Frugal living
Frugal living doesn't necessarily mean giving up all your comfort and hobbies in order to save.
It just means spending carefully so that you can have more paycheck then month each month. More and more Americans are getting lost in the maze of debt each year. This happens because they have bad spending habits, especially through credit cards. Frugal living doesn't mean just buying the necessities either. We help you save yourself from the urge to splurge, and encourage you to start saving.
Before you go shopping, always make a list. And buy ONLY what is on your list! This way you can stick to buying the essentials and not overspend on things you may just want and can do without.
Never buy things in bulk unless you are sure that you will use it with in a few months time. Also the more you buy of something the more you use it too. Because buying more will only make your family use more of the stuff you buy. For example, if you buy a case of soda, your kids will just drink more soda.
Cut down on eating out. Make a habit of packing your lunch instead of eating out, you can save more than you can believe. Begin making things yourself, this way you can spend your time productively and also save big. Change your spending habits and don't buying things you don't really need and that you can't really afford. Always set a budget for kids' shopping. We like spending money on our kids but we need to keep it within a budget!
Make a budget and stick to it. Putting the numbers down on paper will reduce your chances of spending a lot.
- Use Grocery Coupons
- Stay Away From Fast Food Restaurants
- Review Your Long Distance
- Shop Where They Have The Good Prices
- Cut down on energy costs, that have risen quite a bit lately therefore, paying attention to energy usage can help your bottom line. Try to use less heating and air conditioning.
- Review Your Credit Card Situation
You'd be surprised how much some of these simple steps can improve your debt position and give your financial freedom.
Download the Rapid Debt Reducer DEMO.
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Why Credit Cards Take So Long to Pay Off
Creditors design your payment schedule to keep you in debt for a very long time.
Lets look at a typical credit card with a 3400.00 balance at 16.9% interest. First we need to understand some special credit lingo (terms)
Annual Percentage Rate (APR) the advertised Interest Rate (example 16.9%) that you are being charged.
I say advertised rate because it is not the actual interest rate that you are paying. You will pay much more. The reason for this is compound interest. That is, paying interest on interest. This is because credit card companies break down the annual percentage rate (APR) to a monthly rate called the Periodic Rate.
Periodic Rate is the monthly interest rate that you will pay. You will find this somewhere on your statement.
The Periodic Rate is the Annual Percentage Rate (APR) divided by 12. There are 12 months in a year:
Example:
Divided 16.9 by 12 = 1.24166%
Next convert the periodic rate to a decimal. To do this you simply move the decimal two places to the left. This will make calculating a monthly payment easier.
Percentage Decimal
1.24166% Move Decimal .0124166
Always calculate the periodic rate out at least 5 decimal places. Accuracy is important. Trust me that’s what the Creditors do! They are going to get all that is coming to them.
Some Credit cards use a daily percentage rate! This is to their benefit, every penny counts.
Monthly Finance Charge this is the amount of interest that will be charged for one month. IT CHANGES EVERY MONTH as the balance goes down or up.
The preferred method of coming up with the monthly finance charge is the Average Daily Balance. There are other methods but this is the most used. We are going to assume that no more charges were made on the card so the daily balance remained the same.
For ease of explaining lets use the 3400.00 and determine the monthly finance charge.
Balance X Periodic Rate = Monthly Finance Charge
3400 X .0124166 = 42.22 (ok to round)
This is only the interest portion of the monthly payment.
Next we will calculate the actual monthly payment
The actual monthly payment is a percentage of the balance owed. (Usually around 2%.)
Change 2% into a decimal.
Percentage Decimal
2.0% Move Decimal . .02
Example: BalanceMonthly Payment
3400.00 X .02 = $ 68.00
Ok so we now know that the monthly payment is 68.00 and the interest (or monthly finance charge) for this month is $ 42.22. So, that means only $20.12 goes to principle this month.
To illustrate here is 12 months of payments:
Month |
Balance |
Payment |
Interest |
Principle |
1 |
$ 3,400.00 |
$ 68.00 |
$ 47.88 |
$ 20.12 |
2 |
$ 3,379.88 |
$ 67.60 |
$ 47.60 |
$ 20.00 |
3 |
$ 3,359.89 |
$ 67.20 |
$ 47.32 |
$ 19.88 |
4 |
$ 3,340.01 |
$ 66.80 |
$ 47.04 |
$ 19.76 |
5 |
$ 3,320.24 |
$ 66.40 |
$ 46.76 |
$ 19.64 |
6 |
$ 3,300.60 |
$ 66.01 |
$ 46.48 |
$ 19.53 |
7 |
$ 3,281.07 |
$ 65.62 |
$ 46.21 |
$ 19.41 |
8 |
$ 3,261.66 |
$ 65.23 |
$ 45.94 |
$ 19.30 |
9 |
$ 3,242.36 |
$ 64.85 |
$ 45.66 |
$ 19.18 |
10 |
$ 3,223.18 |
$ 64.46 |
$ 45.39 |
$ 19.07 |
11 |
$ 3,204.11 |
$ 64.08 |
$ 45.12 |
$ 18.96 |
12 |
$ 3,185.15 |
$ 63.70 |
$ 44.86 |
$ 18.85 |
The monthly payment goes down each month but, so does the amount going to principle.
At this rate it will take 34.2 years to payoff and you would have paid 10,673.70 in payments. $7,273.70 going to interest.
That is if you stop using the credit card and make only the minimum payments. Scary!
Let’s look at what happens if you pay a fixed amount or constant payment each month instead.
What would happen if you paid a fixed amount or constant payment amount on the same Credit Card Debt
In our example: we will use the same balance of $ 3,400.00 and the current month’s payment $ 68.00 as our constant payment amount. Anther words we will pay a fixed 68.00 a month until the debt is paid off. Paying no more then we are now.
Month |
Balance |
Payment |
Interest |
Principle |
1 |
$ 3,400.00 |
$ 68.00 |
$ 47.88 |
$ 20.12 |
2 |
$ 3,379.88 |
$ 68.00 |
$ 47.60 |
$ 20.40 |
3 |
$ 3,359.48 |
$ 68.00 |
$ 47.31 |
$ 20.69 |
4 |
$ 3,338.80 |
$ 68.00 |
$ 47.02 |
$ 20.98 |
5 |
$ 3,317.82 |
$ 68.00 |
$ 46.73 |
$ 21.27 |
6 |
$ 3,296.54 |
$ 68.00 |
$ 46.43 |
$ 21.57 |
7 |
$ 3,274.97 |
$ 68.00 |
$ 46.12 |
$ 21.88 |
8 |
$ 3,253.09 |
$ 68.00 |
$ 45.81 |
$ 22.19 |
9 |
$ 3,230.91 |
$ 68.00 |
$ 45.50 |
$ 22.50 |
10 |
$ 3,208.41 |
$ 68.00 |
$ 45.19 |
$ 22.81 |
11 |
$ 3,185.59 |
$ 68.00 |
$ 44.86 |
$ 23.14 |
12 |
$ 3,162.46 |
$ 68.00 |
$ 44.54 |
$ 23.46 |
More of the monthly payment is going to principle each month!
At this rate it will take 7.33 years to payoff and you would have paid 5,922.06 in payments. $2,522.06 going to interest alone.
I don’t know about you but $ 4,751.64 is a lot of money in my book. And so is 27 years
This is what the Rapid Debt Reducer PC software does. After one debt is paid off then take that payment amount and apply it to the next debt. Simple!
No magic here, just the plain truth. Create a plan to eliminate your debt. To start today
Download the Rapid Debt Reducer DEMO.
View the 3 Steps to Financial Freedom
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