Debt Management http://www.wisebread.com/taxonomy/term/7681/all en-US How to Manage Debt While Unemployed http://www.wisebread.com/how-to-manage-debt-while-unemployed <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-manage-debt-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/iStock_000050909676_Large.jpg" alt="trying to manage debt while unemployed" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you're unemployed, it can be harder than ever to manage your debt. But with the right strategy, you can stop worrying about debt and start focusing on finding a new job. Here's how to get a handle on your debt during unemployment:</p> <h2>Assess Your Assets</h2> <p>First consider all assets and possible sources of income available to you. Can you accept part-time work, sell belongings on eBay, or take a local babysitting gig to make a little extra cash for the necessities? This can make it easier to stay afloat and make your minimum monthly payments on-time. And if you haven't already done so, visit the <a href="http://www.dol.gov/">U.S. Department of Labor</a> to apply for unemployment benefits.</p> <h2>Create a Survival Budget</h2> <p>Determine what your basic living expenses are, such as food, mortgage, utilities, transportation, insurance, and medical costs. Create a budget that details every single dime you spend each month so that you can determine what can be cut during this time. Once you find new employment, try to stick to this survival budget so that you have extra funds available to pay down debt or invest in an emergency savings fund.</p> <p>Assess your remaining costs to determine if there is anything that can be cut. For instance, try reducing your credit card and cable bills, forego the land line, cancel any magazine subscriptions, cut back on entertainment expenses and streaming services, and reduce or eliminate costly habits (such as drinking, smoking, and eating out). Look for other creative ways to save money, such as relying on public transportation and finding easy ways to cut back on utilities. (See also: <a href="http://www.wisebread.com/10-ways-to-save-money-when-you-are-unemployed?ref=seealso">10 Ways to Save Money When You Are Unemployed</a>)</p> <h2>Set Priorities</h2> <p>Prioritize your debts. Determine which bills need to be paid first, once your basic living expenses are taken care of. Secured credit accounts, like credit cards, loans, and car payments should be paid next.</p> <p>The goal is to preserve your savings, so don't try paying off any debts early at this point. Make only the minimum payments on your credit cards and avoid using any sort of credit for as long as possible. Once you find new employment, you can start working on paying down your debts as quickly and efficiently as possible.</p> <p>If you have a federally-backed student loan, there are a number of payment options available during tough times. Often, the loans can be deferred until you find work again. Check with the <a href="http://www.ed.gov/">U.S. Department of Education</a> for more information.</p> <h2>Negotiate With Creditors</h2> <p>Speak with your mortgage lender and credit card issuers at the first sign of trouble. If you wait to contact them until after you've already missed a payment, it's less likely creditors will work with you to find a reasonable solution.</p> <p>Your creditors may be able to help you ease loan terms, reduce your monthly payments, or even put your payments on hold for a short period of time. While there are no guarantees that they will work out an arrangement with you, it's worth a shot.</p> <h2>Pursue Alternatives</h2> <p>There are alternative options, such as debt management, debt settlement, debt consolidation loans, and bankruptcy. Speaking with a <a href="https://www.nfcc.org/">credit counselor</a> can provide you with precise information on the options available to you. (See also: <a href="http://www.wisebread.com/11-steps-to-take-when-bankruptcy-is-your-only-option?ref=seealso">11 Steps to Take When Bankruptcy Is Your Only Option</a>)</p> <p><em>Do you have other tips for dealing with debt when you're unemployed? Please share your thoughts 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/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/how-to-manage-debt-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-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-do-a-one-day-do-it-yourself-bankruptcy">How to Do a One-Day, Do-It-Yourself Bankruptcy</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/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</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-deal-with-collection-agencies">How to Deal With Collection Agencies</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-debt-lessons-from-darth-vader">5 Debt Lessons From Darth Vader</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-its-time-to-destroy-debt-start-with-a-goal">When It&#039;s Time to Destroy Debt, Start With a Goal</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Creditors negotiating out of work Paying Off Debt survival budget unemployed Mon, 02 May 2016 10:00:11 +0000 Andrea Cannon 1700680 at http://www.wisebread.com 6 Ways Life is Wonderful When You're Debt-Free http://www.wisebread.com/6-ways-life-is-wonderful-when-youre-debt-free <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-life-is-wonderful-when-youre-debt-free" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_carefree_smile_000074865831.jpg" alt="Woman learning ways life is wonderful when debt-free" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Some people think debt is the norm rather than the exception. To each his own. Just know that this type of mindset can become dangerous, especially if you develop the habit of financing anything and everything.</p> <p>Credit cards and other loans can put what you want within financial reach, but a life without debt can be rewarding. Here are six ways life is frickin' awesome when you're not burdened by a negative net worth.</p> <h2>1. You Have the Freedom to Work Less</h2> <p>The more debt you have, the more you have to work to keep up with monthly payments. Whether it's a house payment, a car payment, or credit cards, debt holds your freedom hostage and keeps you stuck in a career or job you don't like. Think of how great life could be if you had fewer bills. Rather than working a 40- or 50-hour week, you might get by working only 20 or 30 hours a week. With fewer financial pressures, you can quit a high-stress job and find satisfying work, although you might earn less.</p> <h2>2. You Can Retire While You're Still Young</h2> <p>Even if you know the importance of early retirement planning, debt can limit how much you stash for the future. Eliminating needless debt and reducing monthly expenses frees up disposable cash, allowing you to grow your retirement account faster. A sizable account might be the difference between working into your 60s and retiring young while you're still healthy and energetic. And that's not even considering how good the &quot;everybody envies me&quot; factor is gonna feel.</p> <h2>3. You Can Finally Have a &quot;Real&quot; Savings Account</h2> <p>Not only can debt-free living boost your retirement account, there's also an opportunity to grow your personal fund. Imagine what you could do with a &quot;real&quot; savings account. I'm not talking about $500 or $1,000, but rather tens of thousands of dollars. This is money that can be used for an emergency, home improvements, investments, or a good time. You can take a much-needed (and deserved; do you, boo!) vacation or deal with home repairs without relying on a credit card.</p> <p>If you're struggling to build your personal account, be honest and consider whether your lack of savings has anything to do with debt payments eating up your extra cash. If you could eliminate $1,000 a month in debt payments (between credit cards, student loans, and automobile loans), you could save $12,000 in just one year.</p> <h2>4. You Will Become a Smarter Spender</h2> <p>I've learned something from my own experience with debt: It is easier to accumulate new debt when I already have debt. Whenever I have a zero balance on my credit card, I'm more cautious and conscious of how I spend my money and use the card. I'll second-guess or rethink the smallest purchases. It doesn't matter if it's only $5 or $10, I'll wait until I have cash to avoid using the card. But the moment I give in and use the card, I stop second-guessing myself and I continue using the card.</p> <p>I've had debt discussions with others and found that some people feel the same. Maybe it's just our experiences, or maybe there's a connection between existing debt and new debt. Either way, <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt">getting rid of debt</a> can make you more aware of your spending habits. Debt elimination can be a long process. Reflecting on the effort it took to become debt free (and the benefits) is motivation to remain debt free.</p> <h2>5. You Will Experience Less Financial Anxiety</h2> <p>Debt keeps you enslaved to a bank. And sometimes, the amount you owe can heighten your anxiety level. This might be the case if payments stretch your budget beyond a comfortable limit. If you get into hot water, you could lie awake worrying about late payments, a damaged credit score, or collection calls. On the other hand, when you live within your means and don't rely on financing, you enjoy an inner calm and better financial security. When you own your stuff outright, you don't have to worry about anybody taking your items, unless, of course, you fail to pay taxes on your home or car. Then, well, you better hide.</p> <h2>6. You Don't Have to Pay to Borrow</h2> <p>One of the best things about avoiding debt is that you avoid interest. Interest is the cost of borrowing, and most banks charge some form of interest when you take out a loan or use a credit card. The longer you carry the balance, the more interest you pay, which can add up to hundreds or thousands of dollars depending on the amount financed.</p> <p>Borrowers with superb credit may qualify for <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases">0% financing</a> for furniture, credit cards, or automobiles. But these promotions are short-lived and only beneficial if you pay off the balance during the introductory rate period. If not, interest kicks in. In the case of financing furniture, if you miss a payment or don't pay off the balance during the promotion period, you could end up paying retroactive interest. All this equates to extra money you're spending for which you have nothing to show. A fool's game, for sure. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">When to Use a 0% Balance Transfer to Pay Off Credit Card Debt</a>)</p> <p><em>What would you do if you were debt free? Travel? Retire? Throw the party to end all parties? Let's talk 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/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/6-ways-life-is-wonderful-when-youre-debt-free">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/goal-setting-getting-out-of-debt-once-and-for-all">Goal Setting: Getting Out of Debt Once and For All</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/beyond-debt-free-getting-by-in-the-new-economy">Beyond Debt-Free: Getting By in the New Economy</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/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">8 Signs You&#039;ve Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; 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/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> Debt Management Lifestyle borrowing debt free early retirement financial freedom net worth savings Tue, 19 Apr 2016 10:30:10 +0000 Mikey Rox 1691580 at http://www.wisebread.com 12 Easy Ways to Avoid Student Loan Debt http://www.wisebread.com/12-easy-ways-to-avoid-student-loan-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-easy-ways-to-avoid-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/iStock_000070282971_Large.jpg" alt="avoiding student loan debt" title="" class="imagecache imagecache-250w" width="250" height="126" /></a> </div> </div> </div> <p>College awaits, but the shared dilemma all students face is agonizing. Should you go to college and let loans pick up the tab for the ever-rising cost of tuition? Or, join the workforce directly out of high school and risk earning far less than a college graduate? Decisions, decisions.</p> <p>According to the National Center for Education Statistics (NCES), with a bachelor's degree, <a href="https://nces.ed.gov/fastfacts/display.asp?id=77">you'll make 62% more</a> than you will with a high school diploma. Or, with a bachelor's you'll make $48,500 a year, versus $30,000 a year with a high school diploma.</p> <p>The high school grad who doesn't have a big chunk of change must weigh the cost of incurring debt against their projected earnings, and many have opted to risk the debt. Nationwide, <a href="http://www.marketwatch.com/story/every-second-americans-get-buried-under-another-3055-in-student-loan-debt-2015-06-10">student loan debt is rising</a> at the rate of $2,726 per second, with a cumulative tab at about $1.3 trillion.</p> <p>But why does debt have to be the theme of a post-graduate life? You <em>can </em>go to college and avoid debt. Here's how.</p> <h2>1. Grants</h2> <p>Unlike scholarships, grants are based on your Expected Family Contribution (EFC) and financial need. Fill out your free application for Federal Student Aid (FAFSA) as early as you can. Grants from schools go to those who need them the most and those who apply for aid the earliest.</p> <p>You may be eligible for the Pell Grant, which the federal government awards to 10 million students a year. You may also be eligible for state grants: the Federal Supplemental Educational Opportunity Grant (FSEOG), the Teacher Education Assistance for College and Higher Education (TEACH) grant, as well as grants based on your ethnicity.</p> <h2>2. Consider Crowd-Sourcing</h2> <p>There are now websites specifically set up to facilitate crowd-sourced funding for students to avoid loans, or to pay off loans. You'll do volunteer work in exchange for crowd-sourced funds, for example. Several options here are <a href="http://www.zerobound.com/">zerobound</a> and <a href="http://www.sponsorchange.org/">SponsorChange</a>.</p> <h2>3. Score Scholarships</h2> <p>Have you been a good student? Have you done extracurricular activities, excelled in sports, or are you willing to prove you're worthy of a scholarship? There are so many of these available that you can bet there's something for you &mdash; whether it's a $500 <a href="http://www.excel-university.com/scholarship/">accounting scholarship</a> or a $1,000 <a href="http://www.bulkofficesupply.com/scholarships-in-new-york">teaching, art, or entrepreneurial scholarship</a>. Sites such as <a href="http://www.fastweb.com/">Fastweb</a> and <a href="https://www.scholarships.com/">Scholarships.com</a> offer scholarship databases and information. The key here is to look into as many as you can and work hard at getting them.</p> <h2>4. Check Out Work-Study Options</h2> <p>If you qualify for federal financial aid, you may qualify for the Federal Work-Study Program. Work-study will gain you experience in your field of choice and will pay you to go to school, whether you're a part-time or full-time student. These positions get snatched up quickly, so check with your school's financial aid office as soon as your enrollment application is accepted.</p> <h2>5. Work a Part-Time Gig</h2> <p>Although this is likely to prolong the amount of time you spend in college, it will also lessen your debt. Consider looking into what the <a href="http://www.wisebread.com/find-a-side-gig-at-these-4-best-micro-jobs-sites">gig economy</a> has to offer. You could <a href="http://www.wisebread.com/how-to-earn-extra-money-driving-for-uber-or-lyft">drive for Uber or Lyft</a>, you could do freelance writing, accounting, clean houses, or you could be a virtual assistant through <a href="https://www.zirtual.com/">Zirtual</a>. Gigs offer flexibility, options, and a safety cushion. There are cons, such as lack of benefits, but at least you can make your own schedule. (See also: <a href="http://www.wisebread.com/100-ways-to-make-more-money-this-year?ref=seealso">100+ Ways to Make More Money This Year</a>)</p> <h2>6. Talk to Your Employer About Education Benefits</h2> <p>If you're employed, your employer may be able to pay for your college education. Talk to your employer, because the IRS allows them to write off any reimbursement they make to you for tuition, no matter how much it is. They will be especially inclined to do so if your field of study is directly related to your job. If you're unemployed, or your employer doesn't offer reimbursement, apply for a job that does. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso">15 Ways to Pay Back Student Loans Faster</a>)</p> <h2>7. Consider Community College</h2> <p>You'll be earning experience you can later apply toward your bachelor's at a community college. And on average, tuition and fees for <a href="http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-2005-06-2015-16">community college are $3,435</a>, while they're $32,405 for university. According to the NCES, an associate's degree only earns you an average of about $11,500 less per year than a bachelor's.</p> <p>If you choose to go for a bachelor's degree, you'll be in school longer, but by the time you're done with community college, you'll be prepared for university. You may also be able to apply some of your community college credits toward earning your bachelor's. You may also have more money saved up for university tuition than you did when you got out of high school.</p> <p>There are also <a href="http://www.communitycollegereview.com/blog/community-college-scholarships">community college scholarships</a>. They can be merit-based, need-based, or entirely unique. Some schools, such as Metropolitan Community College in Kansas City, offer an automatic, merit-based scholarship for the student with a high GPA seeking to transfer to a university.</p> <h2>8. Live at Home During College</h2> <p>Are you a high school graduate considering a college near your hometown? Most likely, your parents would be happy to let you to live with them if you're paying your way through college. If they are willing to put you up rent-free, you're good to go. You could work a side job at the same time. College isn't about partying and living in a dorm. Sure, it happens, but it's not a requirement. Living at home will help you concentrate on studying and saving money.</p> <h2>9. Forgo College Until You're Financially Ready</h2> <p>Be committed for the long-term when it comes to your career, and your life. The staggering <a href="http://www.wisebread.com/5-sobering-facts-about-student-loan-debt">facts about student loan debt</a> put it into perspective. If you end up with debt, you could end up living with your parents after graduating, as 27% of graduates do. You could end up falling behind on your loan repayments, as 35% did in 2012. On average, it could end up taking you 20 years to pay off your loan.</p> <p>Commit to going to college after you've saved enough money, and your life will be a lot easier once you graduate &mdash; you'll be free to pursue what you want, instead of taking a low-paying job right out of college because you just need the money.</p> <h2>10. Talk to an Academic Advisor</h2> <p>Graduate as fast as you can by planning out your degree. This will minimize money you spend. In other words, decide what you want to major in before jumping into general classes, and find the fastest path to graduation.</p> <h2>11. Pay in Installments</h2> <p>Speak with the financial aid office at the college you want to attend about tuition installment plans. You have to be certain you can pay, but this will make it more like paying rent, which is easier than forking over lump sums. If you're budgeting wisely, living at home, and working part-time, meeting installments shouldn't be a problem.</p> <h2>12. Stick With Federal Loans Only</h2> <p>The Federal Direct Loan offers the most options for income-based repayment, including <a href="https://studentaid.ed.gov/sa/about/announcements/repaye">REPAYE</a>, which fixes your payment at 10% of your discretionary income and forgives your debt after 20 years. The Direct Loan also offers debt forgiveness if you're working in a public service field and have made 120 payments without defaulting. Your interest rate will be fixed, unlike a private loan, which sticks you with a variable rate. Pay on the loan as you go through school, and make the biggest payments so you can to avoid paying too much on interest. When doing your taxes, write off interest payments. And be sure to use tax returns and other windfalls to make large payments.</p> <p><em>Any other easy ways to avoid student loan debt? Share with us 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/daniel-matthews">Daniel Matthews</a> of <a href="http://www.wisebread.com/12-easy-ways-to-avoid-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-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-sobering-facts-about-student-loan-debt">5 Sobering Facts About Student Loan 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/8-ways-to-get-student-loan-debt-forgiveness">8 Ways to Get Student Loan Debt Forgiveness</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/student-loans-how-to-make-post-college-decisions">Student Loans: How to Make Post-College Decisions</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/share-your-thoughts-consolidating-student-loans">Share Your Thoughts: Consolidating Student 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/3-private-lenders-that-can-really-save-you-money-on-your-student-loans">3 Private Lenders That Can Really Save You Money on Your Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Education & Training college college debt debt management saving for college student loan debt student loans Tue, 12 Apr 2016 09:30:33 +0000 Daniel Matthews 1688980 at http://www.wisebread.com 8 Debt Reduction Mistakes Even Smart People Make http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-debt-reduction-mistakes-even-smart-people-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_blindfold_money_000084064747.jpg" alt="Woman making debt reduction mistakes even smart people make" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Everyone knows it is a good idea to reduce your debt load. With less debt, you save money on interest charges and reduce your risk of financial catastrophe if your income is disrupted and you are unable to make payments. If you don't have enough to make debt payments, you can fund investments and build wealth instead of working to get back to zero net worth.</p> <p>Some people are much more successful at debt reduction than others. What key mistakes prevent people from paying down your debts?</p> <h2>1. High Interest Accounts</h2> <p>It is hard to pay down the principal on a debt when the interest rate is high. Too much of your payment gets burned up paying interest charges and too little actually goes to paying down the debt.</p> <h3>How to Fix It</h3> <p>Use a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer card</a> to move debt from a high interest credit card to a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">lower interest credit card</a>, allowing you to pay off the principal faster and get out of debt sooner. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Use a Balance Transfer to Pay Off Credit Card Debt</a>)</p> <h2>2. Negative Cash Flow</h2> <p>If your bills and payments are higher than your income, then you are not going to get out of debt! In fact, negative cash flow may be the reason your debt has built up in the first place. There are only two ways to correct negative cash flow: Lower your expenses or raise your income &mdash; or both!</p> <h3>How to Fix It</h3> <p>Consider debt consolidation to reduce your total monthly payments, find ways to reduce nonessential expenses, and look for side hustles to boost income.</p> <h2>3. Faulty Repayment Strategy</h2> <p>I was stunned the first time I saw personal finance advisers offering the advice to pay off your smallest debts first. This strategy for paying off debt is called the &quot;<a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">debt snowball</a>.&quot; You make minimum payments on all of your debts and put the rest of your available money toward paying off the smallest debt. After that smallest debt is paid off, you use the money that would have gone toward that debt to focus on the next smallest debt. This process is repeated until all debt is paid off.</p> <p>The reason the &quot;debt snowball&quot; strategy is surprising to me is that it is not the fastest way to get out of debt. Simple math shows that you will get out of debt faster and spend less money by paying off your highest interest debt first.</p> <h3>How to Fix It</h3> <p>Having any debt repayment strategy is better than not having a strategy at all. Use the &quot;debt snowball&quot; strategy if this motivates you, but paying your highest interest debt first will save the most money and get you out of debt fastest.</p> <h2>4. Adding More Debt</h2> <p>It you are working to pay down debt, obviously adding more debt isn't going to help. Why would anyone add more debt when they are trying to get out of debt? One reason this can happen is if unexpected expenses pop up and you have directed all available funds to paying off debts.</p> <h3>How to Fix It</h3> <p>Put off taking on new nonessential expenses until after you have paid off debts. Keep some cash in an emergency fund to help avoid using credit.</p> <h2>5. Not Tracking Progress</h2> <p>There is a reason that successful business people are so interested in looking at every financial report that comes out about their business. Feedback is essential to spot problems early and find areas for improvement to get even better results in the future.</p> <p>If you do not check your total debt on a regular basis to monitor your repayment progress, you might not be making progress at all. In fact, your debt could be growing and you wouldn't know it! You need to monitor your total debt and track how well your debt repayment plan is working.</p> <p>Once you start making progress in paying down your debt, seeing the smaller debt total every month can be a good motivator to redouble your efforts and get the debt paid off.</p> <h3>How to Fix It</h3> <p>Add up your total debt every month and monitor your debt repayment progress.</p> <h2>6. Not Everyone Is On Board</h2> <p>Many households have more than one person who makes spending decisions. For example, if you are focusing on debt reduction and your spouse is not, then you will probably not make much progress.</p> <p>I think numbers can be a good way to communicate about debt. Instead of debating purchases and problem spending areas, focus instead on agreeing on the big picture monthly budget numbers. Let each person make their own spending decisions to fit within the budget.</p> <h3>How to Fix It</h3> <p>Get all spenders committed to debt reduction goals and work together to agree on a budget plan.</p> <h2>7. Irregular Expenses</h2> <p>Getting the routine monthly bills under control can be manageable since you know what to expect, but it is easy to overlook those occasional expenses that don't follow a regular monthly billing schedule. For example, budgeting for vacations gives a lot of people trouble. When vacation time comes around, a lot of people end up getting out a credit card to cover at least some vacation expenses. In my house, vet bills are problematic since we have a lot of pets and they need expensive vaccinations and treatments at times. Many years, the vet bill has ended up going on a credit card and moving us in the wrong direction on debt reduction.</p> <h3>How to Fix It</h3> <p>Budget to set aside money ahead of time to cover irregular expenses such as vacations, pet care, and medical expenses.</p> <h2>8. Delay Starting Debt Reduction</h2> <p>For a lot of people, &quot;next month&quot; is always the best time to start debt reduction!</p> <p>Paying off debts is hard work. You have to track and control spending, and you will likely have to sacrifice buying things you want in order to pay off debts instead. It can be tempting to take another month to plan out your budget and figure out your strategy before you start seriously working on debt reduction.</p> <p>But delaying another month doesn't provide any advantage to getting your debt paid off. Your debt will hang around and maybe even keep on growing until you take action to turn things around and get it paid off. The sooner you get started, the sooner you will have your debt paid off.</p> <h3>How to Fix It</h3> <p>Start debt reduction now. Don't wait until next month.</p> <p><em>Which of these debt reduction mistakes has caused the most problems for you?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make">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/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">A Comprehensive Guide to the Debt Snowball Method</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/the-simple-way-to-decide-which-credit-card-to-pay-off-first">The Simple Way to Decide Which Credit Card to Pay Off First</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of 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/oops-i-maxed-out-my-credit-cards-now-what">Oops — I Maxed Out My Credit Cards. Now What?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management cash flow expenses interest rates progress repayment strategies snowball method Thu, 07 Apr 2016 10:30:06 +0000 Dr Penny Pincher 1685087 at http://www.wisebread.com 6 Moves to Make in Your First Month of Debt Repayment http://www.wisebread.com/6-moves-to-make-in-your-first-month-of-debt-repayment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-moves-to-make-in-your-first-month-of-debt-repayment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_career_confidence_000051439618.jpg" alt="Woman making moves in the first money of debt repayment" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>So, it's time, is it? Time to get serious about paying off your debt?</p> <p>Congratulations!</p> <p>If you've made the decision to begin repaying your debt instead of generating more, that is huge! Repaying debt can feel so daunting that people avoid it, making minimum payments until their dying day. But facing your problems is always better than running away from them, and, in deciding to do that, you have taken a giant step forward.</p> <p>Still, it's easy to feel overwhelmed when you're just starting to repay debt. If you're not sure where to start, here are some thoughts for you.</p> <h2>1. Stop Overspending</h2> <p>It might seem obvious, but this is the very first step to take when you want to begin digging yourself out of a financial hole. Stop making more debt!</p> <p>Start by analyzing where you're spending. Is all of your spending necessary? Are there areas &mdash; like eating out, buying clothes, or going to happy hour &mdash; where you're spending a lot more than you thought you were? (See also: <a href="http://www.wisebread.com/start-saving-more-with-this-one-simple-tool?ref=seealso">Start Saving With This One Simple Tool</a>)</p> <p>Looking at this takes some courage, as it can be hard to actually see just how much money you're putting towards things that don't matter. However, the only way out is through, at least in this case, and once you know where you're spending too much, it's easier to make better choices.</p> <p>All of this assumes that you are not overspending simply because you don't have enough money. If that is the case, then your first step is to figure out how to make more or lower your expenses. There are always options, but they will differ depending on your situation. The point is, you won't know where to start cutting until you know where you stand with spending.</p> <h2>2. Add It Up</h2> <p>When you have a spending plan in place, add up all of your debt. List each debt source, including total amount owed, monthly minimum payment, and interest rate.</p> <p>This step tends to stop people in their tracks. However, it's essential to know the total amount of damage before you can take steps toward eliminating it. And, sometimes, seeing exactly how much you owe, all in one place, is just what you need to feel motivated to make significant changes in your life.</p> <h2>3. Prioritize Your Debt</h2> <p>There are a lot of different ways to decide which debt to focus on first. Obviously, you need to make at least minimum payments on all of your accounts. But after that, you need to decide which debt will receive higher payments until it's paid off. Then, you can move on to a different account.</p> <p>Some people swear by Dave Ramsey's <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you">debt snowball method</a>. Others say that you should focus on the debt with the highest interest rate first, and still others think you should choose the one that causes you the most stress for your primary repayment efforts. Honestly, and especially when you're just getting started, the most important thing is that you choose a method that appeals to you and that motivates you to keep moving forward with your debt repayment.</p> <h2>4. Set Repayment Goals</h2> <p>Look realistically at your finances, at how you're planning to change your spending patterns, and decide when you think you can pay off your first debt. Set that date as a goal. Circle it in all of your calendars. Set an alarm for it on your phone. Do whatever you have to do to get that date in your head.</p> <p>Having a goal will help you feel motivated, and it will also give you some sense of progress as you move forward. For instance, if you decide it will probably take you six months to pay off your first debt, you'll know after three months that you're about halfway there. That can be satisfying in and of itself.</p> <p>Set these goals knowing that you can always change them. If your financial situation changes, you can always change your goal, too, moving it forward or backward as circumstances dictate.</p> <h2>5. Generate More Income</h2> <p>If you want to pay off your debt as quickly as possible, think about ways to generate more income. This will not only make your repayment move faster, but it will make it so the process isn't just about cutting back all the time, which can feel demotivating after a while.</p> <p>For some people, making more money is as easy as working overtime. Others have to be more creative. Think about taking on freelance projects, turning a hobby into an entrepreneurial enterprise, or selling things that you find around your house on eBay or Craigslist. Depending on your skill set and how much time you have, the possibilities are truly endless. (See also: <a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job?ref=seealso">15 Ways to Make Money Outside Your Day Job</a>)</p> <h2>6. Reward Yourself</h2> <p>It's important that you realize just how significant of a choice you've made to reduce debt. You can mark a time as important by celebrating it. Just do this in a way that doesn't mean spending a lot of money. Buy the special coffee, learn a new recipe, or treat yourself to an extra dessert. Sure, these things cost a little bit, but they aren't a shopping spree at the mall.</p> <p>Make sure you build rewards into your whole system. You can buy yourself a coffee every time you pay X amount off, or reward yourself with something small every month that you follow through with your budget. It's important to stay motivated and to reprogram your brain to actually enjoy this repayment process.</p> <p>Plan a big reward for the day when your debt is all paid off. Maybe that's the day you can start saving for your dream vacation, or maybe you can talk a friend into taking you out for the evening. Plan a big party at your house, spend a weekend in the mountains, or do whatever it is that feels right. Knowing this is coming will help keep up your motivation through the hard days.</p> <p><em>What is your experience of debt repayment? How did you start on that journey?</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-moves-to-make-in-your-first-month-of-debt-repayment">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/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">8 Signs You&#039;ve Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; 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/should-you-use-peer-to-peer-lending-to-pay-down-credit-card-debt">Should You Use Peer-to-Peer Lending to Pay Down Credit Card 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-sobering-facts-about-student-loan-debt">5 Sobering Facts About Student Loan 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/do-this-if-you-have-too-much-credit-card-debt">Do This If You Have Too Much Credit Card 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/getting-your-money-back-without-losing-your-friendship">Getting Your Money Back Without Losing Your Friendship</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management goals money habits overspending repayment reward yourself Mon, 04 Apr 2016 10:00:08 +0000 Sarah Winfrey 1682375 at http://www.wisebread.com Should You Pay Down Debt First or Invest? http://www.wisebread.com/should-you-pay-down-debt-first-or-invest <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-pay-down-debt-first-or-invest" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_000045365316.jpg" alt="Woman wondering if she should pay down debt or invest" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Should you pay down your debt before you focus on investing? This is one of the most important questions in personal finance, and the decisions you make now can greatly impact your financial future.</p> <p>The sooner you start investing, the more time your investments have to grow. The effect of compound interest creates a big incentive to start investing as soon as possible. Compound interest is responsible for the &quot;snowball effect&quot; that grows your small investment into a substantial sum over time.</p> <p>But what about paying off debt? Debt grows through the same effect of compound interest that fuels investment growth. The longer you take to pay off debt, the more it costs you due to compound interest. High interest credit cards have interest rates that likely exceed the best returns you will get in the stock market. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Credit Cards with the Lowest Interest Rates</a>)</p> <p>So what is the best money move &mdash; pay off debt or invest?</p> <h2>The Simple Answer</h2> <p>Mathematically, the best choice is to put your money where it gets the best return on investment. For example, if you have credit card debt at 12.9% interest and your stock market investment account that grows at 8%, then you are better off putting as much money as you can toward the higher interest opportunity &mdash; paying off your credit card in this example. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Save Money on Credit Card Interest with a Balance Transfer</a>)</p> <p>However, there is a complication with this simple answer right off the bat. There is no way to know the rate of return from your investment accounts ahead of time! You could get huge investment returns, even higher than your credit card interest rate, or you could even lose money in the stock market and get negative returns.</p> <p>You have to make an assumption about your rate of return to decide where to put your money. The long-term historical average return from the stock market is around 8% including booms, recessions, and even the Great Depression. No one knows what is going to happen in the stock market, so a reasonable assumption is that you will get returns consistent with the long-term average over the long run.</p> <p>So if the interest rate on your debts is higher than about 8%, you are better off paying debts down first rather than investing. If you have low interest debts such as a mortgage or student loans, you are better off making minimum payments on your debts and investing as much as possible to get the maximum return on your money.</p> <p>As I said, this is the simple answer. There are a few details that make the decision of whether to pay debt or invest a little more complicated. Let's look at some of them.</p> <h2>The &ldquo;Life Isn't Simple&rdquo; Answers</h2> <p>Even with the simple assumption that the long-term historical stock market return of around 8% will continue into the future, there are other complexities to consider in the decision between paying off debts or investing.</p> <h3>Incentives to Pay Down Debt</h3> <p>There are negative consequences of carrying debt that go beyond mathematical calculations of return on investment. Carrying debt is stressful. You have payments to make every month and face immediate severe consequences if you can't make them. If your source of income is disrupted while you have a lot of debt, you can lose everything quickly. Paying off your debts can take this sort of risk off the table.</p> <p>There are other advantages to paying off debt as quickly as possible before focusing on investment. For one thing, focusing on paying off debts is a good deterrent to borrowing more money. If you have investments that are growing, you might be more likely to take on additional debt if you have debt already and are not focusing on paying it off quickly. Paying down debt can be a good way to focus on your financial health and develop sustainable spending habits.</p> <p>So the risk of carrying debt tips the decision toward paying down debt first, but as I mentioned, life isn't simple.</p> <h3>Incentives to Invest</h3> <p>If your employer offers a 401K retirement account matching funds program, the balance tips toward investing. Many companies will match employee retirement contributions with 50% matching funds. This is free money! For example, if you contribute $500 to your retirement fund and your company has a 50% matching program, the company will add $250 to your retirement account. This can tip the balance in favor of investing. If you have $500 available per month, the choice effectively becomes $500 for debt payments or $750 for retirement contributions. This makes investing hard to beat.</p> <p>Let's not forget about taxes. Another advantage of investing in a retirement account is that you can invest pre-tax dollars in an investment program such as a 401K. When you pay debt, you are paying it with post-tax dollars. The impact of pre-tax vs. post-tax dollars is that you can effectively put more money in your retirement account at the same cost to you. For example, you could invest $665 before taxes or pay down a debt with the $500 you get after taxes. This results in an advantage for investing instead of paying off debt.</p> <p>It is true that some types of debt such as mortgages and student loans have tax advantages. You can get a tax deduction for mortgage and student loan interest, but this benefit is small compared with the tax advantages offered as incentives to fund retirement accounts.</p> <p>Another variable that you may be able to change to tip the decision toward investing is the interest rate on your debt. If you can refinance your high interest debt with a debt consolidation loan or a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer</a>, you will save money on interest &mdash; and investing before paying off your debt may make sense if your interest rate is lower than your investment returns.</p> <h2>Example Scenarios: Pay Off Debt vs. Investing</h2> <p>Let's say you have $20,000 of credit card debt at 12.9% interest. Are you better off paying off that debt first as fast as possible before investing, or should you pay the minimum balance on the debt so you can start investing as much as possible right away?</p> <p>If you wait to start investing until you have the debt paid off, you will miss out on years of growth of your investment account. However, the longer you leave the high interest debt around, the more it will cost you to pay back. What should you do in this scenario?</p> <p>Let's say you have $535 per month that you can use to pay a credit card debt <em>or</em> invest for a term of 25 years.</p> <h3>Option 1: Pay Off Debt First</h3> <p>A monthly payment of $535 per month will pay off the $20,000 credit card debt at 12.9% interest in 48 months, or four years. The total cost of paying it off is $25,700 due to compound interest.</p> <p>Now, after four years, you start investing the $535 per month. It grows at the historical average return of 8% for 21 years. You end up with $348,000 in your retirement account. That's pretty good!</p> <h3>Option 2: Make Minimum Payments On Debt, Start Investing Now</h3> <p>In this scenario, we will make a smaller payment on the credit card of $297 so we will be able to invest the rest of the $535 per month that we have available, or $238 per month.</p> <p>With our minimum credit card payment, it will take 10 years to pay off the credit card balance at a total cost of $35,800. It takes much longer to pay off the credit card by making smaller payments, but this move allows us to start investing right away.</p> <p>Our 10 years of investing $238 at the historical average 8% return gets us $43,500 in our investment account. We'll start with this balance and invest the full $535 per month for 15 more years. The final balance: $329,000.</p> <p>In this scenario, the high interest rate on the credit card debt <em>still </em>outweighs the lower rate of return from the investment account. With high interest debt, the best move is to pay it off before starting to invest.</p> <h3>Consider 401K Match, Pre-Tax Investment Dollars</h3> <p>The result above does not include the 401K company match or the use of pre-tax funds. Considering these investment incentives, the balance at the end of 25 years improves, but the choice between investing vs. paying off debt first does not change.</p> <p>Pay Off Debt First: $650,000<br /> Minimum Debt Payment, Start Investing: $630,000</p> <h3>Without the Debt, You Would Almost Be a Millionaire!</h3> <p>So what is the effect of having $20,000 of debt to pay off early in your investment cycle? If you didn't have debt and started investing right away, you would have $951,000 at the end of 25 years!</p> <h2>Final Answer: Should You Pay Off Debt or Invest?</h2> <p>The basic principle of putting your money into the option that gives the best rate of return leads to the best financial results. If your investments yield a higher return than the interest on your debts, then you'll be better off investing right away and making minimum payments on your debts.</p> <p>However, if the interest rate on your debt is higher than the rate of return from your investments, then you should pay off your debt first before investing. The example calculations showed results for a scenario where it would definitely be better to pay off high interest debt before starting to fund an investment account.</p> <p>One big conclusion from this analysis is how much debt impacts your investment growth. In our 25 year investment example, you could have about $300K more in your retirement account if you didn't start with $20K credit card debt. If you have high interest debt, look for opportunities to consolidate the debt or get a balance transfer and end up with a much lower interest rate.</p> <p>Ultimately the choice of whether to pay off debts before starting to invest depends on your tolerance for risk and your assessment of potential rate of return from investments in comparison with the interest rates on your debt.</p> <p><em>Are you investing or paying off debt? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">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/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</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/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</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/the-10-biggest-myths-about-investing">The 10 Biggest Myths About Investing</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/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings">You&#039;re Wasting Up to $42,532 by Not Investing Your Gasoline Savings</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Investment 401k comparisons compound interest money decisions Paying Off Debt retirement Thu, 24 Mar 2016 09:30:23 +0000 Dr Penny Pincher 1678010 at http://www.wisebread.com The Simple Way to Decide Which Credit Card to Pay Off First http://www.wisebread.com/the-simple-way-to-decide-which-credit-card-to-pay-off-first <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-simple-way-to-decide-which-credit-card-to-pay-off-first" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_credit_card_000085027895.jpg" alt="Couple learning simple way to decide which credit card to pay off" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Owe thousands of dollars in credit card debt? You're not alone. As of late 2015, U.S. households with credit card debt owed an average of $15,355 on their plastic, according to a study by NerdWallet.</p> <p>Unfortunately, credit card debt is the worst kind of debt to hold because it comes with such high interest rates. CreditCards.com reported as of early March that the average credit card in the United States came with an interest rate of 15.16%. Such a high rate means that credit card debt grows quickly, especially when that debt is large.</p> <p>Dealing with credit card debt can be overwhelming. But there are strategies you can take to whittle that debt down to manageable levels. The key is to start paying off your credit cards in full one at a time.</p> <p>That leads to the big question: Which credit card should you pay off first? There are two approaches you can take to answer this question.</p> <h2>Snowball Method</h2> <p>In what is known as the <a href="http://www.wisebread.com/a-comprehensive-guide-to-the-debt-snowball-method-0">snowball method</a> of paying off your debt, each month you pay the minimum required monthly payment on all of your credit cards except one &mdash; the card with the lowest balance. You use the majority of your available money each month to pay off as much of this card's balance as possible.</p> <p>Then, when you pay off the debt on that card, you repeat the process: You pick the card with the next-lowest balance and use all of your extra money each month to pay that balance down, making just the minimum required monthly payment on the rest of your cards.</p> <p>You repeat this process until you've paid off all of your credit card debt.</p> <p>Fans of this approach like the feeling of accomplishment it brings. It's a good feeling to pay off that first, second, and third credit card. And by targeting cards with the lowest balances first, you reach that good feeling faster, meaning that you'll be less likely to get discouraged and give up your efforts at reducing your debt.</p> <h2>Avalanche Method</h2> <p>The avalanche method is similar to the snowball approach, but with one key difference. Again, you make the minimum payments each month on all of your cards except for one. But in this method, you devote all of your extra funds to paying off the balance of your credit card with the highest interest rate first. (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?</a>)</p> <p>After you pay off that card, you move on to the card with the next highest interest rate, working your way down your credit cards until you've paid them all off.</p> <p>Supporters of this method say that it makes the most financial sense. You'll end up paying less if you eliminate your debts with the highest interest rates first.</p> <p>On the downside, though, your card with the highest interest rate might also be the card that you owe the most on. This means that it will take longer for you to enjoy the satisfaction of paying off a card completely.</p> <p>Either method, though, will work, if you stick to it. So choose the approach that works best for you.</p> <h2>Pay Less Interest With a Balance Transfer</h2> <p>Once you have determined your course of action and have a good idea of the time frame you are working with, you can save money and buy some interest free time by doing a balance transfer to a credit card that offers a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% APR on balance transfers</a>. Make sure that you can pay off that balance in full within the promotional period, or else you'll just get hit with interest fees again.</p> <p>For example, if you know you can pay off $5,000 in a year, instead of paying interest on that amount while you are paying it off, transfer $5,000 to a new credit card with a balance transfer offer. Make payments towards the new card instead of the card you were going to put it on. If your current card has a 15% APR, you'd save hundreds in interest charges for that year.</p> <p>Keep in mind that most cards that offer a promotional balance transfer period will charge a 3%-5% fee on the balance transferred. Most of the time this would still be cheaper than paying the interest on your current cards. There is one card though that offers a 0% intro APR for 15 months AND has no intro balance transfer fee if you make the transfer within 60 days of opening your account &mdash;&nbsp;<a href="http://www.wisebread.com/chase-slate-visa-review">Chase Slate Card</a>. It's the best card for balance transfers. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seeaIso">When Should You Pay Off Credit Card Debt With a Balance Transfer?</a>)</p> <h2>When It's Paid, Don't Close It!</h2> <p>And here's one more tip: Once you do pay off a credit card, don't close that account. Doing so will hurt your FICO credit score. If you use less of your available credit, your score will be higher. But if you close a credit card account, you'll immediately raise what is known as your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">debt-utilization ratio</a> &mdash; the amount of your debt you are actually using. This will cause your credit score to fall.</p> <p>So keep those paid-off credit cards open. But resist the temptation to run up the debt on them again.</p> <p><em>Have you paid-off credit card debt? What method did you use?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-simple-way-to-decide-which-credit-card-to-pay-off-first">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/how-to-manage-your-debt-in-10-minutes-a-week">How to Manage Your Debt in 10 Minutes a Week</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-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</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/the-best-low-interest-rate-credit-cards">The Best Low Interest Rate 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/10-surprising-ways-to-negatively-affect-your-credit-score">10 Surprising Ways to Negatively Affect Your Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management avalanche method closing cards debt repayment snowball method strategies Tue, 22 Mar 2016 10:00:12 +0000 Dan Rafter 1677117 at http://www.wisebread.com Is a Balance Transfer Offer a Good Deal? http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-a-balance-transfer-offer-a-good-deal" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_credit_card_000030704826.jpg" alt="Woman learning if balance transfer is a good deal" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>A credit card balance transfer is a practical way to consolidate debt, save money, and ditch a high-rate credit card. This involves transferring the balance from a higher-interest credit card to another, <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">lower-interest credit card</a>.</p> <p>There are various balance transfer offers, but unfortunately, not every offer is financially rewarding. To know whether you're getting a solid deal, you have to consider the costs associated with a particular offer.</p> <h2>Balance Transfer Fee</h2> <p>In a perfect world, there wouldn't be any fees to transfer a balance &mdash; or at the very least we would pay a low, flat fee &mdash; but this is rarely the case. The typical fee is $10 or 3% of the transferred balance, whichever is higher. Some balance transfer credit cards charge a 5% fee.</p> <p>Balance transfer fees are charged directly to the card balance and reduce the actual savings of switching to a low-rate card. For example, if transferring your balance to a low-rate card saves $900 in interest, but you paid a $200 balance transfer fee, you actually only saved $700.</p> <p>Since nearly all cards have no cap on how much you pay, the bigger your transfer, the bigger the fee &mdash; hence the importance of comparing different balance transfer offers to make sure you're getting a deal. Shopping around can be the difference between paying $300 and $500 for a $10,000 balance transfer.</p> <p>There are, however, a few cards that don't charge a balance transfer fee. These can include cards offered by smaller banks and credit unions, as well as bigger financial institutions. Here are two cards from major issuers that do not charge a balance transfer fee:</p> <ul> <li><a href="http://www.wisebread.com/chase-slate-visa-review">Chase Slate</a>&nbsp;doesn't charge a balance transfer fee, but only if you transfer balances within the first 60 days of opening an account. Transfers made after that introductory period are charged 3% or $5.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/the-best-cash-back-card-for-average-credit-capital-one-quicksilverone-cash-rewards-credit-card">Capital One QuicksilverOne Cash Rewards credit card</a>&nbsp;also doesn't charge a balance transfer fee, but there is a $39 annual fee. That amount is pretty much the equivalent of paying a fee if you're transferring a balance of $1,000 or less (so it's still a better deal than most cards if you're transferring more than $1,000).</li> </ul> <h2>Longest 0% APR vs Low Standard APR</h2> <p>For a balance transfer offer to make sense, the interest savings should be significantly greater than any fees paid to transfer your balance. To win your business, many cards offer an introductory 0% interest for a set period.</p> <p>There are currently <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">offers of 0% APR up to 21 months</a>. This teaser rate eventually disappears, but if you pay off your credit card balance before the regular interest rate kicks in, you don't pay a penny of interest.</p> <p>However, some people make the mistake of only looking at the introductory rate when selecting a card, and they forget to consider the ongoing or regular APR once the promotional period ends.</p> <p>When you don't compare rates, you could unknowingly apply for a card with a regular APR that's higher than what you're currently paying. Which isn't that awful if you pay off the card during the introductory rate period. But if you don't pay off the entire balance before the end of the 0% APR period, the new interest charges might cancel out some of the potential savings.</p> <p>Let's say you have a credit card with a $2,000 balance and a 20% interest rate. If you transfer the balance to a card with 0% interest for 12 months and a balance transfer fee of 3%. You'll save about $340 over the introductory rate period.</p> <p>If the card had a 16% regular APR, you'd save about $7 per month after the intro 12 months. But if you qualify for a card with a regular interest rate of 10%, you would save $17 per month.</p> <p>Ideally, you want to find a card that has both a long intro 0% APR period <em>and</em> a low regular APR afterwards. Here's are two good choices:</p> <ul> <li><a href="http://www.wisebread.com/bankamericard-credit-card-review">BankAmericard Credit Card</a>&nbsp;gets you 18 billing cycles of 0% APR on balance transfers made within the first 60 days. Afterwards, the regular APR is 11.24%-21.24%.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/the-discover-it-card-attractive-cash-back-awards-for-shoppers">Discover it</a>&nbsp;also offers 18 months of 0% APR on balance transfers (6 months for purchases), followed by a regular APR of 11.24%-23.24%.</li> </ul> <h2>The Low Rate May Not Apply to New Purchases</h2> <p>The rules regarding interest and balance transfers vary, so it's important to read the fine print and understand an offer before you apply &mdash; or else you could end up paying interest unexpectedly.</p> <p>Some credit cards have 0% introductory rates that apply to both new purchases and balance transfers, whereas other cards only apply the teaser rate to balance transfers. So if you transfer a balance to a card, and you also use this card for new purchases, you'll have dual interest rates and you'll pay regular interest on all new purchases.</p> <p>To keep it simple, choose a card that offers a promotional rate on both purchases and balance transfers.</p> <h2>Protect Your Credit When Transferring a Balance</h2> <p>Applying for a new credit card and transferring your balance can potentially harm your credit score &mdash; but only if you do it the wrong way.</p> <p>A new card triggers an inquiry on your credit report, and each inquiry can drop your credit score by a few points. This isn't the best news, but at the end of the day, it isn't a big deal as long as you don't apply for too many new accounts in a short span of time.</p> <p>As mentioned, a balance transfer is one way to simplify your finances. You can transfer all your balances to a new card and only worry about one monthly payment. The problem, however, is that a balance transfer could throw off your credit utilization ratio if you cancel the old card that no longer has a balance on it.</p> <p>Credit utilization is your percentage of outstanding balances compared to your total credit limit. This ratio should never exceed 30%, and if your ratio is higher than this percentage, your credit score suffers.</p> <p>The way you approach a balance transfer can either help or hurt your credit score. To illustrate, imagine you have two credit cards:</p> <ul> <li>Credit card #1: $1,000 balance with a $2,000 credit limit<br /> &nbsp;</li> <li>Credit card #2: $4,000 balance with a $5,000 credit limit</li> </ul> <p>In this example, you owe a total balance of $5,000 with a total credit limit of $7,000, resulting in a total credit utilization ratio of 71%, which is more than doubled the recommended max percentage of 30%.</p> <p>Let's say you then get a new credit card with a credit limit of $10,000 and transfer both balances to this card, this new card increases your total available credit to $17,000, which drops your credit utilization ratio to 29% &mdash; but only if you keep the old paid-off accounts open!</p> <p>If you're going to open a new account and transfer balances, don't immediately start closing accounts. Run the numbers first, and only close accounts if your credit usage is no more than 30%.</p> <p><em>Have you transferred a balance? How did you make out? Let's discuss 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/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal">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/10-questions-to-ask-before-accepting-a-credit-card-offer">10 Questions to Ask Before Accepting a Credit Card Offer</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-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</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-important-things-you-should-know-about-balance-transfer-cards">7 Important Things You Should Know About Balance Transfer Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-does-your-credit-card-debt-cost-you">How Much Does Your Credit Card Debt Cost You?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management APR balance transfers credit utilization ratios debt reduction fees interest rates Wed, 09 Mar 2016 11:30:05 +0000 Mikey Rox 1669479 at http://www.wisebread.com 8 Signs You've Crossed From "Healthy" Debt to "Problem" Debt http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-youve-crossed-from-healthy-debt-to-problem-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_tied_up_000012430983.jpg" alt="Learning signs you&#039;ve crossed from healthy debt to problem debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We here at Wise Bread generally preach that all debt is bad &mdash; but there is such a thing as a healthy level of debt. Most people can get by with a modest amount of debt, especially if it's for constructive things like college or a mortgage, which can help you build wealth long term. Debt becomes a problem, however, when it reaches a certain magnitude or is wrapped up in credit cards or other unnecessary, high-interest loans.</p> <p>Here are some signs your debt level has crossed from healthy to problematic.</p> <h2>1. Your Debt-to-Equity Ratio Is Holding You Back</h2> <p>Lenders, especially those offering mortgage loans, will often evaluate loan candidates based on a measure of debt versus income. People with a higher ratio of debt to equity are often denied the ability to borrow more. It's very difficult to get a mortgage loan if your debt-to-equity ratio is above 40%, and many lenders shy away from anything above 30%. People with high ratios are considered less likely to have the ability to repay money they owe. If you find that banks and other lenders are turning you down, it's time to reduce your debt load.</p> <h2>2. Your Debt Is Not in Student Loans or a Mortgage</h2> <p>It's debatable whether there is such a thing as &quot;good&quot; debt, but at the very least, student loans and mortgages can play a role in building wealth over the long term. Credit cards, however, are often what you use to buy &quot;stuff&quot; &mdash; clothes, gadgets, and other items that accumulate in your life and don't build any real value. If you have a <a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">mountain of debt</a>, and most of it is the result of consumer spending, it's time to recognize that you have a problem.</p> <h2>3. Your Credit Score Is Sinking</h2> <p>Having <em>some </em>amount of debt isn't going to kill your credit score. In fact, it can help it, as long as you've consistently shown you can pay in full. But there's a point at which debt can be too high for credit bureaus to view positively. Order a copy of your credit report &mdash; you can get a copy from each bureau for free once a year &mdash; and check your score. A score above 700 means you're doing well. But lower scores could negatively impact the interest rate if you borrow for a home, a car, or other need. A score that's too low could make it impossible for you to borrow at all. (See also:&nbsp;<a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score?ref=seealso">10 Surprising Ways to Negatively Affect Your Credit Score</a>)</p> <h2>4. You're Maxing Out Those Credit Cards</h2> <p>When you are finding yourself increasingly in the hole due to credit card borrowing, that's a bad sign. Interest rates on credit cards are often very high, so if you can't pay off the balance in full each month, your debt problem only grows. Credit cards have borrowing limits, and you should rarely come close to hitting them. If you're hitting those limits &mdash; or even worse, opening new credit cards to allow for more spending &mdash; that's a sign that your debt problem is severe.</p> <h2>5. You're Not Paying on Time</h2> <p>You can have debt and maintain a solid credit score, as long as you pay your bills when they are due. People see their credit scores decline when they begin paying bills late. <a href="http://www.tkqlhce.com/click-2822544-10809829-1284618439000?sid=lemke-1658760">Credit Karma</a> reports that for people with with fair to excellent credit scores (600 or above), the on-time payment rate was more than 95%. But that dipped to 75% for those with scores between 500 and 599, and 60% for those with scores under 500.</p> <h2>6. You've Considered Ignoring Important Bills</h2> <p>I once had a friend who was struggling with debt to the point that he would consider pushing back or even blowing off payment of his rent, utilities, and other key bills. His feeling was that as long as he wasn't evicted and the lights stayed on, he'd be able to manage. But this is living on the edge and a sign your debt level is absolutely unhealthy.</p> <h2>7. You Have No Emergency Fund</h2> <p>If debt has you stretched so thin that you can't save anything for a rainy day, that's a problem. You may feel like you're getting by okay, but all it takes is one dead heat pump, one surprise medical emergency, or a blown car engine for you to face true financial hardship.</p> <h2>8. It's Hurting Your Relationships</h2> <p>Couples argue about money frequently, even when they're financially stable and have money in the bank. But the carriage of heavy debt can lead to serious strain between your loved ones. If you're constantly arguing about the level of debt that you have, it's not healthy and bears paying down.</p> <p><em>Do you recognize yourself in any of these signs of unhealthy debt?</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/8-signs-youve-crossed-from-healthy-debt-to-problem-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-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/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-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-ever-okay-to-cosign-a-loan">Is It Ever Okay to Cosign 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-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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-paying-off-student-loans-early-can-boost-your-finances">7 Ways Paying Off Student Loans Early Can Boost Your Finances</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/ask-these-4-important-questions-before-signing-any-loan">Ask These 4 Important Questions Before Signing Any Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management borrowing credit scores emergency funds equity loans overspending Fri, 19 Feb 2016 10:30:30 +0000 Tim Lemke 1658760 at http://www.wisebread.com How to Manage Your Debt in 10 Minutes a Week http://www.wisebread.com/how-to-manage-your-debt-in-10-minutes-a-week <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-manage-your-debt-in-10-minutes-a-week" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_debt_management_000022976723.jpg" alt="Woman managing her debt in 10 minutes a week" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Juggling multiple debts can feel like playing whack-a-mole. As soon as you pay one bill, another pops up, and you spend each month scrambling to stay afloat.</p> <p>You know that you need to get organized if you ever want to <a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">get ahead of your debt</a>, but you are <em>not</em> the kind of person who enjoys organizing your bills.</p> <p>Thankfully, the work necessary to manage your debt &mdash; and get it paid off once and for all &mdash; is not nearly as overwhelming as you might assume. In fact, with just a little initial effort, you can organize and manage your debt in as little as 10 minutes per week. Here's how.</p> <h2>1. List Your Debts</h2> <p>The first step is to track down the specific information about each and every one of your debts. Look up who you owe, the remaining balance, the rate of interest on each debt, and each debt's minimum payment. For instance, your list might look like this:</p> <table> <tbody> <tr> <td> <p><strong>Creditor</strong></p> </td> <td> <p><strong>Balance</strong></p> </td> <td> <p><strong>APR</strong></p> </td> <td> <p><strong>Minimum Payment</strong></p> </td> </tr> <tr> <td> <p>Store Credit Card</p> </td> <td> <p>$2,600</p> </td> <td> <p>23.99%</p> </td> <td> <p>$104</p> </td> </tr> <tr> <td> <p>MasterCard</p> </td> <td> <p>$1,200</p> </td> <td> <p>18.99%</p> </td> <td> <p>$48</p> </td> </tr> <tr> <td> <p>Visa Card</p> </td> <td> <p>$5,750</p> </td> <td> <p>15.99%</p> </td> <td> <p>$232</p> </td> </tr> <tr> <td> <p>Federal Student Loan</p> </td> <td> <p>$25,800</p> </td> <td> <p>6.80%</p> </td> <td> <p>$295</p> </td> </tr> <tr> <td> <p>Private Student Loan</p> </td> <td> <p>$6,700</p> </td> <td> <p>5.50%</p> </td> <td> <p>$73</p> </td> </tr> <tr> <td> <p><strong>Total:</strong></p> </td> <td> <p><strong>$42,500</strong></p> </td> <td> <p><strong>$752</strong></p> </td> </tr> </tbody> </table> <p>Depending on your tech comfort level, you might choose to use a simple paper-and-pencil list, create your own Excel spreadsheet, or use a pre-made program, such as <a href="http://www.mdmproofing.com/iym/products/debt-tracker.php">DebtTracker</a> from It's Your Money. The important thing about creating your debt management list is that you should use a format that you are likely to stick with.</p> <p>Once you know exactly what you owe, it's time to look for some extra money in your budget to send to your debts. Whether you give up your daily Starbucks habit, or officially quit the gym you haven't actually been to since New Year's, you are sure to find fat you can cut from your budget to send to your debts. (And of course, make sure you are not adding any new debts.)</p> <h2>2. Debt Avalanche vs. Debt Snowball</h2> <p>Once you have your list, decide what order you plan to pay off your loans. There are two schools of thought on this: debt avalanche and debt snowball. (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> <h3>The Debt Avalanche</h3> <p>According to this method, you start your debt payoff with whatever has the highest interest rate. You send extra money to that debt until it is paid off, and then begin sending the same amount to the debt with the next highest interest rate.</p> <p>For instance, if our example budgeter had a total of $1,000 to send toward her debts each month, that would give her an additional $248 per month to pay toward her Store credit card, which has the highest APR, making her monthly payment $352. At that rate, she will have her Store card paid off in nine months.</p> <p>From there, she will begin to send $400 per month to her MasterCard (the $48 minimum plus the $352 she had been sending to her Store credit card), paying that off within three months. At that point, she can begin to send $632 to her Visa.</p> <h3>The Debt Snowball</h3> <p>This method recommends you begin with your lowest balance because you can pay it off quickly and feel motivated by your results.</p> <p>In our example budgeter's case, she would begin by sending $296 to her Visa card (her $48 minimum payment plus the additional $248 she can spend on her debts), paying it off in five months. She would then work on her Store card balance, sending $400 per month to it.</p> <p>Generally, you will spend less money over time if you employ the debt avalanche method. However, depending on how you are wired and motivated, the debt snowball may be easier for you to maintain.</p> <h2>3. Automate</h2> <p>Automation is the center of the 10 minutes per week debt management plan. Setting up automatic payments for each of your debts will eliminate the &quot;Oh, crud, I forgot to pay my Visa bill!&quot; realization that is the worst part of being disorganized.</p> <p>The key to having automation work is ensuring that you have enough money in your account to cover your debts on your due dates. There are two ways to do this without keeping track of every penny:</p> <h3>Schedule Payments With Your Paycheck</h3> <p>Many credit cards and lenders are willing to let you change your due date to one of your choosing, or will allow you to make payments anytime. Schedule your payments to come out automatically on the same day you receive a paycheck.</p> <h3>Open a Debt Payment Checking Account</h3> <p>You'll automatically transfer the full amount you need to pay all of your debts each month into this account. For instance, our example budgeter might transfer $500 from each of her bi-weekly paychecks into her debt payment checking account. On her bills' due dates, her payments will be automatically transferred. The benefit of a dedicated account like this is the fact that the money will be out of sight, making it less tempting to spend on anything other than debt payoff.</p> <h2>4. Spend 10 Minutes Per Week on Maintenance</h2> <p>Once you have developed your debt payoff plan and set up your automation, all you have to do is spend 10 minutes each week (or less) maintaining the plan. There are three items on your maintenance list:</p> <h3>Don't Overdraw</h3> <p>Check how much money is in the account you use to pay your debts. With automation, this should be a quick process with no surprises &mdash; but it's always a good idea to check in weekly to make sure you are on track. Otherwise, it's very easy to accidentally overdraw your account.</p> <h3>Revise Your Balances</h3> <p>Do this at least once a month. As you are working to pay off your debts, revising your balances for each debt can help to keep your motivation high.</p> <h3>Adjust Your Payments as Necessary</h3> <p>Change your payment amount with each debt that is paid off. You can also use this time to add any one-time payments you might make from windfalls or other unexpected money.</p> <h2>&quot;When eating an elephant, take one bite at a time.&quot;</h2> <p>As with consuming a pachyderm, the trick to debt payoff is working slowly and steadily. While each small chunk of debt does not seem significant, it all adds up to a monumental accomplishment.</p> <p><em>How are you maintaining your debt repayment program?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/how-to-manage-your-debt-in-10-minutes-a-week">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/the-simple-way-to-decide-which-credit-card-to-pay-off-first">The Simple Way to Decide Which Credit Card to Pay Off First</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-debt-reduction-mistakes-even-smart-people-make">8 Debt Reduction Mistakes Even Smart People Make</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/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-debt-while-unemployed">How to Manage Debt While Unemployed</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management avalanche method bill pay checking accounts organization snowball method Thu, 18 Feb 2016 10:30:22 +0000 Emily Guy Birken 1658696 at http://www.wisebread.com Save Money on Interest with the BankAmericard&reg; Credit Card http://www.wisebread.com/bankamericard-credit-card-review <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/bankamericard-credit-card-review" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000019952359_Large.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Simple credit cards such as the <a href="http://ct.wisebread.com/click.php?pg=150&amp;pid=16&amp;pp=0&amp;uv=sname1">BankAmericard&reg; credit card</a>, which do not provide all the extra bells and whistles like rewards and bonuses, are designed primarily to provide a low-interest opportunity for those who typically carry a balance from month to month. Transferring your balance to a card with a lower interest rate will save you money in interest fees. Plus, the BankAmericard&reg; credit card offers an introductory APR of 0% on qualifying balance transfers for 18 billing cycles. (See also: <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">Best 0% Balance Transfer Credit Cards</a>)</p> <h2>How This Card Works</h2> <p>There is an introductory APR of 0% for balance transfers made within the first 60 days of opening your account. The intro APR will last 18 billing cycles, then the APR will be 11.24% - 21.24% Variable APR on purchases and balance transfers, according to your credit worthiness and the prime rate. There is no annual fee.</p> <h2>Other Benefits</h2> <p><strong>ShopSafe</strong>. Bank of America&reg; credit cards include ShopSafe, a feature designed to provide extra protection when you shop online. If you sign up for ShopSafe, you are issued a temporary credit card number, expiration date, and security code, for using when you shop online.</p> <p><strong>Museums on Us&reg;</strong>. Get free admission to 150+ participating museums, science centers, botanical gardens and more on the first full weekend of every month when you present your Bank of America credit card and a photo ID.</p> <h2>Costs</h2> <ul> <li>$0 Annual Fee</li> <li>11.24% - 21.24% Variable APR for purchases and balance transfers (0% Intro APR on balance transfers made within the first 60 days for 18 billing cycles)</li> <li>Up to 29.99% Penalty APR</li> <li>3% Balance Transfer Fee, or $10, whichever is greater</li> <li>3% Foreign Transaction Fee</li> <p><a target="_top" href="http://ct.wisebread.com/click.php?pg=150&amp;pid=16&amp;pp=0&amp;uv=sbutton2 "><img class="img-exempt" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/apply-now.png" /></a></p> <p><a href="https://consumer.bankofamerica.com/USCCapp/Ctl/entry?sc=VACJCF&amp;pid=dppf">See Terms</a></p> <h2>Pros</h2> <p><b>0% APR for balance transfers</b>. If you need to transfer a balance from a card with a high APR, you can save money in interest by transferring to this card and paying it down within 18 billing cycles. This is one of the longest durations available for 0% interest rates on balance transfers, with many cards offering 12 months at the most.</p> <p><b>Low APR</b>. Although it is recommended that you pay your balance in full each month in order to avoid paying high amounts of interest on your purchases, if you typically carry balances from month to month, cards with low interest rates are the most economical.</p> <h2>Cons</h2> <p><b>0% only on balance transfers</b>. The introductory APR of 0% does not apply to purchases. Many credit cards offer an introductory APR of 0% for purchases also. This allows you to save money in interest if you need to make a large purchase when you open the account. (See also: <a href="http://www.wisebread.com/0-apr-credit-cards">Best 0% Intro APR Credit Cards</a>)</p> <p><b>Balance transfer fee</b>. Although this card offers one of the longest introductory APRs for transferring balances, you have to keep in mind that there is still a balance transfer fee. The balance transfer fee of $10 or 3% can be costly if you have a large balance to transfer. You should also consider whether or not you can pay the entire balance down within the 0% period, or you might end up paying more, instead of saving money. (See also: <a href="http://www.wisebread.com/5-best-credit-cards-with-no-balance-transfer-fees">Best Cards without Balance Transfer Fees</a>)</p> <p><b>No rewards program</b>. Low-interest credit cards generally do not offer rewards programs as the focus is on providing the lowest interest rate possible. However, if you consistently pay your balance in full each month, you are missing out on valuable rewards you could be earning with your purchases. The <a href="http://www.wisebread.com/get-more-cash-back-for-the-essentials-the-bankamericard-cash-rewards-card">BankAmericard Cash Rewards&trade; credit card</a> and <a href="http://www.wisebread.com/bankamericard-travel-rewards-more-rewards-for-more-travel">BankAmericard Travel Rewards&reg; credit card</a> offer cash and travel rewards respectively.&nbsp;</p> <p><b>Foreign transaction fee</b>. The foreign transaction fee of 3% can quickly add up if you use your card frequently for foreign purchases. If you travel abroad, the <a href="http://www.wisebread.com/bankamericard-travel-rewards-more-rewards-for-more-travel">BankAmericard Travel Rewards&reg; credit card</a> does not charge a foreign transaction fee, and is a better card for making foreign purchases. (See also:&nbsp;<a href="http://www.wisebread.com/smarter-security-and-no-foreign-transaction-fees-the-best-credit-cards-to-use-while-on-vacation">Best No Foreign Transaction Fee Cards</a>)</p> <h2>Who This Card Is Best For</h2> <p>The BankAmericard&reg; credit card is a simple and straightforward credit card, best for those who consistently carry balances from month to month. It is also best if the majority of your purchases are domestic, and if you can pay down a balance transferred from a credit card with a high APR.</p> <p><a href="https://consumer.bankofamerica.com/USCCapp/Ctl/entry?sc=VACJCF&amp;pid=dppf">See Terms</a></p> <p style="text-align: center;"><a href="http://ct.wisebread.com/click.php?pg=150&amp;pid=16&amp;pp=0&amp;uv=send"><strong>Click here to learn more and apply for the BankAmericard&reg; Credit Card today!</strong></a></p> </ul><br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christina-majaski">Christina Majaski</a> of <a href="http://www.wisebread.com/bankamericard-credit-card-review">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/bank-of-america-credit-card-offers-applications-reviews">Bank of America Credit Card Offers: Applications &amp; Reviews</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/get-more-cash-back-for-the-essentials-the-bankamericard-cash-rewards-card">Get More Cash Back for the Essentials: The BankAmericard Cash Rewards™ card</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/bankamericard-travel-rewards-more-rewards-for-more-travel">BankAmericard Travel Rewards®: More Rewards for More Travel</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/retire-your-credit-card-debt-with-citi-simplicity-card">Retire Your Credit Card Debt With Citi Simplicity® Card - No Late Fees Ever</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/alaska-airlines-visa-signature-credit-card-review">Alaska Airlines Visa Signature Credit Card Review</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management Bank of America credit card reviews Wed, 10 Feb 2016 22:44:16 +0000 Christina Majaski 1645519 at http://www.wisebread.com Flashback Friday: 39 Inspiring Stories and Tips to Help You Beat Debt http://www.wisebread.com/flashback-friday-39-inspiring-stories-and-tips-to-help-you-beat-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/flashback-friday-39-inspiring-stories-and-tips-to-help-you-beat-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_happy_victory_000078187401.jpg" alt="Woman learning how to beat debt with tips and inspirational stories" title="" class="imagecache imagecache-250w" width="250" height="143" /></a> </div> </div> </div> <p>Having debt sucks. It weighs on you like a metaphorical stack of bricks piled high on each shoulder, pushing you closer to a pit of despair with every minimum-only payment made. Of course, having some debt is good for your credit, and helps to build a solid credit history, but most debt is just suffocating.</p> <p>Since we're all still in New Year's resolution mode and working hard to stay focused on achieving our goals this year, we've decided to round up our favorite pearls of wisdom relating to debt management. Hopefully, these debt management tips will keep you locked in on clearing that pesky debt from your life &mdash; and sparing your shoulders from more suffering.</p> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/couple-happy-snow-travel-178492223-small.jpg" width="605" height="340" alt="" /></p> <p><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> &mdash; If you need an extra push to get you inspired, this true tale about a couple who got their finances in tip-top shape while unemployed will do the trick.</p> <p><a href="http://www.wisebread.com/5-inspiring-people-who-each-paid-off-over-100000-in-debt?ref=seealso">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</a> &mdash; Here are five real-life stories of debt-fighting superheroes who conquered their debt demons and are currently living financially, happily ever after.</p> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/female-graduate-176844972-small_0.jpg" width="605" height="340" alt="" /></p> <p><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> &mdash; A common misconception about debt management is that you need to be wealthy in order to bring your accounts from red to black. That's simply not true, and this story of a college grad clearing over 25k in debt on a modest salary serves as proof.</p> <p><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> &mdash; Ever wonder how exactly you ended up in debt in the first place? These common debt traps could be the source. Here's how to avoid them forever.</p> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/couple_stressed_finances_000062304938.jpg" width="605" height="340" alt="" /></p> <p><a href="http://www.wisebread.com/do-this-if-you-have-too-much-credit-card-debt">Do This If You Have Too Much Credit Card Debt</a> &mdash; Credit card debt might be the most stressful kind of debt, because it's so easy to get into and so so hard to escape. But it is doable, and these tips will get you there.&nbsp;</p> <p><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> &mdash; Paul Amato was a young dentist drowning in debt. Everything changed for him the moment he decided to face the problem head on and stay vigilant in paying it down. He even found love in the process.</p> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/modern-businesswoman-470761315-small.jpg" width="605" height="340" alt="" /></p> <p><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> &mdash; The incredible journey of Michelle Schroeder and how she managed to clear 40k in student loan debt before she was even able to rent a car will truly inspire you. I mean, talk about impressive.</p> <p><a href="http://www.wisebread.com/15-great-things-you-could-do-if-you-just-got-rid-of-your-debt">15 Great Things You Could Do If You Just Got Rid of Your Debt</a> &mdash; Thinking about all the ways you could spend your time and extra cash sans debt is a powerful tool to keep you focused on your goal. Make a post-debt bucket list and keep on truckin'!</p> <p><em>What are some of the ways you've managed your debt? Share with us 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/chrissa-hardy">Chrissa Hardy</a> of <a href="http://www.wisebread.com/flashback-friday-39-inspiring-stories-and-tips-to-help-you-beat-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-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/flashback-friday-the-107-best-breakfast-hacks-to-start-your-day-off-right">Flashback Friday: The 107 Best Breakfast Hacks to Start Your Day Off Right</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/flashback-friday-the-95-best-ways-to-get-fit-for-free">Flashback Friday: The 95 Best Ways to Get Fit for Free</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/flashback-friday-the-76-best-life-lessons-you-should-learn-by-30">Flashback Friday: The 76 Best Life Lessons You Should Learn by 30</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/12-easy-ways-to-avoid-student-loan-debt">12 Easy Ways to Avoid Student Loan 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/flashback-friday-the-60-best-ways-to-use-food-other-than-eating-it">Flashback Friday: The 60 Best Ways to Use Food Other Than Eating It</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management budgeting debt management fbf flashback friday money hacks Fri, 22 Jan 2016 18:00:04 +0000 Chrissa Hardy 1643287 at http://www.wisebread.com 7 Ways Being Debt Free Can Cost You http://www.wisebread.com/7-ways-being-debt-free-can-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-ways-being-debt-free-can-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/cloud_of_debt_000083150391.jpg" alt="Man learning ways being debt free can cost him" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Here at Wise Bread, we generally hate debt. Owing money to banks and credit card companies is usually a guaranteed way of never achieving the financial freedom you want. But there are cases when taking on some debt can be useful, especially as part of a long-term plan.</p> <p>Here are seven times when eschewing debt can be a bad financial move.</p> <h2>1. Market Returns May Be Higher Than Interest Rates</h2> <p>When interest rates are very low and the stock market is booming, you may be missing out on investment gains by choosing to live debt-free. For example, let's say you had $20,000 left on a mortgage with a 3.5% interest rate. If you had the cash, you <em>could</em> pay off your mortgage and avoid paying any additional interest. Or, you could put two-thirds of that money in the stock market and get a good return.</p> <p>There's a chance you'd end up with more cash in the long-run under the second scenario. This is why even super wealthy people are known to mortgage their homes. There is some risk here, especially if you don't have a fixed-rate mortgage.</p> <h2>2. Healthy Economies Rely on Debt</h2> <p>Whether we like it or not, we live in a consumer-driven economy. And one of the key ways for the economy to grow is through people spending. In an ideal world, spending can increase because people are earning more. But it's often credit card debt that fuels much of the growth.</p> <p>While too much personal debt can be a drag on the economy, some nations have found that high savings rates can make the economy sluggish. In fact, there are some nations &mdash; including Germany and China &mdash; that have sought to <em>encourage </em>more spending by their citizens. This is not an invitation to go on a spending spree, but it's worth noting that it helps to have some big spenders in our ranks.</p> <h2>3. You Might Miss Out on Opportunities</h2> <p>It's always best to try and achieve your goals without taking on debt, but sometimes there isn't much choice if you're cash poor and set on pursuing a dream. Taking on a manageable student loan to attend college could be seen as a better decision than not going at all. Borrowing to buy a car so you can make it to a well-paying job might be worth it. Taking out a loan to start a business is a common practice. If you're missing out on opportunities because you're averse to all debt, it may be worth loosening up. Just be careful not to dig yourself a hole you can't get out of.</p> <h2>4. Renting Stinks</h2> <p>There are some people who are so averse to risk that they refuse to even consider taking on a mortgage for a home. That's fine if you have the ability to pay for it all in cash, but very few of us can do that. Buying a home, even if you have to take on a 30-year mortgage, is generally a good long-term financial move, because you're building equity as you make payments. Owning a home is considered a great step on the path to wealth. Just be sure that the payments are easy for you to handle.</p> <h2>5. You Can't Build Credit</h2> <p>There's a weird paradox with credit, which is that you can't be approved for loans or credit cards until you've shown that you can pay back loans and make credit card payments. People who never borrow may have no debt, but they may also have very low credit scores because of a lack of credit history. This means that when they eventually do need a loan, they may end up with a high interest rate &mdash; if they are even approved at all.</p> <p>Credit card debt can be burdensome if you're not careful, but your credit score will rise if you keep at least a <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">modest balance on a credit card</a> and make payments on time. If you pay your credit card balance in full each month, you can still avoid debt and build a credit history.</p> <h2>6. You've Depleted Your Emergency Fund</h2> <p>Let's say you have $12,000 left on a mortgage and $13,000 in the bank. You <em>could</em> pay off the mortgage and celebrate owning your home free and clear. But then you have just $1,000 left, which isn't really enough to cover an emergency. While it may be tempting to try to pay down debt as quickly as possible using any money you have, it's important to maintain a decent-sized emergency fund to handle any unexpected costs from &quot;life events.&quot;</p> <h2>7. Frugal Isn't Always Fun</h2> <p>When you're in your early 20s, it's tempting to go out with friends, travel, and take on new experiences. But when you're young, you're also probably broke. No one wants to be 22, living at home and unable to even go out for as much as a pizza with friends. There's an argument to be made that being <em>too </em>focused on avoiding debt will cost you some good life experiences. Taking on a small amount of debt could be okay when you're young, as long as you understand how it can impact your long-term goals and have a solid plan to be debt-free once you start earning more.</p> <p><em>When has taking on some debt improved your life &mdash; and your finances?</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/7-ways-being-debt-free-can-cost-you">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/the-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-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/8-debt-reduction-mistakes-even-smart-people-make">8 Debt Reduction Mistakes Even Smart People Make</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/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</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/a-comprehensive-guide-to-the-debt-snowball-method-0">A Comprehensive Guide to the Debt Snowball Method</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management credit score Economy emergency funds interest rates market returns Fri, 22 Jan 2016 14:00:04 +0000 Tim Lemke 1643167 at http://www.wisebread.com Beware of These Common Debt Consolidation Traps http://www.wisebread.com/beware-of-these-common-debt-consolidation-traps <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/beware-of-these-common-debt-consolidation-traps" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_concerned_paperwork_000082590043.jpg" alt="Man learning to beware of common debt consolidation traps" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've vowed to eliminate your credit card debt, but your bills are too overwhelming. You're ready to consider a final option: debt consolidation.</p> <p>It's true that consolidating your debts can make it easier to eliminate them. But debt consolidation can come with its own financial traps. Because of these potential pitfalls, consumers should be wary before signing up for debt consolidation. Bruce McClary, vice president of external affairs and public relations for the Washington D.C.-based National Foundation for Credit Counseling, says that sometimes, it makes more sense to consider other options.</p> <p>&quot;Debt consolidation is not always the right choice,&quot; McClary explains. &quot;It is not a free service. And often, you can take care of your debt on your own, if you change your spending habits and take a more disciplined approach to paying off your existing debt.&quot; (See also:&nbsp;<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>)</p> <p>Here are the most common debt consolidation traps to avoid.</p> <h2>1. A Sky-High Interest Rate</h2> <p>In debt consolidation, a company will combine your debts into one single monthly payment that you can afford. In theory, it's a low-stress way to tackle what would otherwise be overwhelming.</p> <p>But even if your monthly payment is lower, this doesn't mean that you won't be spending too much. Some debt consolidation companies charge high interest rates to go along with the new monthly payment plans they set up for their clients. Make sure you ask your debt consolidation company what interest rate they'll charge you. If it seems too high, look elsewhere.</p> <h2>2. High Fees</h2> <p>Debt consolidation isn't free. But some debt consolidation firms soak their clients with especially high fees, either in the form of monthly or upfront charges.</p> <p>Again, make sure you know exactly what fees your debt consolidation company plans to charge you. Request a list of these fees in writing so that there's no confusion. If the firm won't provide this information to you, don't work with it. You want to work with a company that is clear about how much it charges.</p> <h2>3. Consolidating the Wrong Debt</h2> <p>Some forms of debt are worse than others. Credit card debt with high interest rates, for instance, is the bad kind of debt. But debts with low interest rates, such as auto loans or student loans, are generally considered good debt.</p> <p>You might be tempted to consolidate all of your debts into a single monthly payment. But rolling low-interest-rate debts into your monthly payment might be a poor financial decision depending on the interest rate of your new debt consolidation loan.</p> <p>When taking out a debt consolidation loan, focus on your debts with the highest interest rates. Pay off your low-interest-rate debt on your own.</p> <h2>4. Running Up Your Debt Again</h2> <p>Taking out one debt consolidation loan is bad enough. But if you don't change your spending habits, you might find yourself facing overwhelming debt again, even after paying off a debt consolidation loan.</p> <p>Consolidating your debt is treating the results of your bad spending habits. This isn't the same as treating the reasons for your bad spending.</p> <p>Once you've entered debt consolidation, it's time to determine why you ran up your debt in the first place. Maybe you spend when you are anxious. Maybe you overspend in an effort to keep up with your neighbors. Maybe you've never learned how to make and stick to a budget. If you don't address the reasons behind your overspending, you run the real risk of piling up debt yet again.</p> <p><em>Have you tried debt consolidation to eliminate debt? Did it work?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/beware-of-these-common-debt-consolidation-traps">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/is-a-balance-transfer-offer-a-good-deal">Is a Balance Transfer Offer a Good Deal?</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-best-0-balance-transfer-credit-cards">The 5 Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-debt-reduction-mistakes-even-smart-people-make">8 Debt Reduction Mistakes Even Smart People Make</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/a-comprehensive-guide-to-the-debt-snowball-method-0">A Comprehensive Guide to the Debt Snowball Method</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/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management consolidation fees interest rates spending habits traps Wed, 20 Jan 2016 14:00:03 +0000 Dan Rafter 1638728 at http://www.wisebread.com Ask These 4 Important Questions Before Signing Any Loan http://www.wisebread.com/ask-these-4-important-questions-before-signing-any-loan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-these-4-important-questions-before-signing-any-loan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_with_papers_000021456485.jpg" alt="Woman asking important questions before signing any loan" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're ready to apply for that big loan, whether it's a mortgage for a new house, student loans to pay for your college education, or a way to finance your first new car. But the debt you take on will be with you for years in the form of regular monthly payments. How can you be certain that you're ready for this financial commitment?</p> <p>Financial experts say it's normal to be nervous before taking on a new loan, no matter what it's for. Still, you can ease some anxiety by asking the right questions before taking on your new responsibility. What you learn might surprise you &mdash; and help you decide whether that loan is really what you need.&nbsp;</p> <h2>1. How Much Do I Really Need to Borrow?</h2> <p>Before applying for any new loan, determine how much you <em>really </em>need to spend. Many times, lenders might offer you the option to take out a larger loan than you actually need. If you're taking out a mortgage, for instance, you might be able to take out a loan for more than what the home is worth, and then use the extra dollars to pay for improvements to the property. (See also:&nbsp;<a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Ask Yourself These 5 Questions Before Buying a Home</a>)</p> <p>But Andrew Josuweit, chief executive officer of Student Loan Hero, warns borrowers to only take out loans for what they really need.</p> <p>&quot;It can be tempting to take on a larger loan than necessary and have some extra play money,&quot; Josuweit said. &quot;But that extra play money will end up costing you down the line. The larger the loan, the more interest you will pay. Only borrow what you need to avoid paying thousands of dollars in additional interest charges.&quot;</p> <h2>2. Can I Afford My Monthly Payment?</h2> <p>This is the most important question of all: Can you afford to make your monthly payments after taking out a loan? If not, whatever you are borrowing money for will seem like a burden, not a pleasure.</p> <p>A rule of thumb for determining whether a monthly loan payment is in your budget is to calculate your gross monthly income &mdash; your income before taxes are taken out &mdash; and your total monthly housing expenses, including whatever your new loan payment will be. You'll want your housing expenses to total 36% or less of your gross monthly income.</p> <h2>3. How Much Will My Loan Cost Me on Closing Day?</h2> <p>It's also important to determine whether you can afford the closing costs associated with your actual loan. Some loans come with high upfront fees. David Hosterman, branch manager with Castle &amp; Cook Mortgage in Greenwood Village, Colorado, says this is especially true with a mortgage loan. Closing costs for such loans &mdash; everything from property taxes to underwriting fees &mdash; can run thousands of dollars. Can you come up with the money to pay for these, or will you have to roll these costs into your loan, increasing your monthly payment?</p> <p>&quot;Such items as taxes, insurance, and mortgage insurance can have a major impact on a customer's payment,&quot; Hosterman said. &quot;Customers need to make sure these items are explained to them and that the information is provided to them so they can have a clear picture as to what the total payment on the loan would be.&quot;</p> <h2>4. How Much Does This Loan Cost Each Year?</h2> <p>When shopping for loans, consumers too often focus on only the interest rate. This number is important, of course, but what's even more important is something called the annual percentage rate, or APR.</p> <p>This figure tells you how much your loan will cost &mdash; including fees &mdash; over the course of one year, and is a more accurate measure of how much you're really spending on your loan.</p> <p>&quot;APR is the holy grail of loan cost,&quot; said Priyanka Prakash, finance specialist at FitBiz Loans. &quot;You should never commit to a loan without knowing the APR.&quot;</p> <p>Anthony VanDyke, president of ALV Mortgage in Salt Lake City, gives a good example of how important APR is. Say you are taking out a 60-month auto loan for $10,000 and are offered either a loan with an interest rate of 5% and $500 in upfront fees, or one with an interest rate of 7% and no fees. Which loan is better?</p> <p>This isn't easy to discover without knowing the APR. But if you do know the APR, you'll know that the second loan, despite its higher interest rate, is actually cheaper over its lifespan. The first loan choice comes with an APR of 7.124%, while the second loan comes with an APR of just 7%.</p> <p>&quot;The loan with the highest interest rate is actually the cheapest loan option, but most people see the lower interest rate and unwisely choose option A,&quot; VanDyke said.</p> <p><em>Have you borrowed recently? What questions did you ask before signing the paperwork?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/ask-these-4-important-questions-before-signing-any-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-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/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">8 Signs You&#039;ve Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; 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/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/is-it-ever-okay-to-cosign-a-loan">Is It Ever Okay to Cosign 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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-paying-off-student-loans-early-can-boost-your-finances">7 Ways Paying Off Student Loans Early Can Boost Your Finances</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management affordability borrowing loans monthly payments questions to ask Mon, 18 Jan 2016 14:00:03 +0000 Dan Rafter 1638137 at http://www.wisebread.com