How to Invest Money and Combat Debt

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[The following is a featured post discussing the idea of investing a small amount of money in order to pay off debt. This is something that I have done with mixed results so far.]

In days gone by, it was commonly believed that the specter of debt could only be overcome by reducing expenditure and committing to a frugal lifestyle. While this remains solid advice, however, it is not necessarily the most productive method in an age of technological advancement and advanced money making opportunities.

Although it may sound a little unorthodox, the prevailing contemporary theory requires individuals to invest capital in pursuit of greater returns. This money can then be used to repay debts more effectively, without forcing households to struggle against a back-drop of austerity and long-term uncertainty.

Debt Investing

How to Speculate and Accumulate: 3 Ways to Spend More and Generate Additional Income

With this in mind, how exactly can modern-day speculation inspire you to boost your income and stave off debt? Consider the following:

Embrace the Financial Markets

While access to the open financial markets was once exclusive to professional traders and large commercial institutions, the development of sophisticated online trading platforms and educational resources have removed many of the pre-existing barriers to entry. As a result of this, numerous markets are now within reach of independent traders with minimal dollars.

This has exposed everyday citizens to a diverse range of financial products and derivatives, from trading forex and currencies to exchanging carbon credits. While you will needs patience and knowledge to succeed, there is ample opportunity to build wealth through this method.

Understand how to Create a Stream of Passive Income

Passive income is a term used to describe capital can be generated without the completion of a direct action or the sale of a commodity. It allows you to speculate and accrue wealth that is entirely separate to what you earn through traditional working methods, which in turn can be used to clear a significant amount of your total debt.

There are several options of this type to suit alternative risk appetites, with the latest high yield checking accounts providing a low-risk avenue for growth and real estate investments available to those with more income and a desire to achieve greater returns.

Do not Underestimate the Rewards of Hard-work

While it may sound old-fashioned and overly simplistic, hard work remains one of the most effective methods of boosting your income and combating personal debt. This does not necessarily mean that you have to work for 12 hours a day in a number of physically demanding jobs, however, as those of you with a viable industry skill can use it to work from home and freelance in your spare time.

Website developers, content writers and software developers remain in constant demand in the current economy, and this has created opportunity for proactive individuals to market themselves as an independent contractor.

As a general rule, speculating to accumulate does require a certain degree of disposable income in order to generate any sort of return. This can be minimal, however, so as long as you are willing to commit this sum in the pursuit of reducing your debt then you can achieve outstanding results over time.

Sponsored Video – When Credit Cards Can Help You

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The following post has been sponsored by Capital One, but all thoughts & experiences are my own. In fact, the great thing is that I’ve been a very happy customer of Capital One for years – with my business account (the account/card mentioned in the video below)!

As most of you already know, I’m no stranger to expensive car repairs. Keep in mind that anything over about $150 is expensive in my mind (one of the consequences of being broke and in debt). Well, we had to spend another $600 recently – this time on our SUV. Since we are trying to use every extra penny to pay off our debt and also build up an emergency savings account, we were putting off the repairs until they were absolutely necessary.

We had to get the air temperature door actuator replaced on our Ford Explorer – apparently, this is a common problem. We were originally told that it would cost about $750; mainly due to the labor involved – the center console and part of the dashboard had to be removed. Going through the winter without any heat is difficult in New Jersey, so once the temperature dropped down to the low 20s consistently (hitting the teens on a couple of days), we knew we couldn’t put it off any longer.

We have a credit card that is dedicated for car repairs. If our repair bill is over $299, then we have 6 months to pay off the balance before any interest is charged. So, in this case, our credit card has saved us from prematurely depleting our emergency fund or taking from our monthly budget, while allowing us to put heat in our vehicle!

We definitely plan to pay off the credit card before the 6 months are up – something that we have done each time we’ve used it – so we aren’t expecting to pay any interest for this loan. If we aren’t able to save enough in the 6 months by reducing our expenses (not likely since we don’t have many variable expenses), then we will still be in a better position to take money from our savings.

If we weren’t in debt, we would probably use credit cards for everything. We already use it for any online purchase (for security) or any other payment where we aren’t completely comfortable (like some gas stations, restaurants, etc.). Between the added security, the rewards, and the possible cash back, I am a big fan of credit cards.

Now obviously, this love only goes as far as the benefit gained combined with the responsibility of the user. To be fair, this can be said about most good things. Too much or a misuse of a good thing can easily make it detrimental. Someone once said that a credit card is like fire…useful, but handle with care.

photo credit: freedigitalphotos.net

7 Ways to Raise Cash in a Hurry

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Most everyone hits a point where they need cash, like yesterday. While it’s not quite that easy to raise cash that quickly, there are at least seven ways to raise cash within at least 30 days.

But before we get into that, we’ll start with one common method you should avoid.

Rule #1: Stay Away From Loans!(!!!)

Let’s start with every American’s favorite source of quick cash – loans. Stay away from them unless it’s a life threatening emergency.

Though getting a loan may be the quickest and easiest way to raise cash in a hurry, each loan type comes with it’s own set of problems, and some can be severe.

Credit cards. Spend some time ruminating on the word “revolving” – that’s the most basic feature of credit cards. As in revolving door – as in, you never get out of it! That’s why you should avoid credit cards.

Bank loans. Generally speaking, a bank loan is a long term solution to a short term problem – it gets you the cash you need now, but in doing so it creates a drain on future income. That guarantees future cash shortages.

Payday and title loans. If bank loans and credit cards have the potential to lock you into a cycle of future cash shortages, payday and title loans have infinite capacity to do that even more efficiently. The high interest rates, penalties and short payback periods guarantee a future of greater misery.

Loans from family and friends. Borrowing money from family and friends is a classic way to destroy important relationships. If for any reason you are unable to repay the loan in a timely manner, the liability will be a storm cloud hanging over your relationship. The best time in getting a loan from family and friends is when you first get the money you need – after that, it’s pure agony.

No matter how tempting loans may be, you should avoid them at all costs.

OK, we’ve beaten loans to death – what are some viable alternatives?

Cash Envelope

1. Sell anything you don’t need

Most of us have any number of items sitting around the house that we can sell to raise quick cash. Inventory all of your storage areas – the closets, garage, basement, and any storage units in your backyard. If you have not used in item in at least a year, you probably have no real use for it.

Have a garage sale this weekend, and sell as much of it as you can. If you think that any items are potentially high dollar sales, you may want to consider selling them online. Try eBay for small items (to keep shipping costs low), and Craigslist for larger items that will not ship easily. You can easily generate an extra several hundred dollars this way.

2. Sell your skills for cash

Do you have particular skills that are in demand, or a willingness to do certain jobs that most people don’t like to? You may be able use this to your financial advantage.

For specific skills that have a retail market, try taking an ad on Craigslist (it’s free) seeking quick jobs to earn cash. Otherwise, for general work offer to family, friends, neighbors and coworkers that you are available for jobs. This can include painting a couple of rooms, cutting lawns, raking leaves, trimming hedges, doing laundry, or any other jobs you are comfortable doing.

3. Baby sit or pet sit for a weekend

If your weekends are free, and you have space in your home, offer to either baby sit or pet sit for people you know. It can earn you some quick cash without even leaving your home.

Girl With Stack Money Fan

4. Increase your withholding allowances at work

A lot of people like to over-withhold in their paychecks so that they will have a generous tax refund. But this is one of the quickest and easiest ways to raise cash. By adding a couple of exemptions on your withholding, you can quickly increase your paycheck. Think of it as taking an advance on your income tax refund.

5. Offer to work overtime, or on any major projects at work

If your employer is offering paid overtime, get to the front of the line and make yourself available. Likewise, if there are any major projects at work that need to be done, step up and offer to do the job if you can. It may provide you with a surge of overtime income in a short amount of time.

6. Skip a week of grocery shopping

Most of us have more money tied up in groceries then we need. Try skipping grocery shopping for a week and drawing down on your existing food supplies. You may be surprised at how creative you can be in working around any shortages.

If you normally spend $200 on an average grocery shopping trip, skipping will make that money available to you for any purpose that you need.

7. Cancel or transfer services to cheaper suppliers

Are there any services you are paying for you don’t need? Or are there some that you can quickly substitute with less expensive alternatives? Eliminating or lowering one or more recurring bills could get you some quick cash.

As an example, we are about to cancel our discount landline phone service and replace it in a bundle provided by our Internet service provider. The switch will save us about $50 per month. If you can find two or three of these, not only will you get some cash this month, but it will improve your cash flow every month thereafter.

If you need quick cash, try some of the strategies above. You should resort to more costly methods of raising cash, such as loans or tapping retirement plans, only after you have exhausted all other methods.

What you do when you need to raise cash in a hurry?

How To Deal With Financial Emergencies Before They Happen

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Having a financial contingency plan is always important, even more so, now that the economy is more unstable than ever, it is a necessity for every household! Keeping your finances organized when you fall upon hard times is one of the keys to surviving and thriving in these situations.

Here are 6 things that you can do now in order to prepare for financial hardship.

How To Set Up A Financial Contingency Plan

Rather than waiting until you fall on hard times, it makes sense to plan for the worst now, while you are in the best position to prepare yourself. Start with these basic points…

Set Up An Emergency Fund

I have talked a number of times on this site about the importance of an emergency fund. Having money set aside will be extremely important if you lose your job, or face some other financial difficulty. My goal (once our debt is paid off) is to to have between 9 months and a year of our living expenses saved for a “rainy day”..

Many people have gone deep into debt (I’m one of them) because they did not have significant savings to carry them through hard times. The purpose of an emergency fund is to remove the stress, fear, and even the need to borrow, when financial hardship comes.

Emergency Fund

Every good financial contingency plan should involve a large emergency fund!

Pay Off All Debt

One of the biggest factors in how well you handle a financial emergency is the amount of debt that you have. It is much easier to adjust your living expenses than it is to rearrange your debt payments. So when you are in a position where you need to free up a large amount of committed money, you won’t have over $500 in student loan repayments (that used to be me) to worry about!

Being at the mercy of credit card companies, banks, and other loan servicing agencies, will only add to your stress and may impair your ability to make good decisions during an emergency.

Know Your Options Ahead of Time

Whether it’s an old profession, becoming a part of the contingent workforce, or part-time job, you should ensure that you have a way to earn money that’s not connected to your current full-time job. You may not want to take on that side job, or put more time into your hobby just yet, but knowing what realistic options you’ll have if you are no longer able to work at your current job will be crucial if/when it happens.

Also knowing what expenses you can easily cut and what services you can do without (it may be wise to just cut them now and build up your emergency fund, pay off debt, or save for retirement), can save you from having to make those tough decisions while under stress!

Know Who You Can Depend On

Don’t make assumptions about who will and who won’t help you. Many people who you think you can count on may not be willing or able to help you, while those you’re not even considering could be the ones who offer you the most support during your time of need!

If your relationship allows for it, verify with your loved ones that they would be willing to help out (and find out how) if you fall on hard times.

You may need to consider taking loans from family or living with friends for an extended period of time; it’s best to know ahead of time (if possible), the people upon whom you can rely.

Financial Emergency Help

Be Prepared To Sell Your Possessions

I’m not saying that you should start holding garage sales tomorrow, but it is important to have a discussion with your family members and decide what items can go if you fall upon hard times. A good financial contingency plan will take into account how much money can be gained from selling certain items.

It will be much easier to make this plan now, rather than when you are all under the stress of a financial hardship (stress can skew proper judgment)! Decide what things you can part with, and conduct research to see how much you could possibly get for them. Knowing that you can get $7,000 for you 2nd car may be all that you need to survive a financial emergency.

Be Prepared For Natural Disasters

Even though New Jersey has been hit hard by storms in the last few years, I’m not really focusing on hurricane preparedness, or being able to prevent the damage from a natural disaster in this point. What I am referring to is the ability to quickly get back on your feet after the devastation.

The first thing that you should do is create a home inventory. This will allow you to quickly determine what items were damaged (or are completely missing) after the disaster. It will also help you when filing an insurance claim – everyone around you will be filing claims with their insurance company or requesting disaster assistance from the government. Having a home inventory can help to speed up your claims when that happens.

You should also review your various insurance policies to ensure that you are covered against various disasters. Many people just assume that their policy will reimburse them for all of their damages if something happens, only to find out that they weren’t covered at all, when it’s too late!

Reader Questions

  1. Do you have a financial contingency plan? If so, what are some of the things that you have included?
  2. Have you dealt with emergencies in the past? If so, what have you learned from the experience(s)?
  3. Have you ever been hit by the sudden loss of income or dramatic increase in expenses or debt? If so, how did you handle it?
  4. What else would you add to this list?