The sad truth is that nowadays the majority of us are living in debt. Having credit cards, loans, mortgages and hire purchase agreements means that the average family owes a staggering £25,000!

If this is you (and you quite probably owe even more money than this, it’s only an average remember), you’re probably wondering if you are doomed to be trapped in the debt cycle forever.

Living Free of Debt

Starting to think about the possibility of living free from debt and the worry that debts can bring is the first step, so well done for getting here! You are already starting to think with the right financial mindset and are no longer willing to be sucked dry by the loan and mortgage companies who are living rich on your hard earned cash. Be rest assured that paying off your debts is the wisest financial decision you could ever make.

Debt Affects Our Health

Debt has so many damaging effects on us and not just on our bank balances. The health costs of debt are huge! There are many well researched and documented studies on the personal effects of debt. From increased suicide rates and substance abuse, to higher levels of divorce as well as causing depression in our children. Can you really go on taking these kinds of risks with your health and the health of your family?

How We Get Duped

Are you aware that the majority of the money that you are paying out each month is not actually going on paying off your loan debts at all? That’s right! Most of what you are paying is interest on your debts with only a small percentage paying off the actual loan.

That’s how the financial companies dupe us and make millions, if not billions, of pounds each year by charging us interest, upon interest. Take your mortgage for example, which you might consider as a “cheap loan”. Over 25 years you will likely pay out more in interest than the original loan amount. If you move house or change mortgage provider frequently it’s even worse! At the end of 25 years you could have paid more than treble the initial loan amount!

Develop the Right Mindset

Clever of them – but we need to be even smarter. Make the decision to stop lining their pockets and start lining your own now. By making a commitment to paying off debt you can get out of the dangerous trap that nearly all of us have been manipulated into and start experiencing the freedom of living a life without debt.

Paying Off Debt, What You Need to Know is a post from: Smart Money Mindset.com

Though the current global recession seems to be easing we can all still use tips to help us save some of our hard earned money. Just by utilising a little creativity and changing our mindset we could each be saving hundreds, if not thousands per year and increasing our own bank balances rather than those of the loan companies!

3 Top Tips for Saving Money

Mortgage lenders, loan and credit card companies all use the law of compounding to make sure they squeeze every last penny that they can out of you. Not only do you pay interest on your loan, but you pay interest on the interest. This is how financial companies keep us in debt for as long as they possibly can and they certainly don’t want you to know these tips for saving money!

Stay With Your Current Mortgage Provider

Yes, you read it right! One thing that many people do not realise is that when you change mortgage lender you also reset your interest payments to start from the beginning. Since the majority of your monthly mortgage payments in the first 12 years is actually paying the interest rather than the actual loan, when you switch to a new lender you actually restart this process. This means that the more times you change lender the more interest you will pay over the lifetime of the mortgage. What a waste of your money!

Ask Your Credit Card Company for a Lower Rate

Another one of my top tips for saving money is asking your current credit card provider to lower their interest rate for you! Just give them a call and ask them. Point out what a good customer you have been, how you pay on time and that you would like a reduced rate please. The customer service advisor may be a little surprised, but you can get a reduced rate if you negotiate in the right way.

Save Money on Anything Using Simple Negotiation Techniques

Try these out to see for yourself how you can buy nearly anything, from an apartment to an apple, for lower than the ticket price.

Act reluctantly – Pretend you are not interested in the product and watch the salesperson lower and lower the price until you buy!

Ask for more than you want – Always offer a price lower than what you are actually willing to pay. 9 times out of 10 you will pay either what you wanted to or less than you expected.

Which of these top tips for saving money will you try? If you decided to do all of these things you could save yourself hundreds per month – think of how those savings could be used!

3 Top Tips for Saving Money is a post from: Smart Money Mindset.com

If someone offers you a guaranteed profit or return on your money what should you do? Yes, that’s right, RUN!!

You see in personal finance there are very few things that offer a guaranteed return, in fact I know of only one. (if you know any more please do tell me!). However that doesn’t stop people using phrases like:

• “You definitely get your money back and more!”
• “The stock market always goes up in the long-run”
• “Your money is safe”

When in reality nothing could be further from the truth. The explanation of a guaranteed return by saying “the stock market always goes up in the long-run” is probably the worst, if you don’t believe me ask someone who has spent the last 10 years making pension payments invested into the stock market and after management fees and the timing of his investments has less than he put in!

However there is one place you CAN get a guaranteed return, and that’s in making early debt repayments.

You see finance companies use the power of compounding against you (sign up for my Free Dangers of Debt Report on the right for more information), by charging you interest on interest on credit cards, loans and mortgages.

However by making extra debt payments you can use the compounding effect in your favour, and then some! Take the following simple mortgage example:

• Mortgage: £200,000, 7% interest, 25 years, monthly payment, £1413.56

Over the course of the mortgage the following happens:

• Pay the bank: £424,067
• Pay off what you borrowed: £200,000
• Pay in interest: £224,067

Let’s say that more clearly, you will pay the bank over double what you borrowed! The majority of that being interest!

However make overpayments of just £300 a month and this happens:

• Mortgage paid off in 16.4 years
• Almost 9 years off the mortgage!
• Total future payments saved: £145,597

Yes, for £300 a month you get £145,597 back as your return. That’s a guaranteed return of 7% for those 16.4 years, the same 7% the bank was charging you.

Certainly looks more attractive than the interest you’re getting on your savings right?!

What guaranteed return could you get on your money using this method?

Let me know what you think below!

A Guaranteed Profit On Your Money? It’s Possible! is a post from: Smart Money Mindset.com

I’ve heard these phrases so many times:

“My house is an asset”
“I’m not worried about my mortgage – I have lots of equity in my property”
“I can always sell if I get into trouble”

And I used to think the same way. That it was ok if I had a large mortgage, so long as I had equity in the property I was safe. I was wrong.

These phrases are based on some common misconceptions:

1) House prices will always go up
Maybe in the very long-run, but in the short-term they can fall and fall rapidly

2) All other circumstances will remain unchanged
The time when you get into trouble is usually the time when other people are getting into trouble, as well as the economy. This means just when you need to sell one or more of the following will be occuring: job losses; restrictions in mortgage lending; falling house prices; buyers holding back from the market; people restricting spending; interest rate increases (we have been lucky on this one but think back to the last recession); price inflation.

3) That you will be able to sell your home
Even at a discount, if economic circumstances have changed you will find it very difficult to sell and sell in a quick timeframe. As recent events have shown buyers can dry up, and even those still around will struggle to get mortgages at the level they need.

4) That things won’t spiral out of control
As you fall behind in mortgage payments charges will increase rapidly putting you in a even more difficult position financially. You will find it difficult to remortgage as your financial circumstances have changed, and your credit rating will be falling rapidly!

Here is a common sequence for repossession:

1. You get into trouble financially (job loss; injury; business collapse; personal or family member illness; divorce etc. – you only need one of these to occur)
2. You realise that your biggest financial outgoing is your home (mortgage, property taxes, insurance, electricity, gas etc)
3. You realise that you have no option but to sell your home and within 6 months or you will be repossessed
4. You need to sell quickly so you put it on with multiple estate agents at a small discount, hoping to get a good price
5. Viewers come, they are fussy (it’s a buyer’s market), even if they make an offer they cannot get mortgages, and cannot complete in the timeframe necessary
6. You become increasingly desperate and drop the price further, and further…
7. You run out of time. (By the way you still have plenty of equity in the property)
8. The bank repossesses the property, you lose your home, the bank adds multiple charges, sells your home at a discount at auction, allocates the remaining debt to you for the next 6 years, your credit rating is shot.

What you must realise is that cash flow is more important than equity when dealing with property, especially the home you live in. Here’s why: you can survive negative equity if you have the cash flow to service your debts (think of all the people who managed to keep their homes during the last recession), however you without cash flow it doesn’t matter how much equity you have in your home, you will be repossessed if you can’t pay your debts.

Even the tiniest debt, if unpayable, gives the lender the right to repossess.

In these ciricumstances it’s often professional property investors who are actually able to purchase and in the timeframe required. So even if you do manage to sell, and your equity saves you, you pay a heavy price.

The follow example is a deal a friend did recently:
Market Value: £300,000
Mortgage: £140,000
Purchase Price: £200,000

Now a £140,000 of debt on a £300,000 property isn’t much is it? But it is if you cannot service the debt.

The lesson here? Don’t rely on your equity to get you out of trouble. Pay constant attention to the cash flow position you are personally in.

Why The Equity in Your Home Will NOT Save You is a post from: Smart Money Mindset.com