Paying Off Debt http://www.wisebread.com/taxonomy/term/11699/all en-US 8 Financial Decisions You'll Never Regret http://www.wisebread.com/8-financial-decisions-youll-never-regret <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-financial-decisions-youll-never-regret" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_piggy_bank_000058476892.jpg" alt="Woman making financial decisions she&#039;ll never regret" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>A new year is here. And even if you've already broken the resolutions you made at the end of the holiday season, it's never too late to make new ones, especially when it comes to your finances.</p> <p>Here are eight financial decisions you can make now that you'll never regret. Make the moves on this list soon, and you'll dramatically increase your odds of a happy financial future.</p> <h2>1. Save More for Retirement</h2> <p>How much money will you need each year to enjoy a happy and healthy retirement? That depends on what you want to do after you leave the working world. You'll need more money if you plan to travel the world, and less if you envision days spent reading, binge-watching TV, and playing with your grandchildren.</p> <p>A survey released last April by the Employee Benefits Research Institute suggests that more workers understand they'll need large amounts of money to enjoy their retirement years. The survey found that more than one in 10 workers think they'll need to save at least $1.5 million for their retirements. That's a lot of money. One way to reach such a lofty goal? Put away as much as you can each year now, even if your retirement days seem far away.</p> <p>You'll never regret your decision to maximize your contributions to your 401K plan or your annual deposits to an IRA. Start boosting those savings today.</p> <h2>2. Building an Emergency Fund</h2> <p>What happens if your furnace conks out today? What if your car's transmission needs to be replaced? If you're like too many people, you'll put the cost of replacing these items on your credit card, building your debt.</p> <p>The better option is to draw from an emergency fund of cash that you have already saved, usually in a savings account. Financial experts recommend that you build an emergency fund that can cover at least six months of your daily living expenses. (See also:&nbsp;<a href="http://www.wisebread.com/6-emergency-fund-myths-you-should-stop-believing">6 Emergency Fund Myths You Should Stop Believing</a>)</p> <p>This might seem daunting. But if you deposit what you can each month &mdash; even if it is as small as $100 &mdash; that emergency fund will steadily grow.</p> <h2>3. Pay Off Your Credit Cards</h2> <p>Carrying a balance on your credit cards each month is a terrible financial decision. That's because cards come with such high interest rates &mdash; sometimes 18% or more. This makes your monthly debt grow by too much, even if you don't add any new purchases to your cards.</p> <p>Don't just make the minimum monthly payment on your cards. If you do this, it will take far too long to pay off your credit card debt. Say you have a credit card with a balance of $5,000 and an interest rate of 18.9%. If your minimum monthly payment is 4% of your outstanding balance, it will take you more than 11 years to eliminate this debt, even if you don't make any new purchases with this card.</p> <p>The better move is to always pay more than the monthly minimum. And don't buy items with your cards that you can't afford to pay off at the end of every month.</p> <h2>4. Pay Your Bills on Time Every Month</h2> <p>A single missed payment &mdash; on credit cards, mortgage loans, auto loans, and other debts &mdash; can drop your three-digit FICO credit score by 100 points. That missed payment will also stay on your credit report for seven years.</p> <p>Decide today to never make a late payment again. Having a low credit score makes it difficult to qualify for loans or credit. When you do qualify for these loans, you'll be faced with high interest rates.</p> <h2>5. Buy a Home That You Can Actually Afford</h2> <p>It's tempting when home shopping to stretch your budget to get into a bigger, more expensive home. But buying a home that's out of your budget, even by a bit, can be a big financial mistake. Those monthly mortgage payments can quickly become a burden.</p> <p>Instead, buy a home that you can comfortably afford, even if it's not your dream residence. Mortgage experts recommend that your total monthly housing expenses, including your estimated new mortgage payment, be no more than 30% of your gross monthly income. Follow this guideline if you don't want to feel the strain each time your monthly mortgage payment comes due.</p> <h2>6. Track Your Spending</h2> <p>You might be surprised by how much you spend each month on take-out lunches or morning coffee runs. But if you create a spending book and track those expenses, it might help you make lifestyle changes that can add up to big savings each year.</p> <p>A spending book is just a notebook in which you record all your daily purchases for a set period of time, usually anywhere from two weeks to two months. Once you're done tracking your expenses, add them up. This gives you an idea where you are overspending. (You can also use automated tracking at free sites like Mint.com.) If you're spending too much on those morning coffees, for instance, you might decide to limit your time at Starbucks to twice a week instead of five times.</p> <h2>7. Create a Household Budget</h2> <p>You might shudder at the thought of drafting a budget for your household. But you can't get control of your finances if you first don't know exactly how much money is coming in and going out of your home each month. Fortunately, creating a budget isn't difficult.</p> <p>First, write down the income you receive each month. Then write down those monthly expenses that never change, everything from your mortgage payment to your auto payment to your student loans. Then, write down those payments you make each month that fluctuate a bit. This would include your utility bills, credit card bills, and transportation costs to and from work. Estimate these. Finally, include estimated amounts for monthly groceries, entertainment, and eating out.</p> <p>Once you have these figures, you can determine how much money you should have left at the end of the month. Armed with this information, you can figure how much money you can save, invest for retirement, or put away for a child's college education.</p> <h2>8. Save First, Then Buy It</h2> <p>You want that new computer or that high-end flat-screen TV. It's tempting to simply use your credit cards, but the better move is to save up for that big-ticket non-necessity, and only buy it when you can pay for it with cash.</p> <p>This takes patience, of course. It might take you several months to save up for that new TV. But you'll enjoy your new electronic treat more if you don't have to dread next month's credit card bill.</p> <p><em>What financial decisions have you never regretted?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/8-financial-decisions-youll-never-regret">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-money-resolutions-you-should-skip-this-year">4 Money Resolutions You Should Skip This Year</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/saving-money-is-easy-if-you-set-the-right-goals">Saving Money Is Easy If You Set the Right Goals</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-money-saving-new-years-goals-that-you-can-actually-keep">10 Money-Saving New Year&#039;s Goals That You Can Actually Keep</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-savings-tricks-you-havent-tried-yet">5 Savings Tricks You Haven&#039;t Tried Yet</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-good-manners-make-you-wealthier">5 Ways Good Manners Make You Wealthier</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance emergency funds goals Paying Off Debt resolutions retirement saving money Wed, 13 Jan 2016 14:00:03 +0000 Dan Rafter 1634855 at http://www.wisebread.com 5 Debt Lessons From Darth Vader http://www.wisebread.com/5-debt-lessons-from-darth-vader <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-debt-lessons-from-darth-vader" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2271426854_ea90012b8b_z.jpg" alt="Darth Vader" title="Darth Vader" class="imagecache imagecache-250w" width="250" height="187" /></a> </div> </div> </div> <p>One of the most evil heroes in science fiction history is Anakin Skywalker, aka Darth Vader. He went from being a great man and good friend to betraying everyone he loved and becoming a sinister Sith Lord. Ultimately, the story of Anakin Skywalker is one of redemption. We can learn a few lessons about debt from his tumultuous tale.&nbsp; Anakin's life was full of ups and downs just like your journey to pay off debt.&nbsp; Although things seemed bleak and beyond repair, good forces kept up the fight and triumphed in the end. Here are five lessons about debt we can take away from the Jedi who finally brought balance to the Force. (See also: <a href="http://www.wisebread.com/21-personal-finance-lessons-from-harry-potter">21 Personal&nbsp;Finance Lessons From&nbsp;Harry&nbsp;Potter</a>)</p> <h2>1. Debt Often Entices You Bit by Bit</h2> <p>Anakin didn't turn to the dark side all at once. No, he was enticed a little bit at a time. Debt is the same way. You consider buying something small with your credit card, telling yourself that you can pay it off soon. Then you buy something else. Soon you are making increasingly large purchases. You tell yourself that you will pay it off in two or three months, but you don't. One day, you wake up and realize that you are so deep in debt that you're not sure you can get out. This is just like when you realize that you're so deep into the dark side that your only option is to kill off nearly all of the remaining Jedi.</p> <h2>2. Debt Becomes Your Master</h2> <p>When Anakin became Darth Vader, it seemed as though he had all the power. In reality, though, he was merely the apprentice. His master was the Emperor. While you're racking up the debt, it might seem as though you are in charge. You feel great about all the stuff you have. However, debt can become the real master. Your financial resources are claimed by the principal and interest payments. Over time, you find that you have less at your disposal &mdash; just as Darth Vader's will was subservient to the Emperor's.</p> <p>Don't let debt rule your life.&nbsp; It is oppressive, but you're not a broken person just because you got into debt. To borrow a quote from the &quot;Get Out of Debt Guy,&quot; <a href="http://getoutofdebt.org/about-steve-rhode/">Steve Rhodes</a>, &quot;you ain't your f*$#$*# debt&quot;.</p> <h2>3. Blaming Others Won't Help Your Problem With Debt</h2> <p>I'm going to go into the prequels a little bit for this one (sacrilege, I know, but it makes a good point). Anakin blamed others for his problems, especially Obi-Wan. Rather than owning his issues and facing his demons, he retreated into the comforting idea that his difficulties were someone else's doing. With debt, you need to take ownership of the problem and recognize some of the behaviors that put you in this situation. Until you <a href="http://www.wisebread.com/how-to-start-fighting-debt-today">face your own debt demons</a>, you won't be able to overcome them.</p> <h2>4. Beware What Seems Too Good to Be True</h2> <p>When Anakin is filled with self-doubt and worried that his wife will die, Chancellor Palpatine takes advantage of this weakness and makes promises that are too good to be true. Palpatine claims that he can teach Anakin how to save his wife's life and keep her alive. All Anakin has to do is follow Palpatine and listen to what he says.</p> <p>Unfortunately, when you're in debt, the bad guys come after you in full force, making lots of promises they can't keep. Don't get taken advantage of by people trying to sell you <a href="http://money.usnews.com/money/blogs/my-money/2013/01/17/3-debt-reduction-shortcuts-to-handle-with-care">shortcuts out of debt</a>. If you fall for them, the shortcuts will end up putting you even more in the hole than you were to begin with.</p> <p>That being said, don't rule out alternatives to getting out of debt until you've done your research and <a href="http://www.wisebread.com/taming-your-debt-aggressive-repayment-strategies">understand the pros and cons of each approach</a>. Our society has a stigma about bankruptcy and some of us avoid it at all costs &mdash; which could end up hurting you and your family in the long run. Your best option is to learn about what you owe and what your payoff options are &mdash; then choose what makes the most sense.</p> <h2>5. It's Possible to Conquer Debt</h2> <p>Ultimately, the best debt lesson to learn from Anakin Skywalker is that debt can be overcome. In the end, Anakin managed to throw off the persona of Darth Vader, defeat the Emperor, and die his own man. While you don't have to die to reach debt freedom, you can overcome it and reclaim your financial resources. In the end, Darth Vader turned himself into a hero. You can pay off your obligations, free yourself, and become a <em>debt hero</em>. Are you ready?</p> <p><em>To read about 21 real life Debt Heroes who got into and out of large amounts of debt check out my new book </em><a href="http://www.amazon.com/dp/B00BLLT79W"><em>Debt Heroes</em></a><em>.&nbsp; Put together with Jeff Rose as part of the </em><a href="http://www.wisebread.com/best-money-tips-the-debt-movement-edition"><em>Debt Movement</em></a><em> this book walks you through your own personal journey to </em><a href="http://moneysmartlife.com/get-out-of-debt-like-a-debt-hero/"><em>pay off debt</em></a><em>, giving you success stories for example and motivation!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ben-edwards">Ben Edwards</a> of <a href="http://www.wisebread.com/5-debt-lessons-from-darth-vader">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-its-time-to-destroy-debt-start-with-a-goal">When It&#039;s Time to Destroy Debt, Start With a Goal</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-you-know-when-it-s-time-for-bankruptcy">How You Know When It&#039;s Time For Bankruptcy</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-financial-decisions-youll-never-regret">8 Financial Decisions You&#039;ll Never Regret</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Debt Problems Paying Off Debt star wars Thu, 28 Mar 2013 10:36:30 +0000 Ben Edwards 971529 at http://www.wisebread.com When It's Time to Destroy Debt, Start With a Goal http://www.wisebread.com/when-its-time-to-destroy-debt-start-with-a-goal <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/when-its-time-to-destroy-debt-start-with-a-goal" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/Setting Goals.JPG" alt="Setting Goals" title="Setting Goals" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Hey, let&rsquo;s go for a ride! Where do you want to go? Nowhere? OK, we&rsquo;ll just drive around aimlessly and hope we accidentally end up somewhere interesting. Hop in!</p> <p>That&rsquo;s the way most people plan their lives, financial or otherwise. They may have a vague idea of a destination, like living debt-free, for example. But they&rsquo;re not really sure how to get there or how long the trip will take. So they waste time driving in circles and wondering, &ldquo;Are we there yet?&rdquo;</p> <p>If you feel like you&rsquo;re not getting where you want to go, this could be why. Because if you don&rsquo;t know what your specific goals are, you&rsquo;re not likely to achieve them.</p> <p>Watch the following video about goal-setting, then meet me on the other side for some specifics to get you started.</p> <embed width="480" height="300" src="http://blip.tv/play/kjqBvNg5Ag%2Em4v" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true"></embed> <p>So as you saw in this news story, I'm a big believer in goals. Your goal is your destination. You get there by describing that destination as specifically as possible and getting everyone who&rsquo;s going with you on board. You visualize your goal in as much detail as humanly possible, then define the exact steps required to achieve it. You divide those steps into manageable tasks. Then you follow through until you arrive. If you don&rsquo;t do each and every one of these steps, you&rsquo;ll drive around in circles.</p> <p>This is explained in detail in my recently released third book, <em><a title="http://www.moneytalksnews.com/store/" href="http://www.moneytalksnews.com/store/">Life or Debt 2010</a></em> but here&rsquo;s the condensed version.</p> <h3>Name your destination.</h3> <p>If your goal is to live a debt-free life, write it down. Put reminders on your bathroom mirror, on your dashboard, on your computer screen. Keep it in front of you as much as possible. And when you look at that goal, take the next step.</p> <h3>Visualize it.</h3> <p>Visualize your goal: What will your life be like when you have no debt payments? What will you do with all that extra money when you don&rsquo;t have any credit card payments? Car payments? Mortgage? When all the money that used to go to lenders is now going into a big, fat bank account? How will your life be different? Try to actually feel the freedom you&rsquo;ll experience.</p> <p>Do that every time you see your goal, especially when you first wake up and just before bed.</p> <h3>Get everyone on the bus.</h3> <p>Unless you live alone, your goals will likely affect those you live with. So if your goal is paying off debt, for example, you&rsquo;ll most likely need the cooperation of your family. After all, it doesn&rsquo;t do much good if you&rsquo;re trying to pay off debts and your husband is out new-car shopping. Make sure your goals are shared and the people who can affect the outcome endorse them.</p> <h3>List the steps to achieving it.</h3> <p>Obviously, to achieve a debt-free life, you&rsquo;ll have to pay off all your debts. Start by listing them all, then decide in which order you&rsquo;ll pay them off. How? Try ranking your debts by starting with the one with the fewest payments left. To do that, list all your debts. Divide the amount owed by the monthly payment. That gives you the number of months it will take to pay them off.</p> <p>For example:</p> <table border="1" style="clear:both;"> <tbody> <tr> <td><b>Debt</b></td> <td><b>Current Balance</b></td> <td><b>Minimum Monthly Payment</b></td> <td><b>Months to Payoff</b></td> <td><b>Debt Rank</b></td> </tr> <tr> <td><b>Visa Card</b></td> <td>$2,239</td> <td>$45</td> <td>50</td> <td>2</td> </tr> <tr> <td><b>MasterCard</b></td> <td>$1,845</td> <td>$37</td> <td>50</td> <td>2</td> </tr> <tr> <td><b>Car loan</b></td> <td>$7,500</td> <td>$212</td> <td>35</td> <td>1</td> </tr> <tr> <td><b>Student loan</b></td> <td>$11,700</td> <td>$182</td> <td>64</td> <td>3</td> </tr> <tr> <td><b>Mortgage loan</b></td> <td>$120,000</td> <td>$917</td> <td>131</td> <td>4</td> </tr> </tbody> </table> <p>In this example, the first debt I&rsquo;ll pay off is the car loan. Then the credit cards, the student loan and finally the mortgage.</p> <p>Now, in addition to having an overall goal of a debt-free life, I&rsquo;ve got a more digestible, definable, shorter-term step: to pay off my car loan. I&rsquo;m going to focus like a laser beam on that debt, applying as much extra money as I can on it, until it&rsquo;s gone. Then I can move on to the next step of paying off the Visa or MasterCard.</p> <p>Of course, there are other steps I&rsquo;ve got to take, like finding the extra money to destroy these debts. <a href="http://www.moneytalksnews.com/store/">In the book</a>, I ask that you set aside 10% of your gross monthly income to do it and show you specifically how to go about finding that money with literally hundreds of specific ways to save.</p> <p>We&rsquo;ll be going more into that in coming news stories and blog entries. But in the meantime, start now by setting a goal and ranking your debts for payoff.</p> <p>One more word on debt ranking: The reason I rank debts by fewest payments rather than highest interest first is that I&rsquo;m going to use old debt payments to help pay off debts further down the list. It&rsquo;s a system called snowballing. For example, if I apply an extra $500 a month to my car payment, it will be paid off in about 10 months rather than 35, and I&rsquo;ll use the $212 I&rsquo;ve freed up to apply to the Visa or MasterCard.</p> <p>But if you&rsquo;d rather pay off higher-interest debts first, that&rsquo;s OK. Just decide and get started!</p> <h3>Follow through.</h3> <p>And that leads us to the last step in goal realization: following through. Goals like living debt-free take time, so long-term follow-through is critical. That&rsquo;s one reason you keep your goal in front of you, visualize it as often as possible, and track your results often.</p> <p>Bottom line? When you finance with debt, you&rsquo;re wasting massive amounts of money &mdash; money you should be using to create a better life. So, paying off debt is definitely a worthy goal. But don&rsquo;t just wish it. Make it real: Write it down, plan it out, and make it happen.</p> <p><b><i>Note:</i></b><i> To go along with <a href="http://www.moneytalksnews.com/store/">Life or Debt 2010</a>, I&rsquo;ll be doing 20 related news stories and blog entries at <a href="http://www.moneytalksnews.com/">Money Talks News</a>, as well as hosting monthly <a href="http://www.moneytalksnews.com/live/">live webcasts</a> where I&rsquo;m inviting everyone to participate with advice, tips and motivation &mdash; all with the goal of getting together, motivating one another and destroying as much debt as possible this year.</i></p> <p>&nbsp;</p><br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/stacy-johnson">Stacy Johnson</a> of <a href="http://www.wisebread.com/when-its-time-to-destroy-debt-start-with-a-goal">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/get-out-of-debt-first-then-focus-on-saving">Get Out of Debt First, Then Focus on Saving</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/recession-journal-part-i-fast-money-in-the-09">Recession Journal Part I: &#039;Fast&#039; Money in the &#039;09</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-financial-decisions-youll-never-regret">8 Financial Decisions You&#039;ll Never Regret</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/try-these-6-money-saving-challenges-now">Try These 6 Money-Saving Challenges Now</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beyond-budgeting-pocketsmith-helps-you-forecast">Beyond Budgeting: Pocketsmith Helps You Forecast</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting Debt Management Goal-Setting Paying Off Debt Tue, 12 Jan 2010 14:00:09 +0000 Stacy Johnson 4586 at http://www.wisebread.com