Beating Broke

Personal Finance from the Broke Perspective

Beating Broke Rules: Payday Loans

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This one is simple.  Or should be in any case.  And yet, the industry keeps getting stronger and more prolific.  But let me be clear on this one.  Do not touch Payday Loans!

Payday loans are something that I and other financial folks like to call Parasitic Lending.  They tout their convenience and ease all the while (like a parasite) putting you further and further behind with their high fees.  That money that you thought you needed so badly becomes about 25% lighter before you even leave the office and if by some chance the check you wrote them is bad?  You could easily rack up enough fees for that to exceed over 50% of the “loan”.

I cannot say this enough.  Debt is BAD!  And Payday loans are the worst of the bunch.  The only thing that I can think of that is worse would be bookies that take broken fingers and knees as fees rather than money.  Yes, they are that bad.

Do yourself the favor.  If you’re even thinking about using a payday loan service, don’t.  Things will be tight for a while, but if you truly work at it, you can get by without them and you will be much more financially sound without them.

Beating Broke Rule: Don’t touch PayDay Loans

There are plenty of alternatives around.  You can get a pretty good rate on a shorter term loan through a peer-to-peer lender like Lending Club.  You can sell off some of the junk you don’t need for some quick cash.  You can ask your bank or credit union.  You might be surprised by what they say.  Especially if you’ve got a relationship with them.

Beating Broke Rules: Emergency Fund

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If I could use only one word to describe my thoughts on this it would be the word yes.  I went the first 26 years of my life without an emergency fund and I’ll never go another day without one.

The purpose of an emergency fund is to give you available funds in case of an emergency.  Your car breaks down and needs repair.  You fall and break an arm and have to take some unpaid leave.  Whatever the emergency is, your fund is there to see you through it.  It’s a great thing, and can take an immense weight off of your mind that you didn’t even know was there.

So where do you put your emergency fund?  A fluid account that you have nearly immediate access to.  I prefer to have it in a secondary account that is separate from my everyday account because that makes it that much harder to spend on silly non-emergencies, but where it’s still available if I need it for an emergency.  At the moment, I keep my e-fund(my pet name for it) in an Ally Bank interest checking account.  The interest rate is consistently in the top 10 or so and the service has been superb.

How much do you put in it?  Ideally, you’ll keep 3-6 months of expenses in your emergency savings.  If you’re just starting out with your debt plan, try for something between $1000 and 1 month of expenses.

Make your emergency savings a priority.  Until your reach your $1000 balance goal, you should be paying as much as you can into it.  The peace of mind that you’ll get by having the account is well worth the extra interest you’ll pay on your debt while your building it.

Beating Broke Rules: What Are They?

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What are the “Beating Broke Rules”?

They are a mantra.  Living debt free is a lifestyle and living the Beating Broke lifestyle requires some lifestyle changes.  The Beating Broke Rules are meant to establish some simple guidelines on which to build the foundation of a debt free financial life.

Many people look at their debt and imagine what it would be like to be without it.  The Beating Broke rules can help them get on their way to that new life.  And along the way, we think they’ll experience some life changing things that will make their old lifestyle and financial habits a thing of the past permanently.

So, when you see a Beating Broke rule pop up, read it carefully and consider using it in your everyday financial life.

*I should note that there are no financial planners or financial advisors here at Beating Broke, so none of what we write here can be taken as financial gospel.  Please consider seeking the advice of a qualified financial planner or advisor before making any major financial decisions.