Ways Impulse Buying Could Easily Get You Into Debt

 

Avoid the Pitfalls of Impulse Buying

The way today's society is structured it is pretty easy to outspend your means if you are not careful. Between the ease of technology and the availability of buying on credit, nowadays commercial promotions are designed to get people to spend. Between credit and debit cards, pay later plans, and other forms of deferred payment, it is tempting to make purchases and worry about making payment later.

With these many conveniences available today, on the surface they might seem like terrific options for consumers. In many ways they are - as is anything designed with convenience in mind. However, the big drawback is due to the ease of purchase without worrying about payment right away, debt has a tendency to sneak right up on you. And, if you're not paying attention, interest begins piling on your balances and before you know it you could have creditors knocking at your door demanding payments you cannot afford to make. Ways impulse buying could easily get you into debt include:

You Outspend Your Income

Continuously purchasing items without planning for them financially can lead to debt if spending exceeds income. Chances are most people have a specific monthly income, or at the very least, earn the same average amount each month.


To avoid this pitfall, prior to spending your available credit on non-necessary and non-budgeted items, it is important to pay all outstanding bills first to ensure spending does not amount to more than income does. Debt can creep up if bills are not paid first; however paying bills can give a clear indicator of how much money, if any, is left over for spontaneous shopping adventures.

Overuse of Credit Cards

Many individuals who are compelled to impulse shop frequently use their credit cards. Credit cards are a terrific convenience, however the drawback is using credit cards can lead the spender on a very slippery slope, one that will land the consumer right in heavy debt if he or she is not careful.



When impulse shopping leads to credit cards bills that cannot be paid off at the end of the billing cycle, this means interest charges will be tacked on to the original expense. Depending on the card's interest rate, this could get costly - quickly.

Impulse spenders have to be extra careful when using credit cards because it could lead to excess debt which may be hard to dig up out from.

You Lose Track of Expenses

People who tend to impulse buy also often have a predisposition to not track expenditures until it is too late. As shoppers go from store to store or website to website to make purchases without really paying as close attention to spending, debt can tally up quick.

Online Shopping

The growth of e-commerce, and now mobile commerce (or “m-commerce), in many ways helps contribute to overspending because it is so convenient. With customized ads hand-delivered to pretty much any web page, including social media and flash sales designed to get people to buy impulsively with deals that (the companies are hoping) cannot be resisted. Then there are daily deal sites and other enticements all over the web.

Online shopping is quick, and this alone makes it much easier to compile debt because a consumer can visit many stores within the matter of minutes. Add location trackers and other geo-location details and retailers may send targeted ads or deals on the spot to mobile that people accept in the fear of missing out on such a deal.  In April 2015, Mobile Commerce Daily reported on the ways Twitter's "buy button" can change the dynamics of m-commerce.

Statistics on Debt

According to figures put out by the U.S. Federal Reserve, in the United States, total outstanding consumer debt was said to be $3.34 trillion. This figure includes car loans, student loans and revolving debt. Mortgages were excluded. Reports also indicate credit card debt is steadily on the rise. CardHub reports on American spending:

"Consumers ended 2014 with a $57.1 billion net gain in credit card debt, and CardHub now projects that we will incur more than $60 billion in new credit card debt during 2015 – a 5% increase. We’ve now had six consecutive quarters of year over year increases in our credit card debt load." 

Revolving debt, which is primarily composed of credit card outstanding balances was said to be $884.8 billion as of January 2015. ¹ On the plus side, the number of people who carry credit card balances from month-to-month in the United States is decreasing.

In Canada, statistics indicate total consumer debt  as of Nov. 30, 2014 is $1.810 trillion (unlike U.S. statistics, this does include mortgages). Fifty-two percent of Canadian households carried credit card debt in 2014. This is down 2 percent from 2013.

For many, impulse buying plays a strong role.  As a result, it can lead to serious financial problems and, due to this reason, it is important to be sure to spend only within your means in order to avoid the financial hardship that comes along with excess debt. Even if you have to plan a budget. If not, they'll be financial consequences to pay.

Impulse buying can lead to excessive debt, but the good news is recognizing and avoiding the pitfalls of on-the-fly shopping can help allow you to spend and remain within your budget.

source: infobarrel.com

The silent struggle of senior citizens with debt

(The writer is a Reuters contributor. The opinions expressed are his own.)

NEW YORK - When Wanda Simpson reached retirement a couple of years ago, the Cleveland mom had an unwelcome companion: Around $25,000 in debt.

Despite a longtime job as a municipal administrator, Simpson wrestled with a combination of a second mortgage and credit-card bills that she racked up thanks to health problems and a generous tendency to help out family members.

"I was very worried, and there were a lot of sleepless nights," remembers Simpson, 68. "I didn't want to be a burden on my children, or pass away and leave a lot of debt behind."

New data reveal that Wanda Simpson has company - and plenty of it.

Indeed, the percentage of older Americans carrying debt has increased markedly in the past couple of decades. Among families headed by those 55 or older, 65.4 percent are still carrying debt loads, according to the Washington, D.C.-based Employee Benefit Research Institute (EBRI). That is up more than 10 percentage points from 1992, when only 53.8 percent of such families grappled with debt.

"It's a two-fold story of higher prevalence of debt, and an uptick in those with a very high level of debt," says Craig Copeland, EBRI's senior research associate. "Some people are in real trouble."

To wit, 9.2 percent of families headed by older Americans are forking over at least 40 percent of their income to debt payments. That, too, is up, from 8.5 percent three years earlier.

The only bright spot in the data? The average debt balance of families headed by those over 55 has actually decreased since 2010, according to EBRI, from $80,564 to $73,211 in 2013.

Still sound high? It is especially so for those heading into reduced earning years, or retiring completely.

The primary culprit, according to Copeland: rising home prices and the longer-term mortgages that result, often leaving seniors with a monthly nut well into their golden years.

Seniors are even dealing with lingering student debt: 706,000 senior households grappled with a record $18.2 billion in student loans in 2013, according to the U.S. Government Accountability Office.

It's not an easy subject to discuss, since older Americans may be ashamed that they are still dealing with debt after so many years in the workforce. They do not want to feel like a burden on their kids or grandkids, and so keep their financial struggles to themselves.

But financial experts stress that not all debt is automatically bad. A reasonable mortgage locked in at current low rates, in a home where you plan to stay for a long period, can be a very intelligent inflation hedge.

"I always suggest clients consolidate it in the form of good debt, like a mortgage on your primary residence," says Stephen Doucette, a planner with Proctor Financial in Sherborn, Massachusetts. "You are borrowing against an appreciating asset, you don't have to worry about inflation increasing the payment, and the interest is deductible.

As long as this debt is a small portion of your net worth, it is okay to play a little arbitrage, especially considering stock market risk, where a sudden decline could leave older investors very vulnerable.

"A retiree who has debt and a retirement account with equity exposure may not have the staying power he or she thinks. The debt is a fixed amount; the retirement account is variable," says David Haraway, a planner with LPL Financial in Colorado Springs, Colorado.

It is important not to halt 401(k) contributions, or drain all other sources of funds, just because you desire to be totally debt-free. Planner Scot Hansen of Shoreview, Minnesota has witnessed clients do this, and ironically their good intentions end up damaging years of careful planning.

"But this distribution only created more income to be reported, and more taxes to be paid. Plus it depleted their retirement funding source." he says.

Instead, take a measured approach. That's what Wanda Simpson did, slowly chipping away at her debt with the help of the firm Consolidated Credit, while living off her Social Security and pension checks.

The result: She just sent off her final payment.

source: www.abs-cbnnews.com

Bring financial order to your life in 2015

MANILA, Philippines - Have you ever felt that you are always at the mercy of circumstances where money matters are involved? For instance, are you always running out of cash? Do you feel that your bills are always piling with no reprieve in sight?

Perhaps, it’s time to bring financial order into your life. Financial order, in a nutshell, means being prepared to face your financial obligations without getting stressed to the point of anxiety. Although money matters are not exactly the easiest to think about and may cause you a measure of stress, they should not overwhelm you completely.

Financial order is important. At the very least, it gives you peace of mind. It also keeps you out of trouble and helps you avoid unnecessary expenses and losses. For example, if you missed funding a check you issued by only one day, you could be paying as high as P2,500 in penalties. Same thing holds true for credit card bills.

Creating financial order in your life is possible, but it entails careful analysis of your financial standing, your consumption and spending patterns, and your personal goals. It is both a process and a goal. You have to continuously work to keep financial order in your life, and you should always aspire to achieve or keep it.

Here are some concrete ways to achieve financial order:

Keep records.

By keeping records, you will be able to keep an eye on your bills’ due dates which allows you to plan accordingly. Over the longer term, your records will allow you to monitor your spending and debt levels. There are programs available online to help you do this. If you prefer to keep records the old way, you can get a large envelope where you can file your receipts, bills, credit card and bank statements. It would be helpful to organize these regularly.

Manage expenses.

Are you going overboard with too many expenses? If you keep financial records, you will be able to pinpoint areas where you can cut back or where you can better manage your expenses. Look at areas where you may be incurring unnecessary expenses like paying for too many cable channels you hardly tune in to or gym memberships you hardly have time for.

Have a savings plan.

Once you are better able to manage expenses, you can have a savings plan. Commit to saving a fraction of your income and to add to this regularly. As much as possible, try to allocate funds for savings before you spend your regularly monthly earnings.

Pay debt.

Try to keep your debt level to a level that is comfortable. To know how much debt you currently have, calculate your monthly disposable income. This covers your take-home pay, bonuses, and all other income coming from other sources. Next, compute your monthly payments on all loans. Then, divide this amount by your monthly disposable income and multiply by 100. This will give you the percentage of your disposable income that goes into debt payment.

Protect your income.

One source of financial stress is the fear of leaving your family and loved ones vulnerable if you pass away. This is why it helps to take out a life insurance, especially if you have young children or if you are the breadwinner in your family. Insurance will also protect your assets. If you own a car, consider getting an automobile insurance. If you own property, home insurance is a worthwhile purchase.

Know your net worth.

This is an exercise that everybody should do, regardless of economic status. To know this, add up the value of all your assets (property, stocks, etc.) and income. Deduct the amount of your debt from this amount. The resulting number is your net worth. Note that this may change every year, depending on the value of your assets (e.g. share prices may change) and the amount you owe.

Once your finances are in order, you will be better able to forecast your fiscal activities, and you will be able to create realistic goals that will lead you, eventually, to financial freedom. It’s never too late to start – and 2015 is as good a year as any.

source: www.abs-cbnnews.com