trying to avoid the problem. If we can’t see the problem, it doesn’t exist, right? Unfortunately, the problems we can’t see still hurt, but there is hope.
The first step in overcoming anything is recognizing you have a problem. We need to be able to take responsibility for the financial situation we are in today. This does not mean that we need to feel shame for what we have done, but we need to recognize we can not continue on this path anymore. The more we are able to take responsibility for our past mistakes, the better our future will be.
The next step is the fact-finding mission. We need to get all of our ducks in a row. Don’t worry about making sense of what you have at this point in the process. Just get all the information in front of you.
The natural question is, what does this look like practically? Here are a few items we need to “throw” on the wall during this stage.
Once we have gathered this information, we need to get our damage report which for us is a credit check. A credit report shows the status of our credit activity and our overall standing from the lender’s perspective, which affects our rates and premiums and shows our potential problem areas. You can get a free credit report once a year from the three main credit bureaus: Experian, Equifax, and TransUnion.
Essentially it is time to clear off the kitchen table and get organized! We want to get a net number per month of profit or loss. Once we have all that information, we can start developing a safety net and create a plan!
Before we go on tackling our debt, we want to make sure we can cover whatever life throws our way. The goal is financial margin and what we don’t want is to have to go into more debt trying to pay off the debt we already have.
A general rule of thumb is we need to have $1,000 saved to cover unexpected expenses before we start tackling our debt aggressively. Now, of course, we can have more than this in our savings safety account, but I wouldn’t recommend any less. This safety net is not to be used monthly on everyday expenses. It is designed to cover unexpected costs, so if you are tempted to spend it, do whatever you need to do not to spend it! That can look like putting the money in a different account, having an accountability partner, not having “easy” access to the funds, etc…
This step is all about foundation repair so that we have proper support moving forward. The foundation we lay today will directly impact our results tomorrow. Life is stressful enough; let’s make our finances a little easier.
Once we have our emergency fund in place and have organized our debt, it’s time to initiate a plan to pay it off! We want to create good credit good habits such as budgeting, automatic payments, using a low debt ratio, and being aware of the rates they charge. Doing this will allow you to dig yourself out of debt, but we still need a concrete strategy to get out of debt.
My two favorite strategies for getting out of debt are the debt snowball and the debt avalanche! They are both highly effective and will produce extraordinary results!
Getting out of debt usually means sacrificing what you want today for what you want most. Depending on the level of debt, it may seem impossible, but there is always a way forward. It might just require some discipline and a little creativity.
In order to create a financial free life and to be debt-free, we need financial margin. By making some extra money plus monitoring and cutting our expenses, we can create some serious margin in our lives.
There are several side hustles that you can do to generate some extra income, thanks to the emergence of the gig economy. There are several opportunities to make some serious side income, including Ubering, Lyft, dog-watching, writing reviews, selling your old stuff, etc.
Once we have budgeted and identified our spending habits, it is typically time to make some changes. There are two main changes that I like to classify as soft cuts and hard cuts.
Soft cuts are when you substitute the thing you want for a cheaper version. Such as, instead of a trip to the beach, you try a staycation. Instead of the gym membership, you buy a jump rope and some running shoes. You replace going out for dinner and a movie with going for a walk in the park and having a picnic. These types of substitutions are easily made and can make a serious impact on getting out of debt.
Depending on our level of debt and spending habits, we may need to take more drastic measures. These harder cuts look like downsizing your home, selling your car, and cutting all of your discretionary spending. These harder cuts are more radical changes to our lives, but they can make radical changes in our financial situation.
At the end of the day, getting out of debt is hard. If it was easy, then no one would be financially stressed and loaded with debt. People fail when they don’t have the proper support and help along the way. That’s where a financial coach or advisor is so helpful in the process. They can help hold you accountable and provide you with concrete steps to take for your personal situation. A financial coach can also help you walk through more nuanced financial decisions such as refinancing, negotiating with creditors, and choosing a payment plan.
Wherever you are in your financial journey, it is important to know that you aren’t alone when you hit the bottom and that it is possible to come out from under debt being strong and financially stable.
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]]>The post The Traps You Don’t See Still Hurt — Unpacking Victim Mentality appeared first on Affording Freedom.
]]>At some point in all of our lives, we all have been guilty of the victim mentality. It could be that something happened where you were indeed a victim of a crime or complicated situation. Maybe you put your money with a business partner who took off and ran, or you attempted to help a family friend, and they used and abused your kindness. I know for some of you, the wounds cut much deeper. Regardless of the reasons, we all have been victims to something or someone at some point in time, and if you haven’t yet, odds are you will experience it later on in life. Unfortunately, we can not choose what happens to us, but we are in complete control of how we choose to respond to whatever life throws our way.
As painful as it is to be the victim of a situation, and I know how painful it can be, letting the situation change our identity can be worse than the situation itself. The real danger is that when we embrace the victim mentality, we open the doors for it to change our identity. Our identity is critical to protect and build up because it affects everything from our thoughts, perceptions, feelings, and actions. When we allow the problem to frame our identity rather than using our identity to frame our problem, we are in serious trouble.
Focusing on the root of the problem allows us to heal and grow rather than bandage and avoid. What I want to do in this article is explore the victim mentality, why it is dangerous, and how we can stop the cycle of the victim mentality.
Before we dive into the victim mentality, I think it is essential to understand what we say whenever we say, victim. As defined by the Merriam-Webster dictionary, a victim is “one that is acted on and usually adversely affected by a force or agent.” This definition reveals a few truths you must accept if you call yourself a victim in any situation.
A victim’s mentality feels, acts, perceives, and views every situation through the lens of a victim. In short, their identity becomes that of a victim.
Unfortunately, bad things happen all the time in which other people or circumstances are to blame, and you really don’t have responsibility for the situation. When you indeed are a victim of a situation or person, it feels like a sucker punch. All the air is knocked out of you, and you struggle to get your footing back.
There is nothing wrong with acknowledging that you have been a victim. The problem is when you start to see every situation from the lens of a victim in which other people or circumstances are to blame, and you have no responsibility for the given situation.
Even if you can truly call yourself a victim of a situation, having an identity of a victim only will hurt you, even if it is bandaging some more significant wound. It can be difficult to accurately assess if you have a victim mentality because let’s face it, we typically aren’t very skilled at looking at ourselves honestly. Below are a few side effects associated with a victim’s mentality.
Living with a victim mentality ultimately leaves us isolated and angry. It makes us feel powerless to address life head-on, and it is also challenging to have lasting relationships with people with a victim mindset.
First things first, you are not broken. The victim mentality is a learned behavior and a coping mechanism. When we are faced with trauma and don’t have a healthy example of how to deal with it, adopting the victim mentality is an entirely natural thing to do; just don’t stop there. Just because it is natural doesn’t mean it is the best thing for us. There is so much more for us out there and being a victim holds us back.
Below are a few practical ideas and practices to start taking into your everyday life to stop living out of the victim mindset.
Your self-worth gets dragged through the mud when you live as a victim. When you are struggling, it is important that you are patient with yourself and prioritize yourself even if you don’t feel like it.
There are many ways to give yourself the self-care you desperately need; just make sure to start and prioritize it. Below are a few great habits of self-care that you can start today.
At the end of the day, you are the only person in control of your life and actions. You can not choose what life throws at you, but you always get to choose how you respond. You get to control who you spend time with, what you do each day, and what you bring into each situation. The quality of your life is directly correlated with the level of responsibility you have over it. When you make a mistake, own it; when you fail, face it.
There are no quick fixes in life. Things tend to take time and effort consistently in order to see results. The problem is when we are to results orientated and not in love with the process. The journey of life is not a straight line. There are ups and downs, highs and lows, and we need to be grounded in something, ideally our identity.
Our identity is not something we can check off a list, and then we are that person forever. For example, if your identity is you are a healthy person, you don’t work out one time and then don’t work out for a year because you have achieved being healthy. It just doesn’t make sense. Being a healthy person means you work out consistently day after day. Our identity must be grounded in principles and habits that are journey-minded because when you know who you are, you know what to do.
There is always a way forward, sometimes you just need some help seeing it. You got this!
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]]>The post Drowning In Debt — 2 Strategies Proven To Get You Out Of The Water appeared first on Affording Freedom.
]]>If we know debt is scary, why do so many of us find ourselves in positions of crushing financial obligations and drowning in debt? Well, maybe you start off with just a little debt; perhaps you purchase the new car, take out a student loan, or you borrow a little just to make ends meet. A little debt doesn’t feel overwhelming, but debt has a way of growing and growing until one day you wake up, and the minimum payments are too much. The debt has grown to a number where you feel paralyzed. Debt takes away options and adds stress to our financial and personal lives. You know it’s time to make a change, but often with debt, it feels like one step forward and then two steps back. Let’s get out of the water and on your way to financial freedom!
In order to get debt-free, you will have to make accelerated payments, which means paying more than the minimum or the agreed-upon amount. Now obviously this means we must find in our budget a way to increase the amount we can pay each month. I tell everyone to start by making an additional $100 a month to contribute to their bills. There are several ways to do this, from restructuring your budget to online surveys and many things in between. This may seem impossible, but that is our stress talking. When we are drowning in debt, we are unable to see things clearly. We are in survival mode. In order to tackle debt, we have to find a better way to look at our situation and find a way forward.
My two favorite debt handling strategies are the debt snowball method and the debt avalanche method. Both are highly effective at tackling all kinds of consumer debt ranging from personal, home, medical, and student.
Both the debt snowball and debt avalanche are centered on paying off one debt as fast as you can while paying minimum payments on the others. Focusing on eliminating one debt as quickly as possible and then rolling the balance into the next debt keeps the momentum and gives you tangible results to keep moving forward. These strategies differ by which debt you choose to start with. By the end of this article, you will have a deep understanding of how to deploy either the debt snowball or debt avalanche into your finances and begin your journey into financial freedom.
Let’s look at this example and see how the debt snowball would be applied to this specific situation. The first step would be to gather all the debt information and list it out, as I have done below.
Now that we have all the debt information listed, we can tackle the problem. Our current debt obligation by just paying the minimum payments totals $795 a month.
Now let’s say through budgeting and generating income through a side hustle, we have $1,000 available for paying off debt. Our standard month payout would like this:
Once the car loan is paid off, you would apply the $280 that you were paying for the car and apply that to the next smallest loan; in this case, it would be the personal loan. It would look like:
If you keep stacking payments together until the snowball gets large enough to knock out all of your debt, you have successfully stopped drowning!
This strategy is great because it gives you a win early but you are not minimizing the amount of interest you are paying with this strategy.
Let’s look at the same scenario as above and see how the debt avalanche would work to stop us from drowning. It still starts with listing all debts out with their payment and interest rate information, but now we are going after the highest interest rate instead and don’t care about the balances. Our first-month payment structure would like
After the credit card has been paid off, we would apply the $430 to the personal loan because it has the second-highest interest rate. The example payout structure is listed below:
As you can see, this method reduces the amount of interest you pay over the long term by eliminating the highest interest payment first regardless of balance.
When you are drowning in debt, it can feel very scary but it is up to us to get out of the water. Ultimately both of these strategies work, and I recommend whatever system you feel more comfortable with. I often tell people to use a hybrid approach and combine the methods. I think the psychology of winning is critical in making a change. The debt snowball lets you see progress even though you are not minimizing interest payments. But, who cares! When getting out of debt, the most important thing is making and following a plan to get out of it! But if you are disciplined and stick to it, your wallet will thank you for following through with the debt avalanche.
As always, you have so many options available to you. The most crucial step is always the next one. You got this!
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