Debt Management http://www.wisebread.com/taxonomy/term/7681/all en-US 4 Annoying Things Bill Collectors Can't Do -- And How to Stop Them http://www.wisebread.com/4-annoying-things-bill-collectors-cant-do-and-how-to-stop-them <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-annoying-things-bill-collectors-cant-do-and-how-to-stop-them" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/lady_phone_bill_000020951752.jpg" alt="Lady on the phone with bill collector" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are some scary and crazy debt collectors stories out there. For example:</p> <ul> <li>A California debt collector threatened a woman by claiming that they'd <a href="http://www.kmov.com/news/local/Foul-Mouth-Debt-Collectors--107059238.html">dig up her daughter</a> if she didn't pay her debt to a funeral home.<br /> &nbsp;</li> <li>A man received several racially-charged and <a href="http://abcnews.go.com/Business/man-wins-15m-vulgar-debt-collection-calls/story?id=10795674">profane voicemail messages</a> from a Pennsylvania-based collections agency.<br /> &nbsp;</li> <li>A Texas-based debt collector used scare tactics, such as threatening to <a href="http://money.cnn.com/2013/02/06/pf/debt-collection/">take away children</a>.</li> </ul> <p>You don't have to tolerate abusive behavior from unscrupulous debt collectors. Here is how to stop four annoying things that bill collectors absolutely <em>can't</em> do.</p> <h2>1. Report Late Payments to Credit Bureaus Within 30 Days</h2> <p>Missing a payment deadline is something that can happen to even the most meticulous person. When this happens, some bill collectors may start calling to scare you into believing that if you don't make the payment right away, they'll notify the credit reporting bureaus.</p> <p>You've worked hard to <a href="http://www.wisebread.com/the-5-best-secured-credit-cards">build up your credit score</a>, so the mere thought of being reported for a late payment may send shivers down your spine. There's no need to panic. As long as you make your missed required minimum payment before the 30th day after your due date, you'll prevent any creditor from reporting delinquency to any of the credit bureaus.</p> <p>While you may still be liable for a late payment fee (ranging from $25 to $35) and may be charged a penalty APR (as high as 29.99%), you can't be reported to a credit bureau before you're a full 30 days past due.</p> <h3>How to Stop It</h3> <p>If a bill collector threatens to report you to a credit bureau for anything earlier than a 30-day late payment, tell them that is a violation of federal law. The collector would be knowingly providing incorrect information. If you receive a late payment fee and penalty APR, and are in good terms with your credit card company, call its customer service line to check if they can remove both penalties.</p> <h2>2. No Harassing Phone Calls</h2> <p>While it may be funny to look up crazy calls from debt collectors on YouTube, it's definitely not fun to receive them. Debt collectors don't want you to know that you have the legal right to not answer their calls.</p> <p>Under the <a href="http://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text">Fair Debt Collection Practices Act</a>, debt collectors can't:</p> <ul> <li>Call you between 9:00 p.m. and 8:00 a.m. in your local time.</li> <li>Contact you at unusual or inconvenient places.</li> <li>Try to circumvent your lawyer, if one is representing you regarding the debt.</li> <li>Attempt to reach you at your place of employment if no incoming calls are allowed.</li> </ul> <h3>How to Stop It</h3> <p>Request in writing that they not call you, and keep a copy for your records. When you mail the letter, ask for a return receipt. If the collectors keep on calling you, you have ammunition to file a complaint with the Federal Trade Commision. The more FTC complaints a collection agency has, the more likely that the FTC will sue the agency or, in case of egregious violations, shut it down. (See also: <a href="http://www.wisebread.com/dealing-with-nasty-debt-collectors?ref=seealso">Dealing With Nasty Debt Collectors</a>)</p> <h2>3. No &quot;Taking It All&quot;</h2> <p>Bill collectors will say anything to get your attention. The reality is much different.</p> <ul> <li>The <a href="http://www.dol.gov/compliance/guide/garnish.htm#Penalites">Consumer Credit Protection Act</a> limits the amount that can be garnished from your paycheck to the lesser of 25% of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage.<br /> &nbsp;</li> <li>In cases of economic hardship, creditors may not be allowed to garnish the full 25% of your disposable earning. Certain state wage garnishment laws may impose additional limits.<br /> &nbsp;</li> <li>Your state's collection laws and exemptions may provide additional protections. For example, my home state of Hawaii has a <a href="http://www.govcollect.org/files/Hawaii_Debt_Collection.pdf">collection exemption</a> of $2,575 on vehicles and up to $30,000 on real property.<br /> &nbsp;</li> <li>The <a href="http://www.dol.gov/compliance/laws/comp-erisa.htm">Employee Retirement Income Security Act</a> protects qualified retirement accounts, such as 401(k), deferred compensation, and profit sharing plans from most bill collectors.</li> </ul> <h3>How to Stop It</h3> <p>Know your rights and find out the relevant collections laws and exemptions for your state. In cases of abusive threats from debt collectors, file a complaint against them with the FTC.</p> <h2>4. No &quot;Doomsday&quot; Dates</h2> <p>Another common scare tactic from collection agencies is to anchor to a final deadline that would trigger lots of additional fees and legal problems if not met. Debt collectors know that the clock is working against them, so that's why they want to cash in as early as possible.</p> <ul> <li>Collection agents get commissions based on how big your first down payment is.<br /> &nbsp;</li> <li>Bill collectors buy debts at discounted prices, yet want to maximize their profit margins.<br /> &nbsp;</li> <li>Debts can become too old for a collector to sue. Depending on your state's <a href="https://www.consumer.ftc.gov/articles/0117-time-barred-debts">statute of limitations</a> for credit card debt, a creditor may be out of luck as early as three years.</li> </ul> <h3>How to Stop It</h3> <p>Always negotiate. You're not required to make a big down payment or forced to accept monthly repayment plan. When dealing with any debt collector, almost everything is negotiable, including payment schedules and deadlines.</p> <p>Bill collectors are great at playing hardball, but they know that it's in their best interest to negotiate a repayment plan that you can realistically stick to. Don't be caught off guard by malicious collection agents and keep them in check.</p> <p><em>What is your craziest story about bill collectors? Please share in the comments.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/4-annoying-things-bill-collectors-cant-do-and-how-to-stop-them">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/how-to-deal-with-collection-agencies">How to Deal With Collection Agencies</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/surprising-things-that-can-kill-your-credit">Surprising Things That Can Kill Your Credit</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/how-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</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/how-to-erase-your-medical-debt">How to Erase Your Medical Debt</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-get-a-credit-card-when-you-have-bad-credit">How to Get a Credit Card When You Have Bad Credit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Consumer Affairs Debt Management bill collectors Collection Agencies credit score harassment Thu, 19 Mar 2015 13:00:12 +0000 Damian Davila 1347503 at http://www.wisebread.com 6 Smart Things to Do With Your Bonus http://www.wisebread.com/6-smart-things-to-do-with-your-bonus <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-smart-things-to-do-with-your-bonus" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_couple_financial_advisor_000020064711.jpg" alt="Young couple meeting with financial consultant" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>&quot;The windfall of great riches can, if mismanaged, make things worse, not better, for the recipients,&quot; said American author and professor Michael Mandelbaum.</p> <p>But you don't need a college degree to know that extra cash shouldn't be spent frivolously &mdash; that part is easy. The hard part is actually figuring out what exactly qualifies as a good way to use a small windfall. Here are six simple &mdash; and most importantly, <em>smart</em> &mdash; things to do with your bonus or commission check.</p> <h2>1. Build an Emergency Fund</h2> <p>One in four Americans has no emergency savings. If you're guilty as charged, then use your bonus check to set up your emergency fund <em>stat</em>. A good rule of thumb is that your emergency stash should cover six months of living expenses.</p> <p>When calculating your monthly expenses, go beyond just your mortgage or rent payment and include important recurring payments such as groceries, utilities, and minimum debt payments. If the final number shocks you, take that as a wake-up call about how important it is to have your emergency fund in place.</p> <h2>2. Pay Off High Interest Debt</h2> <p>By only paying the minimum on your maxed out credit cards, you're shelling out way more than you should.</p> <p>Let's assume that you have balance of about $2,461 on your credit card with an APR of 12.24%. If you make no additional charges, and each month you only pay the required minimum of $50, you will pay off the balance in &mdash; get this &mdash; 17 very long years! Even worse, you'll end up paying a total of $4,753, or nearly twice what you originally owed!</p> <p>Be smart and pay off those high interest credit cards <em>pronto</em>. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">When to Do a Balance Transfer to Pay Off Credit Card Debt</a>)</p> <h2>3. Max Out Contributions to Retirement Accounts</h2> <p>In 2014, workers and their employers averaged $9,670 in 401(k) contributions. While this number may seem impressive, keep in mind that the contribution limit in 2014 was $17,500.</p> <p>There is still a lot of room for improvement in our nest eggs. This year, there is even more. In 2015, the IRS bumped up the <a href="http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-401k-and-Profit-Sharing-Plan-Contribution-Limits">contribution limit</a> for 401(k) and profit-sharing plans to $18,000. For those age 50 and over, you are permitted to make an additional catch-up contribution of $6,000 to traditional and safe harbor 401(k) plans, and $3,000 to solo 401(k) plans. (See also: <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make?ref=seealso">5 Dumb 401(k) Mistakes Smart People Make</a>)</p> <p>Making out your contribution to your retirement accounts is also a great way to defer income taxes until retirement, when you're more likely to be in a lower tax bracket.</p> <h2>4. Start Saving for College</h2> <p>Data from the U.S. Department of Labor shows that workers with four-year college degrees have an hourly rate earning 98% higher than people without a degree. The same data shows that the gap is continuously increasing over time.</p> <p>This means that saving up for your, or your kids', college education is a smart thing to do with your commission check. A good way to save for college is via a <a href="http://www.savingforcollege.com/529_plan_details/">529 college-saving plan</a>, because in 34 states and the District of Columbia, you can receive a state income tax deduction for your contribution.</p> <p>To make sure that your higher education investment pays off, double check the market value of your or your child's college diploma. Some <a href="http://www.wisebread.com/5-college-degrees-not-worth-the-money">degrees aren't worth their cost</a>.</p> <h2>5. Get Better Banking Options</h2> <p>Your lucky windfall could unlock some better banking opportunities.</p> <ul> <li>By maintaining a larger account balance, you could qualify for a better interest rate. For example, my credit union currently offers an annual percentage yield of 0.20% for balances below $25,000, 0.25% for balances between $25,000 and $99,999, and 0.30% for balances over $100,000.<br /> &nbsp;</li> <li>Depending on your financial situation, you may not have access to free checking accounts. Make use of your bonus to pad your checking account and meet the minimum threshold for avoiding any fees.<br /> &nbsp;</li> <li>Determine if your bank can offer you a better deal with a larger account balance. If your bank can't provide you one, it's time to shop around for a better financial situation. (See also: <a href="http://www.wisebread.com/9-good-reasons-to-choose-a-credit-union-instead-of-a-bank?ref=seealso">9 Good Reasons to Choose a Credit Union Instead of a Bank</a>)</li> </ul> <h2>6. Prepare for Taxes Next Year</h2> <p>Last but not least, it can be wise to start preparing for next year's tax season<em> now</em>.</p> <ul> <li>Your year-end bonus may put you in a higher tax bracket this year. Ask your employer if he or she can defer your bonus (or at least a portion of it) in order to lower your tax bill this year.<br /> &nbsp;</li> <li>Keep in mind that most employers opt to slap a standard <a href="https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/What-is-the-Federal-Supplemental-Tax-Rate-/INF19305.html">25% withholding rate</a> (39.6% for amounts over $1 million) on bonuses and commissions. If your usual tax rate is far below that 25%, then you may already have paid enough in taxes this year. You'll need to adjust your W-4 form to decrease how much is withheld for taxes for the rest of 2015.<br /> &nbsp;</li> <li>Ask your human resources department which withholding option works best for you. Besides the standard withholding rate, the IRS allows employers to treat the bonus as regular compensation or take additional taxes only from the bonus check.</li> </ul> <p>Every year, 75% of U.S. taxpayers withhold too much tax. Don't become one of them and plan ahead. You want to enjoy as much as possible from that well-deserved bonus or commission check.</p> <p><em>What are you planning to do with your bonus or commission this year?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/6-smart-things-to-do-with-your-bonus">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-2"> <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/5-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</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/credit-cards-vs-debit-cards-a-comprehensive-comparison">Credit Cards vs. Debit Cards: A Comprehensive Comparison</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/6-times-when-its-okay-to-take-a-loan">6 Times When It&#039;s Okay to Take a Loan</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/how-to-create-a-financial-5-year-plan">How to Create a Financial 5 Year Plan</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/when-to-use-savings-to-pay-off-debt">When to Use Savings to Pay Off Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income Banking Debt Management bonus check savings smart spendings windfall Wed, 18 Mar 2015 15:00:15 +0000 Damian Davila 1345313 at http://www.wisebread.com 6 Times When It's Okay to Take a Loan http://www.wisebread.com/6-times-when-its-okay-to-take-a-loan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-times-when-its-okay-to-take-a-loan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple-contract-financial-consultant-loan-iStock_000051526142_Large.jpg" alt="couple financial advisor" title="couple financial advisor" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Loans are a tricky subject in the financial world, because ideally, you'd never really need one. In the real world, however, plenty of responsible people find themselves needing loans for legitimate reasons. (See also: <a href="http://www.wisebread.com/6-times-you-should-never-take-a-loan?ref=seealso">6 Times You Should Never Take a Loan</a>)</p> <p>Whether it's an unplanned financial emergency or a necessary, major purchase, there are some situations when taking out a loan can't be avoided. Read on to understand when a new loan is actually okay.</p> <h2>1. When You Can Easily Afford the Payments</h2> <p>This might seem like a no-brainer, but when people are desperate they will sometimes assume loans with large payments they couldn't possibly afford. Before you take out any loan, create a realistic budget that includes the payment. If you can't afford it, you should probably reconsider the loan.</p> <p>Don't fall into the temptation of telling yourself that you will find <em>some way</em> to make ends meet. Instead, take care of securing any realistic extra income sources <em>before</em> you sign on the dotted line. Get a second job, line up freelance work, start selling stuff on eBay, or do whatever else you need in order to make loan repayment affordable. Just do it before you get the loan &mdash; otherwise, you're just creating more financial stress for yourself. And isn't that what the loan was supposed to solve?</p> <h2>2. When Your Purchase is Essential</h2> <p>Loans are never a good idea when you're using them to finance a lifestyle that is beyond your means. If, however, you find yourself in a place where you absolutely must have something <em>essential</em> (no, a remodeled kitchen or a tropical vacation are not essentials), and you can't afford it, a loan might be a good idea.</p> <p>Again, I'm talking basic essentials here. If you have to drive to work, you must have a functioning vehicle. If you live in a cold climate, you need a working furnace. Most of the time, these aren't purchases that can wait until you've saved the funds, and so a loan might be necessary.</p> <h2>3. When You Have Good Credit</h2> <p>If you have good credit (above a 720), you will most likely be eligible for lower interest rates on your loans. This means that you will pay less over the life of the loan and that your individual payments will be lower than they would be if your credit were poorer. And having good credit is, in itself, an indicator that you're probably capable of managing your debt effectively.</p> <p>Having good credit makes loans a lot more affordable. But once again, make sure you can make those payments! Otherwise, you'll ruin that solid credit score.</p> <h2>4. When Interest Payments Are Less Than Your Investment Returns</h2> <p>Many investors think that they should use money from their investments to make major purchases before considering a loan. While this is sometimes true, it's also possible that it'll be better financially to leave your investments untouched and get a loan to cover the purchase instead. As an example, if your portfolio generates 10% annual returns, but a loan's interest rate would be only 4%, then it doesn't make sense to lose that extra 6% in returns that your portfolio's funds are generating.</p> <p>If the rate on the loan is lower than your rate of return <em>and</em> you can make the loan payments, take the loan and keep your money invested. On the other hand, monies from your portfolio might be a smart source of cash for re-paying very high interest loans, such as credit cards. Never touch your emergency fund, though &mdash; that's the money you'll need for true emergencies, and unless you're facing bankruptcy or legal action, high interest debt isn't quite a <em>true</em> emergency that warrants depleting your safety net.</p> <h2>5. When You Can Pay it Off Early</h2> <p>Sometimes you know there's money coming in, but you just don't have it yet. If you need to make a major purchase before that money arrives, you can take out a loan and repay it as soon as the funds hit your bank account.</p> <p>But if you're taking this approach, be sure that your loan doesn't have any prepayment penalties. This strategy can work well for people who get large bonus or commission checks on a quarterly or yearly basis, so long as you don't overestimate your actual earnings.</p> <h2>6. When You Qualify for a &quot;Special&quot; Loan</h2> <p>There are a lot of &quot;special&quot; loans on the market, most offered by different government programs for things such as home-buying, education, or energy-efficiency retrofitting. These loans typically offer very favorable repayment terms which often make them worthwhile.</p> <p>For example, <a href="http://www.fha.com/fha_loan_requirements">FHA loans</a>, <a href="http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp">VA loans</a>, and even <a href="http://time.com/money/2929695/home-loan-usda-credit-rural-development/">USDA loans</a> can help people buy homes who might not have qualified otherwise. My husband and I bought our house last year using his VA loan, which saved us tons of money on the up-front costs. Without it, we'd have been hard-pressed to afford the house.</p> <p>Taking out a loan is something that a financially responsible person might never want to do. However, sometimes loans are necessary to meet our larger goals and, in the above cases, they may not be such a bad idea.</p> <p><em>What have you bought with money from a loan? Do you think that getting the loan was worth it?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/sarah-winfrey">Sarah Winfrey</a> of <a href="http://www.wisebread.com/6-times-when-its-okay-to-take-a-loan">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-3"> <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/stop-is-that-loan-too-big-for-your-wallet">Stop! Is That Loan Too Big For Your Wallet?</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/5-loan-options-for-those-with-good-credit">5 Loan Options for Those With Good Credit</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/best-of-personal-finance-credit-where-credit-is-due-edition">Best of Personal Finance: Credit Where Credit Is Due Edition</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/co-signing-for-a-loan-4-things-to-consider-first">Co-Signing for a Loan: 4 Things to Consider First</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/6-smart-things-to-do-with-your-bonus">6 Smart Things to Do With Your Bonus</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Debt Management big purchases borrowing finances loans Wed, 11 Mar 2015 13:00:09 +0000 Sarah Winfrey 1333072 at http://www.wisebread.com Stop! Is That Loan Too Big For Your Wallet? http://www.wisebread.com/stop-is-that-loan-too-big-for-your-wallet <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stop-is-that-loan-too-big-for-your-wallet" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_car_loan_000025294979.jpg" alt="Woman signing for a new car loan" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's not uncommon to find yourself in need of a loan to pay for a home, car, or other major expense. But navigating the world of lending can be a bit bewildering.</p> <p>If you're careful and sensible, it's possible to borrow money without risking your financial wellbeing. In fact, responsible borrowing can be an integral part of wealth-building. The key is to know how much loan you can actually handle easily. But, how do you determine this?</p> <h2>1. Know Your Credit Score</h2> <p>Your FICO credit score will play an enormous role in the size of the loan you can qualify for and the interest rate that you will pay. The higher the score, the better off you'll be. Everyone is entitled to <a href="http://www.consumer.ftc.gov/articles/0155-free-credit-reports">one free credit report</a> each year, so be sure to examine it if you're considering taking out a loan. A credit score above 720 usually qualifies you for good rates. Anything less than that, and you may want to consider taking steps to improve your score before borrowing. This means correcting any errors and paying down outstanding debts.</p> <h2>2. Learn About Debt-to-Income Ratios</h2> <p>The general rule of thumb regarding mortgage loans is to avoid dedicating more than 28% of your monthly take-home income to housing. This includes not just the mortgage payments, but also related taxes and fees, which can add another 2%-3% to the overall cost. So in other words, a person taking home $50,000 should avoid paying more than $1,166 per month toward their home. ($50,000 x 0.28 = about $1,166)</p> <p>There's another key factor, however, and that is your overall debt load. The 28% rule above applies to the mortgage loan itself, but financial experts advise having an overall debt-to-income ratio of no more than 36%. So if you already have other loans, you may want to take on a smaller mortgage, or paying them down before borrowing more.</p> <h2>3. What You're Approved For Is Not Necessarily What You Should Borrow</h2> <p>When you apply for a loan, a lender will usually let you know how much you are approved to borrow. It's best to ignore that number. Just because you are approved to borrow $500,000 for a home does not mean it's wise to go and borrow $500,000. It's nice to get approval, but banks found themselves in trouble a few years ago when they approved loans for amounts that were well beyond what the borrowers could comfortably afford.</p> <h2>4. Down Payments Are Key</h2> <p>If you can't afford to buy a house or other big purchase in cash, at least put down as much money as you can. This will reduce the size of the loan and the amount of interest you will pay. A larger down payment could also make you more attractive to lenders, who can offer a more generous interest rate. When buying a home, a down payment of 20% or more will usually mean you can avoid paying for mortgage insurance.</p> <h2>5. Look at Loan Length, Not Just Monthly Payments</h2> <p>All too often, borrowers will focus on the monthly payments without looking at the total cost of a loan. The great car buying advice site, Edmunds, advises to keep <a href="http://www.edmunds.com/car-loan/how-long-should-my-car-loan-be.html">loan terms under five years</a>, and reports that two additional years on a loan of a Honda Accord would add more than $3,400 in interest charges. Similarly, a 15-year mortgage on a home will save you tens of thousands of dollars over a 30-year term, even if your monthly payments are higher.</p> <h2>6. Future Income Is Not Guaranteed</h2> <p>I once heard a friend say that they planned to purchase a more expensive home than they could really afford, because they figured they'd be earning more down the road. This is a very risky approach to borrowing. A more sensible approach is to borrow based on your current financial situation, then any extra income you earn over time can go into savings or be used to pay off the debt earlier.</p> <h2>7. Don't Steal From Your Future Self</h2> <p>Are you putting away money toward retirement? Would a mortgage payment or other loan prevent you from contributing to an IRA or 401(k)? If you're making loan payments but are unable to set aside money for the future, then you may be borrowing too much. Set aside 10%-15% of your salary for retirement before seriously considering large loans.</p> <h2>8. Consider Future Expenses</h2> <p>A couple with no children might crunch some numbers and determine that they can comfortably afford a loan of a certain size, but will their monthly expenses always be what they are now? It's important when borrowing to try and anticipate future costs, especially when exploring a long-term loan. A good rule of thumb is to assume that your costs will rise yearly with inflation (roughly 2%-3% a year; add more if you expect a larger family, or a move to a more expensive area).</p> <p><em>What rules of thumb do you use to know your loan limits?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/stop-is-that-loan-too-big-for-your-wallet">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-4"> <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/5-loan-options-for-those-with-good-credit">5 Loan Options for Those With Good Credit</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/6-times-when-its-okay-to-take-a-loan">6 Times When It&#039;s Okay to Take a Loan</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/5-strategies-to-wipe-out-your-credit-card-balance">5 Strategies To Wipe Out Your Credit Card Balance</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/worried-about-debt-tips-on-managing-your-loans">Worried About Debt? Tips On Managing Your Loans</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/freedom-from-the-day-job">Freedom From the Day Job</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management borrowing debt lending loans Fri, 06 Mar 2015 16:00:06 +0000 Tim Lemke 1320914 at http://www.wisebread.com 5 Tricks to Consolidating Your Debt and Saving Money http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-tricks-to-consolidating-your-debt-and-saving-money" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man-calculating-bills-home-Dollarphotoclub_76897987.jpg" alt="man calculating bills" title="man calculating bills" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're in the red, repaying the money you owe as quickly as possible can save you big. The longer you carry a balance on credit cards and loans, the more interest you'll rack up on your debt &mdash; and the more you'll have to fork over when all is said and done. (See also: <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you?ref=seealso">Snowballs or Avalanches: Which Debt Reduction Strategy Is Best for You?</a>)</p> <p>One means of speeding up the repayment process is debt consolidation. Consolidating the various balances you're carrying on different credit cards and loans into one single balance can help you obtain a lower interest rate, which will save you money over time. It will simplify your debt repayment, making it easier to get a handle on what you owe. Read on for a roundup of your best debt consolidation options.</p> <h2>1. Execute a Balance Transfer</h2> <p>If you're carrying debt on a credit card with a high interest rate, you can save big by <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">transferring the balance onto a new card with a lower rate</a>. Some cards offer promotional interest fees as low as 0%, which can be monumental in helping you conquer your debt faster. But it's essential to have good credit in order to qualify for a card with a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">low interest rate</a>. There's typically a fee in the range of 3% of your debt that you'll pay upon shifting your balance onto the new card. And be mindful that that introductory 0% interest rate won't last forever. Most of these offers expire in 15 months or less, so use that time wisely to pay down your debt quickly. (See our <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">favorite credit cards for 0% balance transfers</a>)</p> <h2>2. Take Out a Peer-to-Peer Loan</h2> <p>In peer-to-peer lending, borrowers obtain a loan from individual lenders without going through a traditional financial institution. The greatest benefit of P2P loans are their interest rates, which can be as low as 7% for borrowers with good credit &mdash; this means you can save money in the long term. The two largest P2P platforms are Prosper and <a rel="nofollow" href="http://track.flexlinks.com/a.ashx?foid=1029882.227343&amp;fot=1071&amp;foc=1" target="_blank">Lending Club</a><img border="0" src="http://track.flexlinks.com/i.ashx?foid=1029882.227343&amp;fot=1071&amp;foc=1" alt="" />. Both charge fees for new loans (1% to 5% of the total loan amount at Prosper and 1.11% to 5% at Lending Club), depending on the size of the loan.</p> <p>Once you're approved, you'll receive the funds in a few business days (which is much faster than a bank loan). Another notable difference between P2P loans and those issued by banks are that they come with a fixed term for payment, meaning the borrower typically has a deadline of three to five years to pay the loan off entirely, with monthly payments to meet. &quot;Some people like the idea of having a fixed term for the payment,&quot; said Peter Renton, founder of <a href="http://www.lendacademy.com/">LendAcademy.com</a>. &quot;It's a kind of enforced discipline. They know they have three or five years on a loan and they will have paid off their debt.&quot; (See also: <a href="http://www.wisebread.com/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt?ref=seealso">Should You Use Peer-to-Peer Lending to Pay Down Credit Card Debt?</a>)</p> <h2>3. Tap Into Your Home Equity</h2> <p>If you own a home, you may be able to use your home equity to consolidate your debt. The risk, of course, is that if you don't use that equity responsibly, you could find yourself facing foreclosure. But if you're careful not to overextend yourself, tapping into the equity of your home and then repaying yourself can be a very convenient way to consolidate your debt.</p> <p>First, you need to decide between two choices: <a href="http://www.expertlaw.com/library/finance/home_equity_loan.html">a home equity loan or a home equity line of credit</a>. The annual percentage rate (APR) for a loan typically incorporates points and finance charges, whereas the APR for a line of credit typically reflects only the interest rate. With a loan, you'll receive a payment totaling the full amount borrowed upon closing. With a line of credit, you'll be handed a checkbook with which you can write checks against your equity up to the amount of the line of credit. Home equity lines of credit or HELOCs are similar to credit cards in that interest is only charged on the amount withdrawn. In fact, most of them give homeowners as long as a <a href="http://homeguides.sfgate.com/mean-home-loan-draw-period-49163.html">decade to draw out the equity</a> and then another 15 to 20 years to repay it after the draw period expires.</p> <h2>4. Borrow From Your Retirement</h2> <p>This is a last resort means of debt consolidation, but if you're in dire straits, you might want to investigate <a href="http://www.wisebread.com/this-is-when-you-should-borrow-from-your-retirement-account">borrowing against your 401(k)</a>, 401(b), or pension plan at a low interest rate. The benefit of borrowing from your retirement is that it enables you to pay back your plan (generally under more favorable terms), rather than having to pay back a lender. The drawback, of course, is that you could be jeopardizing your retirement savings.</p> <h2>5. Borrow From Your Life Insurance Policy</h2> <p>Another last-ditch option is borrowing from your life insurance. You can take out a loan against it (typically up to the value of the policy), and with the proceeds, consolidate your debt. Your insurance company usually won't require you to make payments, but it's a good idea to do so anyway. Failure to repay a life insurance policy loan means your family may be entitled to nothing when you die.</p> <p><em>How have you considered consolidating your debt?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brittany-lyte">Brittany Lyte</a> of <a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">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-5"> <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/how-one-college-graduate-paid-off-28000-in-three-years-on-a-30k-salary">How One College Graduate Paid Off $28,000 in Three Years on a $30K Salary</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/8-organizations-that-really-can-help-you-with-your-debt">8 Organizations That REALLY Can Help You With Your Debt</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/5-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</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/7-occasions-when-you-should-definitely-hire-a-financial-advisor">7 Occasions When You Should Definitely Hire a Financial Advisor</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-deal-with-collection-agencies">How to Deal With Collection Agencies</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management debt debt consolidation debt repayment Fri, 13 Feb 2015 14:00:07 +0000 Brittany Lyte 1286247 at http://www.wisebread.com How One Couple Paid Off $147k of Debt (Even While Unemployed) http://www.wisebread.com/how-one-couple-paid-off-147k-of-debt-even-while-unemployed <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-one-couple-paid-off-147k-of-debt-even-while-unemployed" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple-happy-snow-travel-178492223-small.jpg" alt="happy couple snow" title="happy couple snow" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Jackie Beck and her husband once &quot;owned&quot; a six figure debt. They'd borrowed for their mortgage, credit cards, education, autos, and home improvement projects. Like most of us do, they'd borrowed over time, barely noticing as their balances grew and interest accrued.</p> <p>Beck is not alone. The <a href="http://investorplace.com/2013/09/report-average-american-in-debt-hundreds-of-thousands/#.VGJM1vnF98E">average American borrower owes</a> $225,238 in consumer debt, including $15,263 for credit cards, $147,591 in mortgage debt, $31,646 for student loans, and $30,738 for auto financing.</p> <p>What set Beck and her partner apart, however, is that they set out to pay off that debt, and after a 10-year journey, they succeeded. Today neither holds a traditional job, they maintain collective annual expenses of less than $12,000, and they're free to pursue their passions. &quot;Anyone can do it, too,&quot; says Beck. &quot;You don't have to have debt. Life is a lot easier without it.&quot; (See also: <a href="http://www.wisebread.com/how-one-inspiring-saver-found-true-love-shook-off-debt-denial-and-paid-off-123000?ref=seealso">How One Inspiring Saver Found True Love, Shook Off Debt Denial, and Paid Off $123,000</a>)</p> <h2>Getting Started</h2> <p>The Beck's get-out-of-debt journey began when they decided to tackle their credit card balances. &quot;We were just really sick of being in debt and feeling like all our money went toward the credit cards and interest,&quot; says Beck. Paying off the balance on their cards took a full three years and Beck was unemployed for a lot of that time. &quot;In the beginning, it took us a long time to pay things off,&quot; says Beck. &quot;Then we figured things out and we had more money because we had paid more off. You get better at it and it gets faster.&quot;</p> <p>She'd been deferring her student loan payments but, once the credit card bills were paid, that freed up some extra cash. &quot;I'd been living for many years on very little money. I never would have been able to start paying on my student loans if I'd still had those credit card payments,&quot; she says.</p> <p>Beck viewed her student debt as a burden and she couldn't wait to get rid of it. When finally she landed a job, she was able to speed her repayment schedule. &quot;I continued to live on nothing. I put all my money toward my student loans,&quot; she says. &quot;Then it went super fast.&quot; (See also: <a href="http://www.wisebread.com/how-one-college-graduate-paid-off-28000-in-three-years-on-a-30k-salary?ref=seealso">How One College Graduate Paid Off $28,000 in Three Years on a $30k Salary</a>)</p> <h2>Maintaining Momentum</h2> <p>Beck's husband was inspired by her student loan success and together they worked to amp up their efforts. They started paying for most of their purchases in cash, foregoing credit cards altogether. Then they decided to tackle their car loan. &quot;After he saw what I did with my student loan,&quot; says Beck, &quot;he thought it would be nice to live without the car payment.&quot;</p> <p>Even with successful milestones along the way, the Becks repaid their debt at a measured pace. &quot;We spent a lot of time getting out of the debt we had gotten into,&quot; says Beck. &quot;You don't have to live like a monk the whole time. We had more money coming in and it didn't all go toward our debt. We spent some.&quot;</p> <p>The Becks increased spending somewhat over time but even so, they began to view their mission as preparation for an emergency. In the previous years they'd taken turns being unemployed, had undergone surgeries, paid expensive veterinarian bills for their pets, and even totaled a car. They'd taken out a $10,000 home improvement loan around this time, but even though the loan came with a 0% introductory rate for the first 12 months, they realized their attitude toward borrowing had shifted. They were no longer comfortable taking on new debt. &quot;Gradually we realized that debt is dangerous and that something could go wrong,&quot; says Beck.</p> <p>Ultimately, the Beck's took the remaining balance from their savings account and paid off the loan. &quot;Life doesn't work out perfectly and, when you don't have debt, it really changes what you're able to do,&quot; she says.</p> <p>By the time they were able to start tackling their mortgage, their journey had become about more than just safety. They started to view it a road to freedom. According to Beck, &quot;The fewer expenses you have, the longer you can go without a job.&quot; (See also: <a href="http://www.wisebread.com/the-freedom-of-a-debt-free-life?ref=seealso">The Freedom of a Debt-Free Life</a>)</p> <h2>Rewarding Yourself</h2> <p>For the Becks, freedom was defined by the rewards they chose for themselves after they paid off their mortgage. Beck had wanted to travel to Antarctica since she was eight years old and her husband had his eye on a new car. &quot;After the house was paid off, we spent another year saving up for those things,&quot; says Beck, &quot;and then we went and did them.&quot;</p> <p>Beck also started developing other streams of income and eventually left her day job. &quot;I created the app <a href="https://itunes.apple.com/us/app/pay-off-debt/id308554006?mt=8&amp;ign-mpt=uo=4">Pay Off Debt</a> after I paid off my student loan,&quot; she says. &quot;I thought other people might want to obsess about debt as much as I do.&quot; She also started to blog about her journey at <a href="http://www.thedebtmyth.com">TheDebtMyth.com</a>, and even bought a couple of rental properties, paying for them in cash.</p> <p>As a couple, they'd also learned to keep their collective expenses low.</p> <p>&quot;We can live on $12,000 a year if we need to,&quot; says Beck. &quot;We basically have no required bills and we're not eating ramen,&quot; she laughs. &quot;My husband got laid off a week after I quit my job. Neither of us has a [traditional] job now. People who owe a lot of money don't do things like that,&quot; says Beck, &quot;because they can't.&quot;</p> <p>The Beck's get-out-of-debt journey has changed the way they think about money altogether. Now it's common practice for them to make their purchases &mdash; even big ones &mdash; in cash. They don't carry debt and they can live their lives freely, without the burden of owing money to anyone. Beck is even thinking about a second trip to her dream destination, Antarctica. &quot;I'm totally going back,&quot; she says.</p> <p>Because she can.</p> <p><em>Are you paying off your consumer loans? What strategies work best for you? How do you stay motivated and on track? We want to hear about it in the comments below!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/alaina-tweddale">Alaina Tweddale</a> of <a href="http://www.wisebread.com/how-one-couple-paid-off-147k-of-debt-even-while-unemployed">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-6"> <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/how-one-college-graduate-paid-off-28000-in-three-years-on-a-30k-salary">How One College Graduate Paid Off $28,000 in Three Years on a $30K Salary</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/this-recent-grad-paid-off-34k-in-sudent-loans-and-launched-a-business-in-just-4-years">This Recent Grad Paid Off $34K in Student Loans and Launched a Business (In Just 4 Years)</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/how-one-young-entrepreneur-paid-off-40000-in-student-debt-by-age-24">How One Young Entrepreneur Paid Off $40,000 in Student Debt By Age 24</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/our-worst-financial-mistakes-and-what-you-can-learn-from-them">Our Worst Financial Mistakes and What You Can Learn From Them</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/depressed-it-could-be-your-debt">Depressed? It Could Be Your Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management auto loan credit card debt debt repayment debt stories life hacks mortgage student loans Fri, 14 Nov 2014 14:00:05 +0000 Alaina Tweddale 1254112 at http://www.wisebread.com Should You Use Peer-to-Peer Lending to Pay Down Credit Card Debt? http://www.wisebread.com/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young-people-consultant-153999609-small.jpg" alt="young couple consultant" title="young couple consultant" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you are digging yourself out of credit card debt, you might consider borrowing from a <a href="http://en.wikipedia.org/wiki/Peer-to-peer_lending">peer-to-peer lending</a> (P2P) company. Depending on your personal situation and credit profile, this approach may enable you to get out of debt faster and save money.</p> <p>There is much to consider besides the possibility of snagging a lower interest rate, reducing your monthly payments, and accelerating your payoff. Here's what you should know about getting a loan from Peer-to-Peer lender.</p> <h2>Consider the Pros and Cons of Peer-to-Peer Lending</h2> <p>There are distinct advantages and noteworthy disadvantages to credit card refinancing or debt consolidation with a P2P lender, such as <a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=22959155&amp;fot=1159&amp;foc=1" rel="nofollow">Lending Club</a> or <a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=22964539&amp;fot=1159&amp;foc=1" rel="nofollow">Prosper</a>.</p> <h3>Pros</h3> <p>Getting a P2P loan has several benefits that may allow you to quickly pay off credit card debt.</p> <p><strong>Lower Interest Rates</strong></p> <p>Interest rates as low as 6.03% are available through P2P lenders, depending on your creditworthiness. Even if you don't qualify for the lowest possible rate, you may be able to borrow at rates much lower than the current rate on your credit card, which could be as high as 30%. Additionally, credit cards are set up so that you're paying interest on top of your interest, since it's based on your running total balance.</p> <p><strong>Fixed Payment Schedule</strong></p> <p>Loans are fully amortized over standard loan terms of either 36 months or 60 months and your interest rate stays the same throughout the term; as a result, your loan payment is predictable and each loan is paid in full at the end of its term.</p> <h3>Cons</h3> <p>Before committing to a new loan, be sure that you are aware of all the costs, including the monthly amount due and additional fees.</p> <p><strong>Origination Fees</strong></p> <p>Loan origination fees are charged to borrowers at both Lending Club and Prosper. These fees range from 1.1% to 5.0% of the loan amount and are deducted from loan proceeds transferred to the borrower. The annual percentage rate (APR) associated with the interest rate offered to you reflects the true cost of borrowing and includes the origination fee (similar to credit card companies' <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer fees</a>).</p> <p><strong>Fixed Monthly Payment</strong></p> <p>Borrowers must make the entire loan payment every month, as opposed to a credit card balance where you can change your payment depending on your cash flow (after meeting the minimum payment required).</p> <p><strong>Late Fees</strong></p> <p>Late payment fees are the greater of $15 or 5% of the unpaid loan balance (also referred to as the unpaid installment amount). If you have a high loan balance, 5% could mean a very hefty fee (5% of $5000 is $250).</p> <h2>Compare Total Payments of Various Payoff Alternatives</h2> <p>To decide if you should use P2P lending to pay down credit card debt, start by getting a rate quote. Then evaluate the offers to see what might work best for your situation.</p> <p>Let's say you have a $35,000 balance on your credit card, an interest rate of 18.90%, and a minimum monthly payment of 4% of your outstanding balance (currently, $1,400.00). If you made the minimum payment of 4.0% for five years and then $500 per month until the balance was paid down (with the last payment to wipe out remaining debt), then you would pay $52,615.70 over 78 months.</p> <p>Borrowing through a P2P lender to eliminate the credit card balance and then repaying the P2P loan may work better for you financially. For example, you could take out a debt consolidation loan at <a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=22964539&amp;fot=1159&amp;foc=1" rel="nofollow">Prosper</a>. Judging from listings on the firm's website, you may be able to snag a 36-month loan at an interest rate at 10.29% for a monthly payment of $1,134.12 if you have good credit with an &quot;A&quot; rating. You would be charged a loan origination fee of $1,400.00. Over the life of the loan, your cost to destroy your credit card debt using this method will total $42,228.42, as long as you made every payment on time and never had a late fee or other charge.</p> <p>Alternatively, you could borrow money through <a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=22959155&amp;fot=1159&amp;foc=1" rel="nofollow">Lending Club</a>. Based on a rate offered to a family member, you may be able to get a 36-month loan for a credit card payoff at an interest rate of 7.69% if you have average credit with an &quot;A4&quot; rating. Your loan origination fee would be $1,050.00 and your monthly payments would equal $1091.78. In total, you would make payments of $40,354.24 to pay off your loans.</p> <p>If you decided to aggressively pay down debt with $1,400.00 monthly payments, then the credit card balance would be eliminated in less than three years using any of these options. Your total cost would vary from just over $39,000 to nearly $44,000 depending on interest charges and loan origination fees.</p> <p>Note that if your credit card rate is much higher, 29.99% for example, then the benefits of a P2P loan are significantly greater.</p> <h2>Be Realistic About Your Cash Flow</h2> <p>Crunching the numbers to determine your best course of action is a reasonable way to make a decision. In the scenario described above, paying off your credit card balance at a high rate and borrowing at a much lower rate using a P2P loan seems to make the most sense.</p> <p>But before signing up to get a debt consolidation loan, you should consider what might happen if you are late in making a payment. At both Lending Club and Prosper, late payment fees are the greater of $15 or 5% of the unpaid balance. So, if you happen to have a cash flow problem in the second year of your loan and are more than 16 days late on a payment, you'll be charged a late fee of more than $1,000. Just a handful of such fees can create significant loan-payoff woes.</p> <p>A comparable problem with your credit card company may trigger late fees and added interest charges (along with a higher interest rate), but the cost of your tardiness should be less than the P2P fees. Again, every situation is different and should be evaluated independently.</p> <p>If your financial picture is likely to change in the next three to five years, consider whether your cash flow will be able to sustain regular payments. Major life events, such as returning to graduate school, starting a family, or opening a new business, may interfere temporarily with the availability of funds. Make sure you will be able to make the monthly payments on a timely basis over the life of the loan.</p> <p>When comparing various types of credit, look at all aspects of the loan structure, <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=inarticle">interest rate</a>, monthly payments, terms, and fees. Note that offers extended to you may look much different than those available to your friends, coworkers, or family members. Do the math and consider your entire financial picture when determining whether you should use P2P lending to pay down credit card debt.</p> <p><em><a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=22964539&amp;fot=1159&amp;foc=1" rel="nofollow">Click here to check out available loan offers at Prosper.</a></em></p> <p><a title="Get a Personal Loan at a Low Rate" alt="Get a Personal Loan at a Low Rate" rel="nofollow" href="http://track.linkoffers.net/a.aspx?foid=22964539&amp;fot=1159&amp;foc=2&amp;foc2=600913" target="_blank"><img border="0" src="http://content.linkoffers.net/SharedImages/Products/220171/600913.gif" alt="" /></a></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt">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-7"> <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/whats-the-best-way-to-get-out-of-debt">What&#039;s the Best Way to Get out of Debt?</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-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</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/debit-or-credit-which-one-should-you-choose-at-the-checkout">Debit Or Credit? Which One Should You Choose At The Checkout?</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/10-tricks-to-save-money-with-credit-cards">10 Tricks to Save Money with 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/5-strategies-to-wipe-out-your-credit-card-balance">5 Strategies To Wipe Out Your Credit Card Balance</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Credit Cards Debt Management credit dept peer-to-peer lending repayment Fri, 14 Nov 2014 10:00:06 +0000 Julie Rains 1254514 at http://www.wisebread.com How One College Graduate Paid Off $28,000 in Three Years on a $30K Salary http://www.wisebread.com/how-one-college-graduate-paid-off-28000-in-three-years-on-a-30k-salary <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-one-college-graduate-paid-off-28000-in-three-years-on-a-30k-salary" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/female-graduate-176844972-small_0.jpg" alt="female college graduate" title="female college graduate" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The average college senior graduated with $29,400 in <a href="http://projectonstudentdebt.org/state_by_state-data.php">student debt</a> last year and the number is projected to rise by a staggering 6% per year. Even worse, a full 44% of borrowers <a href="http://online.wsj.com/articles/joel-best-and-eric-best-student-loan-debta-federal-toxic-asset-1412204612">aren't making their payments</a> for one reason or another. Despite the depressing statistics swirling around what's now been dubbed the current student loan crisis, there are still plenty of college graduates who manage to buckle down, live cheaply, and pay off their debt burdens. (See also:<a href="http://www.wisebread.com/how-one-inspiring-saver-found-true-love-shook-off-debt-denial-and-paid-off-123000?ref=seealso"> How One Inspiring Saver Found True Love, Shook Off Debt Denial, and Paid Off $123,000</a>)</p> <p>Take Zina Kumok, for example, who is just one month shy of making her last payment on what was once a $28,000 student loan balance. Through a combination of tenacity and frugal living, Kumok will pay off her debt in just three years &mdash; while bringing home an income that's just slightly higher than what she once owed.</p> <p>How did she do it?</p> <h2>The Motivation</h2> <p>Like most students today, Kumok didn't give her loans much thought while she was in school. &quot;It wasn't until I graduated and had my first job,&quot; she says. &quot;I was making $28,000 per year. It was depressing to think that for the next 10 years I would have this payment that was a large chunk of my income.&quot; Even more motivating, Kumok and her then-boyfriend and now fiancee had started talking about marriage. &quot;I didn't want to saddle him with my debt. My monthly payment was $350.&quot; (See also: <a href="http://www.wisebread.com/10-dark-side-motivations-to-get-you-out-of-debt?ref=seealso">10 Dark-Side Motivations to Get You Out of Debt</a>)</p> <h2>The Job Switch</h2> <p>Kumok's newspaper job required frequent night shifts and she was living a three hour distance from her boyfriend. &quot;I wasn't happy at the newspaper and I wanted to go back to a normal schedule,&quot; she says. &quot;I knew I wanted to switch jobs.&quot;</p> <p>Kumok was able to land a marketing and communications position in the city where her boyfriend lived and she even received a slight salary bump. (Her current annual income is slightly more than $30,000.) With a little more money coming in and lower expenses now that she wasn't traveling to see her boyfriend most weekends, Kumok was able to increase her student loan payment by an additional $300 per month. In short, instead of using her excess cash flow to expand her lifestyle, Kumok funneled the extra cash into her loan so she could chip away at her balance month by month. (See also: <a href="http://www.wisebread.com/6-simple-steps-to-discovering-your-true-salary-potential?ref=seealso">6 Simple Steps to Discovering Your True Salary Potential</a>)</p> <h2>Decreased Living Expenses</h2> <p>After their engagement, Kumok and her fiance moved in together. They also took on a close friend as a boarder. &quot;My rent went down significantly,&quot; she says. &quot;Now I split utilities and rent with two other people. That really made a huge difference. Now half my take-home pay goes toward my loans.&quot; (See also: <a href="http://www.wisebread.com/7-unnecessary-household-expenses-you-can-cut-today?ref=seealso">7 Unnecessary Household Expenses You Can Cut Today</a>)</p> <h2>Keeping Track</h2> <p>For Kumok, her fairly low income offered motivation to wipe out her debt. &quot;Every month I would go through my statement and I would see how much was going toward interest. It was so much hard earned money and I didn't have a lot of it,&quot; she says. &quot;When you're not making a lot, every little bit counts.&quot;</p> <p>Kumok was further inspired once she was able to boost her monthly payment. &quot;I was finally paying more in principal than in interest,&quot; she says. &quot;I liked seeing my interest decrease each month. I felt like I was throwing less money away.&quot;</p> <h2>Budgeting for the Fun Stuff</h2> <p>Kumok admits she finds it difficult to spend money unnecessarily when she owes so much. Even so, she was able to put money aside for a couple of overseas vacations, proving that debt repayment doesn't have to be all work and no play. &quot;It was hard for me to relax and have fun,&quot; says Kumok, who was able to take each trip on the cheap. Even so, she says, &quot;I counted my budget every day on those trips. I'm excited to travel on a budget but not feel guilty about it, once my loans are paid off.&quot;</p> <h2>And&hellip; What's Next?</h2> <p>About a year ago, Kumok started saving for retirement. &quot;Once I became eligible for my company's 401(k), I paid enough to get the match. Now I'll be boosting that contribution amount.&quot;</p> <p>She soon won't owe any money and yet she doesn't expect that much to change. &quot;I was careful for so long. I don't want to get back into the frivolous habits I had in college,&quot; she says. &quot;I'm a child of the recession, the stock market crashed when I was in college, and I'm the child of immigrants. There are plenty of horror stories around about people who didn't save or make careful choices. Those things make it hard for me to take a backseat when it comes to money.&quot;</p> <p>Being the careful sort, Kumok looks forward to starting her marriage without any debt. &quot;He helps me relax a bit so I hope we'll learn how to be responsible while still having a balance,&quot; she says.</p> <p>You can read more about Kumok's journey on her blog, <a href="http://www.debtfreeafterthree.com/">Debt Free After Three</a>.</p> <p><em>Are you paying back your student loans? What strategies work best for you? How do you stay motivated and on track? We want to hear about it in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/alaina-tweddale">Alaina Tweddale</a> of <a href="http://www.wisebread.com/how-one-college-graduate-paid-off-28000-in-three-years-on-a-30k-salary">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-8"> <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/how-one-couple-paid-off-147k-of-debt-even-while-unemployed">How One Couple Paid Off $147k of Debt (Even While Unemployed)</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/this-recent-grad-paid-off-34k-in-sudent-loans-and-launched-a-business-in-just-4-years">This Recent Grad Paid Off $34K in Student Loans and Launched a Business (In Just 4 Years)</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/5-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</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-tricks-to-consolidating-your-debt-and-saving-money">5 Tricks to Consolidating Your Debt and Saving Money</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-one-inspiring-couple-paid-off-48000-in-25-years">How One Inspiring Couple Paid Off $48,000 in 2.5 Years</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management debt debt repayment debt stories life hacks student loans Wed, 05 Nov 2014 14:00:05 +0000 Alaina Tweddale 1250695 at http://www.wisebread.com 7 Occasions When You Should Definitely Hire a Financial Advisor http://www.wisebread.com/7-occasions-when-you-should-definitely-hire-a-financial-advisor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-occasions-when-you-should-definitely-hire-a-financial-advisor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/financial-advisor-153824915-small.jpg" alt="financial advisor" title="financial advisor" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Laying out a few hundred dollars for a financial advisor can seem like money down the drain if everything is going smoothly. (See also: <a href="http://www.wisebread.com/9-signs-you-need-to-fire-your-financial-planner?ref=seealso">9 Signs You Need to Fire Your Financial Planner</a>)</p> <p>Until it isn't. Life's road bumps pop up, and good and bad things that happen can lead to financial problems or opportunities that you weren't prepared for. Here are seven occasions when a financial advisor should be called in to help.</p> <h2>1. Ruinous Debt</h2> <p>We're not talking about having payments for a credit card lapse for a month, but deep debt where you're having difficulty deciding which bills to pay and which to put off each month. This is a case where you don't want to have to pay a financial advisor &mdash; whether it's a one-time fee or percentage of assets that they manage. Instead, go somewhere such as the <a href="https://www.nfcc.org/index.php">National Foundation for Credit Counseling</a> or look for <a href="http://www.usa.gov/topics/money/credit/debt/out-of-control.shtml">local nonprofit agencies for free help</a>. At the very least, get help setting up a budget.</p> <h2>2. Career Change</h2> <p>Hopefully, this is an opportunity to earn more money and therefore put more money aside in a retirement account. A financial advisor can help you pick a retirement account that's right for you.</p> <p>Young people with the potential for increasing their assets who are starting their careers should seek a financial planner, says Eric Roberge, a fee-only certified financial planner in Boston and founder of <a href="http://beyondyourhammock.com/">Beyond Your Hammock</a>. This is especially true for a single person earning at least $75,000 a year or a couple earning $150,000 because they should have more money to invest, Roberge says.</p> <h2>3. Sudden Wealth</h2> <p>An inheritance, insurance payout, lump-sum pension payment, divorce settlement, lottery winning, or any other sudden influx of new money can burn a hole in a pocket, says Mike Sena, a certified financial planner at <a href="http://www.whitestreetadvisors.com/">White Street Advisors</a> in Roswell, GA. It can be tempting to splurge a little &mdash; or a lot. Instead, seek advice on how best to use your windfall now &mdash; and for years to come.</p> <h2>4. Death in the Family</h2> <p>The death of a close relative can be a key time to get financial help. You could face tax implications or need help with estate planning, for example.</p> <p>Roberge had a client who didn't seek his advice after her father died with a $600,000 annuity she inherited, and she took some money out of the annuity. She ended up having to pay a $40,000 tax bill, which Roberge says he could have helped her avoid.</p> <h2>5. Passing on a Family Business</h2> <p>Your parents and grandparents may want you to continue running the family business when they die, but you may not. This is a conversation that a financial advisor can help with early, says <a href="http://charleskochel.com/">Charles Kochel</a>, a wealth advisor for a fee-only Registered Investment Advisor in Arkansas. Kochel specializes in helping farmers transfer the family farm from one generation to the next.</p> <p>&quot;A major concern of a large family farm is legacy planning,&quot; he says. &quot;The issue is usually lack of communication. Multigenerational farmers assume the next generation will want to come back home, after college, and manage the farm or the assumption is that farming may prove too costly.</p> <p>&quot;A series of conversations needs to take place, often emotional and uncomfortable,&quot; Kochel says. &quot;A family meeting and ongoing proactive conversations help monitor the wants and needs of the entire legacy.&quot;</p> <p>The family will likely evolve over the years, and a financial advisor can help systemize the process and create an ongoing conversation that will move the estate planning beyond a one-time event.</p> <h2>6. Big Drop in the Stock Market</h2> <p>If your portfolio includes stocks, a financial advisor can help you come up with a financial plan, and stick to it.</p> <p>&quot;Most people think they can handle their own investments, but when the stock market drops, they start second-guessing their plan,&quot; says Tyler Gray, a financial planner at <a href="http://www.sageoakfinancial.com/">Sage Oak Financial</a> in Tulsa, OK.</p> <p>In 2008-09, for example, &quot;you had a lot of people who pulled out of the market at the worst possible time because they didn't have an advisor to help them stay disciplined,&quot; Gray says. &quot;The worst part is that many of these folks never got back in the market and have missed out on a lot of growth over the last five years.&quot;</p> <h2>7. Growing Family</h2> <p>Whether you're getting married or having children, it's best to have a financial conversation ahead of time, Sena suggests. New couples merging finances or planning for a baby and all of the costs that go into raising a child should have a financial plan.</p> <p>&quot;In general, anyone who is not meeting or exceeding their life and financial goals should work with an advisor,&quot; White says. &quot;Most of us are simply too close to our money to be objective.&quot;</p> <p>For better or worse, major life events can cause people to rethink their lives and plan for the future. Planning for a financial future should be part of many major events in life.</p> <p><em>Have you ever sought advice from a financial planner? What prompted you? Was the advice worthwhile and helpful? Please share in comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/aaron-crowe">Aaron Crowe</a> of <a href="http://www.wisebread.com/7-occasions-when-you-should-definitely-hire-a-financial-advisor">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-9"> <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/intimidated-by-retirement-investing-get-professional-help">Intimidated by Retirement Investing? Get Professional Help!</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/5-reasons-to-fire-your-financial-adviser-soon">5 Reasons to Fire Your Financial Adviser Soon</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/is-this-hidden-cost-sapping-your-retirement-savings">Is This Hidden Cost Sapping Your Retirement Savings?</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-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</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-dumb-401k-mistakes-smart-people-make">5 Dumb 401(k) Mistakes Smart People Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Investment Retirement debt financial planner financial planning investing retirement Mon, 03 Nov 2014 13:00:04 +0000 Aaron Crowe 1248279 at http://www.wisebread.com How to Never Succumb to Impulse Spending Again http://www.wisebread.com/how-to-never-succumb-to-impulse-spending-again <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-never-succumb-to-impulse-spending-again" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/shopping-81172431-small.jpg" alt="shopping" title="shopping" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Impulse spending can make it almost impossible for someone to manage their finances effectively. It creates a habitual need to spend and a knee-jerk reaction to sales, products, and advertising. And the result is usually the same: a lack of cashflow, problems saving, and almost always an inability to maintain a budget.</p> <p>But what exactly is impulse spending? How do we define and/or recognize it?</p> <h2>Defining Impulse Spending</h2> <p>First, impulse spending is almost always chronic and recurring. To see something every once in a while and &quot;splurge&quot; is normal. Impulse spending is something that happens regularly and develops into a bad habit. (See also: <a href="http://www.wisebread.com/13-creative-ways-to-avoid-spending-money?ref=seealso">13 Creative Ways to Defeat Impulse Spending</a>)</p> <p>Second, buying on an impulse means that you're making an unplanned purchase that you hadn't already recognized a need for. These purchases might be useful and might even seem wise on the surface, but had you not made visual contact with the item, you probably wouldn't have wanted to spend money on it. In other words, an impulse purchase is made when a product or ad instigates the transaction. Instead of you deciding that you need something and then going to find it, you see a product or service and decide immediately that it warrants your money. Those who struggle with this end up spending a lot of money that they didn't need to spend or that wouldn't have been spent, had they been in control of their purchases. In fact, that's the real goal here &mdash; to be in control of how purchases.</p> <h2>1. Break the Habit With a Freeze on All Discretionary Spending</h2> <p>Impulse spending is a habit, so try breaking it by going cold turkey on all discretionary spending. That's not to say that you can't pick back up after a few weeks, but stick to essentials until you've given yourself enough time to get comfortable spending money on just those things.</p> <p>The goal is to take away your tendency to be a reactive purchaser, before you take the steps necessary to build yourself back into a proactive budgeter. Once you can go into stores and see ads without feeling that twitch making you want to spend money, you're ready to move on. It'll happen quicker than you think.</p> <h2>2. Make a Weekly Budget</h2> <p>Budgeting is one of the simplest and most basic safety nets you have to protect yourself against impulse spending. There are plenty of ways to do it, like using a <a href="http://www.daveramsey.com/tools/budget-forms/">Dave Ramsey budget sheet</a>. But the general concept is to start by writing down both your expected income and expenses for each month. Separate your expenses between the amounts that are fixed (rent, insurance, etc.) and those that fluctuate (gas, groceries). Use what's left to disperse between savings, discretionary spending, charitable giving, or however you choose to divide it up. That discretionary amount will serve as a safeguard to help limit your ability to spend impulsively.</p> <p>You'll know that there's a limit to what you can spend, thereby making you less likely to buy something on an impulse. Instead, you end up asking yourself the question: &quot;Do I really want to buy this?&quot;</p> <h2>3. Practice Deciding What to Buy Before You Leave the House</h2> <p>After breaking with your bad spending habits, a good habit to get into is to always make a list or at least plan in your mind what you want to buy before you shop. This ensures that you're in control of your purchasing and that you're not being pushed around by products and advertisements that you might see. Make sure you decide specifically what you want to purchase and avoid deviating from that plan. In time, you'll be able to shop around in a way that isn't impulsive. But until you get better spending habits established, it's best to never deviate from intentional expenses.</p> <h2>4. Put Potential Purchases Through a Litmus Test</h2> <p>There will be gray areas that come up regarding whether or not you're being impulsive or if a purchase is actually necessary or beneficial in some way. A good way to figure that out is to come up with a litmus test in the form of a few questions that you can use to figure out whether or not you really need to spend money on something.</p> <ol> <li>Is there room in the budget for it?<br /> &nbsp;</li> <li>Is the purchase redundant (do you already have the item or something similar to it)?<br /> &nbsp;</li> <li>Will it substantially improve your quality of life?<br /> &nbsp;</li> <li>Did you want or need this item before you were made aware of its existence?<br /> &nbsp;</li> <li>What really made you want the item (an ad, visual appeal, need, practical use, etc.)?</li> </ol> <p>These questions can help give you a clearer picture of why you might want to buy something and whether or not that purchase will benefit you in a way that justifies the amount of money needed to acquire it.</p> <h2>Be the One in Control</h2> <p>The underlying problem with impulse spending is that you end up losing control of your money. If products, services or advertisements are completely driving you to spend, then you'll never be able to stop, because those things will always be there. While it's true that those things have an informative impact (i.e. you see a product and can tell it's useful), the bulk of the decision should stem from your own needs and decisions. Thus, learning how to avoid impulse buys will go a long way in freeing up your financial situation and putting you back in control of your money. It's well worth the effort.</p> <p><em>How do you control impulse spending? Please share in comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/how-to-never-succumb-to-impulse-spending-again">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-10"> <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/10-dark-side-motivations-to-get-you-out-of-debt">10 Dark-Side Motivations to Get You Out of Debt</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/10-dumb-little-budgeting-mistakes-you-need-to-stop-making-today">10 Dumb Little Budgeting Mistakes You Need to Stop Making Today</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-sites-and-apps-to-help-you-track-your-spending-and-stick-to-your-budget">10 Sites and Apps to Help You Track Your Spending and Stick to Your Budget</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/10-big-expenses-you-can-easily-get-rid-of">10 Big Expenses You Can Easily Get Rid Of</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-have-an-above-average-life-for-below-average-prices">How to Have an Above-Average Life for Below-Average Prices</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Debt Management budgets impulse spending mindful spending spending Thu, 16 Oct 2014 09:00:08 +0000 Mikey Rox 1236048 at http://www.wisebread.com Best Money Tips: Ways to Deal With Student Loan Debt http://www.wisebread.com/best-money-tips-ways-to-deal-with-student-loan-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-ways-to-deal-with-student-loan-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/sad-graduate-student-177704055-small.jpg" alt="sad graduate student" title="sad graduate student" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found some awesome articles on dealing with student loan debt, feeling less stress, and money moves for the fall.</p> <h2>Top 5 Articles</h2> <p><a href="http://www.thesimpledollar.com/15-ways-to-deal-with-student-loan-debt/">15 Ways to Deal with Student Loan Debt</a> &mdash; To deal with student loan debt, take advantage of your grace period and understand your loans.[The Simple Dollar]</p> <p><a href="http://www.marcandangel.com/2014/10/05/11-ways-to-let-go-and-feel-less-stress/">11 Ways to Let Go and Feel Less Stress</a> &mdash; Saying less and breathing more when you are angry can help you feel less stress. [Marc and Angel Hack Life]</p> <p><a href="https://www.mint.com/blog/planning/5-money-moves-for-fall-100714/">5 Money Moves for Fall</a> &mdash; Now that fall is here, start saving for the holidays and shopping strategically. [MintLife Blog]</p> <p><a href="http://timemanagementninja.com/2014/10/the-4-key-components-of-every-time-management-system/">The 4 Key Components of Every Time Management System</a> &mdash; Every time management system has a todo list and calendar.[Time Management Ninja]</p> <p><a href="http://moneyplansos.com/why-getting-out-of-debt-is-so-hard/">Why Getting Out of Debt Is So Hard (and What to Do About It)</a> &mdash; The secret to getting out of debt is to not quit, keep trying! [MoneyPlan SOS]</p> <h2>Other Essential Reading</h2> <p><a href="http://outofyourrut.com/need-approach-life-mindset-student/">Why We Need to Approach Life With the Mindset of a Student</a> &mdash; Students have the mindset to learn new disciplines and ideas. [Out Of Your Rut]</p> <p><a href="http://www.lifehack.org/articles/communication/the-top-10-things-that-could-make-wedding-disaster.html">The Top 10 Things That Could Make a Wedding a Disaster</a> &mdash; Running out of food and having your guest list become out of control can make your wedding a disaster. [Lifehack]</p> <p><a href="http://www.dumblittleman.com/2014/10/5-things-complicates-lives.html">5 Things We All Do That Over Complicates Our Lives</a> &mdash; Taking pride in working hard may be over complicating your life. [Dumb Little Man]</p> <p><a href="http://www.popsugar.com/smart-living/Uses-Club-Soda-30394321">11 Extraordinary Uses for Ordinary Club Soda</a> &mdash; Did you know the minerals in club soda makes it better for plants than actual water? [PopSugar Smart Living]</p> <p><a href="http://parentingsquad.com/5-books-to-help-prepare-your-preschooler-for-her-education">5 Books to Help Prepare Your Preschooler for Her Education</a> &mdash; To help your preschooler prepare for their education, read the &quot;I Am&quot; series with him or her. [Parenting Squad]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> of <a href="http://www.wisebread.com/best-money-tips-ways-to-deal-with-student-loan-debt">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-11"> <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/how-one-college-graduate-paid-off-28000-in-three-years-on-a-30k-salary">How One College Graduate Paid Off $28,000 in Three Years on a $30K Salary</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/can-you-talk-to-your-friends-about-debt">Can you talk to your friends about debt?</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/your-interest-rates-are-about-to-go-up">Your Interest Rates Are About to Go Up</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-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</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-tricks-to-consolidating-your-debt-and-saving-money">5 Tricks to Consolidating Your Debt and Saving Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management best money tips debt loan student loans Thu, 09 Oct 2014 19:00:04 +0000 Ashley Jacobs 1230391 at http://www.wisebread.com How One Inspiring Saver Found True Love, Shook Off Debt Denial, and Paid Off $123,000 http://www.wisebread.com/how-one-inspiring-saver-found-true-love-shook-off-debt-denial-and-paid-off-123000 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-one-inspiring-saver-found-true-love-shook-off-debt-denial-and-paid-off-123000" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple-paying-bills-89654425-small.jpg" alt="couple paying bills" title="couple paying bills" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>American <a href="http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/">debt is on the rise</a>, up 3.8% from last year. We're carrying higher mortgage balances, more <a href="http://www.wisebread.com/5-strategies-to-wipe-out-your-credit-card-balance?ref=inarticleinarticle">credit card debt</a>, and significantly higher student loan burdens (which are up an astonishing 11.5% from last year).</p> <p>For students in particular, it's easy to overspend. The cost of college is staggering and, to make matters worse, few students come to campus prepared with financial literacy training. Both federal and private loans are readily available for most students, but so are a barrage of credit card offers. Credit is so easy to obtain for many students that, according to one recent survey, most college graduates are <a href="http://www.fidelity.com/inside-fidelity/individual-investing/college-grads-surprised-by-student-debt-level-exceeds-35000">shocked to discover how much debt they've racked up</a>.</p> <h2>A Young Dentist in Debt</h2> <p>Just ask Paul Amato, DDS at LeCuyer Amato Dentistry who, according to one <a href="http://money.msn.com/debt-management/debt-calculator.aspx">debt calculator</a> I ran his numbers through, owed over 85% of his first year take-home pay to creditors. &quot;When I finally sat down and looked at the numbers,&quot; he says, &quot;the interest was like a gut punch.&quot; Amato had finished dental school and had landed a well-paying job, but even so, the path he'd taken to get there had left him struggling with more debt than he could manage. (See also: <a href="http://www.wisebread.com/5-inspiring-people-who-each-paid-off-over-100000-in-debt?ref=seealso">5 Inspiring People Who Paid off Over $100,000 Each in Debt</a>)</p> <h2>Being in Debt Denial</h2> <p>Amato graduated with $120,000 in <a href="http://www.wisebread.com/can-borrowers-still-pay-off-their-student-loans-in-10-years?ref=inarticle">student loan debt</a> and and another $40,000 in <a href="http://www.wisebread.com/6-warning-signs-that-you-need-to-stop-using-your-credit-cards?ref=inarticle">credit card loans</a>. Shortly after graduation, he took on an additional $40,000 in auto financing. All told, his debt burden was 2.5 times that of his first year take-home pay and he didn't even have a mortgage to show for it. &quot;I had six credit cards,&quot; says Amato. &quot;I never added up how much I was paying on the cards. I just paid the minimum. I wasn't thinking much about the interest. I was really kind of careless.&quot;</p> <p>Looking back, Amato accepts he could have lived on his student loan disbursements alone. He didn't need the credit cards. &quot;I overdid it,&quot; he admits. &quot;I had friends who had money I didn't have and I wanted to hang out with them. I wanted to do the things they were doing.&quot; Amato also accepts that he could have bought a less expensive car. &quot;At first I thought it wasn't a big deal. Then I saw it was a huge deal. I was paying a lot in interest. I paid that car off and I kept it for eight years. But now I have a more practical car.&quot;</p> <p>Amato admits to <a href="http://www.wisebread.com/6-harmful-money-beliefs-that-are-keeping-you-poor?ref=inarticle">being in denial about the debt</a> he was accruing until he and his then girlfriend (and now wife), Rebecca, got serious, moved in together, and started talking about their money. &quot;She noticed that I had a lot of credit card bills coming in,&quot; says Amato. &quot;That's when we sat down and started looking at everything together.&quot;</p> <h2>Getting Motivated</h2> <p>&quot;Rebecca had no debt and she always paid everything off. She was a buy-what-you-can-afford kind of gal,&quot; says Amato. &quot;She wanted me to get my finances in order before we committed to a relationship.&quot; (See also: <a href="http://www.wisebread.com/say-no-7-reasons-why-you-shouldnt-get-married-if-youre-in-debt?ref=seealso">Say No! 7 Reasons You Shouldn't Get Married if You're in Debt</a>)</p> <p>Every month, the two would sit down and review Amato's balance sheet. It quickly became clear that he'd need additional income to make a dent in his debt. &quot;I filled in wherever I could,&quot; says Amato. &quot;I took hygienist shifts. I'd drive one to two hours away to take an extra job. If there was somewhere I could work, I worked.&quot; (See also: <a href="http://www.wisebread.com/what-20-somethings-can-do-about-credit-card-debt?ref=seealso">What 20-Somethings Can Do About Credit Card Debt</a>)</p> <p>In addition to increasing his income, Amato also lowered his living expenses. &quot;We lived on the cheap,&quot; he says. &quot;We lived in a modest apartment in a questionable part of town. We didn't have cable. We rarely went out.&quot;</p> <p>It wasn't always easy, Amato admits. &quot;I wanted to spend my money every time I got paid. Rebecca really kept me rooted in reality. She'd say, 'You can have those things one day but now is not the time.'&quot; (See also: <a href="http://www.wisebread.com/10-dark-side-motivations-to-get-you-out-of-debt?ref=seealso">10 Dark-Side Motivations to Get You Out of Debt</a>)</p> <h2>Digging Out of the Hole</h2> <p>Amato tackled his debt by paying the minimum payments on all debts except his highest interest loan. &quot;I paid off the credit card with the highest rate first and then I kept going, in order,&quot; he says. &quot;Then came the car loan and eventually I started doubling up on my student loan payments.&quot;</p> <h3>Reset Goals</h3> <p>Life isn't always a linear journey, though, and Amato reprioritized his financial goals several times along the way. After making his final credit card payment, Amato bought the engagement ring. A few years later the Amatos bought their first house. The big purchases didn't re-open the door to bad habits, though. &quot;Ever since I paid off the credit card debt, I've been much more savvy about other bills like car or home-owners insurance. I'm a much better saver.&quot; (See also: <a href="http://www.wisebread.com/how-to-trick-yourself-into-better-credit-card-behavior?ref=seealso">How to Trick Yourself Into Better Credit Card Behavior</a>)</p> <h3>Refinance</h3> <p>Amato also consolidated his federally-funded student loans. The rate on his private education debt was substantially higher so he kept those loans separate, and paid them off as early as he could. During those early years, as Amato's income grew, he kept his standard of living low, and paid as much toward his debts as he could.</p> <p>&quot;I became even more Type-A. I could see the light at the end of the tunnel,&quot; says Amato. &quot;If I could run a tighter ship, I could be more profitable.&quot; It was a philosophy that helped Amato with his personal finances, but also within his professional practice.</p> <h3>Shift to Retirement</h3> <p>Eventually, the Amatos eased off their student loan and mortgage repayment strategies and focused more on boosting retirement savings. Today Amato still has $80,000 in student loans and a substantial mortgage balance to contend with. They've since filled the house with 18-month-old twin boys and, because of the frugal choices they made early on, were able to put Rebecca through dental school without taking on any additional debt. &quot;It helped that we didn't have to re-buy books or equipment,&quot; says Amato. &quot;That made her cost less than when I had gone to school.&quot;</p> <h2>Looking Back</h2> <p>&quot;Paying off that credit card debt really gave me a lot of perspective about living beneath my means,&quot; says Amato. &quot;Without that debt I can take life into my own hands and work toward my long-term goals. I want financial freedom. I don't want to be constrained by debt.&quot;</p> <p>What Amato learned is that financial freedom isn't about how much money you make. It's really about how you manage what you have. &quot;I made some poor decisions early on,&quot; he says, &quot;but fortunately I was able to learn from them.&quot;</p> <p><em>Have you retired a significant debt? Tell us your story in comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/alaina-tweddale">Alaina Tweddale</a> of <a href="http://www.wisebread.com/how-one-inspiring-saver-found-true-love-shook-off-debt-denial-and-paid-off-123000">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-12"> <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/10-tricks-to-save-money-with-credit-cards">10 Tricks to Save Money with Credit Cards</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/8-things-people-with-good-credit-never-do">8 Things People With Good Credit Never Do</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/watch-out-for-new-credit-card-policies-chase-card-holders-already-hit-with-fees">Watch out for new credit card &quot;policies&quot; - CHASE card holders already hit with fees</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/do-we-really-need-help-in-getting-more-debt">Do we really need help with getting more debt?</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-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management credit cards debt debt management debt stories paying debt Fri, 03 Oct 2014 13:00:06 +0000 Alaina Tweddale 1226229 at http://www.wisebread.com Why One-Third of Americans Haven't Saved for Retirement http://www.wisebread.com/why-one-third-of-americans-havent-saved-for-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-one-third-of-americans-havent-saved-for-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/old-man-frustrated-bills-179813059-small.jpg" alt="old man frustrated" title="old man frustrated" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>More than a third of <a href="http://www.bankrate.com/finance/consumer-index/survey-36-percent-not-saving-for-retirement.aspx">Americans haven't started saving for retirement</a>, according to a recent report by Bankrate.com. Interestingly, it's not just young workers who aren't banking their bucks. The survey found that more than a quarter of those aged 50 &ndash; 64 haven't started saving for retirement, either. (See also: <a href="http://www.wisebread.com/10-easy-ways-to-supercharge-your-retirement?ref=seealso">10 Easy Ways to Supercharge Your Retirement</a>)</p> <p>While it's true that the current generation of retirees and pre-retirees are more likely to have a pension plan to cushion their financial burden, the Bankrate.com results point to a staggering conclusion. A large number of Americans &mdash; regardless of age &mdash; are unprepared to take financial responsibility for retirement. So, what's holding us back?</p> <h2>1. We're Living Paycheck to Paycheck</h2> <p>One-third of American households <a href="http://www.brookings.edu/about/projects/bpea/papers/2014/wealthy-hand-to-mouth">live paycheck to paycheck</a>. Of those families, 66% are middle class and have a median income of $41,000.</p> <p>It's difficult to save for retirement when disposable income is limited, but if you manage to do it, most employers offer a match on your 401(k) contributions. An employer match can add a substantial boost to your retirement account balance. (See also: <a href="http://www.wisebread.com/trick-yourself-into-saving-more-of-your-biweekly-paychecks?ref=seealso">Trick Yourself into Saving More of Your Biweekly Paychecks</a>)</p> <h2>2. We Procrastinate</h2> <p>It's tempting to put big decisions off and wait for the next big raise, until the next bill is paid off, or until the kids are through college. The problem, <a href="https://time.com/money/3265108/retirement-savings-crisis-solution/">as defined by one financial journalist</a>, is that savings levels aren't all that different between new workers and those already retired.</p> <p>Putting an end to procrastination can have a monumental effect on your end balance. According to recent research from the Employee Benefit Research Institute, 401(k) participants who consistently contributed to their accounts over the five years ending in 2012<a href="http://www.ebri.org/pdf/PR1089.Longit.31July14.pdf"> saw a healthy 6.8% average annual uptick</a> in their collective balances, even despite a 34.7% drop during the financial crisis of 2008.</p> <p>Further, the earlier you start, the easier it is to build substantial savings. In his analysis of the Bankrate.com poll results, Greg McBride, CFA and Bankrate's chief financial analyst says, &quot;the power of compounding is most evident over long periods of time, and having a longer period of time for your retirement savings to grow and compound makes today's contributions much more impactful.&quot; (See also: <a href="http://www.wisebread.com/this-is-why-you-cant-postpone-planning-for-your-retirement-and-how-to-start?ref=seealso">This is Why You Can't Postpone Planning for Your Retirement</a>)</p> <h2>3. We Don't Have a Retirement Plan at Work</h2> <p>Even if you don't have access to an employer-sponsored retirement savings option, don't let that keep you from having a plan of your own. According to the Employee Benefit Research Institute study noted above, those with a plan are 72% likely to feel very or somewhat confident about their prospects for retirement. Those without a plan, meanwhile, are 69% more likely to feel not at all or not too confident about retirement.</p> <p><a href="http://money.cnn.com/2014/04/01/pf/expert/retirement-savings/">Those without a plan</a> can benefit from several plans such as the traditional IRA, Roth IRA, MyRA, or a traditional brokerage account.</p> <h2>4. We're in Denial</h2> <p>Some workers assume they can maintain their current workload for the remainder of their lives and so choose to forego or limit retirement savings. While later-life retirements are increasing in frequency, the assumption that one can work until death doesn't account for uncontrollable factors like an unexpected job loss or medical issue.</p> <p>Even among those who are saving, many are not saving enough. In <a href="http://www.cnbc.com/id/101480388%23">a recent article</a>, one finance giant CEO tagged the average retirement contribution level at 6% while suggesting that 10% would be better. (See also: <a href="http://www.wisebread.com/6-harmful-money-beliefs-that-are-keeping-you-poor?ref=seealso">6 Harmful Money Beliefs That Are Keeping You Poor</a>)</p> <p>Low or nonexistent contribution levels indicate that many workers aren't taking the time to figure out just <a href="http://www.wisebread.com/how-much-money-will-you-need-to-retire">how much they'll need in retirement</a>. Being aware of your end goal number is the first step to getting financially prepared for retirement &mdash; at every age.</p> <p><em>Are you among the one-third of Americans who haven't saved for retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/alaina-tweddale">Alaina Tweddale</a> of <a href="http://www.wisebread.com/why-one-third-of-americans-havent-saved-for-retirement">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-13"> <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/this-is-why-you-cant-postpone-planning-for-your-retirement-and-how-to-start">This Is Why You Can&#039;t Postpone Planning for Your Retirement (And How to Start)</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/the-step-by-step-guide-to-rolling-over-your-401k">The Step-by-Step Guide to Rolling Over Your 401(k)</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/7-occasions-when-you-should-definitely-hire-a-financial-advisor">7 Occasions When You Should Definitely Hire a Financial Advisor</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-dumb-401k-mistakes-smart-people-make">5 Dumb 401(k) Mistakes Smart People Make</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/6-tax-moves-you-need-to-make-right-now">6 Tax Moves You Need to Make Right Now</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Retirement 401(k) retirement saving Tue, 23 Sep 2014 13:00:06 +0000 Alaina Tweddale 1218886 at http://www.wisebread.com 8 Dark-Side Motivations to Start Saving http://www.wisebread.com/8-dark-side-motivations-to-start-saving <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-dark-side-motivations-to-start-saving" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/business-couple-flirting-480187847-small.jpg" alt="business couple flirting" title="business couple flirting" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>From ruling the galaxy to getting out of debt, embracing the dark side can be a powerful tool. Sure, the motivations may be impure, but if it's monetary results you're after, maybe that's okay. (See also: <a href="http://www.wisebread.com/10-dark-side-motivations-to-get-you-out-of-debt?ref=seealso">10 Dark Side Motivations to Getting Out of Debt</a>)</p> <p>So embrace your demons and get ready to stockpile some cash with these eight ways you can use the darker side of your nature as a driving force to save more money.</p> <h2>1. To Impress Someone</h2> <p>Whether it's a potential new partner, or just someone you really want to one-up, having a nice wad of cash in the bank can be a great way to get noticed. You can't just casually drop &quot;hey, I've got $30k in my savings account&quot; into conversation, though. You'll need to find more underhand ways to do it. You could check your balance, get a receipt, and just happen to leave it in a place someone else could see it. Or, you could ask about investment opportunities for your enormous rainy day fund. This works well at those high school reunions.</p> <h2>2. To Get Laid Off</h2> <p>Most people don't want to get fired. These days, jobs are tough to get in many industries, and just as tough to keep. Why on earth would anyone want to get laid off, or fired?</p> <p>Well, some people do have <a href="http://www.wisebread.com/how-to-get-laid-off-a-step-by-step-guide">reasons for wanting to leave a job</a>. They may genuinely hate it, but leaving is not as lucrative as being kicked out, with many companies offering handsome severance packages. If this is your plan, you need to have some savings as a safety net. When the time comes, you can use it as buffer until you find work. A word of warning though: be sure to check the redundancy policy of the job you plan to &quot;leave.&quot; Some companies are making cuts everywhere, and that includes termination benefits.</p> <h2>3. To Get Revenge</h2> <p>It may be a dish best served cold, but it can also be an expensive one. If you really want to hit someone where it hurts, you are going to have to put down some cash to make it happen. Revenge can be as simple as a college prank, or as complicated as the plot from a movie. It could be something that takes five minutes to plan or several months. Depending on the level of vengeance you're aiming for, you may need to put away a large sum of money to finance your cunning plan.</p> <h2>4. To Spy on Someone</h2> <p>Cheating spouse? Co-worker embezzling money? Neighbor's dog using your lawn as a toilet? Whatever your reason, you'll need a nice sum of money if you want to get hard evidence. This could involve hiring a private investigator, setting up a substantial hidden camera system, and even wearing recording devices (check the legality of this in your state first). However you plan to spy, you'll need to bankroll your operation. Start saving now &mdash; some of these people will only accept cold, hard cash.</p> <h2>5. To Get Plastic Surgery</h2> <p>Some would say that improving yourself is very worthwhile, and I tend to agree. Are breast implants, tummy tucks, and lip injections really that bad? Well, it all depends. If you're saving for those and letting your kids go hungry, then yes, that's bad. If everyone is taken care of, and this is something you'd rather do than buy a new car or go on vacation, then more power to you.</p> <h2>6. To Annoy Your Neighbor</h2> <p>Have you ever watched a show about battling neighbors? It happens often, and it can go from the silly to the downright bizarre. Case in point &mdash; the Bank of Manhattan and the Chrysler building. Both wanted to be taller than the Woolworth back in 1929. It looked like the Bank of Manhattan won the battle, but the war went to the Chrysler building a few months later, when a spire was secretly assembled on its roof. From building bigger fences, to painting houses brighter colors, suburban neighbors have also battled for years. If you want to get into it, you'll need the money to compete.</p> <h2>7. To Get Divorced</h2> <p>Maybe you're in a relationship that is just barely hanging on for life. You may be tied to the other person financially, and cannot separate until you have the money to do so. This is where saving money comes in, but you will have to be careful how you do it. You cannot just squirrel away money from your partner, and not declare it. But if you do it legally, and with full disclosure, saving money now is the best way to ensure you can finally start down the road to unwedded bliss. As Louis CK has so rightly said, don't commiserate with people going through this; no good marriage ended in divorce.</p> <h2>8. To Do Nothing</h2> <p>Some people have a dream that is neither productive, nor inspiring. They simply want to save enough money so that they don't have to work again. Or do anything else remotely connected to work, if truth be told. There's a famous quote from <a href="http://www.wisebread.com/7-secrets-about-life-and-career-from-office-space">Office Space</a> that sums it up, uttered by the protagonist Peter Gibbons, when asked what he'd do with a million dollars: &quot;I would relax&hellip; I would sit on my ass all day&hellip; I would do nothing.&quot;</p> <p>Of course, his friend Lawrence counters that with, &quot;Well, you don't need a million dollars to do nothing, man. Take a look at my cousin; he's broke, don't do sh*t.&quot; Sorry, Lawrence, you do need money. A lot of money. Doing nothing may not cost a lot, but you still need to eat, pay bills, and live a somewhat comfortable existence. Start saving.</p> <p><em>So, those are eight dark side motivations, but what are yours? What dark things inspire you to save money? Let us know in comments below!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/8-dark-side-motivations-to-start-saving">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-14"> <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/10-dark-side-motivations-to-get-you-out-of-debt">10 Dark-Side Motivations to Get You Out of Debt</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/the-most-valuable-thing-debt-takes-from-you-isnt-money-its-this">The Most Valuable Thing Debt Takes From You Isn&#039;t Money — It&#039;s This</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/debt-free-living-is-attainable-if-you-want-it-you-can-have-it">Debt-Free Living IS Attainable: If You Want It, You Can Have It</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-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</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/debt-repayment-is-not-an-expense">Debt repayment is not an expense</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Debt Management debt goals motivation saving Mon, 15 Sep 2014 17:00:05 +0000 Paul Michael 1209316 at http://www.wisebread.com 8 Organizations That REALLY Can Help You With Your Debt http://www.wisebread.com/8-organizations-that-really-can-help-you-with-your-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-organizations-that-really-can-help-you-with-your-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/debt-177716803-small.jpg" alt="debt" title="debt" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Pinpointing the exact moment you got over your head in debt may be tricky. But if you suspect you're never going to pay off your loans without a drastic change in circumstances, then you are likely stuck in a bad spot.</p> <p>You may need to seek outside help, and that means being careful to avoid shady companies that promise to make you debt-free quickly and painlessly. Consider tapping the capabilities of these organizations to do a financial turnaround.</p> <h2>1. Non-Profit Credit Counseling Agencies</h2> <p>If you're struggling and unsure about your financial future, a reputable non-profit credit counseling agency may be able to help. Visit the <a href="http://www.nfcc.org/FirstStep/firststep_01.cfm">National Foundation for Credit Counseling (NFCC)</a> website to find a NFCC member agency licensed in your state. There are local, regional, and national agencies that offer face-to-face, telephone, and online counseling.</p> <p>Generally, credit counselors at non-profit agencies develop a debt management plan and support you in its implementation. You give them a list of your obligations (outstanding balances, monthly payments, interest rates, late payment amounts, etc.). They negotiate with lenders on your behalf to reduce interest rates and waive penalties; otherwise, you may continue to make extremely slow or negligible progress in reducing balances as much of your money goes to fees and interest charges.</p> <p>At the same time, they should work with you to develop a budget that includes making regular payments to eliminate debt over time, often three to five years. This can mean making monthly payments to the agency, who then disburse funds to creditors, as well as receiving guidance on developing better money habits to avoid future debt.</p> <p>Note that even though services are provided by non-profit agencies, there are upfront fees for plan set-up along with monthly fees. Review proposals to make sure that these expenses won't exceed your savings associated with the debt management plan. And get a signed agreement before you move forward.</p> <h2>2. Federal Trade Commission (FTC)</h2> <p>The FTC has valuable tips on managing credit and dealing with debt overload at its <a href="http://www.consumer.ftc.gov/articles/0150-coping-debt">consumer website</a>. For example, you can learn about vetting a credit counseling agency with the Attorney General's office in your state.</p> <p>Plus, the difference between a debt management plan and a debt settlement plan is explained. Briefly, debt management involves a plan to pay off debt in a reasonable manner; debt settlement requires you to default on loans so that the debt-help organization can then attempt to negotiate payment of pennies on dollars owed. Creditors may refuse to deal with the debt settlement firm, demanding full payment plus late fees. As a result, this approach often worsens your situation.</p> <p>Also at the FTC site, you can access a budget worksheet. Complete the form to help you see where you might eliminate expenses and accelerate paying down debt.</p> <h2>3. Credit Reporting Agencies</h2> <p>Your local credit reporting agency, along with national ones (Equifax, Experian, Trans Union), can be allies in making sure your <a href="http://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports">credit information is accurate</a>.</p> <p>Correcting errors may help improve your credit score. As a result, you may be able to negotiate lower interest rates and insurance premiums, leaving you with more money to apply to loan balances.</p> <p>The idea here is not to wrangle removal of negative-but-true items but to remedy any problems. Start by <a href="http://www.fdic.gov/consumers/consumer/ccc/reporting.html">ordering and reviewing your reports</a>. Then deal with inaccuracies through communications with the reporting agency and information provider.</p> <h2>4. Creditors</h2> <p>Going to your creditors may seem like an odd way to get out of debt. But you may be able to negotiate lower interest rates and get fees waived directly, rather than through a third-party agency. Be prepared when you make calls to discuss possibilities (such as proposing a reasonable interest rate) based on current offers for which you qualify.</p> <p>If you decide to take this approach, make sure that you can meet the requirements of a revised payment schedule. <a href="http://www.extension.org/pages/16134/deciding-which-bills-to-pay-first#.U8lj_fldUlk">Creditors may be lenient</a> with those who demonstrate earnestness to repay debts but show less mercy to those who renege repeatedly on agreements.</p> <h2>5. StudentLoans.gov</h2> <p>The <a href="https://studentloans.gov/myDirectLoan/index.action">Student Loans website</a> run by the federal government offers a wealth of information on ways to manage your debt. You can learn how to avoid default, get your loans forgiven through public service or cancelled through other methods, and consolidate your federal education loans.</p> <p>Loan consolidation and income-based repayment plans may be useful if you want to lower your monthly payments, although you may pay more interest over the life of your loan.</p> <h2>6. Private Student Loan Consolidators</h2> <p>Consolidators may be able to help you manage debt, if you have multiple private student loans. For example, Wells Fargo offers <a href="https://www.wellsfargo.com/student/private-loan-consolidation/">consolidation of private student loans</a> and the <a href="http://www.studentloannetwork.com/consolidation/private-student-loan-consolidation.php">Student Loan Network</a> provides resources for consumers looking for this service.</p> <p>Through consolidation, you eliminate the need to deal with multiple organizations. You may be able to save by lowering your interest rate or getting a fixed rate, rather than a variable one.</p> <p>Even if you are not able to get a better rate, you may be able to lower your monthly payments so that you are better able to handle debt obligations. Like federal student loan consolidation, this approach may result in higher interest charges over the life of the loan (by extending the term) but could provide short-term relief.</p> <h2>7. National Institutes of Health</h2> <p>Those with doctoral degrees in a health profession may be eligible to receive loan forgiveness of up to $35,000 per year if they work in medical research after graduation. Check out the <a href="http://www.lrp.nih.gov/index.aspx">Loan Repayment Program (LPR)</a> on the National Institutes of Health website for details.</p> <h2>8. The United States Department of Justice</h2> <p>The Department of Justice maintains a list of approved <a href="http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm">debtor education providers</a> and <a href="http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm">credit counseling agencies</a> on the <a href="http://www.justice.gov/ust/eo/ust_org/index.htm">United States Trustee Program &amp; Bankruptcy</a> section of its website. You can also find information on avoiding foreclosure through this site.</p> <p>Much of this information is focused on bankruptcy but could be useful in understanding processes for dealing with debt and avoiding scams relating to getting out of debt.</p> <p><em>Have you worked with any of these organizations to deal with debt? Or have you chosen a different path? Tell us what worked for you in the comments.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/8-organizations-that-really-can-help-you-with-your-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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