How to break the cycle of debt
Closing the financial gap of getting out of debt and into savings and positive territory can become a downward spiral.
We’ve all been here at some point. Struggling to pay the next mortgage or rent repayment, credit card bill or living in overdraft. But how do we get out of the debt trap?
Here I share my top tips on breaking the cycle:
1) Change your mindset
Once you understand the why behind your debt, you can move forward and focus on how to break this cycle. Asking yourself questions such as was this debt out of your control? Was it a lack of planning and prioritising your spending? Or are you just disorganised and don’t keep a budget?
Once you figure out why, you can begin to change your relationship with money starting right now. While you can’t change the past, you can find new ways to better prepare a great financial future.
2) Stop “poor” spending habits
You can’t create a positive financial foundation with poor spending habits. Do you spend beyond your means? Are you an impulse purchaser?
There are also many things that you can reduce to ease financial pressure. Can you reduce your mobile phone bill? Can you find better insurance quotes? Can you cancel the gym membership you never use?
Once you can get clear on your spending habits, and make better choices, you can make the necessary changes to spend less and save more.
3) Find new income opportunities
Multiple income streams can increase your earning power and get you out of debt quicker. It can also allow you to diversify your cash flow and even save and invest while breaking free of debt. A few hundred dollars a week extra can have a massive impact on your overall personal finances.
Debt cycles don’t solve themselves, so you’re going to need to buckle down and make some changes If you are serious about breaking the cycle of debt, now is the time to invest in yourself and your financial future. The sooner you start, the less debt you’ll have to deal with.
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Investing in a slow market
It seems every property expert, blogger and real estate agent are talking about nationwide slowing of the property investment market. With banks tightening investment lending, higher rental vacancies in some areas and sluggish growth, the market seems to be making a polar shift from the previously enjoyed golden years of the last decade.
However slowing markets are not a bad thing and should be considered as opportunities rather than the doom and gloom approach taken by the media. One thing you can always rely on is that markets will rise and markets will fall. The timing is not always an exact science, however historical trends paint a consistent and somewhat reliable picture of what we can expect in the future.
Today, we consider the keys to help you adapt, thrive and take massive leaps forward in a down market.
1) Don’t Panic
One of Warren Buffets most famous lessons he shares is don’t panic when everyone else is. Investing is thinking with your head not your heart. Keeping the perspective that this is a long term game will help you overcome the short term downs.
In a down market there is allot more opportunities on offer and allot less competition vying for them.
2) Change your expectations
it can be hard to accept things are slowing and the unknown of when things will turn back around. The sooner to adjust your expectations of the current market and your returns, you can refocus on the opportunities this type of market can bring instead.
3) Don’t stick your head in the sand
Maximising your investing result in a slow market is best achieved when you have fully educated yourself to the market and trends. There are always hot spots and opportunities, you just need to know where to look. By researching smarter you can find and negotiate below market value property bargains and strong returns. Even with banks tightening their lending there are still options out there including government subsidiaries such as the National rental assistance scheme, distressed developer sales and flip opportunities.
4) Try a different strategy
Many investors in a slow market are trying a new property investment strategy. Experts have reported an increase of investors looking for “value add” opportunities, such as renovating, subdividing or even land with future rezoning potential.
Overall the property investment outlook in Australia long term will remain favourable. With our enviable conditions such as extremely low interest rates, low unemployment levels and growing populations, we remain one of the best countries in the world for real estate investing. Focus on seeing the property cycle downswing as an opportunity to pick up a great deal and get ahead rather than a time to batten down the hatches and wait for the storm to pass.