3 Strategies to Manage Your Money
The first step to increase your savings and properly manage your money is to start reducing your expenses. What is the first expense that you have to reduce and eventually eliminate? So is the interest you pay on your consumption.
You have to avoid taking a lot of debt, and seeks to eliminate the debts that have very long periods. Why? What happens is that 7% -8% may seem small but on many long-term payments, it becomes much money.
For example, if you buy an apartment at $ 250,000 and take $ 200,000 in mortgage at 6% for 30 years and you pay only the minimum you should pay each month, you end up paying $ 422,280 in monthly installments. You will have paid $ 222,280 in interest to the bank. That’s like if you bought two apartments and you gave one to the bank!
That means instead of paying the minimum payment required by your bank (like your bank want to do), you CONSTANTLY have to deposit more money, to reduce and eventually eliminate the principal amount … but you end up donating money to the bank in the long term.
David Bach, in his book “The Automatic Millionaire”suggests that we should put the monthly payment of our mortgage, for example, and” two fortnightly payments “means that if you have to pay $ 1,500 monthly for your mortgage, you’re done negotiating with the bank to pay $ 750 every two weeks. The result: you end deposit 26 payments a year (every year brings 52 weeks), which translates to pay … 13 months. Every year of your mortgage is reduced by one month at a time. Do you think that this extra payment is going to hurt? Are you going to notice? Most likely not. But this is the point: if you do it from the beginning of your mortgage, you end up paying your property in 23 years, saving seven years of the total mortgage. That’s a huge savings because we are talking about a 30% reduction.
More than anything, YOU required to cut any consumer interests beyond 6%, especially credit cards, or lines of credit and overdraft, you load the “modest” sum of 2% per month. That seems small, but adds a 24% per annum of the total debt.
That is why from now on:
After covering your needs at home and transport, avoid any consumer debts now. Never lend money to spend.
Pay only in cash. If you pay by credit card, pay the entire balance of your credit card each month end.
Takes 10% of your money each month to reduce the principal amount of your outstanding loans. This is in addition to the minimum payment required on each share.
