Consumers who are serious about fixing their finances are always on the lookout for pieces of financial advice they can use to help them strengthen their finances. This can come from different sources such as family and friends, colleagues, industry leaders and even people from the bank. There are even a lot of financial knowledge you can pick up from simply searching online.
The challenge now becomes being able to read through and choose the ones that best apply to your current situation. There is also the task of filtering through the advice that will not put you deeper in debt. This could lead to debt pulling you down and keeping you in the red unable to enjoy the fruits of your hard work.
What makes this even more difficult is the fact that the holiday season is just around the corner and this usually means more unexpected expenses. In fact, Forbes.com shares that this coming Christmas season, there are about 26% of American consumers who are already planning to add more debt. This is to allow them to enjoy the holidays either by buying and giving gifts for themselves and other people.
This means that even before the year ends, there will be a good number of consumers who will either be carrying a higher debt amount than when they started the year or end the year with the same debt level. This is where looking for great pieces of financial advice comes in because it can help you straighten your ways. Though it is not a magical wand that will automatically erase your financial obligations, they can guide you on what you need to do to lower down and eventually pay them off.
Two pieces of financial advice to hold on to before the year ends
As the year comes to a close, here are two great pieces of money advice you need to seriously consider. They are not meant to overhaul your finances overnight but rather, they can make the incoming year a little better for your finances.
Buy a house. Do no rent
There is no question that one of the biggest expense a household would have on their budget is their house payment. Regardless if they are renting or paying down a mortgage, the house payment normally sits on top of an expense list in a budget. This is usually a to priority as it gives the family roof over their heads and beds to sleep on at night.
There is a debate on whether it is better to just rent a house to do away with some of the annual expenses such as taxes and insurance or buy a house a try to pay it off within 30 years. Especially now that the NYTimes.com shares that mortgage rates are increasing. Those that are renting are enjoying a less stressful experience because aside from the landlord taking care of insurance and tax payments, they are also responsible for maintaining the property.
On the other side of the fence, those that are paying for a mortgage loan also takes up the responsibility of ensuring their tax and insurance payments are done every year. They also have to make sure that the house is in tip top shape as long they are living in it. Repair cost and periodic maintenance expenses will come out of their own pockets
Financial benefits of renting and owning a house
With all these different benefits, a lot of people are slowly considering renting to do away with some expenses. This makes the decision of renting or owning a lot harder. However, they are also giving up a potential earning possibility in a few years time which can coincide with their retirement years. Consumers who own their house has the ability to use it to advance their financial position in life.
If they are able to pay it off early enough, they can get a new house while putting up the old one for rent. By the time they are retired, they either close to paying off the second one while earning a steady income from the first house. They get to enjoy retirement debt free on their house with an additional income from rent on the first property.
Take advantage of 401(k)
If someone tells you that they will be giving you money right now, what would you do? Would you ask why or ask if what’s in it for them? Or would you just put your hand out waiting for money? Regardless what your reaction is, the mere mention of free money always gets our attention and your 401(k) is similar in nature.
Of course, you would be quick to point out that you are contributing to your 401(k) every month which is automatically deducted from your pay. How does that become free money? It comes from your hard work and being automatically taken out does not make it any different from having to pay it out of pocket every month.
401(k) free money
There are two things you need to understand when you have a 401(k) which makes the fund practically free money and one of them is employer matching. Your employer matches whatever you are putting into your 401(k) up to a certain level. This means that while you are saving for your retirement, your employer is also putting money into your account as well.
Another one of the factors that would help you appreciate 401(k) even more is how compound interest can make your money grow exponentially over a long period of time. This simply means that you will earn interest on interest on your fund.This is one piece of financial advice you need to seriously consider as it gives you the chance to grow your money over time.
Holiday debt pitfalls
Here are a few great pieces of financial advice in time for the holiday expenses.
- Be wary of store cards that offer the lowest rate. This season, there is a big chance that you will be frequenting several stores to do your holiday shopping. These stores would be quick to offer you their store cards so you can get unbelievable discounts on your purchases. This can work in your favor if you will pay the items on time. However, if you start missing your payments then these store cards has some of the highest fees and charges that can really do a number on your finances.
- Taking advantage of sales promotions. This season, there will be a lot of sales promotions which will encourage you to buy left and right. Buy one get one, but two take one are just some of the things you will often see plastered on the display walls of several establishments. However, one piece of financial advice for the holidays is to look beyond these promos and ask yourself if you really need two of anything. You might end up with more stuff than you know what to do with.
- Maxing out your credit cards. Nerdwallet.com shares that US consumers in total owe about $747 billion. Keeping that amount in mind, how much are you repaying your credit card debt? You need to keep an eye out on this especially with the holiday season kicking into high gear.
There are a lot of great pieces of financial advice that you can use to help prepare for the coming year. You can start putting together your strategy to address financial problems and manage your debt payments to help you reach your long-term goals.