Saturday, July 18, 2020
How to Avoid a Payday Loan Savings Strategies How to Avoid a Payday Loan: Savings Strategies How to Avoid a Payday Loan: Savings StrategiesNobody wants to take out a payday loan. Theyre seen asâ"at bestâ"a necessary evil. A way for people without credit to borrow money in a hurry. People dont look forward to them any more than they look forward to going to the dentistBut the problem with payday loans is that theyre often worse than that. These short-term, high-interest loans trap borrowers into a cycle of never-ending debt. If they were a dentist, theyd be a guy working out of a back alley with one rusty drill and a baseball bat for anesthesia.Thats why its best to avoid payday loans altogether if you can! And that means building up your savings so that, when a financial emergency does arise, you can take care of it on your own.Easier said than done, right? Well, here are nine great tips from real experts to help you build an emergency fundâ"and stay away from payday loans altogether.1. Follow the 50/20/30 ruleNatasha Rachel Smith, head of global communications at TopCash back says that you should, Review your spending and ensure youre allocating the right amount to savings and emergency funds. You should have at least six months salary saved in an âemergency fund as, according to the Bureau of Labor Statistics, the average duration of unemployment in the US is 27 weeks.In order to build this up, its best to follow the â50/20/30 rule, says Smith. You should spend only up to 50% of your after-tax income on essentials, such as housing and food; 20% on financial priorities, such as debt repayments and savings; and 30% on lifestyle choices, such as vacations.2. Automate your savingsRobert R. Johnson is the president and CEO of The American College of Financial Services. He says,Making savings automatic is a key to success.A disciplined approach is the key to success, and automating savings is the key to discipline. Out of sight, out of mind is the operative philosophy here.One way to do it? [Have] a specific amount taken out of each paycheck and deposited directly into a savings or money market account.3. Get out of debtSmith has a couple great tips for tackling debt repayment.First, she says, ensure youre paying the lowest interest rates on any credit cards or loans by transferring existing balances to 0% interest credit cards.Once youve done that, she continues, ensure youre allocating at least 20% of your income to debt repayments.According to Smith, Focusing on the most costly borrowing first is the fastest way to get out of debt as the overall interest charge is reduced more greatly in lesser time, though some people find they are more motivated by paying off the smallest debts first to lessen the total number of creditors they have.4. Get rid of cableOne of the best ways people can save for an emergency fund is to cut the cord, says Chris Brantner, also known as Mr. Cable Cutter. With the average cable bill sitting at over $100 per month (not to mention those bills with expired promotions that skyrocket), the average person can easily save $50 or more per month when they get rid of cable.(If you visit Brantners website, CutCableToday.com, you can walk step-by-step through exactly how you can cut the cord and keep the programming you want.)According to Brantner, Most people already pay for Netflix, which gives you a ton of programming. The average person also subscribes to Amazon Prime, which also has a Netflix-like library full of older HBO series and more. You can get all the local stations you want with an antenna for free.Now if you need more up-to-date programs, he says, you can opt for a live streaming service like Sling TV which starts at $20 per month, or go with Hulu, which airs many shows the day after they air, starting at $7.99 per month. Whatever the case, you can still save big.Youll still need internet, but you can likely find a good connection for $40â"60 per month, says Brantner. Luckily, his site has a tool that will help you find and compare internet provider promotions in you r area.5. Save your tax refundAccording to a recent study by BankRate.com, says Smith, a surprising number of millennials (39%) plan to save or invest their refund, 28% plan to use it to pay for necessities and 24% say theyll use it to pay down debt.While it is tempting to splurge on a vacation or a big purchase, saving the refund for emergency situations will be more beneficial to you in the long run, she says.For more on how you can use your tax refund more wisely, check out our blog post: 5 Smart Ways To Spend Your Tax Refund.6. Use appsThere are financial apps that help people save money, says Johnson. One popular app is called Acorns. You tie Acorns to your debit card and it rounds the purchase up to the nearest dollar, effectively allowing you to invest your spare change.Johnson even lays out how it works:If your Starbucks latte costs $4.29, when you use your debit card $5 will be taken out of your account with $4.29 going to Starbucks and $0.71 going into your investment acco unt. This allows you to save money as you make everyday purchases.7. Turn your clutter into cashSmith suggests that you should Have a clear-out and sell anything you dont use â" or genuinely dont even want â" anymore.Two questions to ask yourself when deciding whether to keep something or not is: have I used this in the last year? and is it sentimental? If the answer to both questions is no, then sell it and collect the cash, she says.According to Smith, There are plenty of websites that can help you, eBay being one of the most notorious. However you pay less fees with Bonanza and eBid. If your goods are designer, its worth checking out Tradesy.com or Poshmark.com. BuyBackWorld.com is great for electronics and Raise.com will, in many cases, actually pay you $1.50 per gift card you list for sale through TopCashback.8. Invest your raiseAnother idea is to invest your raise for retirement, says Johnson. That is, act as if you didnt receive a raise and have the after tax amount of the raise deducted directly from your paycheck into a retirement fund. You dont give anything up other than the opportunity cost of the raise.Johnson points out that You are already accustomed to living on the current amount you make. When you invest your raise, You simply continue your lifestyle as if you didnt receive that raise. Now, mind you, you dont need to do this every time you get a raise, as the results are cumulative and compound over time.9. Maximize your rewardsSmith advises that you should Make sure youre being rewarded for your spending.Use credit cards that give you air miles, points or money back on your purchases, she says. Shop through free cashback websites such as TopCashback.com to earn a percentage of your spending back as a cashback rebate (think of it as effectively getting a sales tax refund 30 to 90 days after the transaction).Smith says that you can also sign up to free loyalty schemes that give you access to discounts and free shipping.Do you have some sav ings strategies that have worked really well for you? Let us know! You can find us on Twitter at @OppLoans.com.ContributorsChris Brantner is the founder of CutCableToday.com, where he shares his knowledge on saving money by getting rid of high priced cable bills. Hes also a contributor for Business Insider, TechHive, and other publications.Robert R. Johnson, Ph.D., CFA ® , CAIA ® , CLF ® , is the President and Chief Executive Officer of The American College of Financial Services. Bob is the author of multiple books and scholarly articles. He is co-author of the books Invest With the Fed, Strategic Value Investing, The Tools and Techniques of Investment Planning, and Investment Banking for Dummies. His articles have appeared in The Journal of Finance, Journal of Financial Economics, Financial Analysts Journal, and Journal of Portfolio Management.Natasha Rachel Smith, Personal Finance Expert at TopCashback.com, is based in Montclair, NJ. Natashaâs background is in retail, banking , personal finance and consumer empowerment; ranging from sales to journalism, marketing, public relations and spokesperson work during a 17-year career period. Sheâs originally from London, UK, but moved to Montclair, New Jersey, USA, several years ago to launch and run the American arm of the British-owned TopCashback brand; a global consumer empowerment and money-saving portal company.