Personal Finance Tips (Pt. 1)
In this article series I will teach you a few tips how to improve your personal finances, minimize costs and maximize profits. You don't have to be an wealthy investor to apply these tips, it applies to everyone whether you are a student, a parent, unmarried or elderly, everyone can do it.
1) Stay out of Debt or Minimize it!
Easier said than done right, well I know, that is why I have some good examples here how to do it.
A) Never take out a personal loan to buy electronics: phone,PC, laptop,TV or other gadget. It is a stupid mistake. All of these items are deflationary, meaning that if you wait a little bit, their price goes down. Why would you take out a loan, pay interest on it, and in the end you could have bought the item for half of the price by the time you end paying the loan back?
If the new phone costs 1000$, you take out a loan with 10% interest, you pay back 1100$ + commission, while you could have got the phone for 500$ if you've waited a few months. There is no urgency to buy one, it's just advertising pressure, turn off the TV and save your money!
B) Avoid payday loans & loan agents: They are the new legal mafia loan sharks. They are predatory and charge huge interest, take no collateral, and if you default they send mafia debt collectors court appointed executors to your house to rob you collect the debt by selling your stolen goods auctioning your stuff. If you don't pay in time, they will shake you down inform you politely about your late loan payment. If they require collateral, they will keep both the collateral and your previous down-payments after you default, what a scam that is.
They don't offer big loans, and there is nothing so important in your life that you have to resort to such loans. Avoid them at all cost, better ask for donations than to deal with those criminals. They will aggressively send you advertisements to your mailbox and constantly harass you on phone, and the contract has so many small fine print that you better bring a microscope when you read it, and you will legally sign yourself up to this, so the police can't help you.
C) If you need small loan ask your friends & family, if you need big loan go to a bank: If you require a few hundred or thousand of dollars, just ask your friends & family for it, or start a donation page at some online crowdfunding site, avoid the loan sharks at all cost. If you need a big loan, go to a bank, they are shifty too, so make sure you read the fine print, but still much better than the mafia.
D) Make sure the monthly payment rate is as small as possible: Since we live in an inflationary economy, the debt evaporates over time, but you have to make sure your monthly rates are as small as possible to not impact your cashflow too much. It is not as bad if your loan is big, if your monthly rates are small, it can easily be serviced, and you have plenty of cash left to spend on other things.
In a inflationary economy it's better to pay the loan back as late as possible, with the smallest monthly rates as possible. So if you take a loan of 50,000$ and you have to pay back 75,000$ that is not as bad if you pay in over 40 years, that is only 156$/monthly rate, not as bad, and by the time the 40 year passes, the inflation would have evaporated half or 3 quarters of it, as your income would double or triple by that time.
E) Always pay up 3-4 months ahead as an insurance: We might all have bad income months, lose our jobs and such, make sure your loan is paid up at least 3-4 months ahead so that you don't end up in a disastrous situation, especially if your home is at stake here.
F) Always read the fine print and know your rights: If you don't understand a part of the contract, ask them what it means, they cannot lie to you, if it's a big loan, better bring a lawyer with you just in case, it's better to pay for a lawyer than to end up in a very uncomfortable situation later when you have signed up to something you didn't wanted.
Read all fine print parts, and know what is in collateral (don't give your organs in collateral!!) and what "extra" costs you might have to pay besides the loan. All loans usually come with an insurance scheme, that means extra costs and extra protections. Know your rights, in some countries personal bankruptcy is allowed, which means that you can get off the loan in some conditions and have the right to a court hearing.
Always ask them how much you have to pay back in total, it should never be more than 140% of the borrowed amount, and if there are hidden variables that could add extra risks and costs to your payments such as: LIBOR rates, EURIBOR rates, or other interbank rates.
The most important thing is to stay aware and know your rights. Most lenders are con artists, and they love to get your money one way or another, so don't sign up to things you don't really need, and stay out of debt as much as possible, it is not a joke, many people have got devastated by it, became homeless and being sent to debtor prison for life and being forced to work there to pay it off. Debt is the new slavery, so stay safe! More tips in the next article.
This was a really great article, we need more about personal finance on steemit. I think that debt is a bit tricky, as you say if you take a loan for something that will lose value it's not great, I also had experience with friends taking loans to cover their overdraft on their account to be in the same situation a few months later. Not everyone should take loans and certainly not for everything.