Managing Your Money When You're Broke
Budgeting money is rarely easy, but it's especially difficult when you don't have enough of it to even pay all of your bills. You might be between jobs or simply have a job that doesn't pay well enough to address all of your expenses. Either way, it's important to change how you spend your money when you're so short on funds. Follow these steps for effective money management when you're seriously broke:
- Be proactive. Don't wait until the collection agencies start calling. They are relentless and aren't known for being understanding. They only get paid when you pay them, so you can see where their priorities lie.
Call your creditors as soon as you can see that you won't be able to make a payment. You might be able to work out some sort of an extension or get reduced payments for a while.
- Prioritize. Life is all about priorities. Look at how much money you have available and then prioritize your bills accordingly. Typically, your mortgage, basic utilities, insurance and food will come first. Credit cards are usually last on the list.
- Consider the consequences of not paying each bill and make a decision.
- Do this step after you've contacted your creditors. Your decisions might be different, depending on their responses. Now is the time to ruthlessly cut all your unnecessary expenses. Austerity has its time and place, and the time is now.
- Cut back on your savings plan. This might be the one time to stop saving part of your paycheck. The expense and ramifications of not paying your bills might be too great to cut yourself even shorter to make your savings payment.
- You've always heard to pay yourself first, but sometimes that's not appropriate.
- Avoid relying on credit. When cash is short, it's a common practice to start using credit cards to replace a paycheck. The cost of this money can be incredibly high, and this debt is difficult to eliminate later on. Don't fall into the trap of viewing credit as a viable solution.
- Consider how much you're normally able to save and then project how long it would take to pay off this new debt. You already have more debt than you can handle. It doesn't make sense to add even more to the equation.
- Create more income. If you don't have a job, take anything you can get for the time being. If you do have a job, consider adding a second job or getting some overtime. If you have stuff lying around the house that you don't need, it might be wise to sell it. - The less you fall behind now, the easier it will be to catch up later.
- Make a new budget. This might be the last thing you're in the mood to do, but either your financial circumstances have changed or your current budget isn't working. Both reasons suggest that a new budget is required. Take a look at your income and bills and make some smart choices. Remember that it's all about prioritizing intelligently. In stressful times like these, it's easy to succumb to your anxiety and not take action, but understand that this course of action will only make your challenges greater in the future. Take a deep breath and do everything you can to get yourself back on track financially. You'll be surprised how much you can accomplish when you really focus your intention and energy on solutions. Prioritize your bills, increase your income, and make a new budget. Things will be better before you know it.
11 Tips to Create a Bright Financial Future
Regardless of the type of work you do, it's possible to take action now to start creating a bright financial future for you and your family. When you start now, then things like a raise or better-paying job will become the icing on the tasty cake you've already made, and add to your pleasure, rather than having to bail you out of a financial jam. Try these strategies to ensure your financial outlook is bright:
- Save at least 15% of your paycheck. This amount will give you something to fall back on when times are especially lean or funds to invest so your money can be working for you.
- For example, if you clear $500 a week, ensure you put back at least $75 dollars for your future.
- Find a stock broker you trust. As you save your dollars, it's wise to have an overall investment plan to earn the most interest over the long haul. However, look at the facts and listen to your gut when it comes to making the final decision on making a particular investment.
- Have just one major credit card and use it sparingly. Charging a small amount on it each month and paying that amount back before the end of the month builds your credit and keeps you out of debt at the same time.
- Keep the major part of your credit allowance open for emergencies.
- Vow to never pay finance charges again. Of course, you'll likely be paying a mortgage and perhaps a car loan that include finance charges you may be unable to avoid. However, outside of those two payments, paying finance charges is like setting fire to your dollar bills. Take steps to insure you pay as few finance fees as possible.
- Pay all your bills on time. There are a few good reasons to do so:
- You build a positive credit record. - You keep money in your pocket instead of wasting it on late fees.
- You build confidence that you can manage your money responsibly.
- Find a competent tax preparer and accept his financial advice. A great tax accountant will tell you how you can pay fewer taxes and how to rack up some helpful deductions. He may even offer helpful guidance about how much money to put into your Individual Retirement Account (IRA), Roth IRA, or a 401(k).
- Set limits with your kids about money. Teach them from the time they're young that they must earn their own money and save at least 25% of it. They'll gain an understanding of money management that will serve them well the rest of their lives.
- Apply $500 to $1,000 yearly extra toward your mortgage principal. If you prefer, pay an additional mortgage payment each year. It will save you thousands in interest. Plus, you'll pay your home off years earlier, freeing up your funds for whatever you want. 9. Keep your resume up to date. You never know when you'll want to apply for a promotion, change careers, or develop side projects for extra streams of income. 10. Consistently accept part-time, short-term, or temporary second jobs. Bringing in extra money occasionally in addition to your full-time work pads your bottom line. 11. Hone your computer skills. Those who know their way around a computer are more likely to be successful at work. Broaden your horizons even further by learning about new software in your industry. Put the above strategies to work to strengthen your money situation. Care for your finances and nurture your financial situation today and every day. When you do, you'll live the incredible life you've always wanted!
Introduction to Budgeting for First Time Mortgagees
Congratulations on buying your first home! This is surely a great achievement for you and the rewards can be very exciting. As a homeowner, you have equity that's solid. There's so much you can accomplish now that you have this asset under your belt. What you'll now realize, however, is that your bank account has started to behave erratically! You're seeing money moving out of your account faster than ever before. Or so it seems. What you're experiencing is a clear case of a budgeting dilemma for a first time mortgagee. It's completely normal to feel like you've lost some control over your finances now that you're a homeowner. The good news is that you can learn how to budget all over again. It's certainly going to be necessary for a positive mortgaging experience.
- Make your mortgage payment first. If you want to continue to hold on to your home, ensure you pay your mortgage on time! Remember the home is yours and you want to keep it that way. As soon as you get your pay check, withdraw the amount you need for your mortgage.
- A great idea is to set up an automatic payment to the mortgage lender from your bank account. That way, you won't have to worry about remembering to make the payment each month.
- Sure, things come up, but defaulting on your mortgage payment could mean not having a roof over your head!
- Avoid using the equity in your home as a cash advance. Stay as far from additional debt as possible.
- Prioritize other expenses. With the mortgage payment out of the way, you now have to manage all the other expenses. Now that you have a mortgage, your priorities may likely shift.
- All expenses related to the new home are important. However, you need to ask yourself if all of them are necessary right now. Focus on the recurring monthly expenses that contribute to a comfortable dwelling.
- Social time is certainly important, especially when it comes to maintaining your sanity! But try to cut down on entertainment expenses. Instead of going to the movies 3 times per week, go out once and rent a movie twice. 3. Schedule home improvement. As a new homeowner, you'll have the ongoing desire to make the home more beautiful. While your pride of place is admirable, it's important to let better senses rule! - Make a list of all your home improvement needs and wants.
- Prioritize them, with the ones that make the home safe and livable taking precedence over the others.
- Put a schedule in place for accomplishing everything, and tie that into the associated expenses. Your aim should be to commit the same amount of money each month to home improvement.
- If there's something you aren't able to afford this month, simply leave the rest until next month.
- Make saving a priority. With all that can happen as a new homeowner, it's more important than ever to set aside money in your savings account. Major repairs sometimes need to be taken care of immediately. - Have the discipline to put aside untouchable savings. That way, there'll be something for rainy days! Mortgaging a home for the first time can leave you jaded if you aren't able to budget effectively. Pay close attention to the spending of every dollar. Once you've mastered that, you can feel comfortable knowing the financial responsibilities related to your home are well taken care of!
Save Your Estate for Your Heirs: Avoid These Probate Issues
All estates must go through the probate process. Probate is the legal process of determining if a will is valid, paying any qualifying debt and estate taxes, and distributing whatever assets remain.
It is potentially a very complicated legal process, and an attorney should be involved in any estate planning activities.
Using these strategies will help you design your estate to avoid some common challenges of the probate process and save you money:
- Have a valid will. Probate can last up to a year in many cases; typically this is due to a protracted process of validating the will. Probate is a legal process, so the longer it takes, the more money the attorneys make. Be sure to draw up your will with an attorney and review it annually for anything that needs to be addressed.
- Avoid having your assets pass through probate.
- Create one or more trusts. Assets and property within a properly drafted trust avoid the probate process. They are simply transferred to the beneficiaries of the trust. This also has the effect of providing greater protection of the assets from creditors.
- Name beneficiaries for your 401(k) account. This will allow the account to avoid having to pass through the probate process. Again, this can provide protection from creditors.
- Name beneficiaries for your IRA. As with the 401(k), naming at least one beneficiary will avoid probate and can shield the assets from creditors. Just call your IRA firm and they can help you out.
- Name beneficiaries on your life insurance policies. This is the same situation as above. If you don't name a beneficiary, then the proceeds are simply paid to your estate and must pass through probate, increasing the attorney's fees. Be sure to name your beneficiaries!
- Own Assets Jointly. This can include almost anything: real estate, vehicles, stocks, and more. A jointly owned asset is passed onto the survivor automatically.
o Your bank account can have a paid-on-death designation (P.O.D.), and brokerage accounts can have a transfer-on-death (T.O.D.) designation, allowing ownership of the accounts to pass directly to the beneficiaries upon your death.
- Give it away: You can gift your assets to anyone you choose, each year, up to a specific amount, tax-free. As of 2011, you can give as many people as you want a gift up to $13,000 without having to worry about paying taxes on the gift.
o Also, the tax only kicks in after you have gifted a total of $1 million over your lifetime. Any gifts that do not exceed $13,000 do not count towards the $1 million limit. Interestingly, it is the gift-giver that is responsible for paying the tax, if any.
o This reduces the amount of your estate and will lower the probate costs, since they are typically based upon the total value of the estate. See your tax preparer for more information.
Except for certain circumstances, assets that avoid probate are still subject to federal estate taxes, including those assets held in living trusts. A good estate tax attorney can guide you through this maze so that probate expenses will impact your family as little as possible.
The real enemies in the probate process are lack of planning and failure to utilize all the available options. Having your will prepared properly will eliminate the amount of time your estate spends in the probate process. In the legal world, time is very expensive. You don't want the attorneys to get your money instead of your heirs.
By properly planning your estate with the appropriate financial and legal professionals, you can maximize the amount of your estate that passes to your family, friends, and charitable organizations. The unfortunate alternative is that more of your estate will pass to your creditors, various attorneys, and the legal system.
7 Credit Score Destroyers
Your credit score not only determines whether or not you can get a credit card, mortgage, or auto loan, it's also a critical factor in determining the interest rate you have attached to those items. A low credit score can cost a lot of money over your lifetime. Not everyone is aware of the many factors that determine a credit score. It's easy to make assumptions that seem logical, but are actually false. Acting on incorrect beliefs is a sure way to make a critical mistake. Save money and make your financial life easier by avoiding these seven credit destroyers:
- Carrying a big balance on your credit cards. While having a lot of debt is never a good idea, using more than 30% of the available credit on your credit cards hurts your credit score. - For example, if your credit limit is $10,000, your score drops if your balance is over $3,000. This is commonly referred to as the "utilization ratio." Keep yours under 30%.
- Paying late is a huge factor in your credit score. Experts estimate that 35% of your credit score is determined by your payment history. Any late payments will lower your score.
- Closing credit cards is a credit score killer. This is related to your utilization ratio. By closing a credit card, you lower the amount of credit that's available to you. Your credit score is also sensitive to the length of your credit history.
- Defaulting is an obvious credit score mistake. When you fail to pay back a loan you owe to a lender, you can lose as much as 100 points from your credit score. Make every effort to pay back your loans. - If you're struggling, contact the lender and attempt to make other arrangements. They can be very flexible if failing to do so means not getting their payments.
- Applying for too much credit. Everyone needs to have some credit, but applying for too much has a negative effect on your score. - Each time you apply for more credit, your potential lender makes an inquiry of your credit history. - Each of those inquiries lowers your credit score. - Avoid sending in every credit card offer that shows up in your mailbox.
- Not having a credit card at all. Many people are getting rid of their credit cards in an effort to avoid debt. Unfortunately, this does nothing to help your credit score. - Experts believe that the ideal credit score includes 2-3 credit cards. Credit diversity can account for as much as 10% of your credit score. - Credit cards help to keep your credit history current.
- Co-signing for someone else can be a mistake. Putting your credit on the line by co-signing for someone else is a huge risk. Their failure to stay current with the payments can destroy your credit score. - You're equally responsible for that debt, so any late payments or defaults will show up on your own credit report. - You can even be subject to collections and lawsuits. If a lender won't do business with them, you might want to reconsider before co-signing. By simply avoiding these common mistakes, you can't help but have a great score that will guarantee you the lowest interest rates, even if your credit score is poor now. It may take time to boost your credit score, but it's definitely possible. Give your credit score the amount of attention it deserves. It makes life a lot easier!
6 Techniques to Educate Your Small Children About Money
Children can benefit from financial education at an early age. A study from the University of Cambridge, "Habit Formation and Learning in Young Children," found that money habits are formed by age 7. Researchers share it's important to start basic finance education by age 3. Children pick up money habits quickly, so giving them the right direction is crucial.
- Start with basic currency literacy. A study from Yale University found that children can recognize and remember coins by the age of 3.
- Educate your children about the different coins and dollar bills.
- Consider teaching them about foreign currencies during vacations. This will expand their minds and help them learn more about the countries you're visiting.
- Create money jars. Money jars are a fun and easy way to educate your child.
- You can create three types of money jars. Jars for spending, saving, and giving cover the basic lessons of understanding how to use money.
- Teach your children how to use the three jars and why they're important.
- Use the jars to separate money after birthday gifts or allowance payments. Children will learn how to save for the future.
- Use the giving jar for charities. Children will learn about giving and understand how they can help others with their money. They can donate the money to local animal shelters or food pantries.
- Use coupons. Coupons can provide an important lesson on saving.
- Cut out coupons with help from your children and leave them in charge of handling the papers at the store.
- According to the Children's Financial Network, kids as young as 5 can benefit from learning how to use coupons in a store. They will see how to save money and make wiser shopping decisions.
- Set a money goal. Children can set a money goal to purchase a favorite toy or another item.
- Money goals are an easy way to teach children financial patience. They also provide a lesson on how to save money.
- It's important to set realistic goals, so children will be motivated to stay on a savings plan. If the toy they want is expensive, it can take a while to reach their goals. Will they stay interested? Picking smaller and less expensive targets is better.
- Go shopping. Let your children use their spend jars at the store to make purchases.
- Shopping provides an easy lesson setting. How will your children spend their money? Will they use their entire jars at one store or spread them out over many shopping trips?
- An outing to the local toy store also gives you the chance to discuss comparison shopping. Point out different prices on similar items and teach your children about finding inexpensive options.
- Evaluating the results of the shopping trip will help them understand their choices. How will they restock their spend jars?
- Use yard sales. Yard sales offer another way to educate children about finances.
- Yard sales can help you clean out your children's rooms and teach them about money at the same time.
- Ask your children if they want to participate in the yard sale by selling their old toys or clothes. Help them select items they no longer use and find appropriate prices for them. They can use the experience to refill their money jars.
- Older children can help sell items at the sale. They can keep track of change and watch customers. This is also a valuable opportunity to learn about price negotiations with customers. Finance education can begin before your children are in school. It's important for them to understand basic money rules and form the right habits.
Disputing Credit Report Information
The information in your credit report can affect many areas of your life, so it's important to keep track of what's in it. If you find information that is incorrect for any reason, it's your job to dispute that information in order to have it removed from the report. Only you are looking out for your own credit rating, so it's to your advantage to pay attention to your report.
There are actually three credit reports: from Experian, Equifax, and TransUnion. Monitoring all three of these credit reports is essential because the information can differ from report to report.
Follow this process to ensure your credit reports are accurate:
- Request your credit report. The fastest way to get a copy of your credit report is to visit AnnualCreditReport.com, where you're entitled to receive a copy of each of your three reports for free once per year.
- If you haven't been following what's in your credit reports, start out by requesting all three reports at once, because the information they contain can actually vary quite significantly, depending on who has reported what to them. The differences from one report to the next can amount to a significant credit score difference.
- Once you've obtained and corrected past information in your reports, you can stay updated by spreading out your credit report requests to every 4 months. Simply request your report from one of the credit reporting agencies every 4 months, and over the course of a year, you'll have received all three.
- Of course, correct important mistakes in all 3 of them if you find an error.
- Verifying information accuracy. Comb over all three credit reports carefully in search of incorrect or inaccurate information. Any detail that isn't right should be changed, even if it's just a wrong address, because these pieces of information can have an impact on how lenders view you.
- Contact the credit reporting agency. If you find information that needs to be changed in your credit report, the next step is to contact the agency in charge of that specific report. It can take some time to dispute incorrect information, so the sooner you begin, the better.
- Writing a dispute letter. You can find sample dispute letters online that will give you a good starting point for writing this letter. Be professional and include all of the necessary proof that the information is incorrect so the credit agency can make the change.
- Include copies of any documents that support your position. Do not include the originals.
- Disputing an item. Typically, the credit agency (Experian, Equifax, or TransUnion) will contact the company that reported the false information, and an investigation will follow to determine whether or not the information is inaccurate.
- Add accounts to your file. If not all of your credit accounts are being reflected on your credit file, then you may want to ensure that missing information is added. You can achieve this by contacting the companies that aren't reporting your credit history and asking them to begin reporting for you.
- Not every company is going to want to report this information for you, so it can take some time for you to have this information added to your account. However, if you're diligent, you should be able to have the information added.
- Following up. Follow up on your requests if you don't hear anything from the credit reporting company within 30 days, as this is the normal length of time for an investigation.
The power is in your hands to keep your credit report in good standing. If there is inaccurate information in your credit report, or if important information is missing, then take the steps to get the information corrected. Your next job, home, or loan may depend on it.
Financial Rules You Should Reconsider
There are many financial rules we've all heard over and over again. But many of these rules aren't perfect or don't apply to every person's individual situation. Instead of blindly following rules that someone else made, take the opportunity to consider a few counter arguments. You might find a better alternative to what you're currently doing with your money. Consider whether or not these financial rules make sense to you:
- Cutting expenses is the key to long-term financial success. Most of the well-known personal finance gurus focus on cutting expenses and saving money. While there's no reason to spend money unnecessarily, there's only so much you can cut from your expenses. Then you're stuck with no further room for growth and a potentially less than enjoyable lifestyle.
- Few of these financial gurus mention the other side of the equation. How about increasing your income? After a certain point, it's much easier to increase your income $300 per month than to cut another $300 each month from your bills.
- Take the time to trim your expenses to a reasonable level and then focus your efforts on creating more income. A promotion, a new job, or a second job can be easier to accomplish with less effort and grief than making further budget cuts at home.
- Leasing a car is always the wrong choice. Cars today last an average of over eleven years. That's a long time. If you like to keep a car until it's ready for permanent retirement, buying is the best option. However, if you like to get a new car every few years, leasing is a much better option.
- There's no reason to follow anyone's advice on this topic. Pull out a calculator and do the math yourself. Be sure to consider all the expenses included with both options.
- Do the same exercise with regards to housing. Renting is usually a better option in the short-term. If you're not going anywhere anytime soon, buying is likely to be the best bet.
- Do what you love, and the money will follow. This can be a great idea if what you love to do can provide an income and you're good at it. There are many hobbies and interests that would be exceedingly difficult to turn into a significant source of income.
- You might also find that your hobby ceases to be enjoyable when you're forced to do it 40+ hours each week and have to do it in way that earns you money.
- For example, you might love to go bass fishing. But professional fisherman have to fish standing up, rain or shine, in hot and cold weather, and make a certain number of casts per hour to be competitive. You also have to travel extensively. Many people that love to fish wouldn't enjoy fishing in that manner.
- Always contribute the maximum amount into your 401(k). If you don't have an emergency account, how will pay for a new transmission or the $4,000 deductible for your broken leg. What if you lose your job?
- There are other expenses that should be considered before putting all of the money into your 401(k) or other retirement account. Withdrawing money from a retirement account can result in both penalties and taxes. You can't always put the money back in, either. These are just a few of the common financial rules that you should consider breaking. No rule applies to all situations. Examine the rules you've been following and see if they make sense for your financial situation.
Helpful Tips for Conquering Your Student Loan Debt
College is expensive! Sixty percent of those who graduate from college with a bachelor's degree also graduate with around $26,000 worth of student loans. For those who go on to pursue a postgraduate degree, the debt can be significantly higher. Luckily, there are some ways to reduce, and in some cases eliminate, this debt. Loan Forgiveness Programs There are several programs you may want to consider that can eliminate part or all of those loans:
- Volunteer for community service. If you apply to the AmeriCorps program, you can help people in your community while also reducing your debt. The program will repay part of your loans based on your service.
- The Peace Corps and Volunteers in Service to America also offer loan forgiveness programs.
- Military service can help you pay for school. If you enlist in the military before you start college, you can get help paying for your schooling.
- There are some loan forgiveness programs available if you enlist after you've graduated. - Speak to a military recruiter about a plan that could work for you.
- The profession you choose may help you pay down your debt. If you pursue a career in teaching or the healthcare field, speak to your employer or Human Resources Department about programs to reduce or pay off your debt from student loans. Financial Hardship Programs If you don't have a job, earn very little, or your loans are a large percentage of your earnings, one of these plans may be able to help:
- Income Contingent Repayment Plan (ICRP). This program applies specifically to Federal Direct loans that aren't PLUS loans.
- ICRP bases the amount of your monthly loan payments on how much money you earn. The payments can be as little as a few dollars per month. Even better, once you've made these small payments for twenty-five years, any debt remaining on the loan is forgiven.
- Income Sensitive Repayment Plan (ISRP) for your FFEL loan. The amount of the loan, your income, and size of your family all determine how much you will need to pay each month.
- The payments you make have to be at least enough to cover any interest that accrues, and the loan must be paid off within 10 years.
- Income Based Repayment Plan (IBRP). This plan is available on both FFELs and Federal Direct loans. IBRP offers flexible payment options for twenty-five years. After this time, the rest of the loan is forgiven.
In order to qualify for this plan, you can't be in default on your loan payments.
- Hardship Repayment Plan on Perkins Loans. This plan has a minimum payment of $40/month. There are also extensions under certain circumstances, such as if you've been without work for a while or if you have a long illness. More Programs - No Financial Hardship These options can also help you, even if you're not having hard times financially:
- Loan consolidation. Combine several high-interest loans into just one, lower-interest loan. This option allows you to get a lower interest rate and cut down on multiple payments.
- Defer your student loans. If you're experiencing economic hardship, a period of unemployment, or if you're going back to school, you may be allowed to defer your student loan payments until a later time.
- Get a loan forbearance to give yourself more time to pay off the loan. A forbearance is a temporary reduction in payments.
- A lender may grant you a forbearance if you're unable to pay off your loan after a certain number of years. They may also grant a forbearance if your payments on your student loan are greater than 20% of the money you earn each month or if you run into a number of other unforeseen problems. These tips and payment plans can help you manage and pay off your student loans. Consulting with a financial expert can bring to light additional ideas that can help, too.
7 Important Financial Actions for Widows and Widowers
The loss of a spouse is challenging emotionally and financially. Death is an uncomfortable subject and few of us have prepared sufficiently to deal with the aftermath. However, if you find yourself in this situation, there are steps you can take to minimize the negative financial aspects. When a spouse passes away, women are often in a more challenging situation than men are. On the average, women earn less, save less, and start investing much later in life. Consider these steps after the loss of a spouse:
- Acquire multiple copies of the death certificate. You'll find that you can't have too many copies. It's necessary to send a copy to the Social Security Administration, credit card companies, insurance companies, and many other financial institutions. The death certificate is necessary to verify your spouse's death.
- A death certificate is also necessary to change or remove names from accounts. This can also include changing beneficiaries.
- Fifteen copies should be sufficient.
- Contact the necessary professionals first. Ideally, you'll speak with a tax accountant and an estate-planning attorney before taking any significant action. These experts are knowledgeable on the financial ramifications of your situation. Before receiving an insurance payout or taking any other major financial step, speak with an expert.
- Avoid taking the advice of well-meaning friends and family. Unless you know someone that works in an applicable field, their advice isn't likely to be your best course of action.
- Update your will. It's likely that your spouse was the primary beneficiary of your will. Updating your will is necessary for other reasons. In most states, your will becomes invalid when your spouse dies. This means the state will determine how your assets are distributed until a new will is created.
- Contact the social security administration. You are probably eligible for a death benefit and a survivor's benefit. This can be a huge help with funeral expenses.
- Ensure that you're paying your bills on time. It's common during times of grief and stress to ignore day-to-day activities. Remember to take care of yourself and pay your bills on time. The additional stress of late fees and phone calls from creditors is the last thing you want or need.
- Collect all insurance policies and contact the companies. This includes life insurance, automobile insurance, any insurance provided by your spouse's employer, mortgage insurance, and any other insurance. - In some cases, you'll receive a benefit. In others, you may receive a refund when you cancel a policy that has become unnecessary. There are instances where you may keep a policy, but wish to change the beneficiaries.
- Contact the Department of Veterans Affairs if your spouse was in the military. There are funds available for funeral expenses. It's also possible to receive monthly payments if your spouse was receiving disability benefits. These are just a few of the necessary steps to secure your finances if your spouse passes away. It's very important to work with the appropriate financial experts. Most importantly, speak with your spouse before this circumstance occurs. Discuss how these financial issues will be handled and get your papers in order. Take the initiative to get organized beforehand.
8 Important Things to Teach Your Child About Money
Odds are you've had financial stress at some point in your life. If you really think about it, most of the financial stress we suffer is ultimately our own fault. We spend more than we should and save less. We buy things we don't need and fail to give money the respect it deserves. One big purchase on a credit card can result in payments that never seem to end. If you could go back in time and eliminate all of your financial errors, your life would probably be very different. Though it's never too late to make improvements, it's much easier to prevent challenges than it is to solve them. You can help your child avoid such financial challenges. You can give your child the gift of financial wisdom. Consider discussing these ideas with your children:
- Consider the real cost of what you're buying. A $500 stereo doesn't just cost $500. Invested at 10%, $500 could grow to almost $27,000. This is commonly referred to as opportunity cost.
- If you spend your money on something, that money isn't available for anything else, like investing.
- Show your child how to use a simple savings calculator. These free calculators are available all over the internet and are a great way to show what can be accomplished by consistently saving a little money each month.
- Teach them about debt. The average household has over $7,000 in credit card debt. When kids go to college, they're inundated with credit card offers from the first day on campus. Imagine how much better your lifestyle would likely be if you were debt-free. Teach your child not to fall into the debt trap.
- Start building their credit. Consider co-signing for a credit card, if they aren't old enough to get one by themselves. Look for a card with a low rate and no annual fee. Teach them how to use the card wisely.
- An alternative is to take out a loan together. Banks will loan money to anyone if the loan is fully secured. With a small deposit in a savings account, a comparable amount can be borrowed easily.
- Most young adults are unable to purchase a home for several years, often due to a lack of credit history. Get started early.
- Pull their credit report. After some credit building activities, teach your child how to view their credit report and check for errors. The majority of credit reports have errors, typically not in your favor.
- Teach them how to save. Most of us pay our bills, have a little fun, and then plan to save whatever is left. There's rarely ever anything left with that approach. Teach your child to immediately save 10-20% (or more) of every dollar earned. Think about how much money you'd have if you had done the same since you were 18.
- Teach them to be giving. Allow your child to choose a charity and contribute to it. For a young child, it might be just a few dollars. Your child will ultimately come to see that giving affects them as much as it does the person or organization receiving the money.
- Make them work during the summer. All teenagers want more money. Give them the chance to earn it. Their perspective will change. Money is an important part of life. Money provides security, opportunity, and a greater ability to help others. You have a lot of control over the financial habits your children develop. Help them to have a financially successful life.
9 Steps to Removing Credit Report Errors
Checking your credit reports on an annual basis can be a great idea. A study done by the Federal Trade Commission found that 25% of all consumers have an error on their credit report that negatively impacts their credit score. There's a good chance that your reports have one or more errors. The study also showed that 80% of those that challenge items on their credit report are able to get at least some of the negative information altered or removed. That's great news! Follow this process to get these errors corrected:
- Get copies of your credit report from the three major bureaus. You can get a free copy of each report each year from AnnualCreditReport.com. If you've recently been rejected for credit, you're also entitled to a free copy of the report containing the derogatory information.
- Get your official credit scores. It would be a shame to do all this work and not know how much of an effect your efforts had on the metric that matters the most.
- Find and record all the errors that are harming your credit score. Some people decide to simply challenge all the negative information, whether it's accurate or not.
- Write a dispute. Your dispute can be very simple. Provide enough information that the credit bureau can identify you and the item you're disputing. In general, it's most effective to declare that you were never late or that the account isn't yours.
- Mail your disputes and request a return receipt. The credit bureau is on the clock from the time they receive your complaint. If they can't complete their investigation within 30 days, they basically have to make the changes you requested. Include only one dispute per letter. - The credit bureaus would love for you to file your dispute online. It saves them money and helps to automate the process. Receiving your letter is much more cumbersome for them. So send your complaints via snail-mail.
- Watch the calendar. Their response should be postmarked within 30 days of receiving your letters.
- Evaluate the responses you receive back. It's likely that some of your disputes will be found in your favor. It's also likely that some will not. One credit bureau has been known to simply give you what you want without investigating at all!
- Continue disputing all the negative items. At the end of the day, the credit bureaus exist to make money. They make money by selling credit reports, not by dealing with consumers. Your disputes cost them money. With a little diligence, you're likely to get your way, so be persistent. - Consumers have historically done well when suing the credit bureaus. It's difficult for them to truly verify the information in your credit reports. If you're not satisfied with the results, consider filing a claim in small claims court. Credit bureaus get fined $1,000 per infraction. You'll likely settle out of court and get your credit report cleaned up.
- Stay organized. Maintain records of all your correspondence. Make copies and keep those copies filed in an organized manner. Be sure to keep track of dates. Fixing the errors on your credit reports is simple, but it does take time. It's important to check your reports every year. The cost of credit reporting errors can be staggering, as they can dramatically increase your interest rates on any loans you receive. Request your credit reports today and spend the time to examine them carefully. Consider making it a part of your annual financial housekeeping.
How to Handle an Error on Your Credit Report
It's important to monitor your credit reports at least yearly. That way, you'll regularly be able to spot and handle any mistake that occurs on your credit report that could adversely affect you. Using this process will help you find errors on your credit report and correct them:
- Go through the report with a fine-tooth comb. When you receive a copy of your credit report, sit down and take the time reviewing it. Consider it an important part of your financial goals to find out what your creditors are "saying" about your financial life.
- Look at each item. Carefully check each entry to spot any listings that don't look familiar. If you don't remember an item, make a note out in the margin, like "What's this?" or "I didn't apply for this loan."
- Notice names of companies and financial institutions. Are there any you haven't heard of? If so, put an "X" by them so you can look up the names on the internet. An unfamiliar name may well be the name of a company that is known by various names. - Consult your own financial records. If the company still sounds unfamiliar, pull your own financial records for the year in question. Perhaps you'll see some record of what you did that will refresh your memory regarding that part of your report.
- Call the credit bureau where the report originated. If you can't resolve or figure out a particular listing on your report, contact the bureau who issued the report. Experian, Equifax, and Trans Union each offer customer service and might be able to assist you.
- Contact the company that you believe has made false claims against you. Try to resolve the situation with the entity directly and insist they make the proper changes to the credit bureau to correct your information. 6. Dispute the claim. In the event you are unsuccessful in resolving a credit issue with a creditor, you can formally dispute the claim. You do this by phoning the credit bureau that produced the report. You can also contact the credit bureau online to fight the claim there. State you want to dispute the claim. You'll likely have to explain why.
- Place a fraud alert on your credit report. If your identity was stolen or any of your banking accounts or credit cards were inappropriately used by others, you should contact the agency where you received your credit report and follow their steps to place a fraud alert on your credit report. - This way, the agency will monitor your account extra closely to ensure your privacy and security and might even inform you of any action as it occurs on your account under your name.
- Do your homework. Learn more about credit reporting from the Federal Trade Commission's website at http://www.ftc.gov/bcp/menus/consumer/credit.shtm. Your credit report should be an accurate reflection of your financial life. Go through your credit report and examine each entry carefully. Take notes of entities issuing information about you and then peruse your own financial records to support any claims you may use as you go through this process. Stay on top of your credit reports so you can correct errors right away. Protect your credit and identity by obtaining your credit report at least yearly and following up on questionable data.
Can you Afford a Baby? Things to Consider Before Planning for Parenthood
According to the Wall Street Journal, a baby born in 2009 will cost its parents $222,360 to raise until the ripe age of 18. Clearly, becoming a parent is far less stressful (and far more enjoyable) when you have the financial means to comfortably support your family.
Whether you plan on being a frugal momma or fully intend on spoiling your child rotten, here are a few points to consider before taking the leap into the wonderful, yet costly, world of parenthood.
- Childcare. Can you afford to set aside an extra $1,000 to $1,200 per month for childcare? If not, do you have willing family members and friends that are able to care for the baby while you work a fulltime job?
- It may come as a relief to know that you can receive a tax credit up to $3,000 per child by spending an equivalent amount in childcare expenses throughout the year. Be sure to use a licensed childcare provider, as it is the only admissible method of childcare that can result in a tax credit.
- Can you afford maternity leave? Employers are required to allow you maternity leave. However, whether or not the leave is paid is at the discretion of your employer.
- If you qualify for short-term disability insurance, you can receive a percentage of your monthly income throughout your leave. However, there will still be a gap in your income until you return to work.
- If you're not eligible for compensation throughout your maternity leave, be prepared to trim your expenses and build up a savings equal to two to three months of your income before having a baby in order to ensure that your new family will be able to stay afloat.
- Skip the fluff. Plain and simple, most of the baby products geared towards expectant moms are fluff. You can do without an $800 stroller, a fancy crib, or a changing table with all types of secret compartments.
- If you're able to score an item that is safe and fulfills the necessary function for a fraction of the cost of a pricey-but-cute alternative, always choose safe and inexpensive over safe, expensive, and cute.
- Consider shopping for clothing at thrift stores. Your baby won't be able to tell whether his jumper came from Gymboree, Wal-Mart, or the Salvation Army.
- Ask for hand-me-downs from friends and family members with children. You can save hundreds or even thousands by simply asking for contributions. Refrain from feeling like a bother - most moms will feel thrilled to free up valuable storage space.
- Living quarters. When your family expands to three (or more), will you need to upgrade the size of your living quarters? If so, can you afford to do so before the baby arrives?
- If you're planning on purchasing a home before your child arrives, ensure that your credit score allows you to qualify for a fair interest rate, you have enough money to place a down payment, and that you're able to handle all of the increased expenses of home ownership.
- If you're strapped for cash, it's possible to make a small space work for your family. After all, babies need very little space throughout their infancy. But once your baby begins to crawl and walk, you may need to think about expanding your living quarters.
When you're responsible for providing food and shelter for your baby, there's no mountain you won't move. Like most families, you'll always find a way to make ends meet.
But, the true question is: Do you want to be in a comfortable financial situation, or will you be content with scraping by? Becoming a parent is a lifelong commitment - take your time and consider your options before deciding whether it's the best decision for you right now.
How to Set and Achieve Fulfilling Personal Financial Goals
One of the most important keys to living a fulfilling life is to know where you're going. Having goals that motivate you, excite you, and push you forward can help you get the most out of yourself and experience a life that's worth living.
This is especially true for your finances. If your financial life is in order and you're headed toward accomplishing financial goals that support your greatest values and dreams, you'll be happier and more self-confident as a result.
Use these tips to begin setting fulfilling personal financial goals today:
- Brainstorm without editing. Grab a pen and paper, and sit in a room where you won't be disturbed for about 20 to 30 minutes. As fast as you can, write down as many financial dreams and goals as you can. Allow your thoughts to flow freely onto the paper without editing or judging them. The time for that will come later.
- As you brainstorm the possibilities, think about the financial difficulties that frustrate you and the financial dreams that you've been afraid to pursue. Think about what you'd do or dream if it were impossible for you to fail.
- As you brainstorm ideas, think about every area of your life. Would you like to be free? Own your own home? Become financially independent? Help out a loved one that has a big financial need? Supply money for college for your children? The possibilities are endless.
- Prioritize your list. After about 30 minutes, you should have a page or two full of possibilities for your list of financial goals. Once you do, begin to think about which of these goals is most important to you. Which ones bring you peace inside? Which ones excite you the most? Those are the ones to put at the top of your list.
- Write down all the challenges that stand in your way. After you've chosen about 3 to 5 financial goals that excite you, create a new page for each one. Write the goal at the top of the page. Then, list all the reasons you think you can't achieve this goal. Write down all the challenges that stand in your way.
- Your list of obstacles will provide you with concrete next steps that will quickly banish your fear of failure. Come back to this list later and ask yourself how you can overcome each of these challenges. Who can help you? What resources do you need? What information do you lack? What next steps need to be taken?
- Instead of denying that there are challenges on the road to any worthwhile goal, meet those challenges head on by thinking through them in advance. When you do, nothing will stop you from reaching the financial goals you set.
- Create an emergency fund first. One of the simplest ways to dramatically increase your sense of excitement, peace, and joy in life is to be prepared for when things go wrong financially. An emergency fund of one month's income frees you from much of the financial stress you're currently feeling.
- Once you save enough money for your emergency fund, commit to only using this money in the case of real emergencies. This fund ensures the train to your financial dreams stays on track. You'll be surprised how much of your day is spent worrying about finances. This is banished with your emergency fund.
- Focus on action steps. The end result of your exciting financial goals should drive you to keep putting one foot forward. But it can also hinder you from progress by making you feel overwhelmed. Instead, focus on one step at a time until you reach the financial destiny you were born to live.
Finances are a source of stress for many people. However, if you put these tips into practice, your financial situation will be different. Instead of chasing your tail and feeling like you'll never get ahead, you'll be excited about the future and about the peace of mind that comes with a healthy financial life.
Top 10 Ways to Get Your Student Loans Forgiven
With the climbing cost of education, student loan debt is becoming a bigger burden with each graduating class. Luckily, however, there are a few ways to reduce, or even eliminate, your student loan debt. Consider these career strategies to shrink your student loan debt:
- Join the military. Serve Uncle Sam and you can eliminate up to 100% of your student loans. The amount of forgiveness depends on the type of student loan and where you're stationed. If you're considering joining the military, speak to a recruiter and ask for more information.
- Become a nurse. Due to the demand for more nurses, nurses are eligible to receive 100% forgiveness for Federal Perkins Loans. Nurses also enjoy high salaries, especially considering that it only requires two years to learn to become a registered nurse.
- Work with the disabled. Many organizations offer this student loan forgiveness program. If you provide early intervention services to the disabled, you may qualify for up to 100% forgiveness of your Federal Perkins Loans.
- Become a faculty member at a Tribal university. The government has labeled a few colleges and universities as tribal schools. These primarily serve Native Americans or Alaskan Natives. If you teach at one of these schools, you can have up to 100% of your Perkins Loan forgiven.
- Join the Peace Corp as a volunteer. You can have a great experience in a new country, help others, and reduce your student loan debt at the same time. You can earn up to 70% forgiveness of your Federal Perkins Loans.
- Join AmeriCorps VISTA. This is similar to the Peace Corp but serves challenged areas of the U.S. Again, loan forgiveness can be up to 70%. Perhaps not exotic as the Peace Corp, but you can potentially stay close to home.
- Become a teacher. There are many places in the U.S. in desperate need of teachers. Most of these areas serve lower-income neighborhoods. Teach for five years and you can eliminate up to $17,500 worth of Federal Stafford loans. However, Plus Loans are not eligible.
- Become an educator. This program is much broader than the program aimed solely at teachers and will forgive up to 100% of Federal Perkins Loans. You can be a speech pathologist, school librarian, staff member at a pre-kindergarten program, or even a teacher. Other professions can also qualify.
- Depending on the position, you may have to work for a certain number of years or have an advanced degree.
- Become a firefighter. If you've considered becoming a firefighter, there's good news. You can receive up to 100% forgiveness of your Federal Perkins Loans after serving a few years.
- Become a police officer or corrections officer. The firefighter plan also applies to police officers and corrections officers. Many career options offer partial or complete student loan forgiveness. There's a common theme to these programs: you must be providing an important service to those in need. You can gain valuable experience and enjoy the knowledge that you're helping to improve the lives of others while you get rid of your student loans.
A 5-Step Plan for Dealing With Student Loans
The nation's student loan debt is over $1 trillion and is not only larger than the country's collective credit card debt but there are also 5 million ex-students that are delinquent with their payments. Student loans are unique in that they're one of the few debts not discharged with bankruptcy. Only a federal judge can let you out of your obligation to pay and they don't do that often. The only reliable way to get out of your student loans is to pay them off. People frequently get into trouble with their student loans, and it makes getting a mortgage or a car loan much more difficult. While credit repair agencies can do a lot to help remove the bad credit history attached to debts that are paid off, current debts are another story. A slip can haunt you for a long time. This process makes it easier to handle your student loans effectively:
- Assess your situation. Student loans can be confusing. You're likely to have more than one loan and those loans were probably made by different financial organizations. The company servicing the loan might be completely different from the one that provided the loan.
- A great central source of information is the National Student Loan Data System www.nslds.ed.gov. This resource may provide all the important dates and other information about your loans, including the services.
- However, private student loans are not covered in that data system. Your credit report can be a good way of tracking down the information regarding your private loans. Your college should also have the information you require.
- Ensure your information is current. For example, the address listed probably belongs to your parents. When you have your own address, you should change your information accordingly.
- Update all the applicable information, including your email address and phone number. You want to know when there is an issue with your account.
- Create a strategy for repayment. Your options depend on whether your loans are federal or private.
- Federal loans have very flexible repayment options. You can extend your payments out as far as 25 years. You can establish a plan with lower payments now and higher payments later on. Payments can even be a function of your income.
- There can be other options for private loans, but they will vary, depending on who made the loan. Be sure to give them a call and see what other options are available.
- Consider automatic payments. Federal loan interest rates are reduced by 0.25% if you have your payments taken automatically out of your bank account. Similar deals are usually available with private loans. Either way, you'll never be late if the payments are taken out of your account automatically.
- Be focused. It would be wiser to put any extra funds towards higher interest rate debt. But if your student loans are your only real debt, then put some extra money toward the principal when possible. Debt is like a slow leak that keeps draining money away from you.
- Consider a second job to get rid of those loans quicker. The interest rates are relatively low on student loans, but the payback period is long. The interest adds up over 10 years or more. Pull out a calculator and look at the cost.
- Create a goal of making all of your payments on time. Create a second goal of paying your loan back early. Dealing with student debt is a big responsibility. It might even be a newly graduated student's first big responsibility. While making loan payments is never fun, it's a fact of life for most adults at one time or another. Get on top of the situation now, and the future will be much brighter.
Year-End Financial Ideas to Keep You on Track
When the year is about to end, parties often come to mind. There are important issues, though, that are worth considering beyond the festivities.
The end of the year is a great time to go through your finances and find just what you need to do and work on for the coming year. When you do, you'll be better prepared for the upcoming year.
You can save money and pay off debt, even if you make the same amount you made last year. There are usually ways to cut spending, save more money or pay down debt. Sometimes, that requires a serious analysis of the money coming in and the money going out to see how to make changes.
- Take a good, close look at your budget. How much you're bringing in matters, of course, but so does how much you're paying out. If you're spending frivolously, a close look at the money going out will show you where changes need to be made.
- Look carefully at your money. Set up a budget if you haven't already. See exactly where you're spending. It's not just your bills. It's the cups of coffee before work and the lunches out. You'll probably be surprised to find the amount of waste in your spending.
- Cut back. When you're examining what you're doing with your money, consider how you can cut back on some of those little things. They might not seem like much, but they really add up. Even a few dollars a day can mean hundreds or thousands of dollars over the course of the year.
- Use that money for something more important, like savings or paying down debt. Turn wasteful spending into fuel for achieving your financial dreams.
- Plan carefully for the New Year. If you make New Year's resolutions, at least one of them could be financial. Follow up your goal setting with an action plan, and begin to take action toward the successful financial future you deserve.
As you plan, consider all of the issues you're facing. Is overtime going to be cut? Are you due for a raise? Is there something you need to plan for? Take your life into account as much as you're able. As you create your New Year's plan for your finances, consider:
- How much you have in savings and where you'd like to be at year's end
- What debts you have and how quickly you want to pay them off
- What kind of fund you'd like to have for unexpected expenses
- Long-range goals like college, retirement, or a vacation home
- What little expenses you could cut out of your budget
- Ways you could reduce your bills to more manageable levels
It might seem a little overwhelming, but it's really not when you break it down and come up with a plan that you can use long-term. Remember, you don't have to do everything in one day. A plan is just that - and it's not designed to be all done at once. It can also be adjusted as your life changes.
Financial plans are valuable, and sticking to them can help you reach your goals. Be flexible enough to re-think and re-adjust if you need to, though. Make adjustments as necessary until your financial dreams become a reality.
How to Find the Perfect Bank for Your Small Business
It can be challenging and frustrating to find the perfect bank and suitable account for your small business. It's an important decision that requires time and attention. You certainly want to avoid a bank that charges you an arm and a leg in fees. Simplify your life by finding a great bank for your business. Follow these tips to find a bank that suits your small business needs:
- Get online. You can find out more online in a few minutes than in a few hours driving around to different banks. Make an initial list of banks to check out further. Before long, you'll have a list of fitting candidates.
- Realize that all banks are different. Many people erroneously believe all banks are the same. Although the banking industry is one of the most heavily regulated, there is still enough wiggle room for differences to emerge.
- Banks are free to create their own policies around account minimums, interest rates, fees, extra charges, services provided, and loan qualification criteria.
- Ensure you're choosing a bank with the services you require minus the exorbitant fees.
- Know the requirements of your business. Consider all the services you want your bank to provide for you and your business. Will you be taking out a loan or are you just looking for a place to stash your cash? What is your monthly cash flow?
- Can your bank of choice meet those requirements? It might be worthwhile to make a list of your requirements and see how it meshes with the bank's offerings.
- Consider the types of accounts, deposit frequency, credit cards, wire transfers, loan availability, minimum balance requirements, payroll services, and any other services you're interested in.
- Watch the fees! Fees are interesting. They don't seem significant until you add up how much they are costing you over time. Always keep the fees in mind.
- In the long run, the difference between 2% vs. 1% can be costly. - You might find that one bank provides free wire transfers and another charges $15. Also, investigate whether or not a bank charges ATM fees.
- Hit the road. Drive around and check out all the banks meeting your requirements. Stop in and ask to speak to an account manager. Let them know what you're looking for and they'll tell you all about their accounts and services.
- How well do you like the bank and the employees? The customer service department and the compatibility you feel with the people in your branch can make a huge difference. A good relationship with those at your bank is important. - While you might be inclined to work with a large bank, you might want to give the smaller, local banks a look. - Ask other small business owners about their experiences with banks.
- Never totally stop shopping for a bank. Even after you find a bank, occasionally look around and see what other banks are now offering. Your new bank might be the best one for you at this moment, but maybe not in 9 months. Finding a great bank is an important part of your business success. Take the time to do your research. Figure out what you're looking for and go visit the banks that meet your criteria. No one enjoys shopping for banks, but the success of your business demands it. A supportive and reliable bank makes life so much easier.
Money Management Tips for the Holiday Season
It's so easy to get carried away during the holiday season! The excitement of the season makes carefree living seem like the only way to go during the holiday. As fun as the season is, however, it's important to keep an eye on your budget during Christmastime so you're not faced with a financial crisis later on. How can you resist the urge to spend frivolously in the name of gifts and have a jolly good time? Consider these tips to manage your holiday cash effectively:
- Remember January is a long month. Resist the urge to spend all your holiday earnings on gifts, parties, and Christmas decorations. The sooner you spend it, the sooner you'll start to stress out about living through a long January on mere cents.
- Always give thought to emergencies that may pop up. Leave room in your budget for those spur-of-the-moment things that could come your way in January.
- Setup bill reminders. If you have a constant reminder of the bills you need to settle during the holiday and immediately after, you'll be more inclined to manage your money effectively. As you shop for gifts, decorations, and other holiday expenses, keep your financial responsibilities in mind to ensure you can cover them when required.
- Setup alarms on your phone that remind you days in advance of your bill due date.
- Write due dates for your bills on your calendar.
- Avoid credit cards. There's one saying that can help you avoid credit card disasters that you'll regret for months and maybe even years to come: "If you can't pay for it in cash, don't buy it on credit."As simple as it seems, it's very effective to ensure that you avoid getting in over your head with credit card expenses this holiday.
- If you plan to use your credit card, ensure your bank account has at least 90 percent of the purchase total in available cash.
- Aim to settle your credit card bill on time and in full.
- Keep your priorities in check. If you have your financial priorities straight for eleven months of the year, you should be more than able to keep them in check during December. Here's the perfect guide:
- At the beginning of December, make a list of your responsibilities and prioritize them.
- Determine how much of your earnings to dedicate to each priority.
- Put aside the amounts decided upon.
- Whatever you're left with after these priorities is what you can use for holiday spending.
- Give yourself a gift to brighten future holiday seasons. Open a holiday account for next year with $10. Then, starting the first week of January, add $10 each week. You'll have $500 to spend freely next holiday season. If you put in $20 per week, you'll have $1000! Take the financial stress out of your holidays with this small weekly gift to yourself. All it really takes is a little bit of discipline and a lot of focus on what's most important to you. Remember that there are many more holidays to come, so you may as well leave some of the frivolity for those! Focus on getting your priorities taken care of before you take the holiday spending plunge.
Moving Your Financial Life Forward: Four Tips for Success
Does financial freedom seem like an unreachable goal for you? For some, the only goal in sight is getting that next paycheck so you can pay the bills before services get disconnected.
Even if your current situation seems dire, there are things you can do to achieve financial success. Options that can improve your financial situation are all around you.
When you want to move your financial life forward, the first step is deciding on a worthwhile goal. What do you want to see happen? When? As soon as you've made that determination, you can begin marching toward your success in a step-by-step fashion. A worthwhile goal ensures you know where you're going before you set out on your journey.
Long-Term and Short-Term Goals Are Both Critical
You might have a short-term goal to pay off a credit card and a long-term goal to pay off your mortgage. Those are both reachable, but one will take longer than the other. Makes sense, right?
Well, that's why it's so important to set a realistic timeframe for your goals! Stay encouraged by tracking your progress along your planned timeline. When you see a goal getting closer to achievement, you'll become more excited and motivated to keep moving forward.
If you only set long-term goals, the payoff is too far away to provide any real motivation. These goals take a while to achieve and the lack of immediate progress may make you want to quit without shorter-term goals to look forward to.
The goal is to set long-term goals and couple them with short-term goals that excite you. Or, break your long-term objectives into short-term milestones that provide encouraging feedback on your progress. That way, you remain interested in pursuing your financial success.
You Can Get There From Here!
Too many people get discouraged and stop working for their goals. Don't let this happen to you! Avoid allowing yourself to end up financially stuck and struggling because you let setbacks derail your train to financial success and prosperity.
Instead of giving up on your success and stopping yourself from living the good life you deserve, use these strategies to move forward:
- Reap your rewards along the way. Set realistic goals and reward yourself when you meet them. Divide your large goals into small steps and celebrate completing each step.
- Be flexible. Be willing to move your completion dates if you see they're too soon. If you experience a setback, learn from it, adjust your goal's completion date, and continue moving forward.
- Focus. Stay focused on what matters to you instead of getting sidetracked. Remember the reasons why your success is important to you when the going gets rough.
- Make the work toward your dreams more enjoyable. Moving forward doesn't have to be all tedious work. Include goals in your life for things you enjoy, too.
- Turn your hobby or other enjoyable activities into a profitable venture.
- Ask yourself how you can make tasks you dread more fun.
- Include a friend.
- Make it a game with yourself.
- Whatever you do, keep a spirit of playfulness in your work and success is sure to follow!
Your hopes and dreams are what fuel your happiness. You deserve a life that's filled with rich experiences, meaningful relationships and inner peace. With a positive mindset and a determination to succeed, you can achieve all of this and more. Financial independence and the dream life you seek are within your reach.
When you reach your goals - even the small ones - you set yourself apart from most people, who dream big dreams but stay on the sidelines of life.
Get in the game!
Brainstorm the short-term and long-term financial objectives that matter to you. Pick the most important ones, sketch out a plan, and take the first steps toward your financial success today.
Debit or Credit Card - Which One is Right for You?
You probably have an understanding of the basic difference between a credit card and a debit card. However, most of us are unaware of all the differences. There are advantages and disadvantages to each. Understanding these differences will allow you to make more informed decisions about which card you'll want to use in different situations. Consider these points:
- A credit card is simply access to an unsecured loan. When you use your credit card, the card issuer is loaning you the money to pay your bill.
- This means that the credit card company can't take your item from you if you fail to pay the way a bank can with a home or car. Those types of loans are secured with collateral. That's why the interest rate for home and car loans is typically much less.
- Using a debit card removes money from your account to pay your bill. Debit cards are tied to a specific account. From a practical standpoint, it's no different than writing a check. It's just faster and easier. The effect on your account is more immediate, too.
- Credit and debit cards both cost the merchant. One method card issuers use to make money is charging the merchant a fee, typically around 2%, every time a card is used. While cards are convenient, merchants actually make more money if you pay with cash.
- The appropriate use of credit cards can have a positive impact on your credit report. Using a credit card for purchases or paying bills can help your credit score. It's important to pay your credit card bills on time and to keep your balances below 30% of your credit limit.
- Likewise, the improper use of a credit card, like making late payments, has the potential to seriously damage your credit score.
- The proper use of a debit card has no impact on your credit report. Credit bureaus don't have access to your debit card information. It's not relevant to your credit report, since there's no loan involved.
- The liability is similar in the long term. Both types of cards limit your liability to $50. Law mandates this. If you're the victim of fraud, you should be compensated for anything beyond $50. - There is a key difference, however. Credit card companies provide a 60-day window for you to notice the fraud and provide the notification. With a debit card, the window is only 2 days!
- The liability in the short term is different. If someone steals your credit card and makes purchases, you don't lose any money. It's inconvenient, but you haven't suffered a loss. - With a debit card, someone can clean out your bank account. It can take time to be compensated. You might be bouncing checks in the meantime, too.
- Credit cards aren't free. Credit cards can come with a variety of fees. Annual fees are common. There are also penalties if you're over your limit or pay your credit card bill late. If you don't pay back the full amount each month, you'll also be paying interest charges at a high-interest rate on your balance. 9. Both can offer rewards. While credit cards are better known for giving rewards, some debit cards are following suit. It's possible to get cash back, plane tickets, gift cards, and more. Credit and debit cards both have their place in a sensible financial plan. It's very easy to abuse credit cards, so use the necessary restraint to make wise spending decisions. Credit cards can be wonderful for your credit score and tend to provide better rewards, while debit cards, similar to cash, help you stay within your budget.
Does Your Spending Reflect Your Priorities?
When most of your money goes toward providing what's most important to you, you tend to live a more fulfilled life and feel more satisfied with the way you spend your money. It's also easier to stick to your personal finance plan when its objectives are to get you what you really want out of life. Because life priorities can differ drastically from person to person, it's important to be aware of your own personal values. What do you really want from life? What kind of lifestyle do you seek? What are your life goals? Does your spending reflect those things? Follow these steps to help determine if your finances are in alignment with your priorities:
- List your priorities. You might notice different levels of priorities as you write yours down. Things like having a place to live and plenty of food to eat are your basic priorities.
- However, you'll most likely include some "necessary" priorities to ensure a strong future for yourself and your family members, like maintaining good health or providing your kids with a good education.
- Also, list things you love to do that seem more like "luxury" priorities, like reading, traveling or playing golf. These might be on a lower level of priority than your basic priorities, but, nevertheless, they're still important to you, so include these as well.
- Now, write down how you spend most of your money. Where does it go? Although you may get annoyed that much of your money goes toward the mortgage or paying rent, the fact is that we all require a roof over our heads.
- You might consider the type, size, and expense of your home and whether you've gone too far in terms of house expenses. If so, where you live and the mortgage/rent payments might require re-evaluation on your part.
- Maybe a good portion of your dollars goes to other necessary expenses like groceries and paying your utilities. But what else do you spend your money on?
- Do you play slot machines on Saturday for fun and end up losing money? Maybe you love to shop and use shopping as a pastime that ends up costing quite a bit. Perhaps you spend $20 a week on coffee and snacks or $30 a week having drinks with your friends.
- Thoughtfully consider where your money goes from week to week and write it down. 3. Finally, compare your lists. Take a look at your first list, the one with your priorities. Ponder each item; does every item accurately reflect what's important to you? Now examine your second list, the one showing where your money goes. Do the lists appear connected? Does your money go mostly toward your priorities?
- You might be shocked to learn that, even though you listed certain priorities like providing a good education for your children or having a comfortable home, you're spending $100 plus a week on eating out instead of starting an education fund.
- What if you listed reading as one of your priorities, yet you spend nearly $100 a month on cable television you don't watch much? Or if you do, it's the same 3 channels that you'd actually get on a basic cable plan costing less than $40 a month.
- In either case, you've got to ask yourself, "What are my true and real priorities" and "Why aren't I putting my money toward the things that matter most to me?" Having great clarity in knowing your priorities and being conscious of how you spend your money will help you routinely place money toward what's most important to you. Then, you'll like the way you feel about your finances as funds become available for your favorite things.
College Students and Credit Cards - What to Consider
Sending kids off to college isn't easy. Even though you think it's time for your child to experience life on their own, you know they'll still depend on you for some financial support. One of the biggest questions you'll struggle with is the whole credit card dilemma. Is it really the right thing to do to turn your teen into a credit-card-carrying adult with no strings attached? Not so long ago, new college students were inundated with credit card applications and could easily apply for and receive a card without their parents even knowing about it. However, this situation changed dramatically after the passage of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. This act made it more difficult for a student under 21 to get a credit card without his parents' approval. Consider these points when pondering whether your college student might do well with a credit card:
- Has he had any money management experience? Perhaps you've let him use one of your cards in the past. Maybe he received an allowance or worked at a part-time job during high school. These things teach your child about money-how to get it, save it, and use it as he's maturing.
- By the time he's ready for college, you'll know how he's handled money in the past. Use that info when deciding whether he should go off to school with his own credit card. 2. How does your college student handle receiving, budgeting, and spending money? By now, you have a decent idea about how your son or daughter approaches the whole money thing. Does he spend every cent right away or carefully save a certain percentage?
- What are the college's arrangements for payments of dorm and meal costs? These facts can play a major role in credit card decision.
- If your kid will be living in a dorm, room and board is usually required to be paid in a lump sum beforehand, which you could do. - Most colleges now have a meal card arrangement, which means each dorm dweller is provided with a meal card that's scanned to "pay for" meals. So, no credit card is really necessary.
- Think about making your college student an authorized user on your credit card account. A card is issued on your account in the student's name. Your monthly statement will show your child's purchases.
- Designating your college student as an authorized user on your card account is great because you can set the monthly limit on his card. Some credit-card-issuing institutions even allow you to change your student's monthly limits as you like.
- For example, if you know next semester's dorm charges are due in December, you can bump up the monthly limit for December to $2,000 or whatever's required. Otherwise, select a lower monthly limit.
- Handling the credit card dilemma by making your child an authorized user on your account gives your student a chance to show his financial chops while you monitor and control the amount available for his spending.
- Consider a secured credit card. Especially good for college students, a secured credit card account requires a certain amount of collateral be placed on the account, like $300 to $500. This deposit is placed in a low-interest-bearing bond or money market where it will be held for up to one year.
- If your student shows he can pay monthly credit card bills on time consistently, he'll eventually receive back the initial deposit. In essence, your kid is rewarded for responsible, consistent money management skills when using a secured credit card. Take the above points into account when you're trying to decide whether your college student would do well with a credit card. If you do, you'll likely arrive at the best decision for him and for you!
Top 10 Money Tips for New Graduates
Many people who graduated years ago probably wish they could go back and do a few things over. Most financial challenges can be avoided by doing things in a careful way. Adopting healthy finance habits can make your future a lot easier and more enjoyable. On the other hand, unhealthy financial habits can create challenges that take years of work to fully recover. So, get your adulthood started on a positive financial path from the beginning. Consider incorporating these tips into your financial life as an adult:
- Read a basic book on personal finance. Good personal finance habits aren't complicated, but they're very important. They're also most effective when started early. Get a good book on this topic and read all about it. Then actually follow the advice.
- Create a simple budget. Consider your salary and then put together a budget that makes sense for your income and expenses. Remember to set aside some money for savings and investing each month.
- Avoid debt. Poor spending habits can cause challenging situations quickly. Avoid saddling yourself with debt. A possible exception is taking out a loan to buy a home. Debt is a dream killer because it takes years to resolve.
- Reduce your current debt. Few things feel better than being debt-free. Your debt is a barrier to fully enjoying your future. Set up a plan to get out of debt. You'll be glad you did!
- Create an emergency fund. Start with the goal of setting aside three months of living expenses. If you should ever require it, you'll be prepared and grateful to have it. 6. Begin investing as soon as possible. The greatest financial leverage young adults have is time. Even small investments can grow into incredible sums given enough time. Educate yourself about stocks and bonds and get started today.
- Take full advantage of tax-deferred retirement accounts. It's hard to find a better deal than a 401(k) available through your employer. Between the matching, tax deductions and tax-deferred growth, you won't find a better investing deal around. Remember to investigate the different IRA offerings, too.
- Leave your 401(k) alone. Many young adults come up with a reason to dip into their retirement accounts, under the guise of having enough time to make up for it later. This is a huge mistake. You're better off doing without than having to raid your retirement funds.
- Secure health insurance. No country has higher medical costs than the US. Because of this, many bankruptcies are due to medical expenses. Illnesses and accidents happen, so be prepared. Everyone requires health insurance to mitigate this substantial risk.
- Spend your money on worthwhile experiences. You can't just save like a miser. Life is short, so get out and enjoy it. It's okay to spend some money on enjoyable experiences without being afraid. This is a big part of the reason you earn money in the first place. Avoid the many pitfalls of developing poor personal finance habits. Mistakes made at this point in your life are recoverable, but the entire experience can still be extremely challenging. Good habits ensure good outcomes. Your financial future can be great if you're willing to put a smart plan into action right now. There's no reason to repeat the mistakes of others. Implement these 10 tips and you'll find your financial life will have a minimal amount of drama and challenges. Avoiding mistakes is a huge part of being successful.
How to Compare Financing Options for a New Vehicle
Paying upfront for a new vehicle is usually not an option. This is why most buyers use financing, including financing offered by car lots, banks, credit unions or online lenders. The financing option you choose will impact what kind of vehicle you can afford and how much you end up paying for the vehicle. It's important to shop around to find a financing option that's right for you. Compare loans and different lenders to find one that is affordable and that will provide you with a good experience. Typically, having a good credit score will make finding affordable financing easier. Consider applying for a loan via a bank, credit union, or online lender instead of choosing the financing option offered by the car dealership, as these institutions are usually more affordable as long as you have good credit. Finding an affordable loan is also easier if you have a trade-in or a down payment so that you don't have to finance the entire cost. Ideally, your trade-in or down payment should cover 15% to 20% of the cost of the new vehicle. The main thing to look at when comparing financing options is the total amount of the loan. You can use online tools to compare rates offered in your area and get an idea of how much a loan will cost you. Look at these items when comparing auto loans:
- The APR or Annual Percentage Rate. The APR will impact the total amount you end up paying for the loan and for your vehicle.
- The duration of the loan. A shorter loan means you can build up equity in the vehicle faster and end up spending less on fees and interest. A loan with a longer duration means your monthly payments will be lower.
- Late payment fees. Ideally, you shouldn't miss any loan payments, but it's important to know how your balance will be affected if you do.
- Monthly payments. Monthly payments are important because you want to find a loan that's a good fit for your budget.
- Insurance premiums. You should purchase enough insurance to cover the amount of the loan. Ensure you can afford the insurance premiums.
- The reputation of the lender. You'll have a more enjoyable loan experience if you borrow from a company that has a good reputation, offers good customer service, provides you with an easy way to make your payments, and doesn't make mistakes when processing payments.
- The terms of the loan. Read the terms of the loan carefully and look for additional fees, variable interest rates, and other details that weren't mentioned by the lender. Even if the dealership encourages you to take the vehicle, avoid taking it off the car lot until you have financing figured out. Some car lots will let you drive the vehicle and offer conditional financing, which means the terms of the loan, interest, and payments can change once you have the vehicle. Securing financing before you drive the vehicle allows you to be in control of what you end up paying. Following these tips will give you a more pleasing loan experience so you can spend your time enjoying your new car.
Paying Off Debt in the New Year
Having debt is like carrying a huge boulder on your shoulders. Each time you finance another purchase or swipe your credit card, you're adding weight to that boulder.
Let this year be the year of removing that boulder from your shoulders so you can live joyfully in the realm of financial freedom.
You can pay down your debt this year, whether your debt amounts to $3,000 or even $30,000. The single most effective way to do so is by creating an income stream and dedicating all of its earnings towards paying down your debt.
Yes, you may need to temporarily add quite a few hours to your workweek, but one year of long hours can lead to a life free of the many burdens of debt. Can you imagine what it would be like not having to make debt payments? Your paycheck would be yours to do with as you please!
Getting a Part-Time Job
If you have the ability to get a moderate to well-paying part-time job, go for it! If you're able to land a 20-hour per week part-time gig paying just $12 per hour, that's over $1,000 each month. Granted, you'll inevitably need to pay taxes on this income, but even so, you're able to keep about $945 in your pocket by the end of each month.
Over the course of a year, you'll be able to devote over $11,300 to your debt. Surely, that'll remove a heavy boulder from your shoulders! And if your spouse is willing to get a part-time job with the same pay, you'll be able to pay off your debt in the following amounts.
Total Debt Paid Off With Two Additional Part Time Incomes:
Month Debt Paid Off
How drastically would your life change if you were able to pay off over $20,000 worth of debt? Better yet, if you choose to keep the job even after you're done paying off debt, you'll be able to build a hefty savings account to protect yourself from ever needing to borrow money from lenders in the future.
Capitalizing on Your Hobby
Everyone has a hobby. Unless your hobby is habitual shopping, chances are you'll be able to capitalize on indulging in your hobby. You can flip furniture, sell knitted items, profit with sporting gear, or even sell your homegrown vegetables.
If you're talented in repainting furniture, purchase used furniture for pennies on the dime at craigslist.org, yard sales, or a local thrift shop. Then, sand the piece, prime it, paint it with two coats of glossy white paint, apply a protective coat, change the hardware and then list it back on craigslist.org for sale.
If you purchased the piece for $25, spent an extra $20 on supplies and are able to flip it for $150, you've made a $105 profit with just a few hours of work! When you become accustomed to the process, you may be able to flip 3 pieces of furniture per week and end up with a nice $1,260 profit. Not bad for indulging in a hobby you enjoy!
While you may not be the Picasso of cabinet refurbishing, you may have another hobby. Below are 7 common hobbies that are easy to capitalize on.
- Flipping collectibles
- Party planning
There's no need to downsize, or even adjust your lifestyle in order to pay off your debt. You've worked hard to build everything you currently have; why give it up now? Getting a part time job or effectively monetizing your hobby will allow you to pay down your debt considerably this year so you can start living the debt-free life you deserve!
Advantages and Disadvantages of Automatic Bill Paying
If you struggle to pay your bills on time or can't find the time to deal with your finances, auto bill paying is one possible solution. One of the great benefits of online banking is auto bill paying. Your bills are paid automatically on a preset date each month. A checking account or credit card can be used as a payment source. It's comforting to know your bills will be handled each month with a minimal amount of effort on your part.
Auto bill paying has several advantages:
- Your credit score might improve. Many people find that their credit scores improve after a few months of paying bills automatically. Late payments should be a thing of the past, provided you keep your checking account funded adequately. Late payments are a primary cause of lowered credit scores.
- You'll save money. Paying your bills on time means few late charges. It also results in less money spent on checks, envelopes, and stamps. How many times have you been unable to find a stamp at home?
- Auto bill-paying saves time. Though it's not an excuse to put your bills out of your mind completely, you'll spend less time and energy worrying about paying your bills. You won't need to sit down and make time for bill-paying activities.
- It benefits the environment. No more paper bills, checks, or envelopes. You'll have less impact on the environment and save a few trees. The mail carrier won't be burning gas to deliver your payments, either.
- There's a lower risk of identity theft. Identity theft continues to be a significant issue nationwide. Sending snail mail with your account numbers and credit card numbers available to credit thieves is always a risk. While taking care of business online isn't foolproof, there is far more effort made to keep your financial information safe. There are many advantages to paying your bills automatically. Unfortunately, there are also a few disadvantages, too. Consider both before making a final decision.
Consider these disadvantages:
- It can be challenging to stop payments. Automatic payments set up with your bank are usually easy to stop. However, automatic payments set up with a credit card or with the merchant can be very challenging to stop. Be sure to investigate the process for ceasing payments. In many cases, written notification is required.
- Excessive credit card debt. If you're using a credit card as your auto payment vehicle, it's possible to rack up a lot of debt quickly. Be sure to keep your eye on your balance and pay it in full each month.
- The costs can be higher. Most auto bill paying services are free or very inexpensive. However, some do charge high fees. Some merchants also charge high fees if you want to pay your bills automatically. Be sure the costs are reasonable.
- A lack of awareness. Do you know how much your bills are each month? Can you be certain that you have enough money in your account to cover the bill? When your bills are paid automatically, there is the potential to lose awareness. Review your bills and your bank account balance regularly. There are a few disadvantages to auto bill paying, but the benefits outweigh the risks for most. Time and money savings are a significant advantage over paying your bills manually. It's important to maintain awareness of your bills and the balance of your payment vehicle. Spend a couple of minutes each week monitoring the situation. Auto bill paying can save time, money, and improve your credit score. Consider adding this useful tool to your financial tool belt.
How to Simplify Your Budget
Finances have a knack for becoming complicated. Therefore, making your budget as simple as possible will allow you to get a better handle on your finances so that you can focus on matters that are more important. Simplifying your budget can have positive effects on all aspects of your finances by helping you keep everything under control.
Stressing out over your finances is a waste of your time, so rein them in today with a simpler, easier-to-manage budget.
Follow these strategies to make your budget easy, workable, and effective:
- Start with a simple spreadsheet. Keeping things in a spreadsheet can simplify your budget significantly. Set it up however you like or download a free template for Excel or Google Docs; just choose something that works for you.
- Devote 60% to your expenses. The 60% Solution is a budget strategy that entails fitting your expenses into 60% of your gross income so that you can dedicate the remaining 40% to retirement, debt repayment, short-term and long-term savings, and fun or entertainment expenses.
- Devote 10% to your retirement. Put 10% of your gross income toward your retirement, such as in a 401(k) investment plan. Refrain from touching this money for any purpose unless the circumstances are dire.
- Devote 10% to debt repayment and longer-term savings. Invest in an index fund or stocks if these are your investment vehicles of choice. Otherwise, put the money away in a savings account and touch it only to repay debt or in financial emergencies.
- Devote 10% to your short-term savings. This money is for periodic expenses like medical expenses, auto maintenance and repairs, appliances, birthday gifts, Christmas gifts, and home maintenance costs. Spend this money when you need it because that is precisely what you're saving it for.
- Devote 10% to your "fun money." You can spend this money in any manner that pleases you. This is guilt-free money that you can spend on movies, entertainment, eating out, comic books, junk food or anything else that you wish.
- Reduce the number of categories you use. Many budget software programs instruct you to use a million different categories or subcategories. If you want to simplify your budget, use as few as you can. Rather than having a category for every entry, combine some expenses into a larger category to keep it simple.
- Pay your bills online. Automate your bill payments as much as possible so that you don't have to remember to pay your bills every month or buy stamps. Consider automatic bank withdrawals and pay bills online through automatic debit whenever you can.
- Automate your savings. Every time your paycheck is deposited into your account, have a transaction scheduled that will transfer a specific amount into your savings from your checking. Aim to find a high-yield savings account for this purpose.
- Keep your fun money in cash form. Take out your 10%, keep it in cash, and use it as you see fit. Watching the cash disappear from your wallet can actually teach you a lot about where the money goes.
If you investigate, you'll find numerous techniques to simplify your budget. Do what works well for you and your family. Avoid struggling with a new budget plan because you think it must be better. If it isn't actually helping you budget, then it's not the "better" option for your needs. Sometimes simpler is more effective.
Use These Strategies and Avoid Common Money Mistakes in Your 40s
- Your 40s can be a challenging financial time. However, you can take steps to avoid the common money mistakes that create challenges with your personal finances. Follow these strategies:
- Plan with liquidity in mind. How much of your portfolio is accessible in liquid assets? Liquid assets refer to cash or investments that can be easily turned into cash.
- - During an emergency, you may need fast access to cash. In your 40s, emergencies can include a family member's unexpected trip to a doctor that isn't covered by insurance. They can also include an unexpected breakdown at home or at work. How will you pay for these items?
- - You want to avoid being in a financial situation that forces you to sell your belongings or get loans because you need cash. Evaluate your portfolio and ensure you have enough cash to handle a variety of emergencies.
- Balance your payments. It's important to have a balance of payments, so you're not spending too much in one area. Trying to pay off the entire mortgage too soon is a common money mistake. It's tempting to put extra payments toward the house, but other areas may need to be examined.
- - Are you trying to pay off your mortgage while a pile of credit card bills sits on your desk? Although it's a good feeling to own your home, paying off the mortgage shouldn't be the only goal.
- - Extra mortgage payments can wait in many instances, so you can focus on higher interest debt such as credit cards, student loans, and other types of loans. In addition, it's important to be contributing toward your retirement during your 40s so you give your money time to grow. Also, consider your children's college savings funds.
- Focus on retirement. In your 40s, it's easy to expect that you can continue to work for several more decades before retirement. However, your retirement savings need to be a priority.
- - Retirement savings work best as a long-term goal. Your 40s are an ideal time to build your investments.
- - You may want to avoid the common money mistake of taking out cash from your retirement savings. In addition to penalties and fees, you're reducing the portfolio's ability to grow.
- - If you take money out of your retirement funds, you may also face large penalties from both the federal and state government during tax time.
- Consider your job security. During your 40s, it's easy to become complacent about your job.
- - It's important to pay attention to your company's culture and consider job security. Are you watching older workers being pushed out for the younger generation? Are older workers in the same field struggling to find replacement jobs?
- - Job security can affect every aspect of your financial life. It's also important to consider your income. Do you expect it to rise, or is it at a stable level? In your 40s, you may expect income to continue to rise, but experts share that this may not always be the case. It's wiser to avoid the money mistake of spending too much because of hopes for a raise. If you're in your 40s, be aware of these common money mistakes and protect your financial future. This is a perfect time to strengthen your financial foundation at home and at work.
8 Financial Considerations When Starting a New Job
Getting a job offer is always an exciting time. Whether you're getting your first job, a promotion, or changing careers, there's a lot to be happy about. But it's always wise to consider the financial aspect of any decision; starting a new job is no exception.
Before You Accept the Job
- Negotiate your pay. It never hurts to ask for a little more money. Keep in mind that any increase in salary you can get now will only compound your future raises. Respectfully asking for more money doesn't cause any harm.
- Negotiating is the highest-paying activity you're likely to ever take part in. Consider that just a minute or two could result in thousands of dollars in additional income for many years. When was the last time you made that much money for a couple of minutes of work?
- Ask about the benefits. Typically, you'll be told the general aspects of the company benefits. Don't be afraid to ask for details. For example, some medical insurance plans are much more expensive than others. A job with a slightly lower salary might be much better when you have all the details.
After You Start Your New Job
- Deal with your previous 401(k). Either roll the money into an IRA or move it into your new 401(k). Resist the temptation to withdraw the money; the tax penalties are significant. Ask your new human resources department about your options and then make the smart choice.
- Keep your lifestyle in check. Just because you get a raise doesn't mean you have to buy a more expensive house or car. If you can maintain your spending level for even one year, you can save a lot of money. If you do increase your lifestyle, then be sure to bank at least part of your raise. - Getting a raise is a great opportunity to save a lot of money or aggressively pay down your debt.
- Start paying yourself first. Set up your bank account with automatic savings of part of your increased income so you start saving money immediately. It will be easier to start saving now than later because you won't miss money that you've never seen.
- Ensure you're withholding enough for taxes. It's not financially smart to get a huge refund every year. On the other hand, it can be pretty challenging both financially and psychologically to have to pay more at tax time. Be confident your withholding is enough to guarantee a small refund each year.
- Make benefit choices wisely. Set up your life, health, and disability insurance and other benefits intelligently for your own unique needs. For example, the most expensive medical plan might not be the option you want if you're young and in perfect health. Your life insurance needs will vary depending on your family situation.
- Have your paycheck deposited into an interest-earning account. Interest rates are so low right now that it might not matter a whole lot, but it makes sense to deposit your paycheck into an account that pays interest. You can always transfer what you need into your checking account later. Being financially healthy is the result of making smart decisions consistently. A job opportunity is a time for celebration; just ensure you're making positive financial moves to take your best advantage of this occasion.
Getting the Most from Your Credit Card Rewards Program
Many experts predicted that most credit card companies would drop their rewards programs after the passage of the CARD Act. However, that hasn't been the case. If you're willing to put in a bit of work, you can benefit greatly from a rewards card. There are more ways to capitalize on those rewards than ever before. There can be some confusion about which card is best for your situation. The rules can be complicated. There are point caps, minimum spending limits, blackout dates, and other restrictions that make it challenging to receive your rewards. Consider these tips on how to get the most from your credit card rewards:
- Get a card with useful rewards. A card that offers airfare rewards won't do you much good if you rarely travel by air. Find a reward card that fits your lifestyle and needs.
- Watch out for limits. Some cards place limits on your rewards. You might get 2% back on gas, but with a limit of $200. If the annual fee is high for that card, the benefit might be minimal, especially if you drive a lot.
- Stay abreast of term changes. Credit card companies often change their policies. If you get a notice in the mail, read it. You might find that it's time to start looking for a new card. 4. When you've settled on a rewards card, use it as much as you can. The more you spend, the greater the rewards. However, avoid spending more than necessary. It's financially irresponsible to buy items just to earn rewards. 5. Cash back cards are a great idea. Cash back cards are simple. Getting your rewards from other types of cards can be more challenging.
- Cards that offer only cash rewards tend to have the best cash back rates. Pull out your calculator and do the math when choosing a card.
- Some cards permit the user to turn in points toward gift cards. Frequently, the amount of the gift card is greater than what you would receive from a card that offers cash back. This is because retailers are willing to subsidize the card to get you into their stores. Ensure the selected retailers are places where you shop.
- Pay your bill in full every month. Avoid making late payments or carrying a balance because interest and late fees will quickly offset any rewards you earn. - Why do you think credit card companies are willing to offer rewards? They know that many of their customers will carry a balance or pay late, which makes it well worth their while.
- Watch the expiration date on your points. Most cards won't let you keep rewards points indefinitely. Be aware of when your points expire, so you can take full advantage of them.
- Find out if there's a spending requirement. Some cards require you to spend a minimum amount each month or year if you want to keep your reward points active. Rewards cards are a great idea. The issue isn't whether to have one, but rather, which one to get! Take the time to sit down and look at what benefits each card offers. Be realistic about your financial situation and avoid spending extra just to earn a few more rewards points.
4 Methods for Eliminating Overdraft Charges
Overdraft fees can be real killers. You likely already have some financial challenges to get into that situation in the first place. To add insult to injury, you're charged a considerable amount of money as a penalty. Banks are growing more reliant on these fees. These fees account for over $32 billion in income for banks each year. Banks even have software that maximizes your overdraft charges. Imagine that you have $100 in the bank and two outstanding checks for $200 and $50. If both of those checks become payable around the same time, the software will ensure that the $200 check gets paid first. That way, you're overdrawn twice rather than just once. While many banks offer overdraft protection, this is rarely the answer. It has been shown that those that overdraft frequently would actually save money by paying the overdraft fees rather than opting for overdraft protection. Try these strategies to eliminate or reduce your overdraft charges:
- Use a credit card instead of a debit card or check. This method is not without risk. It requires you to keep careful track of your spending and to have the necessary discipline to avoid overspending. This method can be dangerous if you're unwilling or unable to control your spending. - With this method, you only need to write one check each month. That makes it tough to be overdrawn. - You can enter all of your credit card purchases into your checkbook, just as if you had written a check. This will help to control your spending.
- Keep some extra money in your checking account. This is similar to stash an extra $20 in your car for emergencies. It might sound silly, but many people avoid overdraft problems by keeping extra money in their checking account. This can also help to stay above the minimum balance required to avoid unnecessary fees.
- Use online banking systems to stay on top of your balance. Most banks today offer many types of alerts to keep you up to date with your account balance information. You can check on your pending payments at the end of each day and make the necessary corrections.
- Many accounts will allow you to set up low-balance alerts.
- Only use cash. It's difficult to be overdrawn if you never use a check or debit card. You also can't be overdrawn by withdrawing too much cash. The bank simply won't let you have it.
- Use cash for your day-to-day expenses. You can pay your bills with online banking, but a better alternative might be to pay your bills with money orders. Your bank can provide you with a money order, but so can your local post office. These typically aren't free, but it's a sure way to avoid being overdrawn on your account again. Overdraft fees can create a tremendous amount of financial challenge if you're already struggling. Those with at least one overdraft pay an average of over $250 in overdraft fees each year. You can certainly find something better to do with that money other than giving it to your bank! Follow one of these strategies or come up with your own. Responsible banking is simple, yet many people struggle to manage it responsibly and effectively. Always be aware of how much is in your account and track your spending. You may need to review your balance and spending on a daily basis. Develop a plan that works for you.
Annual Credit Report: Small Changes Make Big Improvements in Your Credit
Your credit report paints a picture of your financial history by detailing your experience with credit cards, loans, and other financial vehicles.
Your credit score is a number that comes from the information in your credit report. Three different credit scores are available through Experian, Equifax, and Trans Union. Combined, they make up your FICO credit score.
What Does it All Mean?
Your credit score will come into play when you try to buy a car or a home, take out a loan, apply for a credit card, or apply for some jobs. Credit also plays a role in determining eligibility for renting a home or apartment. Your credit score must be "up to par" in order for you to get by in life.
If your credit score is lower than required by a lender, bank, apartment complex or employer, you may miss out on important opportunities. Luckily, there are ways to repair your credit in big ways with simple steps.
Use these strategies to improve your credit score:
- Obtain your credit reports. You're entitled to a free copy of each credit report once per year. You can obtain them through each of the credit bureaus individually or through their official website, annualcreditreport.com. Your credit reports offer a lengthy explanation of what is impacting your credit score so that you can make the necessary changes.
- Your credit report will give you the information you need on each account you owe on, including who you owe, how much you owe, and a snapshot of your payment history. Past credit accounts may also be included.
- Obtain your credit scores. Your credit scores are numerical values placed on your credit history and can range between 350 and 850. Each credit bureau can have a unique score, but they're combined to create a single FICO credit score. Obtain your credit score at least every six months to keep track of how it changes over time.
- Obtaining your credit scores typically costs money, but can be done through each credit bureau individually.
- Create a plan. Once you know what you're up against, create a plan to help you deal with each record on your credit report. Address each record individually and develop a plan for repayment or dispute depending on the legitimacy of the debt.
- Dispute incorrect information. If there are incorrect records in your credit report, dispute them. Dispute each one individually through the credit bureau or contact the creditor for more information on the debt. If the information really is wrong, the credit bureau will make the necessary changes or removals.
- Pay off your debts. Pay each debt off one by one. You may wish to quickly eliminate your smallest debts first and then focus on the larger ones. Contact each creditor individually to come up with a plan for repayment.
- Follow up. Continue to check on your credit scores and reports, and follow up with creditors to keep track of your progress.
- Pay your bills on time. This is one of the most significant ways you can improve your credit. Plus, you can start building good credit right away by paying this month's bills on time. Make a plan and budget appropriately so you have the funds in order to pay them before the due date.
Take small steps toward improving your credit for a big impact. The longer you have a positive credit experience, the higher your score will go. Work on repaying your debts over time and you'll see your credit score rise along with your progress.
Top 10 Financial Challenges for Millennials
Millennials have unique challenges, including a soft economy with no end in sight. Entry-level jobs are also of much lower quality today. It's more likely that a recent graduate will be forced to endure a minimum wage internship than start at a healthy salary. It's not an easy time to be a young adult. Consider these financial issues and see how you can resolve them:
- A lack of preparation for financial emergencies. Everyone needs an emergency fund. While the lack of an emergency fund is common within every age group, millennials are especially likely to not have any money set aside for emergencies.
- Strive to set aside 3-6 months of living expenses and you'll be prepared for most financial emergencies.
- Failing to take advantage of 401(k) matching. If your employer offers 401(k) matching, take advantage of it. Not only will your money work for you, but your employer is giving you the same amount as what you're investing. Considering future growth, your employer could be handing you a fortune - for free!
- Becoming a homeowner. The rate of homeownership by younger adults continues to decline with each passing year. Before signing that expensive lease in the fancy apartment complex, think about the future. Downsizing today can mean homeownership in the future.
- Becoming debt-free. Younger adults have more issues with debt than any other generation. The high cost of a college education and medical care are two of the primary culprits. An irresponsible use of credit cards plagues every age group. It's easy to accumulate debt quickly.
- Eliminating debt can take years. Make a plan to deal aggressively with your debt. Get started today for a brighter tomorrow.
- A failure to plan ahead. Your 20's and 30's are expensive times. This is when most young adults get married, go on a honeymoon, and have children.
- Few can accommodate these expenses without a significant amount of planning and preparation. Avoid waiting until the last minute to prepare for your upcoming expenses.
- Not choosing a college major with employment in mind. College has never been more expensive. While majoring in art history or the trombone might sound intriguing, there are few employment opportunities within these fields. Consider the future when planning your college years. 7. A lack of health insurance. You may be at the healthiest point in your life, but serious illnesses and accidents can happen to anyone. It may be expensive, but health insurance is necessary. Even a plan with a high deductible is better than nothing and will protect your wallet from a major health issue.
- A failure to save for retirement. It's common to think that you'll have plenty of time in the future to save for retirement. All those 65+ year olds you see working in fast food and retail thought the same thing. - Get in the saving habit early in your career. Over time, your investments will grow to fund an enjoyable retirement. Start early enough and you might be able to retire years early, too!
- Failing to create and follow a budget. Whether you earn minimum wage or $1 million per year, you need a budget. A budget is a great way to limit your spending and make yourself aware of your financial situation on a monthly basis.
- A lack of education. It would be difficult to find a topic covered more thoroughly than personal finance. Buy a popular finance book or two, whether it's about budgeting, saving money on taxes, or making the most of your investments. All the information you need is readily available. Millennials face many financial hurdles that grow taller each year. Now is the time to create a budget, plan for the future, and embrace a little austerity. Suffering a little today can result in a bright future. Taking it easy today ensures a challenging future. The choice is yours.
7 Hidden Benefits of Using a Credit Card
Credit cards come with several hidden benefits. Are you aware of some of the perks of using your card? Credit card companies offer multiple perks to help you get the most out of your card. Check the terms of your credit cards for these benefits:
Roadside assistance. Did you know credit cards often offer roadside assistance that is similar to AAA?
- This perk varies greatly based on your credit card provider. Companies either offer free service or a paid service. You'll have to carefully check the policies as you sign up for this perk.
- If you're stranded and need help, roadside assistance can come to rescue you.
Longer warranties. Did you purchase an appliance or electronic device with your favorite credit card? Your credit card may extend your warranties.
Protection from cancellations. Did you miss your concert or play? Credit card companies can refund the money you spent on tickets. However, you have to use the card to make the initial purchase.
- Even if it's your fault you missed an event, you might still get a refund. This service is only provided by some carriers, so check your card before you claim this benefit.
Exclusive access while you travel. The fancy airport lounges can be yours if you have the right card.
- Credit cards can offer you the chance to stay in the best airport lounges and hotels, at no extra charge. These exclusive offers vary greatly based on your card, but many of them will grant you special access. Enjoy a unique cocktail or appetizer while you wait for your next flight.
Extra help while you travel. The lounges are not the only travel benefit. If you have an emergency while you're traveling, credit cards can help you. They offer services such as insurance to help you if your luggage disappears or your phone is lost.
- Companies can offer assistance in several ways. They may replace the luggage or send you money so you can replace it yourself. They may also help you track down the luggage.
Replacing stolen items. Was an item you purchased stolen?
- If one of your purchases is stolen, credit cards can help you. As long as you paid for the item with the credit card, you can report it to them. This will vary by provider, so check your card.
- Items that can be replaced vary from electronics to furniture. However, not everything is covered. For example, stolen food isn't covered by most cards.
Help returning items. The sweater you purchased is too pink, and the shoes are too tight. Your credit card can help you return these items.
- If the person or business refuses to take back the items, then the credit card will refund it anyway. This is done within 90 days of the purchase.
- You'll need to save the receipt and tags to ensure everything is covered. - Credit cards limit the total amount of money that can be refunded, so extremely expensive items are usually not covered. In addition, some items like food may not be a category that falls into the help section. Credit card perks are often hidden in the fine print. However, you can benefit greatly by being aware of these benefits.
Essential Strategies to Help You Plan for Unexpected Wedding Expenses
As you plan your wedding, it's important to consider unexpected expenses. They can affect your entire budget and make your wedding difficult. Consider these strategies to help your wedding create the memory you always wanted:
Consider your beauty treatments. The cost of the bride's beauty treatments can mess up your budget.
- Do you plan to get a pre-wedding massage? How much will your hair stylist and makeup artist charge? Will you be getting facials and treatments before the wedding? Your beauty routine expenses can quickly add up!
Plan for marriage license expenses. A marriage license can cost $100 in some areas, so it's important to include it in your budget. You may also have to pay for a copy of your marriage license.
- In addition, if you plan to get married in an exotic location, then the cost can be even higher.
Remember the cost of postage. You may spend hours picking out the perfect wedding invitations and thank you cards, but have you thought about the postage?
- If you choose heavy and irregularly shaped invitations and thank you cards, then you may have to pay extra for postage.
Plan for unexpected guests. Your caterer and wedding planner can charge more for these uninvited guests. It's important to plan ahead and decide how you want to handle this situation.
- You can order extra food and favors for the extra people. However, you can also turn them away.
Consider the cost of feeding your wedding party. You may spend hours getting ready for your wedding, and your bridesmaids and groomsmen may need nourishment to survive. Have you planned for extra food?
- The reception can be hours away, and you don't want to order takeout or pizza.
- You may want to ask a friend to make breakfast or lunch for the group. You can also bring snacks. In addition, if you're getting ready at a hotel, you may be able to get room service.
Remember taxes. Depending on your wedding location, you may have to pay a sales tax for some services and items. Have you budgeted for taxes in your wedding plans?
- Your vendors should include taxes in their price estimates. However, some vendors leave it out until the end. You don't want to be surprised by unexpected tax bills.
Check for overtime charges. Did you know that videographers and photographers can charge for overtime if your wedding lasts longer than expected? Your vendors and caterers can also have overtime fees.
- Before you're faced with a big wedding bill you didn't expect, check with your vendors for their policies on overtime.
Plan for wedding party issues. How will you handle a bridesmaid who needs replacement shoes on your wedding day because her heel breaks? These types of unexpected wedding expenses can appear at the worst times. - Your entire wedding party needs to be prepared for emergency situations that require trips to the store. Unexpected expenses don't have to ruin your entire wedding. You can work on preventing such surprises or plan solutions in advance, so your wedding goes off without a hitch.
Expenses That You Forgot to Include in Your Budget
If you have a household budget, you're doing better than most! No matter how thorough we attempt to be when constructing a budget, there are usually a few things that escape our minds. It's the little surprises that can ruin well-laid plans. This is especially true with personal financial matters. Remember to consider these areas when creating your budget:
- Pet-related expenses. This category includes food, boarding, health care, toys, grooming fees, bedding, and any other supplies you feel your pet needs to be happy and comfortable.
- Big-ticket items. Is there a new car, vacation, or new washing machine in your near future? These items often slip our minds when making financial plans. Plan for and include these expenses in your budget projections.
- Non-monthly bills. Since most bills are paid monthly, budgets are set up on the same schedule. However, some bills aren't paid twelve times a year. Depending on where you live, the water and trash bills might be quarterly.
- Automobile registration is an annual bill. This is a small amount in many states, but it can be a very large bill in others. Set aside a little each month if the expense is considerable.
- Property taxes can be built into your monthly mortgage payment, but this isn't always the case. If you're no longer carrying a mortgage, it certainly isn't the case. Plan ahead.
- Insurance premiums are often paid annually or quarterly. Remember to budget for these.
- Subscriptions and memberships are another non-monthly bills. These can include gym memberships, magazine or newspaper subscriptions, and warehouse club membership fees.
- Home and car maintenance and repair costs can vary from year to year. It's easy to plan for oil changes and furnace filters. But how is your roof looking? What about the tires on your car? These possible expenses can also be budgeted for if you remember them.
- Eye examinations, dental checkups, and annual trips to the doctor are other expenses that many of us forget when creating a budget. If you need a new pair of orthotics each year, include them, too. Consider your regular medical expenses and accommodate them within your budget.
- Clothing. Think about your clothing costs over the course of a year and include a line item in your budget. Do you have any special occasions this year? Perhaps a wedding or other formal event will require special financial consideration. Everyone needs to buy clothes on occasion.
- Gifts. Christmas and birthdays have a way of sneaking up on us. It might be a good idea to start saving, and maybe even shopping, in January. Christmas can be a major expense, depending on your traditions and the size of your family.
- School-related expenses. School supplies, field trip fees, school lunches, physicals for sports, and numerous other expenses can add up over the school year. It's important to account for everything in your budget. A household budget isn't very effective if many of your expenses are excluded. There are many financial expenditures that are routinely forgotten when a budget is constructed. Go over your bills from last year and ensure you're including everything relevant.
How to Win Big With Rewards Credit Cards
If you have good credit and you're not using rewards credit cards, you may want to reconsider. Using rewards credit cards will allow you to get all kinds of discounts and freebies without spending any more money than you already do. Let's take a look at some of the rewards cards that are available, and the goodies you can get when you use them:
- Cash Back Rewards Cards. Cash back rewards credit cards are one of the most common types, and they're simple to understand. Each time you spend money, you'll earn points. Then you can use those points to get cash back or credits on your statements.
- Gas Rewards Credit Cards. Gas rewards work in a similar way to the cash back rewards cards. This type of card allows you to earn cash back whenever you buy gas.
- If you do a lot of driving or if you have to pay for your own fuel when you're on the job, you can earn a lot of points with this type of card. - The best cards available offer up to 5% cash back on gas purchases with a cap of $1500 per quarter.
- Sky Miles Credit Cards. Rather than offering cash back, some credit cards allow you to earn SkyMiles when you spend money using your credit card. This is a way to get greatly discounted or even free trips to anywhere in the world. You can also use your points to upgrade from coach to first class.
- If you do a lot of traveling, you may also want to sign up for rewards programs that airlines, hotels, and rental car companies offer. These are separate from the credit card rewards programs, but when you combine the two, the savings can really add up. Find out how to get the most out of rewards credit cards:
- Use a rewards credit card for every purchase you would normally make. Get the most out of your rewards card by buying groceries, gas, clothes, and even paying your bills with your credit card.
- The more you spend, the more points you'll earn, and the closer you'll be to the rewards.
- Avoid spending money just to earn points. It isn't a good idea to buy things you wouldn't normally buy just to earn points. There are plenty of necessities that you're already buying, and those will earn you plenty of points.
- Try not to carry a balance on a rewards credit card. Since these types of cards tend to have higher interest rates, it's a good idea to pay off your rewards cards every month. Although rewards cards can have many benefits, it's important to be aware of these possible drawbacks:
- On the surface, rewards credit cards may sound too good to be true. You can certainly get some great deals, but ensure you read the fine print. It's important to know all of the rules that go along with any type of rewards program.
- Some rewards credit cards have hefty annual fees. Some cards don't offer their best rewards until you've spent a certain amount of money in a given period of time.
- There may also be restrictions that make it difficult to claim your rewards.
- The rewards you earn may also have an expiration date, which puts you in a "use it or lose it" situation. Find out all the rules, and avoid the issues that are buried in the fine print when you're looking into getting a rewards credit card. You want to make the most out of these types of credit cards and reap all the benefits. If you use these cards wisely, you can enjoy some tremendous rewards.
Don't Get a Prepaid Card Until You Read This
Are you considering using a prepaid card? Before you sign up and start waiting by the mailbox for the card, learn the facts about prepaid cards and consider if these cards are the best option for you. Prepaid cards can be useful, but it's important to understand their limitations:
- Understand the data collection. Prepaid cards may resemble credit and debit cards, but the application process is different.
- Before you can get a prepaid card, you may have to provide sensitive private data that you might not want to share for just a prepaid card. You may have to provide your name, address, Social Security number, phone number, and other information.
- Stay aware of the fees. Prepaid cards can come with a variety of fees.
- The fees vary from company to company, but you'll usually have to pay for ATM withdrawals.
- You may also have card inactivity fees and minimum balance fees.
- Fees can also include monthly usage charges, overdraft charges, late charges, and reloading fees.
- It's crucial that you read the fine print so you can be aware of the fees of your card.
- Consider how the cards can be loaded. Prepaid cards can be loaded in several ways. You can add funds from your bank accounts. You can also load them at some retailers.
- Prepaid cards allow direct deposits in some cases. You can directly deposit your paycheck or government benefits to the card. You may also be able to deposit your Social Security or pension benefits.
- Consider FDIC insurance. Some prepaid cards aren't protected by FDIC insurance. This means that if the bank fails, you may lose all of your money. It's important to check for this coverage.
- Before you sign your agreement, read it carefully and check for statements about FDIC insurance. The terms should have this information clearly outlined.
- Evaluate what happens if the card is lost or stolen. How does the bank handle a lost or stolen prepaid card? Are you automatically reimbursed and issued a new card? Or do you lose your money on that card?
- Different companies have different rules for lost and stolen prepaid cards.
- You may have to pay a replacement card fee if your original card disappears. You may also have to wait for the money to be returned to the card.
- Consider customer service complaints. Does the prepaid card have terrible customer service, or do consumers praise it? Before you sign up, explore the customer service experience. Do an internet search for that card and you'll most likely find plenty of reviews.
- Customer service can vary greatly among banks. You may find that the prepaid card doesn't have a call center. It's possible that customer service is limited to online and email interactions. You also have to think about the quality and speed of the service the company offers.
- Compare the perks. Prepaid cards may have additional perks for users. Before you get a prepaid card, compare the perks being offered by different companies.
- These perks can include reduced fees or no fees if a balance and activity level is maintained. The perks can also include purchase protection. Cards may offer travel assistance or roadside assistance.
- Prepaid cards may also have their own rewards programs. These programs may benefit loyal customers who buy or spend a certain amount of money each month. You may accumulate points in different categories that can be redeemed for prizes such as gift cards. A prepaid card can be part of your overall financial strategy. However, before you get a card, it's important to think about the fees and other aspects.
8 Rights You Have as a Student Borrower
Student loan debt has risen sharply over the last several years. The average borrower currently owes approximately $25,000. This debt can be extremely challenging, especially if you struggle to find a job after graduation. There is a failure on the part of most students to understand the magnitude of the debt and the amount of time it requires to pay it back. But there is good news if you have federal student loans. You have several, powerful rights that can make paying back your loan easier. These same rights are generally not available to those with private student loans. All debt can be cumbersome. It only makes sense to understand your rights. As a federal student loan borrower, you have the following rights:
- You have the right to accept or refuse the loans offered to you. You even have the right to accept part of the loans. You can change your mind and simply refuse to accept the loan.
- You have the right to defer your loan payments. There are a variety of ways to qualify for a forbearance or deferment with your federal student loans. This can be helpful if your financial situation makes it impossible to make your loan payments. There's no reason to go into default. It is quite easy to take advantage of these options.
- You have the right to repay early. Most people just assume that all loans can be repaid early, but that's not always true. Those with federal student loans can pay off their loans early without penalty. If you have the extra income available, it's nice to have the option to eliminate your debt without penalty.
- You have the right to a full copy of your promissory note. This spells out all the terms of your loan. You can insist on seeing it prior to receiving your loan.
- You have the right to make payments based on your income. There are a variety of loan payment options that are dependent on your discretionary income. The remainder of the debt is forgiven after a period of 20 to 25 years.
- You have the right to consolidate your student loans. Consolidating your loans can make billing easier, reduce your payments, and even possibly reduce your interest rate. Consolidation has many advantages, especially if you have several loans or need to extend your payment period.
- You have the right to see a Loan Approval Disclosure when your student loan is approved. This will include the interest rate and the repayment schedule. You must be provided 30 days to shop around for other loans without fear of losing access to this loan.
- You have the right to change your payment schedule. While the normal repayment period is 10 years, you can extend your payment schedule out to as long as 25 years. This will decrease your monthly payment, but increase the total cost of the loan. Still, if your income can support paying back your loan in 10 years, you can decrease your payments this way. Federal student loan delinquency has been rising rapidly. Use these rights to ensure that you make your loan payments on time. If you're unable to pay each month, make the appropriate arrangements to keep your loan out of default. Your student loan debt doesn't have to be a tremendous burden. By using these rights, you can make your debt manageable.
How to Create a Budget Chart for Monthly Expenses With Google Drive
Did you know that you can create a budget with Google Drive that will make it easier to keep track of expenses and save money? Google Drive is an online document management service for those who have Gmail accounts. You can even share documents with friends and work on projects together. Creating an online budget chart is a perfect solution for people who find it difficult to save money. When all the stats are displayed as graphics, it motivates you to refrain from spending money. Follow these steps and learn how to create a budget chart using Google Drive:
- Login into your Gmail Account. Go to Google Drive, click on "Create," and then click on "New Spreadsheet."
- The new document will open and you can name it something that suits your situation. For example, you can choose something like, "Monthly Finances," as the title for your spreadsheet.
- Click on "View," then "Freeze Columns," and then "Freeze 2 Rows." This will freeze the first two rows and make it easier to fill in the factors that you want to track.
- You don't necessarily have to freeze the first two rows because you can make a similar chart from any side of the spreadsheet. However, having all the factors at the top of the spreadsheet looks better and makes it easier.
- Type in the name of the factors you want to track. For the purposes of this example, three will be used. But, you can add as many factors as you want.
- On the first row, type in the name of the factor. The row below the factor will be the total amount.
- Let's say that the three factors you want to track are "Spent," "Earned," and "Saved."
- You might notice that there are quite a few columns assigned to each letter of the alphabet. It's possible to delete the extra columns to clean it up.
- Input the formulas. Below Row 2, where the names of your factors are listed, you'll need to type in the formula. This will tell the program what to calculate.
- Click on the area directly below "Spent," and type in this formula: "=sum(A3:A33)." This formula will calculate all the amounts between Row A3 and A33, and list the total on A2.
- Enter the same formula for "Spent," but replace "A" with "B" because that's the column you're tracking for earned funds.
- "Saved" doesn't have a column because it's just there to calculate the difference between the amounts you spent and earned. Enter "=sum(B2-A2)" to calculate the difference between the two numbers.
- You can test to see if the formula is working by typing a number into the row and watch to see if the total amount is calculated correctly.
- Format the numbers by selecting the area and clicking on "Format," then "Number," and then "Currency."
- Hold CTRL, click A1, then C2, and you'll create the chart. Google Docs makes this incredibly simple. Select the area and then click on "Insert Chart," and choose from the types of charts available.
- A bar graph is a good choice because it's easy to read.
- When you click "Insert Chart," the chart will appear on the spreadsheet. You can edit it as you please, and move it to the other side of the document. - Whenever a value changes on the spreadsheet, the graph will recalculate and change as well. Congratulations! You now know how to create a simple budget chart with a graph. You can build upon the spreadsheet as you please to include more factors. Remember, when you're trying to save cash, budgets are extremely useful. Create yours today using Google Drive!
Top 10 Money Tips For Newlyweds
Getting married is a happy and exciting time. One of the issues that can quickly put a damper on the positive energy, though, is money. Financial issues can create a lot of stress and even animosity. Ideally, you've already had a lot of communication regarding your finances. If you haven't, a little prevention isn't a bad idea. It can be much nicer to discuss the topic of money before it becomes necessary and tensions are high. Be proactive. Heed these helpful money tips for newlyweds:
- Agree on a set of financial rules and goals. Work together to establish a few rules around your finances. Will you pay your own, previously established debts? Will bills be split evenly, or will the person with the greater salary pay more? - When you share a vision of the future, it's much easier to get along.
- Create two wills. You'll both need a will. If you already have one, speak with an attorney and have it modified. Ensure that you're taking care of each other.
- Put all your financial cards on the table. Do you have a credit card with a $20,000 balance you've kept from your significant other? Will it take 20 years to pay off your student loans? Let your spouse know what's going on and ask them to return the favor.
- Control your expenses. Just because you're splitting the rent and the utilities doesn't mean you should spend your excess funds foolishly. - Take advantage of your extra cash and maximize your contributions to your retirement accounts. Invest rather than spend. You might even consider saving one salary and living on the other.
- Talk about extended family financial issues. If your brother wants to borrow $1,000, how will you handle that as a couple? If your spouse's mom needs a new roof, will you chip in? Your respective families may handle these matters very differently. Have a conversation.
- Update your beneficiaries. You'll probably want to list your spouse on your life insurance, retirement accounts, and several other accounts and policies.
- Create a budget together. You'll find out a lot about your partner's spending habits by creating a budget together. A budget sets limits and expectations. - An effective budget is an important part of a bright financial future.
- Decide on a banking structure. One joint account or two separate accounts? Maybe you prefer a mixture of joint and separate accounts. There is no right answer, just be sure you're both on the same page.
- Choose one person to pay the bills and schedule regular meetings to go over bills. Choose one person to be responsible for paying all the bills. Have a weekly meeting to go over the bills and ensure they're all being paid on time.
- Decide on a limit for purchases that don't require collaboration. Your spouse probably won't mind if you stop on the way home from work and purchase a candy bar without a family meeting. But stop and buy a $20,000 bass boat and you might create a little friction. Discussing your finances together while you're still newlyweds can be an excellent way to avoid unnecessary drama. It might not be romantic, but it's important. You can talk about it now or wait until later. Doing it now will be more enjoyable.
How to Help Your Children Build Their Credit
It's never too early to start building credit. If your child is in college, now is the perfect time. Your child can land a dream job, have saved several thousand dollars, but still be unable to obtain a loan for a car or a house without a solid credit history. There are many ways to help your child build credit. A few options cost a little money, at least in the short-term. Other options are free, but carry more risk. Regardless of your situation, there are things you can do to help your child. Assist your child to create a good credit history:
- Get your child a secured credit card. A secured credit card appears to be just like any other credit card with one key difference: A deposit has been paid to open the account. The available credit limit is no more than the amount of the deposit.
- While normal payments still have to be made, the bank offering the card is 100% covered. If your child fails to make the payment, the money is taken from the deposit. - In time, many banks will allow a secured credit card to be converted to a conventional credit card.
- The deposit is returned when the card is canceled. Keep in mind that these cards are often loaded with fees, making them expensive to use.
- Cosign a loan. Allow your child to take out a small loan with your support. The amount doesn't have to be large, even a few hundred dollars is enough to start building a solid credit history. Just ensure that the loan is getting paid. It's not a bad idea to keep the proceeds from the loan in your own account and make the payments yourself.
- Use a secured loan. Your child can use a savings account as collateral for a loan. Banks love this type of loan because they're 100% covered whether the borrower makes the payments or not. The funds in the savings account are released as the loan is paid off.
- These loans are easy to acquire and work as well as any other means of building your child's credit.
- Add your child as an authorized user on your credit card account. This is easy to do, too. A quick call to the issuing company is all you need to do. Your child will receive their own card with their name on it. Any charges they make will appear on your bill. This is good news, since you'll be aware of their spending habits.
- Remember that it's still your account and your responsibility. If your college student flies off to Cabo for a wild weekend, you're still as legally as responsible as your child for the bill.
- Co-sign a credit card. Your child will have their own card, and you won't receive the bills. How much do you trust your kid? Be careful.
- As a co-signer, any failure on the part of your child will affect you, too. You can be held responsible for the bill, and your credit rating can be harmed, too. This is the riskiest option for a parent. It's important to build a credit history before you need it. If you've ever had poor credit, you know how challenging it can be. It can limit your options. It's natural to want to give your child a solid financial start by beginning the process of establishing credit before they complete high school. Investigate all of the available options and put a plan in place.
Managing Money 101: Creating and Using a Budget
Even when the economy is good and you're living comfortably on the money you're making, it's a good idea to use a budget. Many people cringe when they hear that word, because they think it means you can't have any fun or spend any money. That's far from the truth. Even a tight budget leaves room for fun and a little extra spending from time to time.
When you plan a budget, you must be realistic about what you're spending and saving. Don't say you spend $10 per week on lunches if you know you really spend $40. You can change the amounts later and cut back if necessary, but the first step is to get everything down on paper just as it is right now. That way, you can see what you're really spending.
You Might Be Really Surprised
Usually, people who create an honest budget by tracking their spending each month and writing everything down find that they're shocked at how much they're paying out. It's not just the bills, but also the little things like lunches and dinners out, coffee in the morning, and small purchases that add up.
For one month, keep track of every cent you spend. Avoid hiding anything or sweeping it under the rug. Save all of your receipts and write them down. That means bills, spending money you withdrew from the bank, and anything else that was paid out in that time frame. At the end of the month, you'll have an accurate picture of what it's costing you to live for 30 days.
How to Lower Your Costs
After you get over the initial shock of your tracking experiment, you'll likely want to find ways to spend less. There are many ways to lower expenses, and they can depend somewhat on how you spend your income. Everyone is different, and not every idea will apply to each person.
Consider these ideas in order to decrease how much you spend each month:
- Adjust the thermostat by a few degrees to save on electricity or gas.
- Skip going out for lunch and coffee by bringing these things from home.
- Change to a less expensive cable TV, Internet, or cell phone plan.
- Have a yard sale to get rid of unwanted items and make some quick cash.
- Carpool or use public transit, and sell that second car.
- Buy groceries only during sales and stock up on often-used items.
Of course, there are plenty of other ways to save. What works for one family might not work for another. However, in all likelihood, you really don't need the latest gadgets, newest car, or brand-name clothing. You may want them, but that's not the same thing.
How much are unnecessary things really costing you? Is it worth it? When you really think deeply about those questions, you'll likely find that living a little more frugally would give you a better quality of life and freedom to do more things, like travel.
Budgeting doesn't have to be depressing and minimalist. However, it can give you an accurate picture of what you're spending. Then, you can decide how to spend less - or if you even want to spend less - and make changes that will benefit you in the long run.
Is it Worth Selling Your Car for One That's More Fuel Efficient?
With the high price of gas these days, you may have considered selling your car and purchasing one that's more fuel efficient. If your current car is only delivering 17 miles per gallon, one of those hybrids that get 50+ miles per gallon might look pretty good! If you start doing some quick calculations, it doesn't take long to get excited about all the money you could be saving. Think about all the wonderful things you could purchase with that extra cash. Maybe you could take that vacation you've been dreaming of! But hold on a minute. It isn't that simple! If you're currently driving an inexpensive model that you've already paid off, you might not be able to justify getting a new car, regardless of the great gas mileage. Consider the car payments, insurance, taxes, and yearly registration fees if you're thinking about buying a more fuel efficient car. Will the increase in those costs validate your decision to go from 20 mpg to 45 mpg? At $3.50 per gallon and 1,000 miles per month, you'd be saving less than $100 per month in fuel costs. As long as your car is in good condition, it doesn't seem worth all the extra expenses. Complete these calculations to see if purchasing a fuel-efficient car is a smart financial move in your situation:
- How much are you going to spend on a more fuel-efficient car? It's important to know how much the new car will cost you. That increase in mileage isn't free.
- For example, let's suppose you're interested in a 2011 Toyota Prius that costs $15,000.
- How much is your current car worth? Assuming you're planning to sell it, that money can go towards the "new-to-you" car.
- Continuing with our previous example, perhaps you're selling your 2003 Ford F-150 that's paid in full and worth $5,000. That means your new car would cost about $10,000.
- What are the other costs associated with owning that new car that are above and beyond the old car? It's important to consider all those "hidden" new car costs you might forget about.
- Sales tax: $600 at time of purchase - Insurance: An increase of $50 per month
- Registration Fee: Depending on your state, it might stay the same, but it could also increase by $200 per year. We'll use $100 per year for our calculations.
- Payments: A 4-year loan at 7% for $10,000 would come to $240 per month.
- If you're paying cash for your car, you'll have to consider how much money you'd be losing by your inability to invest that money. This is called the opportunity cost. Ten percent per year on $10,600 (car + tax) is $1060 per year or $88 per month.
- Look at our total on a monthly basis (assuming a loan): $50 (insurance) + $100/12 (registration) + $240 (payment) = $298 per month beyond the cost of your current car.
- What is the change in mileage per gallon? Let's be optimistic and claim 50 mpg for the Prius and 15 mpg for the F-150.
- How many miles per month do you drive? The average driver puts about 1,000 miles per month on their car.
- How much are you saving? - Prius = 1,000 miles/50 mpg X $3.50/gallon = $70 per month for fuel costs. - F-150 = 1,000 miles/20 mpg X $3.50/gallon = $233 per month of fuel costs.
- You would be saving $163 per month on gas.
- Is it worth it? In our example, it wouldn't be worth it from a financial perspective. You'd be spending $298 per month to save $163. It's important to do all the calculations before making a decision. But in most cases, the old car will win if you're making a financially responsible decision. So, before you run out and get that newer, more fuel efficient car, do the math. The answer might be different than you think.
How to Stick to Your Budget While Eating Out
Eating out is one of life's great pleasures. You get to enjoy a great meal with your loved ones without any cooking or clean up. When you learn to eat out for less, you can even visit restaurants more often! Here are some ideas to start saving money today.
Picking the Right Restaurant for Your Budget
- Take advantage of restaurant week. Many communities offer a special restaurant week when some of the most expensive eateries drop their prices to attract new business. They'll probably limit the menu, but you'll get sample creations from great chefs and enjoy the ambiance.
- Search for places where kids eat free. Look online for places where your kids can eat for free or at big discounts. Plan ahead for family vacations when you may be eating out for most meals. That way, you'll have a variety of options.
- Make the most of your birthday. You can browse online to get free meals or at least a free dessert or drink for your birthday. Even if the restaurant has no official program, tell them you're celebrating a birthday when you make your reservations and see if they'll throw in something special.
- Use coupons. Sign up for daily deal notices. Pay attention to the details like one coupon per table or a drink minimum.
- Negotiate your own discounts. Many restaurants will offer discounts to nearby businesses to attract repeat customers. Ask your employer if they've got any deals in place or ask a restaurant owner if they'd consider making some kind of arrangement for customers at a nearby movie theater or gym. 6. Enjoy ethnic restaurants. Ethnic restaurants are often a treasure trove of low prices and great food. Pick your favorite cuisine or tantalize your palate by trying something new.
- Spend less on water. To avoid surprise charges on your bill, let your server know if you want tap water only. Even in expensive restaurants, it's up to you whether you want to pay for water.
- Evaluate the specials. Some restaurants promote deals that make the most profits for them. It's okay to ask for clarification on the price even if the server fails to mention it.
- Practice portion control. The servings in many restaurants are far more than one person needs for a single meal. Share a dish or put some aside to take home for lunch the next day.
- Approach small plates strategically. Small plates are a great way to dine. However, you can easily wind up with too much food that will just end up assorted into individual tablespoon-sized dollops of mismatched leftovers. Try ordering a few dishes at a time and ask the server to let you keep the menu. That way you can order more if you really want it.
- Consider the mark up on wine. Wine is another big profit center for restaurants. The mark up can easily be 400% or more compared to retail prices. A great wine can be worth it but consider the investment before you splurge. - Meals can be fabulous without wine, too, so remember that you can always elect to save this pricey treat for only the most special occasions.
- Go as a group. Restaurants may be willing to design a limited fixed price menu if you let them know in advance that you're bringing a group. Depending on your guests, be sure to have options for vegetarians and for medical needs such as diabetes and allergies.
- Visit at lunchtime. You can often get the same dish at lunchtime for around 20% less than the price on the dinner menu. If the restaurant is slow, they may even be willing to make your favorite dinner dish at lunch, regardless of whether it's on the menu. Dine well and pay less for the same great experience. If you pick the right restaurants and order wisely, you can have a great time and sample fine cuisine while you stick to your budget.
How to Determine Your Financial Health
You probably get regular checkups from your dentist and doctor. Even cars and pianos require regular tune-ups. Most individuals fail to do the same for their financial health. While there are experts that can analyze your finances, most of us are entirely capable of measuring our own financial health. However, we either don't think about it or choose to avoid it. Determining the financial health of a company requires looking at several things. The same is true for your personal finances. Follow these steps and give yourself a financial check-up:
- Determine your net worth. Your net worth is the number you're left with after subtracting your debt from your assets.
- The primary examples of assets are cash and other securities, the current market value of your personal property, and the equity in your home.
- Essentially all of your debt is your liability. It's the balance remaining on your credit cards, automobile loan, mortgage, and student loans. Any other money you owe would be included.
- Note that a high net worth isn't everything. You could have a painting worth $1 million on your wall, but still be struggling to pay your bills. Your cash flow is important, too.
- Determine your cash flow. Consider how much money you're spending each month compared to the amount you're receiving.
- Tally your household income and subtract your spending. Exclude any amounts you're saving or investing.
- A larger, positive cash flow provides financial breathing room and psychological comfort. A negative cash flow suggests you're getting deeper into debt each month.
- What is your savings rate? Divide your monthly savings by your income. Include any contributions to your retirement accounts, too. Most financial experts recommend a 15% savings rate. Obviously, a greater number will result in more savings.
- If you're saving less than 15%, strive to save more. Increasing it by just 1-2% each month will result in a healthy savings rate in short order.
- Do you have the necessary insurance? Different situations require different types of insurance. Asking yourself a few questions will help determine the types of insurance you need. If you ask yourself all the "what if" questions, you'll have the necessary answers.
- Protecting your home, health, income, and valuable assets are reasonable places to start.
- How much is in your emergency fund? Could you weather the loss of a job, a major car repair, or any of life's other unpleasant surprises? Experts recommend an emergency fund equivalent to 3-6 months of living expenses. That might seem like a tall order, but you can chip away at it a little at a time.
- How much do you expect to have at retirement? There are plenty of calculators that will enable you to extrapolate the value of your nest egg well into the future.
- Are you on schedule to retire with adequate financial resources?
- Are you prepared for major expenses in the future? If you know your car is nearing the end of its lifespan or major educational expenses are coming, are you in the position to handle them? Your answers to these questions will reveal the health of your financial situation. Pay close attention to your financial health. Putting a priority on your finances will result in choices that enhance your financial well-being.
Quick Fixes When You've Blown Your Budget
We're doing much better staying on budget within our households. Personal debt levels are at the lowest point over the last seven years. However, that doesn't mean that even the most financially responsible family doesn't have financial challenges at times. Unfortunately, once your household budget has been blown, it gets easier and easier for additional failings to occur. It's like being on a diet and having a piece of cake. Many people will think, "Heck, I've already blown my diet. I may as well have two pieces of cake." It would be better to admit that things get off course occasionally and then right the ship. These four budget fixes will help you get back on track:
- Ensure your budget is reasonable. Budgets require knowing where money is being spent, as well as how much. When first making a budget, it's easy to incorrectly estimate how much you actually spend on different items. Appearance and reality often collide.
- Until you have some real data to use, build a buffer into your budget to protect against overspending. When you overspend in one area, you can use money from the buffer category to offset the difference.
- Over time, your estimations will improve and the buffer category can be phased out. You might decide to keep it in your budget permanently, but keep the amount down.
- Use the more flexible budget categories to correct spending mistakes. Some categories are much more flexible than others. Your rent or mortgage payment isn't very flexible. But things like clothing are flexible. You can purchase a $20 pair of pants or a $300 pair of pants. That's flexibility. Eating out is similar. You don't have to eat out.
- It's quite easy to cut back in these areas in the event that another category has been overspent. Eat in instead of going out. Rent a movie instead of going to a concert.
- Avoid waiting to ask for help. When folks get behind on their bills, many panic. Sometimes the solution is as simple as asking your creditors for a little extra time. Many are far more accommodating than you might think. Creditors know that if they're willing to work with you, you're more likely to be able to pay them. - Avoid jumping at costly solutions. Payday loans and credit card advances can be difficult debts to eliminate. These types of solutions often result in additional rounds of similar solutions. The amount of debt you owe seems to keep increasing all the while.
- Negotiate with your landlord and even your utilities to see if an alternate payment arrangement can be reached. Never assume you know the answer before speaking with them.
- Adjust your budget as needed. If you're consistently coming up short, your budget likely needs to be adjusted. It might be that your income simply doesn't permit the targets you've set in the more discretionary categories, such as entertainment.
- If you're still struggling, keep track of every cent that you spend for a month. This includes the spending of loose change. Track everything. Then ask yourself how this compares with the budget you've set. Where are you making an error? Living within a budget is a part of being financially responsible. Everyone overspends from time to time. The solution is to make the necessary adjustments by shifting the allocation from one category to another. If you're still having challenges, then your budget probably needs an overhaul. Get that budget under control and reap the rewards!
Teach Your Teen Financial Responsibility
Help your teen enjoy a bright future by teaching them financial responsibility. Knowing the basics of money management will help your child to plan ahead and achieve their life goals.
If you feel a little awkward talking about money, these steps make it easy to explain budgeting, shopping, saving, and using credit wisely.
- Learn the basics of budgeting. Explain budgeting in simple terms as a plan for income and expenses. Discuss examples of trade-offs and the concept of needing to earn more or spend less in order to remain financially secure.
- Get familiar with ordinary household expenses. Give your teen an early start on knowing the cost of typical goods and services. Let them see the cable TV bill and your monthly car payment.
- Monitor your spending. Ask your teen to keep track of their spending for a month or more. Your kids may be surprised by how much they really spend on eating out or clothing.
- Manage your income. As long as the school remains the top priority, encourage your teen to have some income of their own to manage. You can provide an allowance or support their efforts to find a summer job.
- Shop together. Go shopping together to demonstrate how to get the best value. Compare prices for generic and brand name products at the grocery store. Look for special sales at the local mall.
- Research major purchases. Assign your teen some research when they want to make a major purchase such as a cell phone. Let them compare plans and help decide what features they really need.
- Analyze materialism. Advertising bombards people with messages to consume more. Discuss the importance of moderation and basing your happiness on sources other than your possessions.
- Establish goals. Help your teen to set short and long-term goals that will motivate them to build up some savings. They may want to buy a car or put away money for college.
- Understand interest. Provide an introduction to the power of interest. Your child may want to save more if they realize how much money they can earn by starting a savings account when they're young.
- Develop a savings strategy. Help your teen find a plan that works for them. They may want to set aside a small percentage of their allowance or half the money they get for their birthday. If possible, you can provide an extra incentive by offering to match whatever amount they save.
Use Credit Wisely
- Select the right instrument for you. There are many kinds of cards to choose from now so you can find the level of parental control that's comfortable for you. Debit cards give you the peace of mind of enforcing a pre-established spending limit, and many cards give you the option to review all statements.
- Pay your balance off monthly. Let your teen know that interest works against them when borrowing. Show them how paying off a credit card balance each month protects you from paying much more than the original price for the goods and services you charged.
- Know the significance of good credit. Talk with your teens about the importance of good credit. Explain how being responsible about paying off bills helps people to qualify for financing when they need student loans or want to buy a house.
With a little information and guidance, your teen can master the basics of money management. By encouraging them to be responsible, you'll protect your family's financial security while you help your child pursue their dreams for college and beyond.
Top 10 Worst Financial Decisions Made by Retirees
Even if you've made the perfect financial decisions all the way up to retirement, it's still possible to make mistakes that can make your retirement far less enjoyable than it could have been. Making smart decisions is just as important during your retirement years. The need to make sound financial decisions lasts throughout adulthood. As the rules change, your perspective and decision-making process should change, too. Retirement is a time to change gears and adjust your financial decisions. Poor decisions can significantly detract from your retirement wealth. Consider the following poor decisions and avoid them:
- Listening to the wrong people. It seems that we all have a family member or friend that claims to be a financial guru. While your friend may have made great decisions regarding his retirement, it doesn't mean he will have all the answers for your unique situation. Get professional advice.
- Failing to educate yourself. The laws and rules around retirement accounts, taxes, investing, and social security regularly change. Retirement might be a long way off, but that doesn't mean you shouldn't be learning continuously.
- Not having a budget or not creating a new budget. Are you still using the same budget from your working days? As your income and expenses change, it's important to create a new budget.
- Not understanding distributions. Not everyone understands the tax consequences of removing funds from retirement accounts. Simple mistakes can impact the rest of your retirement. Educating yourself or hiring a professional to create a distribution strategy makes good sense.
- Not including your family in your finances. You might want to consider having a conversation with your children about your finances. Will your kids know what to do if you become incapacitated or pass away? It might be easier if you let them know your financial situation and provide advice now.
- Not diversifying risk. Many retirees operate with the belief that a savings account, Social Security benefits, and an IRA will be sufficient. However, there are additional steps that you can take to protect yourself against market fluctuations.
- Spread your risk over a wider range of investments. That probably doesn't mean eliminating all risk from your investments. While your level of risk should change, having too little can mean running out of money before you run out of years.
- Failing to maintain an emergency fund. Many retirees figure it's time to spend the emergency fund. This might seem logical since the threat of losing a job is no longer an issue. But there are other emergencies to consider. Unforeseen medical expenses are one example.
- Failing to do any estate planning. Estate planning is about taking care of your spouse, children, and any other heirs. It's about considering tax implications so your wealth transfers to the people and charitable organizations that you cherish instead of the government.
- Arbitrarily choosing your retirement age. While you could be forced into retirement by layoffs or health issues, you may still have a choice. Begin your retirement planning early and work as long as needed. Let your finances be your guide.
- Underestimating medical expenses. While medical expenses seem to always be significant, they tend to be more frequent and expensive as we age. Keep making good financial decisions into your retirement years. Hire a professional as needed to help you navigate the significant complexities of taxes and distributions. Avoid undoing all your hard work by using the above information wisely. Your retirement can be every bit as great as you always wanted.
Wise Uses for a Home Equity Loan
The equity in your home is just sitting there. It can be tempting to put the money to good use. As with many things in life, there are both good and poor options for home equity loans. Use the money wisely and you can potentially enhance your financial position or save yourself form disaster. Choose poorly and you're digging yourself an even bigger financial hole. There are several good uses for a home equity loan:
- Home improvements. It makes sense to use the money you take out of your home to improve your home. This can be a wise use of a home equity loan, especially if you choose your improvements wisely. Some add more to the resale value of your home than others. If you're planning on selling in the near future, new carpet and paint can be selling points.
- Pay off high-interest debt. Why pay 19% on your credit cards when you can pay 5% on a home equity loan? This use of a home equity loan can save a lot of money and makes good financial sense. - There's one caveat: You can't use your credit cards irresponsibly and get yourself into the same situation all over again. This is a common result. Be careful.
- Emergencies. Sometimes emergencies happen. It would be much better and less risky to have an emergency fund, but a home equity line of credit can be handy when the inevitable financial disaster occurs. Again, be responsible. A home equity loan can be a useful tool when used wisely. Unfortunately, there are a few common uses for home equity loans that don't make good financial sense.
There are also several poor uses for a home equity loan:
- Paying for a vacation. Does it make sense to risk your home for a trip to Disney World? Borrowing money for something optional isn't a wise use of credit, especially when it can potentially put you out in the street.
- Buying consumer goods. A new TV? A 1967 Mustang? A pool in the backyard? These aren't wise ways to spend the equity in your home. If you can't pay for these things without borrowing money, you can't afford them. It can be tempting to use a home equity loan to pay for a trip or a few new toys, but it's not a financially sound decision. A few other options are questionable.
Some uses for a home equity loan are questionable:
- Investing. Why not borrow money at 5% and use it to earn 12%? You can come out 7% ahead, right? The logic is sound, but you can't be certain of your return. What if you lose it all? Can you afford to keep your home? Experts consider this to be a poor choice for most investors.
- Use as a student loan. Maybe. Think about the long-term ramifications of increasing the debt-load on your home. You're postponing your retirement. If you do go this route, it might make more sense to use the equity in your home to finance an engineering degree rather than a history degree. Home equity loans can be a convenient source of funds for any purpose. It's important to objectively determine if that purpose is wise or not. Avoid the temptation to spend the money frivolously. The key to using any line of credit is responsibility. Remember that it's not an unsecured loan. Your home is at stake, so practice caution.
6 Ways to Avoid Paying Banking Fees
How much did you spend on banking fees this year? Surely, you have better things to spend your money on. Luckily, there are ways to avoid these fees!
- Follow these tips:
- Understand the fees charged by your bank. Some banks make understanding their fees more difficult because a charge can appear on your account without any details. You can find out more about these fees by reading the documentation you received when opening your account, calling your banker, or checking your bank's official website.
- Discover how you can qualify for a free checking account. Most banks offer free checking accounts as long as you maintain a minimum monthly balance or receive more than a certain amount via direct deposit. Find out about these requirements and look for an account that requires a minimum direct deposit that corresponds to your paycheck.
- Take advantage of bank promotions. Some of these promotions help you avoid some fees. For example:
- - Some banks will give you $100 or $200 if you open an account and meet a few requirements, such as receiving a paycheck via direct deposit or depositing a certain amount. This promotional offer will cover all your fees for a year or two. - If you are enrolled in college, most banks will offer you a free checking account. Bring your school ID when you open your account to qualify for these offers.
- Watch for ATM fees. Fees are charged every time you withdraw money from an ATM that belongs to another bank. Use these methods to avoid ATM fees:
- - Always carry $20 - $60 in cash with you to avoid having to use an ATM.
- - Plan your purchases in advance and drive to your bank's ATM once a week to withdraw all the cash you'll need. - Install an app on your Smartphone to easily locate the nearest ATM that belongs to your bank.
- Spend only the funds in your available balance. Bounced check and overdraft fees are usually the highest bank fees you pay.
- - Stop using checks. Checks can make it difficult to manage your budget because they can take days to process. Most places offer other payment options. Besides, you will no longer have to purchase checks when you run out.
- - Get into the habit of checking your balance on a daily basis. This is very easy to do, thanks to mobile apps and online banking options.
- - Enroll in your bank's overdraft protection plan if they offer this service for free. Keep in mind that some banks will charge a fee every time you use this service, which can end up being costly.
- Be careful with automated payments. Although automated payments are convenient for paying your bills and avoiding late fees, they might not be your best option. They can drain your account without you being aware of it. It's very easy to set up automated recurring payments for your bills and then forget when the payments are coming out of your account.
- - Your best option is to set up reminders on your phone to ensure you don't forget any bills and to make payments manually by logging in to online banking. Avoiding banking fees is fairly easy, but it does require you to be more aware of what is going on with your bank account. Using the same bank for all your accounts and credit cards will make it easier to check all your financial information because it's all in one place. Familiarize yourself with the mobile and online banking tools offered by your bank. These tools will make managing your finances and avoiding fees a lot easier.
More Bang For Your Buck - Stretch Your Vacation Dollars
What if you could stretch your $5,000 budget into a $10,000 vacation? Imagine how much more you could do and enjoy: a nicer hotel, better food, or maybe you would change your plans all together. It can be done. With some research and planning, taking a nicer vacation than you think you can afford is well within your reach. Try these ideas to turn your vacation funds into more fun:
- Airline Tickets. You can save a lot of money on airline tickets if you're flexible with your travel dates. A day or two earlier or later can make a huge difference in the cost. Tuesdays - Thursdays are usually the cheapest days to travel by air. - Consider alternate airports, too. Sometimes, flying into a different airport can save hundreds of dollars if you have to purchase several airline tickets. Larger cities typically have multiple airports.
- Hotels. If you're going to a popular destination, you're likely to find hotels that offer coupons or even free tickets to popular attractions. - Search online for the lowest price hotel room that meets your needs. Also consider joining a hotel points program. - You can save a lot of money on food by getting a hotel room with kitchen facilities. Food is usually a major expense when traveling. A kitchenette can save a ton of money, especially if you have kids and are staying for a week or more.
- Consider a cruise. Cruises offer spectacular food and a lot of entertainment for a relatively small amount of money. There's always the option to sign up for off-ship excursions, which aren't free, but usually aren't too expensive either. - You'll need to include the cost to get to the ship from your house and back again, but cruises can offer a tremendous value for the money.
- Go in the off-season. Most travel locations have a peak and off-season. This is usually dependent on weather and when travelers are most available to travel there. By going in the off-season, there is much less demand and prices will be lower. This is true for air-travel, car rental, lodging, and most forms of entertainment. - You also have the benefit of fewer crowds to deal with.
- Group travel. Traveling with a group can really cut down on expenses. Larger groups can get better rates on everything, from transportation to lodging, food, and entertainment.
- Condos. Renting a condo for a week can be much less expensive than staying in a hotel. You'll also have the benefit of kitchen facilities. Condos can be very cost effective if you're traveling with several people. A basic hotel room fills up quickly if you have several people. - Again, the off-season is when you're going to find the best deals.
- Pack carry-on luggage only. With nearly every airline charging for bags now, if you can limit yourself to carry on items, it's an easy way to save a lot of money. 8. All-inclusive. All-inclusive resorts can be a great way to cut your expenses. As long as you stay at the location, all your food and entertainment are already paid for. - Though they might seem expensive on the surface, if you really add up all the costs you're likely to incur with other type of vacations, all-inclusive resorts can make a lot of sense. Stretching your vacation dollars is easy if you do your homework. Consider that your major expenses are likely to be transportation, food, and lodging. If you can do something to minimize each of those, you'll be well on your way to dramatically reducing your vacation expenses.
How to Establish Credit When You're First Starting Out
You know that establishing and maintaining a solid credit rating is vital to your future financial success. The challenging thing about credit, though, is that it often seems impossible to get credit unless you've already established good credit.
For young people who want to start on the right foot, beginning from scratch with no credit history can seem like an impossible task. But with the right strategies and responsible use of the tools available to you, you can establish solid credit in the early years of your adult life.
Use these strategies to get yourself off on the right foot and establish a solid credit rating, right off the bat:
- Check your credit report. In order to know where you're going, it's important to first assess where you are. When you're first starting out, your credit file is probably sparse. However, with identity theft on the rise and other credit dangers lurking, it's important to check your credit first to make sure you are indeed starting from scratch.
- It's also important to check your credit file as often as possible. Federal law allows you to obtain a free copy of your credit report from each of the three major credit reporting bureaus once per year.
- To continuously monitor your credit throughout the year, stagger your requests for these reports. That way, you'll quickly be alerted if something improper has been added to your credit file. Instead of requesting all reports at once, request one from a different bureau every four months.
- Pay your bills on time every month. One of the most important factors that influences your credit score is your history of paying your bills on time. When you pay your bills by the due date every month, in the eyes of creditors, you're living within your means.
- Get a recurring bill in your name. Often, students will have regular monthly bills listed in a parent's name. However, if you get a cell phone bill or other monthly recurring bill in your name and pay it in full every month, you'll establish yourself as a person who's responsible in handling financial matters.
- Have someone you know put in a good name for you. You can actually use someone else's good credit to establish your own solid reputation. You can do this by having that person cosign a loan for you or by becoming an authorized user on that person's credit cards.
- Get a student credit card. Often, college students can get credit cards more easily than others can. In fact, on many college campuses, you can find booths at student events that promote credit card sign-ups with cash prizes or other incentives.
- Use these cards sparingly but regularly. If you're obtaining credit cards mainly to increase your credit rating, you need to use the cards to experience the boost in your score. Make small monthly purchases with the cards and pay the balance in full each month.
- Remember, though, that a credit card is not cash. Borrowing from a credit card means agreeing to pay much more than the purchase price if you don't pay it back on time. Avoid credit bondage. Be smart and make only small purchases that you can cover in full when the bill comes due each month.
- Set up a monthly budget. One of the most important factors in maintaining a solid credit rating for life is a lifestyle of wise financial decisions. When you list all of your income and expenses, you know the financial resources you have available to you. When you do, you're less likely to get yourself into a credit bind.
Setting yourself up on solid financial footing early on in life sets the stage for a lifetime of fulfillment. Misuse of credit, however, can set the stage for a lifetime of bondage. Choose fulfillment by applying these strategies to establish a solid credit rating right off the bat.
Lease or Buy? Financing Tips for Automobiles
There are two basic options when you need a new vehicle: Lease or buy. You can purchase a vehicle with cash or through financing, or strike up a lease agreement with an auto retailer. Leasing a vehicle provides you with short-term benefits without ownership, while buying is a much more serious commitment, but with greater long-term value.
To get the most out of either financing option, become familiar with the benefits and drawbacks associated with each option. Both options are viable when the right conditions are met, so leasing might be best for you at some point in time while buying is best during another point in your life.
Here are some things to consider before deciding to buy or lease a vehicle:
Leasing is similar to renting your car. When you lease a vehicle, you make monthly payments on it, but you never really own it. This means that once the lease term is up, you either give the vehicle back or renew the lease. There's never a point where you actually pay off or own the vehicle.
Despite not actually owning the vehicle, you're still responsible for all aspects of maintenance during the lease term in most circumstances. This means new tires, oil changes, new fluids, and all general maintenance costs are your responsibility.
Because you don't own the vehicle, you cannot make any modifications to it: no bumper stickers, aftermarket parts, window tinting, or other alterations that you might like to make on a car that you drive regularly.
Leasing is most ideal for individuals who want to drive a new vehicle every few years. When your lease agreement ends, you can initiate a new lease agreement with a new vehicle.
Getting an auto loan means the vehicle is yours. As long as you make the auto loan payments on time, you get to keep the vehicle. Once the vehicle is paid off completely, you don't have to worry about making payments any longer.
As the owner, you're responsible for maintenance costs and repairs. However, you may enjoy the fact that you're maintaining your own vehicle. You don't have to give it back.
When you own your car, you can use it as collateral for secured lending options. When you lease a vehicle, you cannot use it as collateral and there are many restrictions about how you can use it that may limit your enjoyment of the vehicle.
Interest rates affect whether one option is better than another. Affordability is key when it comes to choosing between leasing and owning a vehicle. The affordability of one option over the other can change based on the market and current interest rates and other incentives.
When interest rates on auto loans are low in general, lease payments may not be the most attractive option. Lower interest rates combined with incentives from auto dealers often make an auto loan the better opportunity.
When interest rates go up and obtaining an auto loan is not always feasible, leasing may be a better option because it provides short term access to a car with lower monthly payments, since you don't pay based on interest rate.
The Bottom Line
Weigh your options closely before deciding to buy or lease a vehicle. Different options provide different incentives, advantages, and disadvantages over time. Compare the opportunities for leasing or buying to your current financial situation to determine which is best for you.
How to Create a Budget Chart to Slice Expenses and Save Money
Using a computer program to keep track of your budget is quite addicting. You start to feel proud and satisfied when you can add a new amount to the "earnings" section of the budget. Of course, the most satisfying part would be to watch your earnings and savings increase as you cut back on spending. But what if you need to pay an upcoming bill and you're flat broke? Relax, there's no need to panic. Fortunately, your handy budget chart will help you cut back on spending without losing the roof over your head. In addition, keeping track of your expenses will help you avoid spending money unnecessarily, so more funds can be allocated to saving. Keeping Track of Income and Expenses
This tutorial can work for any Excel style spreadsheet:
- Open a new spreadsheet
- In the first rows, type in the factors that you would like to track (earned, spent, saved)
- Below the label, select the formula area, and type "=sum(A2:A30)" This is one of the simplest formulas that can be used in Excel. It simply adds the amount of numbers that are found in column A between row 2 and 30. You can put in the dates on the side of each row, but it's easier to just use the default row values and remove any additional rows. For example, if there are 300 rows, delete 270 so that you'll have 30 rows left, one for each day of the month. Keeping Track of Your Saving and Spending Percentages The formula above will add the amounts in a range of rows. But what if you want to determine the percentage difference of two labels? For example, you want to keep track of the percent that you save on a monthly basis.
Follow this process:
- Type this formula in to the formula area of the spreadsheet: "=sum(A2/B3)", assuming that you're "Total Earned" amount was on A2 and your "Total Spent" amount was on B3.
- Right click on the percentage label
- Format the cell as a percentage (from the drop down list of formatting options) Congratulations! You just made an incredibly simple budget chart! Benefits of Using Your Budget Chart When you start to use this budget chart, you'll begin to notice that each time you add an amount to the "earned" section, the spreadsheet will update, and you'll be able to see at a glance how much you've been earning and spending. Get into the habit of using the budget chart and you'll be able to easily manage your finances. The chart will serve as motivation to save money because no one wants to be reminded that they are spending a lot of money. It will be a little mind game to see how high you can make that "Percent Saved" number go. When you have to spend money, that percentage will decrease, which will make you want to bump it back up. Using this chart will create the mentality that you need to save money, which is one of the most beneficial decisions you can make. So create that budget chart and see how much cash you can save!
Marriage and Older Couples: Does it Make Financial Sense?
As a mature couple, are you considering marriage? There are over 1,000 tax breaks available to married couples that are unavailable to those simply living together. However, it's not just about the tax breaks. There are many financial advantages and disadvantages to both marriage and cohabitation. This issue requires a tremendous amount of research and expert advice. There are several areas to consider:
- Taxes: You could pay less or more.
- Benefits, especially benefits acquired through a previous marriage: In most cases, these benefits are lost.
- College financial aid for any children: you could be in better or worse shape after a new marriage.
- Estate issues: It's complicated.
Consider these advantages of getting married:
- Married couples often pay less in taxes. Unless your income is significant, you'll pay less in taxes if you're married. On the other hand, however, you can actually pay more in taxes if your income is at the upper end.
- Marriage may help your child qualify for financial aid. Getting married increases your household size by at least one. If the increase in household income is minimal, it can help your child qualify for additional aid.
- Your estate can be affected, positively or negatively, depending on your location. In a few states, your spouse is entitled to a portion of your estate, regardless of any will or agreement you have with your spouse. These are just a few of the many advantages of marriage. Further research is necessary to understand all the implications. Of course, there are emotional and religious advantages to marriage, too. Consider, also, these financial disadvantages of getting married:
- Social security benefits can be negatively impacted. If you're divorced, your social security benefits may be dependent on your ex's past earnings. This most often affects women who stayed home to raise children. Remarrying could result in the loss of those benefits. - If you're a widow or widower and remarry before the age of 60, you lose any social security survivor benefits. You can, however, reinstate those benefits if your second spouse dies or the marriage ends in divorce.
- Alimony payments usually stop after remarriage. Are either of you on the receiving end of a lucrative alimony agreement? In most cases, alimony payments are eliminated in the event of a new marriage unless a prior arrangement addressed this issue specifically.
- Pension benefits and annuity payments can also be impacted. Spouses of police officers and firefighters are often paid through annuities. These benefits can be lost due to remarriage. Most pension benefits are lost when the surviving spouse remarries.
- Your child's ability to receive financial aid can be affected. The household income is used to determine eligibility for financial aid. The non-parent spouse's income is included in that calculation.
- Costs related to health care can be a burden on the healthy spouse. Remember that both spouses are responsible for any medical bills, including long-term care. Your spouse's bills could wreak havoc on your personal finances, including assets you intended to gift to your children. It's easy to see that the issue isn't simple. Getting married can have both positive and negative implications. The decision between marriage and cohabitation is very complicated. Examine all the potential changes in your finances so you can make the decision that works best for you. Consulting a tax expert is a smart step. An attorney may also be needed, especially if there was a prior divorce for either partner. Remember that love is part of the equation, too! From a purely financial perspective, a marriage later in life can have far-reaching consequences. Ensure that you're making a wise decision. Do your research and get the professional advice you need.
Shopping for the Best Credit Card
Although it's wise to pay off all your credit card debt, it's also practical to have one or two good credit cards.
When you travel or want to order something online, it makes good sense to have a credit card. Plus, using your card responsibly will positively contribute to your credit score.
But which card is the best? The answer can be found in which one best meets your own personal needs. The best credit card for someone else may not be the best one for you.
Use these strategies to help you determine which card may best meet your needs:
Choose a credit card that has no monthly fee. Never pay a monthly fee just to have a credit card.
Avoid a variable interest rate credit card. A variable interest rate credit card has fluctuating interest rates over which you have no control. Make an effort to get a credit card with a fixed interest rate.
- Also, be leery of any cards that advertise 0% interest for the first 12 months. Find out what the interest rate will be after the initial interest-free period. You may find the interest so high that it's simply not worth it to get the first year at 0% interest. Plus, know what can trigger the end of your 0% interest - you might not even enjoy it for one year!
Read the fine print. Even though the fine print "legalese" is difficult to decipher, it's important to be on the lookout for hidden fees and charges.
- Read the terms and conditions of the card at home when you have plenty of time.
- Highlight any areas of the terms that you have concerns about or need to clarify.
- If you're unable to get answers to your questions or receive clarifications for a better understanding of the card issuer's policies, walk away. You're wise to say 'no' as opposed to getting stuck with extra fees.
See what's in it for you. When you're selecting a credit card, focus on those that either give you cash back, credit toward travel awards, or reward points toward free items - whichever perk you feel you would get the most benefit or enjoyment from.
- The cash back cards are, in essence, reimbursing you with "free money." Some cards issue cardholders one check per year for a percentage back on specified purchases. Receiving a check in December between $1 and $1,000 based on your credit purchases is a nice perk.
- If you're a traveler, you might prefer receiving points toward your next flight, car rental, or hotel.
- The third type of rewards credit card rewards you points in relation to the amounts charged on the card. The points can be cashed in to purchase various items such as stereos, portable DVD players, kitchen pots and pans, dishes, and a variety of other items.
Shopping for the best credit card takes time and patience. Protect yourself and your financial life by taking every precaution when selecting your credit card. Discover the freedom of using just one good credit card, paying it off monthly, and enjoying its rewards.
Make Your Credit Card Work For You
Managing a credit card can really be rocket science for many people, and you're probably caught right in the middle of that category! However, if you apply some very simple tips and techniques for managing and monitoring your credit card, you'll find that it's a very workable tool. In reality, you don't always have to work for your credit card. You can, instead, get your credit card to work for you based on how well you can keep track of things. In fact, if you pay attention to the trends of credit card owners, most people end up indebted because they simply don't pay enough attention to the details! Use these handy tips to make your credit card work for you:
- Monitor your due dates. When it comes to managing and monitoring a credit card, timing is definitely the key. The first logical thing to consider would be the importance of paying your bill on or before the due date, and most people are conscious of this. However, not many people consider the option of using the card to delay paying their other bills:
- Make a mental note of your statement generation date.
- Use the card to pay your other bills the day after the statement date.
- Those expenses won't show up on the credit card bill until the next statement.
- Make lump sum payments. A technique that many people use is putting huge payments on the credit card and then using it to make other payments. Once you make a lump sum payment before the statement is generated:
- That amount will be reflected on your statement.
- You can use the card with the newly added payment to settle other expenses and earn credit card rewards points for paying all your regular bills without incurring additional debt.
- Include interest with your minimum payment. Perhaps you're like many of us in only being able to settle the minimum payment on credit card accounts each month. But instead of paying just the minimum payment stipulated on your statement, consider paying that amount plus the figure reflected as interest for that month. With this technique, you'll:
- Be able to cut back on recurring expenses for interest although you won't be totally debt free.
- Come closer each month to completely settling your credit debt, even though it'll be a bit slow. An Additional Tip to Consider Financial institutions are pretty competitive when it comes to the products they offer to customers. Therefore, you can easily find one that offers better rates and consider switching to that institution. Your credit card does not always have to be viewed as the enemy! It can actually be a very helpful tool when financial needs arise, especially when those needs are totally unexpected. What matters most is how you manage the card and how well you do at successfully repaying the debt. You'll undoubtedly find that there's no need to be an accounting guru to get your credit card on your side. You simply need to understand the basics of debits and credits, interest, and due dates. Everything else will fall right into place!
Are You Financially Prepared to Relocate?
Most people relocate because the move will increase their quality of life in some way or another. But, if your finances aren't quite prepared to carry you through the move and beyond, the negatives of relocating can more than outweigh the good.
Use these strategies to financially prepare yourself for your move ahead of time:
Create an emergency fund. In households that are about to undergo an expensive relocation, a well-stocked emergency fund is a requirement.
- When you move, surprise fees and expenses will spring up at every corner. You might need to stay at a hotel for a night. You'll be charged activation fees for every service you start. Or, you may not land a job as soon as anticipated.
- Sell big-ticket items you currently own, like televisions, computers, cars, antique furniture and the like. In this way, you may be able to quickly create an emergency fund that will get you through a few months in your new home.
Have job offers before you move. Ideally, you'll want to have a job lined up in your new location. This saves you from the emotional and financial pressure you'll endure once your savings begin to dwindle.
- Set up interviews with companies you'd like to work for before relocating. In doing so, you'll have a higher likelihood of landing a job sooner than if you were to start sending applications once you arrive at your new home.
- If you're relocating because your spouse has a job offer, be prepared to adjust your expenses to be within budget based on a single income at first. Once you land a job, you'll be able to add luxuries, like expensive cable packages and dining out.
Research and plan for cost of living increases. If you're going to take on a higher cost of living, it's important to have the financial backing to do so, especially if you don't have a job lined up in your new location.
- At the bare minimum, you should have at least three months' worth of living expenses saved up if you don't have a job in-hand. Include approximately one to two months worth of expenses for emergencies even if you do have a job.
Visit the area beforehand. With services, such as rent.com and craigslist.org, it can be tempting to simply see the listing's pictures online and feel as if you know enough to rent the apartment, but resist the urge.
- Landlords display only the most flattering photos of their rental properties. Therefore, what you see online isn't always what you get.
- You need to visit the property physically in order to discern whether it's a safe neighborhood, whether the apartment truly is of high quality, or whether the neighbors seem to be trustworthy people.
Determine a plan. If you're moving to an area where you know very few people, you need a plan. Sure, it may be tempting to take the higher paying job offer, or to significantly slash your expenses, but how much of it will you really enjoy if you have no friends or loved ones in the area?
- Moving to a new state is an emotionally taxing process. Create a list of your favorite hobbies and the qualities you like in your current circle of friends. Then, think of places (book shop, coffee shop, sports teams, church, and volunteer work) where you may be able to meet friends that fit your criteria.
Even if you feel that you aren't prepared to move at this moment, by simply delaying your goal a few months and aggressively minimizing your expenses at your current location, you can still pursue the life you desire by edging towards your relocation one step at a time.
Get a Handle on Your Debt by Learning How to Deal With Debt Collectors
If debt collectors are pursuing you for payment, you know how frustrating the situation can be. However, with knowledge and tact, you can diplomatically navigate the rough waters. Try these strategies when you feel like you're drowning in debt and debt collectors:
- Take responsibility to become enlightened about your debts. Rather than ignoring the statements and phone calls, take action to determine how much you owe and to whom. Call the original companies to ask for the balance due. Write down the figures. - Inquire whether the debt has been turned over to a collections agency. If it has, record the name of the collections agency. 2. Get organized. Pay special attention to the mail you receive regarding your debts. Save them in a file. Clip together those you believe pertain to a single debt.
- Dispute any bills you think you don't owe. If you receive phone calls or letters about an unfamiliar debt, send a letter to the collections agency to let them know. If you don't owe that money, you can get that cleared up: - Send a copy of your "proof" to the collections agency and the company who thinks you owe them. - For example, perhaps you bought a new washer at the local discount store but when you got home, the washer wouldn't fit in the space you planned. You returned it and received a store credit slip. So include a copy of this credit slip in your communications.
- Be polite or at least diplomatic. Even when a caller is rude or aggressive, confidently choose to hold your tongue and temper. Let go of the negativity. It will strengthen your resolve and give you more clarity in determining your best course of action.
- Make decisions right away about which bills you'll begin paying. Let the company know that you plan to begin paying and when.
- Be cautious about agreeing to make payments on a large debt. In some cases, you may be better off by consulting with an attorney rather than paying minimal amounts. Interest and other charges may begin accumulating again as soon as you send your first payment and cost you more money.
- Get a short-term second job to earn enough to pay off a debt. Before you send the money, call the creditor and make an effort to bargain with them to get the original debt down to an amount you can pay. Having the money in hand will give you some bargaining power.
- For example, perhaps you owe $982 to Company A. You decide to take a second job for six weeks to pay off that debt. At the end of the six weeks, you have $700. Call Company A and tell them you'd like to discuss a settlement of $625 for the entire debt. 8. Pay off bills to collections agencies with a certified bank check. Companies can turn in one debt to more than one collections agency, so you'll want to have proof of your payment(s). Also, collections agencies could make an error by misapplying your dollars and then tell the creditor that you didn't pay. Apply these suggestions and work toward paying off your debts one by one. Dispute in writing any claims from companies whom you believe you don't owe. Seek legal advice if you need extra support before beginning this process. Yes, you can handle your debts successfully and get back on a positive financial track! Take action now and you can look toward your financial future with optimism.
Enjoy More Peace of Mind by Living Within Your Means
Living within your means has always been a wise strategy and becomes even more important during uncertain economic times. Here are some of the major advantages of spending less than you earn and relatively painless strategies for sticking with this positive habit.
Advantages of Living Within Your Means
- Reduce stress. You'll feel calmer when you know you have enough set aside to keep your basic expenses covered or get you through potential emergencies like job loss or illness. By planning ahead you can feel secure even on a modest income.
- Improve your finances. Some people become millionaires on remarkably low salaries. Whatever you earn, you can increase your net worth by saving, spending and investing wisely.
- Reach your goals. Make frugality more pleasant by viewing it as a way to attain your goals rather than as a sacrifice. Brewing your own coffee for your morning commute can help pay for your summer vacation or the down payment on a home.
- Contribute to a better society. The Occupy Wall Street movement dramatizes the impact our choices may have on other people. While predicting all future events is impossible, you can try to pay your own way without burdening others.
Strategies for Living Within Your Means
- Create a budget. Get familiar with your monthly income and expenses. Include automatic payments you may rarely think about, like bank fees and insurance.
- Pay down debt. Contact lenders to see if you can consolidate your debts and pay them back on more favorable terms. Avoid going into debt by saving money in advance to pay for holiday gifts and weekend trips.
- Manage your credit cards. If you use credit cards, try to pay off the balance every month. If your balance has already accumulated, consolidate it onto a single card with the best rate you can find.
- Save more. Motivate yourself to save by remembering the purpose, whether it's your kid's education or your own retirement. You may be able to deduct money from every paycheck before you even see it. This way, your savings are set aside before you have any temptation to spend them.
- Earn more. Of course, earnings are the other side of the equation. Consider any classes or certifications that could help you qualify for a more lucrative position. Make money off your hobby, such as giving piano lessons or selling crafts. 6. Remain flexible. Life events are likely to interfere with your budget from time to time. Indulge yourself occasionally or make adjustments for unusual expenses, like if your house needs a new roof.
- Tackle one habit at a time. Be patient while you're changing your old ways. Once you get used to growing your own vegetables you can move on to learning basic home repair. For some of us, even keeping a budget is a new habit. That's okay; just give yourself some time to integrate one change before you jump into the next big project.
- Get outside help. There are many sources of free or inexpensive expert financial advice. Check the website for your local government for resources or consult the National Federation for Credit Counseling.
- Make your own meals. Eating out takes a big bite out of the budget for many families. Pack your own lunch on workdays instead of buying mediocre sandwiches. Learn more recipes so you can enjoy fancy dinners at home.
- Seek out cheap entertainment. Borrow free movies and books from your local library. Play croquet in your backyard. Purchase family memberships at your local museum or zoo so you can visit often and get invited to special events.
- Comparison shop for big expenses. Researching large purchases pays off. Get the best price you can on major expenses like appliances and auto insurance. Living within your means is good for your mental and financial health. Build a better future by putting yourself on a budget that you can sustain.
7 Financial Habits That Will Keep You Poor
Are you continually facing financial challenges? You might be keeping yourself poor with habits you didn't even realize were contributing to your situation. Dropping the habits that are keeping you poor is an effective first step toward enhancing your security and financial future. Make the decision to drop these financial habits from your life:
- Failure to create an adequate emergency fund. There's no better prevention for financial disaster than an emergency fund that covers at least 3 months of living expenses. A short period of unemployment or a single, unexpected, major bill can be financially devastating. It will happen. Avoid believing it's a matter of "if it ever happens." - Set aside whatever dollar amount you can manage and begin building an emergency fund. Even a few dollars each week is a start.
- Habitually paying bills late. Most consumers believe that credit card companies make most of their money from the high interest rates they charge. This isn't true. It's actually the late fees they collect. Nearly every bill you pay each month becomes more expensive if you're late, even by a single day. - Develop the habit of sitting down once a week and paying the bills that are coming due. Pay them at least 7 days in advance.
- Inappropriate use of credit cards. Using credit cards to purchase unnecessary items you can't afford is the worst use. Putting charges on your cards up to their limits and then only paying the minimum due will put you in a precarious position, lower your credit score, and keep you in debt for a long time. - Resolve to limit credit card use to emergencies or to accumulate rewards if you're paying off your balance in-full each month.
- Failing to save money from each paycheck. If you're struggling to make ends meet, saving money often seems impossible. But this is the time it's most critical. Start by saving 1% of your take-home pay and build from there. If you never save any money, how will your situation change?
- Making impulse purchases. How many times have you made a big purchase and then run out of money at the end of the month? Impulse purchases are rarely satisfying after the initial glow has worn off. In fact, you're probably resentful of the purchase after the financial pain comes home to roost. - Take a few days to think about the purchase before making a final decision. You'll often find the urge has subsided.
- Buying items you don't need. After shelter, clothing, food, and medical care, most spending is optional to varying degrees. You probably don't want to feel like you're living in a cave and eating sticks, but you certainly spend money each month that could either be saved or spent more wisely.
- Failing to contribute to your retirement. After forty years of toiling to make ends meet, wouldn't it be nice to retire comfortably? Many seniors find themselves in challenging financial circumstances because they failed to contribute adequately to their retirement. It's never too late to start. Eliminating negative habits is the most effective way to start your journey to financial abundance. Choose one habit and make an effort each day to remove it from your life. The most powerful action you can take with regards to your finances is to eliminate your three most debilitating financial habits.
Records to Keep, Records to Shred
Are you determined to get your home office under control? It doesn't take long for financial records to get the best of us. One of the most important steps to organizing is determining what is worth keeping and what isn't. Paystubs, credit card bills, mortgage statements, utility bills, and the endless stream of financial mail are enough to overwhelm anyone.
There are several records that are important to save:
- Save pay stubs for a year. If you receive your paycheck via direct deposit, you can get away without saving your paystubs. Though errors are infrequent, the ability to double-check your W-2 form against your paystubs can be useful. You can run them through the shredder a year after your taxes are completed.
- Keep investment records for as long as you own the investment. Waiting 12 months after your taxes are filed is even more prudent. It's beneficial to double-check your gains or losses when selling. Remember that these records are frequently available online, so paper copies are redundant.
- Keep tax returns for a minimum of four years. For a standard audit, the IRS will go back 3-4 years. If you've underreported your income by 25% or more, they can go back even further. - If you're an honest tax filer, four years is sufficient. If you're not, keep at least 7 years of returns. - Do you have a nanny, housekeeper, gardener, or other domestic help that you hire directly? Keep 3-4 years of pay records.
- Mortgage records are also worth saving. This includes all the documents received at closing and records of payments. Also, keep receipts related to home improvement projects. Fortunately, there aren't many records that require saving. While there are financial records worth keeping, most paperwork can be fed to your shredder.
Avoid keeping these records:
- Put your bills in the shredder. Most bills aren't worth saving. Only keep bills that are necessary for tax purposes. Check your bills for accuracy and then pay and shred them.
- Throw out all junk mail except preapproved credit card applications. As annoying as junk mail can be, avoid the urge to throw all of it in the trash. Shred pre-approved credit offerings to avoid identity theft issues.
- Computer media can have sensitive information. Be aware of simply throwing away memory sticks, old computer disks, or hard drives. There are companies that will destroy these items for you. A hammer can serve well, too. Some experts recommend fire, but the fumes aren't exactly safe. A hammer is more environmentally friendly.
- Unless needed for tax purposes, avoid saving receipts. If you're very conscientious and go over your finances in great detail each month, keep your receipts for a month. Otherwise, throw all receipts in the trash except those that are for items that you might want to return. Keep these receipts until the return period has expired.
- As a general rule, the more expensive the item, the longer a receipt should be saved. It makes more sense to keep a receipt for a new washer and drier than a pack of gum. It's easy to determine which items should be shredded. Shred items that you wouldn't want falling into the hands of strangers. If an item contains your social security number or credit card number, shred it. Beyond that, it's up to you. Financial records are a part of everyday life. From ATM receipts to mortgage statements, financial papers accumulate at a rapid rate. It's important to know which financial records are worth keeping and which aren't. Avoid keeping records that serve no purpose. Keep your financial records neat and organized.
Are you Passing These Financial Habits on to Your Children?
You might be concerned that your children never listen to you. The good news (and the bad news) is that your children are always watching. Kids quickly assimilate your habits and attitudes regarding money. Are you demonstrating habits that will help or harm their financial future? When faced with uncertainty, it's common to rely on experience. When your children grow up and face financial situations, they're going to mimic what they know. It's up to you to set an example that will enhance their financial future. It's likely you haven't considered what you're inadvertently teaching your kids about money.
Today is a wonderful day to start. Financial habits that make life more challenging:
- Using credit cards unwisely. This may be the most devastating financial habit to acquire. Credit cards are convenient and can be an effective way to get yourself out of a financial jam, but the use of credit to purchase unnecessary items is one of the leading causes of financial stress and bankruptcy.
- Giving in to impulse purchases. Children already have impulse issues. Witnessing a lack of financial control by a parent makes self-control even more elusive in the future. Show your children that purchases should be decided ahead of a shopping trip.
- Not sticking to the budget. Sticking to your budget is another demonstration of financial self-control. Allow your children to know that a budget exists and that certain purchases can't be made because of the budget.
- Not making a clear distinction between needs and wants. Demonstrate to your kids that needs are to be taken care of first. Wants are only considered after the critical items have been addressed. Avoid demonstrating these financial habits to your children. Remember that they're always watching you! But not all habits are negative. There are many positive financial habits you can help your children to develop by setting a good example.
Are you sharing these positive financial habits?
- Consistent saving. Make a big deal out of saving money from each paycheck. Encourage your child to do the same with a portion of any money they earn or receive as a gift. If you had saved 15% of each paycheck since you started working, how much would you have today?
- A robust savings account is an effective solution to many of life's financial challenges.
- Paying bills on time. Your children see those bills with the words "Past Due." They also notice when you avoid the bill collectors that call day and night. Pay your bills and avoid the late fees. You'll also be setting a great example for your child.
- Sacrifice. Making great financial strides requires sacrifice. Let your children know that you're not buying a new car because it's more important to save for their college or retirement. Give them the option of making a small purchase at the sacrifice of something else. All financial decisions have positive and negative consequences.
- Enjoying the rewards of financial responsibility. No one wants to sacrifice all the time. The whole point of sacrificing is to enjoy the end result. Show your children that regularly saving money results in a vacation or a new television. Let your kids see the positive outcome of good financial habits. Are you demonstrating good financial habits to your children? Are you demonstrating poor habits? You have a tremendous amount of influence over your child's financial future. They're likely to behave in a fashion similar to that which they observe. Consider what you're teaching your child each day with your money habits.
Considering Getting a Loan?
Learn About Home Equity Loans Home equity loans are quite simple to understand. It's a loan that is secured by the equity that exists in your house or condominium. If you've ever heard the term "second mortgage," you're familiar with home equity loans. Home equity loans can be a great way to tap into your equity and put that value to work for you. Whether you'd like to pay off your credit card bills, invest in a rental property, or take a trip, a home equity loan can help you achieve those objectives. There are 2 types of home equity loans:
- Traditional. You receive a lump sum and make payments on the loan, just as you would on any other installment loan. The interest rate is usually fixed. - The advantages are a predictable payment and interest rate. This is a great loan for debt consolidation or any big-ticket items.
- Home equity line of credit (HELOC). This is more similar to a credit card. You can use any amount you need, up to your credit limit. The interest rate is usually variable.
- A HELOC is great when flexibility is most important to you. You also only pay interest on the money you actually borrow. You can use the money whenever you need it. Consider which type of loan is most supportive of your situation. Each type of loan can be a viable choice, depending on the circumstances.
Facts about home equity loans:
- There are differences from traditional mortgages. Home equity loans are much quicker to process than traditional mortgages. The fees are quite low, too. A traditional home equity loan can probably be secured for just a few hundred dollars. HELOCs are frequently free to acquire.
- Remember that the amount of equity in your home varies. Depending on what the market is doing, the value of your house is constantly in flux. When the value drops, the amount of equity in your home drops, too. - A HELOC can actually be canceled if your equity drops too much. This is one advantage of the traditional-style loan. Once you have the loan, any change in home equity is irrelevant, at least from the standpoint of acquiring the loan.
- Balloon payments can be part of the loan. Many home equity loans are set up to mimic the payments of a 30-year mortgage, even though the loan may only be for 10 years. This means that you'll be forced to make a balloon payment at the end of that time. Be sure to include this fact in your decision-making process.
- Foreclosure is a risk. Remember that the loan is secured against the equity in your home. If you fail to make your payment, the lender can foreclose on your home to recoup the money that was lent.
- The interest rates are very good, but not as good as a first mortgage. Since the loan is well secured, lenders are able to offer good interest rates. But the loans are junior to the primary mortgage. - If you stop making all of your payments, the primary lender will get their money back first. The home equity lender can only get its share from whatever is left over, which might not be enough. Remember that the amount of equity in your home varies. If you need to borrow money, a home equity loan might be perfect for your needs. The interest rate is very good, and home equity loans can provide a lot of flexibility for any financial purpose. Shop around for the best rates and terms.
College Students: Avoid These Credit Card Pitfalls
Credit card companies used to market aggressively to college students. Laws now prohibit this type of activity, but getting a credit card is important for college students. Sooner or later, you'll want to purchase an automobile or home, and you'll either have to use credit or save for a very long time. However, using a credit card irresponsibly can create a huge financial challenge. For best results, avoid these credit card mistakes:
- Not getting a credit card at all. Now is the perfect time to establish credit and build a good credit score. You might think you're being responsible by not getting a credit card, but you'll face a significant challenge when you want to buy a house or automobile.
- Get a card or two and use them responsibly. That means the occasional, small purchase that you can afford. Buying gas or paying your cell phone bill are two examples.
- Getting too many credit cards. Two cards are plenty for anyone. Imagine the damage you can do with five or more credit cards. Give yourself a chance to become familiar with the responsible use of credit.
- Carrying a balance. Pay the entire balance each month. Once a small balance becomes comfortable, a moderate balance isn't far behind. Use self-control and avoid ever carrying a balance to the following month.
- Getting a credit card before you're ready. Some teenagers are more mature than others. If you don't have a bank account, have never held a job, or don't know how to save, it might be better to wait. Better yet, give the card to a responsible parent and let them hold onto it. - Another option is to get a card with a very low credit limit.
- Failing to track purchases. It's easy to jump from store to store and spend a lot of money quickly. Keep track of your receipts and keep a running total. Post it where you can see it. Everyone with a credit card has been surprised at least once by the size of the monthly bill. Avoid any unpleasant surprises.
- Not paying the bill on time. Being late with your payments will kill your credit score. Know when the bill should arrive and keep your eyes open. College dorms are notorious for losing mail. - Remember that you can see your bill online and pay it there whether you get your bill or not.
- Making purchases you can't afford until you get that big job. Many college students have used credit cards irresponsibly by telling themselves they'll pay it all off in a few years when they're raking in the big bucks. It can be tough to find a job after graduation. You'll also have the expenses of moving, buying furniture, possibly paying back student loans, and more.
- Make a small purchase each month and pay the bill in full. If you can't pay the entire bill at the end of the month, you're outspending your income. It would be a shame to waste the great opportunity college students have to begin building their credit scores. But using a credit card irresponsibly can haunt your finances for years. Give credit the respect it deserves. It's a powerful tool that can either help or hurt you. Use it wisely.
Which Financial Habits Will Help You The Most?
One of the many keys to effectively changing your life is prioritization. Everyone has limited resources, whether those resources are time, money, or energy. Since you're likely limited by your time and energy, it only makes sense to focus your resources on creating those financial habits that will have the biggest impact on your situation. Try this process to focus on your most important new habit:
- Where are you feeling the most pain in your financial life? What keeps you up late at night? Is it the lack of savings? A non-existent emergency fund? Too little income to pay your bills each month? A bleak retirement future? - Addressing the most stressful financial challenge in your life can be an effective place to start.
- Which new habit would have the biggest impact on your finances? Knowing that you need to work on your savings doesn't necessarily highlight the optimal habit to adopt. Consider the impact each potential new habit would bring to your life.
- Make a list of all the potential habits you could build that are related to your target financial concern.
- Prioritize your list based on the likely outcome from incorporating that habit into your life. Eliminate the bottom 80%.
- Reexamine the 20% that remain. Visualize the impact each of the remaining possibilities will have down the road 1 month, 6 months, 12 months, and 5 years down the road. How will the habit impact your life 25 years from now?
- Choose the habit that makes the most sense after carefully considering the future. If you're torn between 2 or more habits, consider which would be the easiest to implement. Never underestimate the power of momentum. You can swing back around and pick up the other habits in the near future.
- Seek to be average at first. Bring all the parts of your personal finances up to an average level before attempting to be a high achiever. The worst aspects of your financial life are causing your greatest financial discomfort.
- In other words, eliminate consumer debt, have an emergency fund, save at least 10% of your income, have adequate insurance, and be consistently saving for retirement before worrying about the purchase of a vacation home or the installation of a swimming pool.
If your habit doesn't address a fundamental, personal finance issue, be certain your target habit is in your best interest.
- On a 1 to 10 scale, bring each part of your finances up to a "5" before attempting anything on a grander scale.
- Do you have what you need to put the habit into place? If not, can you get what you need or start small enough that the habit is viable? If you're 75lbs overweight and spend every evening on the couch, you'd have to start small if your desired habit was to run 10 miles each day. You'd need running shoes, too.
- Some financial habits might require you to gain a significant amount of knowledge or have a starting point that is currently beyond your reach.
- Determine if the habit is possible with your available resources and expertise. It's possible another goal might be more appropriate. Time is a limiting factor for everyone, and there are only so many hours that can be applied to building and performing a new financial habit. Ensure you're spending your time wisely and effectively. The most important habits are often the least appealing. Focus on positive habits to best enhance your finances.
6 Ways to Save Big with a Simple Savings Jar
A simple glass jar can help you save a lot of money in one year. The savings jar provides motivation to stay on a plan. It's an easy way to put money aside for a vacation or home renovation. Any glass jar will work. It's important to keep the jar see-through because seeing the money grow will encourage you to keep going.
The $5 bill plan. This plan involves saving a $5 bill by putting it in the jar each time you receive one back as change. The plan can be modified to be a $10 bill, $20 bill, or even quarters.
- Instead of spending the $5 bill, you save it and slowly build up the contents of the jar.
The 52-week money challenge. This method increases your savings gradually each week of the year.
Start with putting $1 in your jar during the first week of the year. Then, add an extra dollar each week. The savings grow until they reach $52 for the last week of the year. You can save $1,378 using this simple method.
- A print or online calendar can help track the savings. Each week can be labeled at the beginning with the amount that needs to be added to the savings jar.
- It may be easy to save $1 or $2 at the beginning of the plan, but how will you find an extra $52 at the end of the year? This savings method encourages you to think ahead and plan.
The traditional change method. Saving your change by adding it to the jar is a traditional method, but it can provide results. After work or running errands, add all of your change to the jar.
The paycheck plan. Consider adding a set amount of money to the savings jar after you cash your paycheck.
- The paycheck plan also works for couples. You can cash a specific amount of money from each of your paychecks every month and add it to the jar. This works best if you have a financial goal in place.
- Are you trying to save for a trip or a new electronic gadget? Figure out how much you will have to save each month from your paychecks to pay for it.
The inspiration plan. The inspiration plan works best if you have a picture of the item or goal you are trying to achieve. It can be placed near the savings jar or attached to the lid, so you see it every day. Put money in the jar each time you're inspired to do so. Include the whole family.
- Place the jar in the living room or kitchen, so it stays highly visible.
- The inspiration photo depends on your goals. It can vary from pictures of vacation spots to new television sets. You can also write the goal on a piece of paper.
- The photo serves as a constant reminder of why you are saving money.
The $20 weekly plan. The $20 weekly plan is an alternative to the 52 week money challenge. Instead of slowly building savings during the year, you put a set amount of money in the jar each week.
- Similar to the 52 week money challenge, you can track the savings on a calendar or chart.
- At the end of the year, you can save $1,040 in the jar using the $20 weekly plan. A glass jar can help you save more than $1,000 a year. A commitment to saving money will help you achieve your goals.
Easy Ways to Avoid Interest and Prevent Endless Debt
Interest can really wreak havoc on your financial position! It's so easy to end up in constant debt because of interest applied by your financial institutions and other organizations.
Fortunately for you, it's fairly easy to avoid interest in most cases, as it essentially relies on your financial decisions and how quickly you make them.
Try these tips to avoid interest in some day-to-day scenarios:
Pay your car loan on time. If you've acquired a car loan through a financial institution, there's bound to be fees for making late payments. In many cases, these fees are added on to your remaining balance and make your monthly payments that much higher. The best way to steer clear of scenarios like this is to pay your car loan on time.
- This bit of advice goes for any other loan you could have, including a mortgage.
- Institutions will always apply fees and charges to delinquent accounts and you do not want to be in that position.
Avoid going over the limit on your credit card. Having a credit card could be considered a liability to begin with if you're unaware of how to properly manage it.
- It becomes even worse when you end up going over your limit.
- The fees that the financial institutions add on once you go over your limit are exorbitant and can really push you into debt. At all costs, sidestep those expenses if you want to remain debt free.
Consider automatic deductions. You're probably like many other people who would prefer to make monthly commitment payments on their own accord as opposed to having automatic deductions from their bank accounts. However, it makes more sense to do automatic deductions because:
- You'll eliminate the possibility of incurring fees and charges from missed or late payments.
- Automatic deductions ensure that your payments are taken from your account on a set date. As long as you have money in that account to cover the payment, you're sure to get your payments made on time without late fees or added interest for delinquency.
Avoid credit; use cash. With credit inevitably comes interest, unless you pay the total due on your account before the first due date. It doesn't get any simpler than that! If there's any remote way you can make a purchase or complete a transaction with cash, then by all means take that route as opposed to credit to avoid interest altogether.
What To Do When You're Finally Debt Free
As an added piece of advice, your intention should be to remain debt free once you've gotten to that point. It will take some keen attention, but it's undoubtedly attainable.
These strategies will help keep you from incurring debt and additional interest:
- Return all but a couple of your credit cards. Keeping some open and active will enable you to build a higher credit score for future loans, like a mortgage loan.
- Use your cards from time to time, but have the cash available to pay off the total amount charged before the first payment is due.
- Settle any interest or debt you do incur at the soonest possible time.
- Build up your savings to handle emergency cash needs.
Adhering to these simple tips will make it easier to prevent debt and interest and maintain control of any debt you do incur.
So there you have it - easy ways you can avoid interest being applied to your day-to-day expenditures. By using these tips, you'll significantly lessen the chance of being exposed to the burdens brought about by debt.
Smart Ways To Manage Job Search Expenses
A job search can be expensive as well as time consuming. There are ways to manage your expenses so that you get the maximum value out of your spending. These are strategies for keeping costs down and taking advantage of all the tax deductions you are entitled to. Reducing Job Search Expenses
- Network over coffee. Face to face networking still matters even in a Facebook age. Inviting people out for coffee or breakfast is usually less expensive than lunch or dinner.
- Choose your wardrobe carefully. Buy your interview suits and tasteful accessories at consignment shops or on eBay for a fraction of the retail cost. Select separates that you can mix and match for more options.
- Barter for services. Some job coaches are worth their high fees, but you may know people who will help each other out for free. Offer to proof read each other's resumes. Share job leads and take turns rehearsing for interviews.
- Access community resources. Local government offices, nonprofits and business groups often provide free and low cost career services. Call your state employment office and check community calendars.
- Evaluate your travel priorities. In a tight job market, some employers may expect you to pay the travel expenses for long distance interviews. Ask yourself if the position is worth it for you. Clarify how many candidates are being considered.
Deducting Job Search Expenses
- Stay in the same field. The IRS only allows deductions for job search expenses if you're looking for a job in your current occupation. On top of that, there cannot be any significant gap between your last position and the start of your job search.
- Know the limit of 2 percent. Allowable job search expenses are deductible if you itemize deductions on Schedule A and those miscellaneous expenses including your job search costs exceed 2 percent of your adjusted gross income.
- Hold onto your receipts. Good record keeping will help you stay on track. Keep receipts for everything from stamps to airline tickets. The IRS may want to see more than your credit card statement. Mileage logs and odometer readings can be submitted if you travel by car.
- Watch your phone minutes. Phone bills only count if you incur extra charges. If you have an unlimited phone plan, the details are probably irrelevant to the IRS.
- Calculate agency fees. If a job search agency charges you a fee, you may be able to deduct it. If your new employer later covers it, you'll naturally need to make a reimbursement. 6. Keep business trips mostly business. To be deductible, a job search trip must be primarily for business purposes. Keep a log of your time to confirm your activities.
- Specify your coaching services. Certain coaching services can be deducted while others fall outside the guidelines. Improving your interviewing technique is likely to be approved while counseling on making a career switch would be ruled out.
- Consider your child care needs. Some experts question if child care can be deducted. If you want to do so, document it like any other expense with receipts and details on why it was essential.
- Stay up to date. The tax code is complicated and changes all the time. Consult your tax professional or IRS Publication 529 on Miscellaneous Deductions to ensure your information is current. Keep expenses under control so you can focus your efforts on finding the right position for you. Your job satisfaction is worth making an investment, but a little knowledge and careful record keeping can help you get excellent results for less.
Wealth Isn't for the Wealthy - Wealth is for the Smart!
Do you believe that being predisposed with the ability to become wealthy is the only way to earn good money? Fortunately, the reality is that wealth belongs to those who are smart in the ways they go about claiming and creating it.
Being able to make money even without having that background from the onset is definitely attainable, as long as you put some thought and creativity into your wealth making opportunities. Making solid financial decisions and choosing sound investment options are simply the best ways to become wealthy once and for all.
Here are three simple, yet effective, tips you can apply to your life that can help to create the wealth you deserve:
Break down your big goal. "I want to be rich!" Just about everybody you can think of has said this at one point or another in his or her lives. Being wealthy is something that most of us dream about - however very few are able to achieve - because we look at it as a large, insurmountable goal. Remember:
Looking at your desired achievement as an overwhelmingly huge goal makes it very difficult to obtain. In fact, it almost always amounts to a mere dream if we overlook setting smaller, attainable goals towards that major goal. And that's one of the keys for becoming wealthy.
Break your financial goal into smaller, more achievable ones that you can set reasonable timeframes on. You'll be surprised to see how you progress towards your huge goal once you set smaller ones that are much easier to achieve.
Avoid using credit if you can't pay by cash. One of the simplest and most effective tips for building wealth is to avoid credit. And what that means essentially is avoiding credit if you see no way to repay it in the short term. Remember:
If it isn't possible for you to have the cash to settle your credit card expenses each month, then avoid making purchases with the card.
By choosing to purchase only what you can afford to purchase with cash, you can undoubtedly start to create wealth for yourself.
Live within your means. Sure, there will be things you see that you want to do, acquire, or simply accomplish. However:
If it's not financially easy for you to do something or acquire something, then perhaps you should leave it alone for the time being.
It's very likely that something you aren't able to do this month or this year will be more than possible in the near future.
You should only focus on doing things and acquiring things that you are financially able to without feeling stressed in your pockets. The more often you practice that approach, the closer you'll be to having financial freedom.
Creating wealth requires very little money and quite a bit of financial "smarts." The more reasoning, thought, and common sense you put into your financial decisions, the sooner you'll find yourself becoming wealthy. Count yourself amongst the masters of wealth by applying some creative thinking.
Achieve your financial goals by taking it in stride and believing that you are predisposed to the same wealth as anyone else!
Essentials for Managing Your Money
If budgeting and preparing expense sheets sound like tasks only an accountant would do, think again. Keeping track of your personal finances - even if you have an accountant - is important to your financial future. It not only gives you a keen awareness of your money situation, but also increases your chances of making smart spending and investment decisions. Following these crucial tips will help you create a secure financial future for you and your family. Spend Less Than You Earn Although this tip sounds straightforward, you may sometimes find it daunting to actually put it into practice. However, reevaluating where you're spending money can significantly increase the scope of your earnings and help you live within your means.
- The best way to get started is to write out all of your monthly expenses and see how this compares to your monthly income. This important first step will help you determine the current state of your personal finances.
- Take a second look at this list and see if you have any expenses that can be eliminated or reduced. Be honest with yourself. Which expenses show wasting your money on things that aren't even important to you? Focus on keeping what's important and eliminating the rest.
- For example, while there's nothing inherently wrong with spending five dollars per day on a Frappuccino, if your income doesn't support this kind of spending, it may be in your best interest to do without this small luxury for the time being.
- Invest in a good budgeting program, like Quicken or QuickBooks, to help you keep track of your spending and simplify the task. Make Your Money Work For You This can be as simple as taking advantage of the compound interest offered by most savings accounts. Making sound investments can help increase your annual income over 5%. You don't need to invest aggressively to get this kind of return, either. Ask friends and family for referrals to trustworthy brokers to help you get started. Protect Your Money Ensure that you have a plan to protect your assets in case something unforeseen happens. There's nothing worse than working hard for your money and then losing it due to poor planning and shortsighted investments.
- Sometimes, slow and steady not only wins the race with respect to your personal investing strategies, but it can also put your money at lower risk.
- Beware of any instant growth opportunities or investment clubs that promise overnight fortunes. These may include seminars with "self-made millionaires" that pressure you into signing up with a program that might not be a legitimate source of income. Take the time to research investment opportunities before you commit your money to them.
- Consider obtaining renter or homeowner insurance to help protect your assets. Knowing how to manage your money is a fundamental aspect of any successful long-term personal investment strategy. If you take just a small amount of time to analyze your spending habits, you may surprise yourself with how much money you can save! You can then invest these savings in a way that will help you see returns year after year.
7 Signs You're Headed for Financial Disaster
Many of us are good at ignoring the negative trends in our lives. Maybe we refuse to acknowledge a growing waistline or a relationship that's slowly deteriorating. Many people also ignore the signs of impending financial disaster. Most personal financial meltdowns happen over time. They're rarely the result of a one-time event. The warning signs are quite clear. You simply need to look and be honest with yourself. Do you recognize any of these warning signs in your finances?
- You overdraw your checking account more than once a year. When you're already struggling to pay your bills with your available income, overdraft fees only make the situation more challenging. Overdrawing your account can be a symptom of these things: - Poor money management. Some bills simply take longer to clear than others. It's important to do whatever is necessary to stay on top of your pending balance. It can also be a matter of simply failing to pay attention. Having good finances requires regular attention. - Overspending. Do you have a budget? Are you sticking to it? Ask yourself why you are running out of money before you run out of money.
- You're at or near the limit of your credit cards. Your credit score starts to take a hit when you're above 35% utilization. On a card with a $5,000 limit, that would be anything above $1,750. If you're in this situation, you may be tempted to acquire another line of credit. In most cases, this is only a short-term solution with a poor long-term outcome.
- Relying on a future one-time financial event. Counting on an inheritance or big tax return to balance your financial situation is a sign of significant debt. - It's important to arrange your finances so that your situation is under control without the need for periodic injections of extra income just to get by.
- A failure to save any money. A deposit in your savings account can be viewed as just another expense. If you're unable to make that payment, you're headed in the wrong direction financially. - All it takes is one unexpected bill or the loss of a job and you're in dire straits. Savings is a better financial cushion than credit.
- Borrowing money from family and friends is another sign of impending financial challenges. Not only is it a sign of financial struggle, it can also be a real strain on your relationships. Most of us loathe asking the people in our lives for money, so recognize the seriousness of the situation if you're considering it.
- You're dipping into your retirement funds to pay your bills. Stealing from your future is a good sign that the present is shaky. - You're killing the magic of compound interest and likely incurring penalties and taxes by making early withdrawals. You don't have an unlimited amount of time to replace those savings.
- Using a home equity loan to fill the financial gaps. Using a home equity loan to pay bills or to purchase something you can't currently afford is a dire warning sign. Not only are you financially struggling, you're also putting your home at risk. Think long and hard before borrowing from the equity in your house. If you recognize one or more of these financial warning signs, do yourself a favor and start working on a solution. When these financial conditions start to pop-up, it's usually only a matter of time before things get significantly worse. Make strengthening your finances a priority in your life. You'll be glad you did.
Eliminating Personal Debt with a Debt Consolidation Loan
Household debt in the United States totals over $2-trillion; even more shocking, that total doesn't include the money we owe on our homes. Consumer debt has become a way of life in our country. How can you get a handle on your household debts? For many, the answer is debt consolidation. Is debt consolidation a good option for you? Read on to learn the pros and cons. Debt consolidation fundamentally involves taking all of your debts and consolidating them into a single loan. This often includes home-equity loans, car payments, credit card balances, personal loans and even mortgage debt. Most banks and other lending institutions have a variety of debt consolidation options. When used properly, debt consolidation should result in an overall lower interest rate and a lower monthly payment. Ideally, this new, lower payment will free up enough money each month to enable you to make the payment on your loan and still live within your income.
Why Debt Consolidation Might Not Be Your Answer
While there are a number of financially wise individuals that utilize debt consolidation as an effective means to manage their finances, this is frequently not the case. For many consumers, the need to engage in debt consolidation is a sign that they may need to learn how to handle their money more wisely. It is a fact that many individuals that avail themselves of consolidation loans will go out and continue using their credit cards, which now have a $0 balance due to the consolidation. If you give in to the temptation to continue to use your credit cards, you're likely to acquire so much additional debt that, before you know it, you're once again in financial straits. You'll find that you cannot make both the consolidation loan payment and the payments on your new debt. Debt consolidation is the very first step in getting your debt under control, but transforming your habits is a critical part of the process, too. For debt consolidation to have a meaningful and lasting impact on your economic circumstances, you must break the debt habit. It's important to refrain from spending funds that you haven't acquired yet.
If You Don't Have It, Don't Spend It
One of the easiest ways to minimize your spending is to put away your credit cards. Credit card abuse is one of the leading causes of consumer debt. If you don't have your cards with you, you can't use them to add to your debt! Another easy action is to refuse to take on any new loans. Your debt consolidation loan was obtained to make your debts manageable, so taking additional loans is counterproductive. Remember that "loans" also include anything that will require payment in the future, such as any no payment / no interest deals that come your way. Your Debt-to-Income Ratio Continuing to reduce your debt is critical to the long-term success of debt consolidation. Financial experts frequently state that your total debt, including credit cards and mortgage obligations, should not be more than 36% of your gross monthly income. This number is also referred to as your debt-to-income ratio. The ratio is calculated by simply dividing your total debt payments each month by your gross monthly income. When you pull out the calculator, you may be shocked to find out that your ratio is considerably higher than the recommendation. As you pay down your debts, however, you'll see your ratio get closer and closer to the recommended level, enabling you to enjoy feeling more financially secure. Successful Debt Management Debt consolidation can be a powerful debt elimination technique, if used properly. Used unwisely, it can only add to your financial challenges. Use debt consolidation as a tool to get your financial life back on track. Then, live within your means to make your consolidation a great success.
How to Build Your Credit While in College
One of the great things about being a young adult is that it's unlikely that you have any negative marks on your credit. Having a great credit score is the result of having positive credit items, a good payment history, and time. A good credit score requires some credit history - the longer, the better. Building credit is quite easy and there's never a good reason to put it off. The sooner you get started, the better your credit score will be. Tools to Build Credit Just like you need tools to build a house, you'll need tools to build your credit, too:
- Credit cards. This is the most common way to get started. Credit card companies usually consider you to be a good risk, primarily because they believe your parents will jump in and help if you get into trouble. - Be picky. Since you do have a lot of options, look for the best card. The primary things to look at are the interest rate and the annual fee, if any. Be sure to read the fine print. A card might give you a rate of 8.0%, but then reverts to 21.0% after 90 days. Or the rate might rise dramatically if you are even one day late with a payment. - Use your card wisely. That means that you pay it off, in full, every month. It also means that you don't buy things you don't need. Books, gas for your car, plane tickets, food, and more are all reasonable. Just be sure that you have the cash on hand to pay the bill when it arrives. - Your credit score will be influenced by your payment history and the percentage of your available credit that you use. If your limit is $1,000 and your balance is $500, then your utilization rate is 50%. The goal is to keep it below 30%. Higher than 30% lowers your credit score.
- Get a loan. Any kind of loan will do, as long as the payments are reported to the major credit bureaus. So you could get a car loan or even a loan against your savings account. In the case of the latter, the bank would freeze enough funds in your account to cover the amount of the loan. As you pay off the loan, the corresponding funds are released. - The nice thing is that you don't even have to come up with the money to pay back the loan. Use can use the loan itself. Just deposit the loan proceeds into another account and then pay back the loan with that money. You could even take out another loan with that money. - These loans are very easy to get since they're 100% secured. If you have to, borrow the money from your parents to get started. Just be sure to make the payments on time. - When that loan is paid off, get another one and repeat the process. Creating great credit is quite easy; it just takes a little discipline and planning. If you can get 2 credit cards and use them appropriately, you'll be well on your way. If you can also get and pay off a couple of loans, you'll be shocked at how great your credit score is by the time you graduate.
Preparing Your Finances for a New Baby
A new baby on the way is always an exciting and celebratory time. However, a baby can also be a huge financial challenge, especially if you don't take the appropriate steps to prepare yourself. Keep these tips in mind when preparing your finances for the new arrival.
New Baby Expenses
- Medical bills. Find out in advance what medical bills you're likely to incur. This would include prenatal, delivery, and postnatal expenses. Do you have insurance? How much will it pay? If you don't have insurance and have low income, your state has programs that will minimize the expense. - Plan ahead. Depending on your insurance situation, you may want to have additional funds set aside for unforeseen medical issues.
- Baby items. Here we're talking about things like car seats, strollers, changing tables, cribs, bottles, clothes, diapers (2,700 just the first year!), rocking chair, swing, dresser, baby monitor, and more. Go out to your local store and price these items.
- Are you going to breast-feed? You may need a breast pump if you plan on ever leaving the house without the baby. If you're not breastfeeding, you'll need bottles, nipples, and formula.
- Do you need daycare or a babysitter? Call around to compare costs or ask a neighbor or friend what the going rate is for daycare in your area.
Lower Your Costs
- Borrow and buy used. Babies outgrow things long before they wear them out. You shouldn't have any problem finding quality used baby clothes, toys, and furniture. There are even stores that specialize in used baby items. You can also check on Craig's List. - These used items can be much less expensive than new stuff. - When the time is right, tell everyone you know about your happy news. You'll almost certainly be offered plenty of baby-related items.
- Wait for gifts. People can go crazy giving gifts when a baby is involved. You never know what you're going to get. Wait until the dust settles before you start making purchases. The gifts you receive can be a real financial boon. Be patient so you don't get stuck with two of the same thing.
- Remember that you don't need everything. Your baby doesn't require every gadget under the sun to be safe and happy. Ask the mothers you know what they consider to be the most important items.
- Start saving now. You can never start saving too soon. Now is the time to eliminate all those things and services that you don't really need. Sit down and look at your monthly bills and find ways you can cut back. Reduce your expenses as much as you need to so you can save enough money to be as comfortable as possible when the baby arrives.
- Review your life insurance and will. Sit down with the appropriate expert to ensure you have the proper insurance coverage when the baby arrives. Also be certain that your will is up to date. Preparing for a new baby can be an exciting time. For the smoothest first year for you and your little one, remember to include financial preparations as well.
All About Credit Card Delinquency
Even though credit card delinquency has become increasingly common during the past several years, most consumers' understanding of it continues to be lacking. Too many of us don't know how to avoid or solve this personal financial challenge! The good news is that once you gain a more complete knowledge of delinquency, dealing with it is relatively straightforward. When Do You Become Delinquent? What exactly is credit card delinquency? A credit card customer is delinquent when he fails to make at the least the minimum credit card payment. Delinquency is separated into degrees that indicate how many payments have been missed. These ranges are often referenced in terms of days. For example, on the day after the first payment is missed, the holder is one day delinquent. After you miss a second payment, the account is deemed to be 30 days delinquent and so on. Theoretically, a credit card holder is delinquent after just one missed monthly payment. On the other hand, delinquency is commonly not reported to the credit bureaus until after two payments in a row have been missed.
What Are The Effects Of Delinquency?
Being reported delinquent to the credit bureaus most certainly has a negative impact on credit scores. Scores could drop as much as 125 points with three consecutive missed payments. Once four payments have been missed, the impact on the credit score is more severe and the account is likely to be sent to collections. Legal action against the cardholder is a real possibility at this point. How Do You Get Out Of Delinquency? There is a way to stop and get out of delinquency. Making a single minimum payment ends the progression of the delinquency and keeps the account at the current level of delinquency. This is crucial, simply because being reported to the credit bureaus 120 days late is much worse than being 90 days late. Making even one minimum payment can be an effective strategy to keep things from progressing too far. Once you start trying to make up your past due payments, be careful to avoid these damaging errors:
- Making less than the minimum payment. Unfortunately, making a payment that is less than the minimum doesn't have any effect on the delinquency. So, when you make a small payment, it really doesn't help the situation. This error can easily be avoided; just be sure to only make payments that are greater than or equal to the minimum payment.
- Making only one minimum payment. Frequently, consumers mistake the minimum required payment with the total amount due.
- The total amount due is the amount that needs to be paid in order to bring the account current. This amount usually consists of several minimum payments, so it's important to continue making extra payments until the account has been brought current. Credit Repair After Delinquency As soon as the account is current, you can start negating the consequences of the delinquency. The more the negative information is covered up with positive information, the less impact the delinquency will have. Secured credit cards are especially apt for credit betterment. These cards require a deposit to open, and the cards are always approved for this reason. Since the risk is minimal for the credit card company, the fees can be less. Whenever you decide to cancel the card, the deposit is returned. While credit card delinquency cannot be recovered overnight, it is possible to suffer no lasting effects in the long-term. Once the delinquency has been rectified, the negative history can be diluted as much as possible. The key is to be patient and acquire a secured credit card. Using that new card wisely will allow you to be trusted by lenders again. Credit card delinquency is a challenge, but it is a challenge that can be dealt with successfully.
What If... You Had a Vacation with No Bills?
Do the sweet memories of your vacation tarnish a bit when you start getting the credit card bills for it the month after you return home, or as you spend a year paying off your trip from last year? Imagine how differently you would feel if there were no bills to come home to! The best way to steer clear of anxiety and guilt is to save for your trip before ever heading out the door. This will result in a more enjoyable vacation because you'll already have the money set aside and won't have to worry. It's easy to save for a vacation if you set a goal, cut back on your spending, and save money on a regular basis. Follow these tips to budget and save for your next vacation:
Agree on a goal. Get together with the family and agree on a vacation destination. Saving is rarely exciting, but once it's attached to an objective, it becomes tolerable.
Develop a vacation budget. If you want to save painlessly, a budget helps. Based on your destination, create a reasonable budget. Be certain to include everything. If someone needs to care for your dog and cut your grass, include it. Take the time to be accurate.
Calculate a weekly goal. Divide your budget by the number of weeks until your vacation. That's how much you need to save each week. Saving weekly makes it easier to get back on track if you miss a target. If you're an entire month behind, it's more challenging to get caught up.
Find ways to "create" some excess money. Make a detailed list of your monthly expenses and see where you can cut back. Everyone buys things that are "wants" rather than needs.
- Food is one area where most families spend too much. Avoid eating out more than necessary and make an effort to shop more economically. Packaged foods tend to be more expensive than the healthier alternatives.
- Consider ditching your landline or any other service you don't really use. You, your spouse, and maybe even your children have cell phones. Do you need a landline, too? What about that gym membership? Are you using it regularly?
- Look at the loans you're carrying. If you haven't checked the interest rates lately, you might be able to save a significant amount by refinancing.
Put away the money you save on cutting back. It's one thing to cut your cell phone bill or loan payment down. It's another to actually take that $50 and set it aside so it won't be spent. Create a savings account and simply transfer the money you've saved into it each week.
- Consider having some money automatically transferred into a "vacation savings account" each month.
- Try throwing all your change into a jar at the end of each day and deposit it into your vacation account whenever it gets full.
Assess your progress. Regularly check on the status of your savings. Look at the calendar and see how you're doing in regards to your savings target. Then, make any necessary changes. Saving for a vacation can be easy and painless. It all starts with a goal and a budget. With those two items in place, you can determine how much you need to save and implement your plan. Have the best vacation ever without having to worry about spending outside your means!
Before You Cosign on a Loan - Read This!
Have your adult children asked you to cosign a loan with them? Especially if this is their first loan, the financial institution is likely to ask them for a cosigner, such as their parents. However, cosigning a loan with anyone carries responsibilities. It's crucial for your own financial health to understand what your part in the loan could amount to. If you're thinking about becoming a cosigner, consider these tips:
Evaluate why you want to cosign. If you're cosigning a loan out of guilt or an obligation, then these aren't the best circumstances for serious financial decisions.
- You may be tempted to help a family member or friend, but cosigning a loan is a big responsibility. If this person defaults on the loan, then you may be responsible for the entire amount.
- You're putting the relationship at risk by signing a loan because things may not turn out the way you expect.
Understand the default consequences. If the person who is asking you to cosign can't make the payments, then you become responsible. The lender can go after you and demand the payments plus interest and fees.
- In addition to being responsible for the payments, your credit scores will be affected by the default.
- You may have trouble getting future loans because of cosigning on a loan that defaults.
Understand the issues of release. Although many loans have the option of releasing the cosigner after a period of time, the reality is different.
- You may find that you can't be released from the loan, and you may be stuck as a cosigner for the entire term. Lenders don't like to release cosigners because it increases their risk.
Get alerts about the loan. As a cosigner, you have the right to receive alerts about the loan. You can sign up for alerts that go to your email or phone. These loan alerts will notify you of any changes and issues.
Consider a separate account with automatic payments. You should have access to this account, so you can monitor payments.
Set up guidelines. How will you handle a default on the loan you cosigned?
- Before a tragedy occurs, you may want to discuss guidelines for defaulting. Your relationship is at stake, so be careful with your discussion.
- You may want to set up a rule that the person who is getting the loan notifies you before he or she can't make a payment. This will allow you to get involved and prevent your credit from being hurt.
- You may also want to discuss the consequences for defaulting before it occurs.
Understand the collateral clause. If the loan requires collateral, are you prepared to handle a default?
- If the loan goes into default, then you may lose your collateral. It's important to understand you could permanently lose the home, property, car, or other items you listed as collateral.
Get copies of all the documents. The lender is responsible for giving the borrower all of the paperwork. However, as a cosigner, you may not get a copy. It's crucial to ask the borrower to share the documents with you.
- Inspect the documents yourself before you sign anything.
Understand the collection process. Did you know that the lender could go after you before going after the borrower in a collection process? If you cosign on a loan, this is one reason that you want to ensure the payments are always current. Cosigning a loan is a large financial responsibility with serious consequences. Ensure you understand all the terms of the loan - and your responsibilities - before getting involved.
Top 10 Crucial Financial Strategies for Millennials
There are many advantages to being in your 20s and early 30s. You can build a foundation to ensure your financial success for a lifetime. The decisions you make now have a tremendous amount of influence over your future. Make the effort to ensure that you're making wise choices. The earlier you can take advantage of these strategies, the better! Determine your financial future today:
Create an emergency fund. It only takes one minor financial catastrophe to affect your finances for many years. A $1,000 car repair can cause more challenges than you think. You might have to max out your credit card, which negatively affects your credit score. The additional monthly payment can make you late for other payments.
- Save a few months of living expenses, and you'll be able to handle nearly anything.
Begin saving for retirement. Time really is on your side. You don't have to save much each month to retire in style if you get started early enough.
Waiting 7 years will cut your eventual nest egg in half. Waiting 14 years will cut it by 75%. Get started right away.
Build a positive credit history. If you ever want to purchase a car, home, or receive any other type of conventional financing, your credit history is important. Your credit score can affect many things, including purchasing a cell phone plan or getting a job.
- Responsible use of a credit card or two is the easiest way to accomplish this. A small loan from your bank is another simple option.
Avoid debt. Dealing with debt is akin to climbing a mountain with rocks in your backpack. Avoid purchasing items you can't afford. Few stresses match the feeling of being heavily in debt. Even very wealthy people have accumulated more debt than they could manage.
Consider a used car. A new car may seem like a mandatory purchase, but new cars are considerably more expensive than those just a few years old. Remember to avoid taking on too much debt.
Examine your online presence. Your employment can be affected by your online presence. Look at all of your social media accounts and determine if your employer would be impressed.
- There's a reason why most working adults avoid Facebook. Give the impression that you're an intelligent, mature adult.
Start a second income. One of the best ways to ensure that you always have an income is to have more than one income stream. It could be a second job or a small online business. Remember to save some of it!
Get insured. Protect yourself and your possessions. At the very least, have renter's insurance to cover your possessions and health insurance to protect against catastrophic medical bills. Other types of insurance may also apply. It can be worthwhile to contact an insurance professional.
Take advantage of your employer. Many employers offer many benefits. Ensure you're getting all you can out of them. These can include life insurance, savings plans, 401(k) matching, and a host of other benefits.
- Read your employee handbook and talk to your HR department. 10. Consider waiting to start a family until you're financially stable. Getting married is easy, but staying married can be difficult. The failure to stay married can create many financial challenges, especially if you have kids. Even in secure marriages, children are expensive.
- When you're 30, you won't recognize your 22-year old self. There's no hurry. Make a wise decision. Right now, you're in perhaps the most influential period of your financial life. Any mistakes can potentially affect your financial future for decades. Getting off to a good start is the best way to ensure a positive financial future. You also have tremendous financial freedom. Use that freedom to build a strong financial foundation.
How to Find Out Your Credit Score
With all the commercials on television and the Internet, everyone seems to know how to get their credit report. But what about your credit score? It's great to see the information on the report, but what most of us want to know is the actual credit score that banks and other institutions use to determine if we'll get the credit we desire. One thing to keep in mind is that the true, 'official' credit score is only available through Fair Isaacs, the originator of the FICO score (Fair Isaac and Company). All other scores are estimations meant to simulate your FICO score. Fair Isaacs won't release their formula, so everything else is merely a good guess. At this time, the FICO score is used by 96% of banks. You can obtain credit scores through these venues:
- CreditKarma.com. Credit Karma will allow you to see your TransUnion score. Trans Union is one of the 3 major credit bureaus. The score only reflects your TransUnion credit report, however, and is not your true FICO score. On the plus side, Credit Karma is free and allows you to track your score over time. - There are other similar sites that provide free scores. Some of them include: Quizzle, Credit Sesame, and Equifax Credit Score Card. Quizzle and Credit Sesame provide your Experian score. Experian is another one of the 3 major credit bureaus.
- Credit monitoring services. These services typically provide all 3 credit scores and either all 3 credit reports or an all inclusive credit report that compiles all the credit reports into a single report.
- These services are typically about $20 a month, but most come with a free trial, usually 7 days. Again, these are not the FICO scores that most banks use, but the individual scores of each of the credit bureaus.
- Some examples of these services would be www.creditreport.com and www.gofreecredit.com.
- Apply for a loan. If you apply for a loan, you can request that the lender show you your scores. Applying for credit will slightly hurt your credit score. This is not the preferred way to see your scores, but you're likely to see your real FICO scores. There are less damaging ways to get your scores for free.
- FICO scores. If you want to see the real thing and don't want to apply for a loan, go to www.myfico.com. You can sign up for a credit monitoring service that's $15/month with a 7-day free trial. You also have the option of purchasing individual scores and credit reports at the same website. A smart solution is to get your free scores and track them over time. Periodically, get your FICO scores and see how well the estimated values are tracking with the 'real' scores. Your credit scores are no laughing matter. It's important to your future to keep track of your credit scores and be diligent in raising them when you can. Many employers check credit scores to determine whether or not to even give you a job! A difference of 100 points in your credit score can also mean a difference of many thousands of dollars in additional interest charges over the years. Be wise: check your credit scores today and monitor them regularly.