10 Money Hacks that Cut Financial Challenges Down to Size

Don’t let monstrous debt take control of your budget and lead you into peril.

These days, the average household carries a frighteningly high amount of credit card debt – more than $16,000 per household. Use Consolidated Credit’s special Halloween infographic to find simple hacks that help you avoid big problems with debt. Below the infographic, you can find more tips to get ahead.

More tips to help you stop monstrous debt in its tracks

#1: Budgeting is the best way to ward off debt

Creating a household budget gives you a few weapons you can use to ward off debt. First, it allows you to control your spending, so you don’t spend more than you make. This prevents you from relying on credit cards to cover shortfalls in your budget. Using credit cards for everyday expenses is a fast way to wind up in debt.

A budget also allows to you to save money consistently, creating an emergency fund to cover unexpected expenses.  This way, if you have an out-of-pocket medical expense or an emergency car repair, you don’t have to use credit. You can dip into your fund, pay in cash and won’t have to worry about high-interest debt to repay.

#2: Put protections in place so you sense debt problems early

There are a few key ratios that you can use to monitor your financial health. When they hit a certain range, it gives you an early warning sign of financial hardship. So, you can use these ratios to keep ahead of potential trouble.

1. Income-to-expense ratio: Divide your total monthly income by total monthly expenses. To maintain financial stability your ratio should be more than 1.25; if your ratio is less than 0.75, it’s a sign of financial hardship.
2. Debt-to-income ratio: Divide your total monthly debt payments by your total income and multiply by 100. If your ratio is less than 36% then you are financially stable; anything over 41% means you will get rejected for new credit applications.
3. Credit card debt ratio: Credit card debt payments should take up no more than ten percent of your income each month. Multiply your monthly income by 0.1 to determine the maximum amount you should pay. If your minimum payments ever go above that amount, it’s time to consolidate!

#3: Don’t take help from strangers

When you run into trouble with debt, it can lead to feelings of desperation. You’d take almost any help just to be rid of your problems. But this can lead to situations where you get scammed by people who prey on consumers in financial distress.

Never trust an offer of debt help unless you either know where it’s coming from or you thoroughly vet the source. If you don’t recognize a company that’s offering you a solution, look them up through the Better Business Bureau. You only want to work with companies that have an A rating or better. Check out reviews on independent, third-party review websites.

This will help ensure that you only get legitimate help from trustworthy professionals, instead of getting pulled in by a scammer out to make a quick buck.