Debt Management en-US 3 Reasons Why You're Still in Debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-reasons-why-youre-still-in-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="stressed woman" title="stressed woman" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>You feel like you've been working to pay off your credit cards forever, and yet each statement seems to have a higher balance than the last. It's enough to tempt you to break out the credit card for some retail therapy &mdash; even though you know that's just going to make the whole situation worse. Why can't you seem to get any traction with your debt payoff? (See also: <a href="">The Worst Ways to Pay Off Credit Card Debt</a>)</p> <p>As it turns out, your difficulty is not entirely your fault (although you're not totally off the hook, either). There are some deep-seated psychological reasons why digging yourself out of debt is so arduous. Here are three reasons why you haven't made more progress &mdash; and what you can do to become debt-free.</p> <h2>1. Creditors and Marketers Have Your Number</h2> <p>When we look back on the housing crisis of 2008, it's very easy to be scornful of the thousands of borrowers who took on far larger mortgages than they could possibly handle &mdash; let alone those borrowers who didn't even completely comprehend the details of the ARM loans they signed up for. And it certainly is reasonable to expect borrowers to know (and stay within) their own limits. (See also: <a href="">Psychology and Loans: Why You Make Bad Decisions</a>)</p> <p>However, a lender's job is to make sure they sell as many loans as possible for the biggest profit possible. It's in their best interest to get you into bigger loans, so they offer many temptations to make sure you do exactly that. Behavioral economist Dan Ariely described it this way in an interview with Steve Rhode, the &quot;Get Out of Debt Guy&quot;:</p> <blockquote><p>You can say if somebody took a bigger mortgage than they could reasonably repay, whose fault is it? And in the real world you're a big boy. You can decide what you do&hellip; but I think it's not like that exactly. If I put here a plate of fresh donuts and I pump the smell of fresh baked goods into this room, odds are you'll be tempted. And odds are <a href="">you'll be tempted even if you don't want to</a>. And I should accept some of the responsibility for that. And people who sell credit and give mortgages are trying to tempt people to take too much.</p> </blockquote> <p>Whether the debt you are struggling to repay is from a too-large mortgage, a student loan, a car loan, or credit card debt, there was someone you encountered at some point in the process whose job it was to tempt you and convince you take on more debt. And while that does not excuse <em>you</em> from making a poor debt decision, it is important to remember that such tempters get to hone their skills with years of practice on people just like you. You only have to make one mistake to be mired in debt.</p> <p>Basically, if you've been feeling like the system is rigged against you, that's because it is.</p> <h3>The Fix: Embrace Your Paranoia</h3> <p>One of the reasons why it is so easy to fall for financial temptations is because you find yourself <a href=" &amp;mdash article.pdf">focusing on the benefits</a> of whatever it is you want to buy. You can see yourself driving down the street in your new convertible with the wind in your hair, and all of a sudden, the <a href="">exorbitant interest rate doesn't matter in the least</a>. (See also: <a href="">Surprising Marketing Tricks You Should Know About</a>)</p> <p>But what if instead of thinking about all the wonderful experiences you'll have in your new car, you focus on the person selling it to you? What's in it for them, anyway? Why do they care so deeply about your ability to wipe the smirk off your overbearing brother-in-law's face?</p> <p>The truth of the matter is that they don't care about you. To them, you're just a customer (or in extreme cases, a mark), and anything they tell you about how wonderful your life will be if you sign on the dotted line should be regarded with suspicion. They're trying to make a deal, and your bad decision won't impact their life in any way.</p> <p>Once you start viewing sales professionals through this paranoid lens, it becomes much easier to avoid the temptations that can lead you into poor debt decisions.</p> <h2>2. You Might Be Depressed</h2> <p>It's hardly revolutionary to suggest that there is a <a href="">link between debt and mental illness</a> &mdash; and <a href="">depression in particular</a>. If you are having trouble paying your bills, you're likely to feel down about it, which makes it more difficult to get a handle on your bills.</p> <p>But the connection between depression and debt can even go deeper than that vicious cycle. Apparently, depression makes you more prone to see the world as it really is &mdash; which can make it more difficult to dig yourself out of debt. According to Dan Ariely:</p> <blockquote><p>There are some results showing that people who are depressed actually see reality more correctly. All of us have what's called an optimism bias. We think we're a better driver than average. We think we're probably better investors than average. We're less likely to die of a heart attack. We are overly optimistic. There are some results showing that depressed people are actually more accurate.</p> </blockquote> <p>Basically, all of those black-cloud-over-the-head pessimists out there who prefer to describe themselves as &quot;realists&quot; are correct. They have a clearer view of how the world actually works.</p> <p>In the case of debt, if you are depressed, then it's likely that you are able to see very clearly just how long and slow a slog it will be for you to get back into the black. Your cheery brethren may assume that things will go more quickly or smoothly, just because of the optimism bias. But since you see the world without the benefit of rose-colored glasses, you know that you're in for a long and an unpleasant grind. And recognizing that reality makes it that much harder to get started.</p> <h3>The Fix: Set Mini-Goals</h3> <p>If you have a tendency to react to the world (and your finances) like Eeyore, then it's a good idea to break down your huge debt payoff into smaller pieces. That's because a realistic view of the world can still lead you astray. Those without the optimism bias may be more accurate when looking at the reality of what debt payoff will look like, but they still tend to think that making the last payment will never happen, which is simply not true.</p> <p>But making short-term goals for yourself as stepping-stones to your larger goal will allow you to maintain the rosy view you need to stay the course. This works even better if you plan for ways to <a href="">celebrate your small milestones</a> so you can maintain your interest and your sunny attitude toward the process. (See also: <a href="">Surprisingly Simple Ways to Motivate Yourself</a>)</p> <h2>3. You Overthink the Problem</h2> <p>After decades of absorbing the lessons of daytime talk shows, most of us would agree that the most important step in fixing a psychological issue is determining the roots of that issue. Without really digging into the reasons why you feel the need indulge in hundreds of dollars of retail therapy each week, you'll never fix your problem with debt.</p> <p>So, before you do anything else on your debt repayment journey, you sit down with an expert of some kind &mdash; a therapist or a personal finance coach &mdash; and try to figure out what is driving your intense need to buy buy buy. As you delve deeply into your own psyche, you may find that you understand yourself a little better &mdash; but you haven't actually stopped overspending.</p> <p>The problem? Just because you know the root of the issue doesn't mean you can stop the problem itself. According to Dan Ariely:</p> <blockquote><p>When you teach people questions about why [they struggle with debt], the issue is will they use [their new knowledge] every time? And you don't need to fail a lot to fail enough to devastate yourself. So think about something else like texting and driving. If you know the principle you may do it less. But if you do it even once you can kill yourself or other people. Whereas, it's hard to assume that people would think about [the roots of debt or why texting and driving is dangerous] all the time. People have other things to worry about.</p> </blockquote> <p>This is most certainly an issue that is easier to see in other circumstances, such as addiction. For instance, an alcoholic may need to get to the root of their psychological dependence on alcohol &mdash; but figuring out the psychology needs to take a back seat to simply getting away from the temptation. After all, a single drink could be disastrous, even if you know exactly why you are doing it.</p> <h3>The Fix: Make Your Decisions Ahead of Time</h3> <p>Digging into the reasons behind your problem with debt is certainly a good use of your time. But it should not be part of how you actually deal with your current debt problem. What you need now is a rigid framework that will tell you exactly what to do and when. Then, you take choice out of the equation, meaning you never have to rely on willpower, when you know that you just can't say no to another trip to the mall. (See also: <a href="">How to Replace Bad Habits With Good Ones</a>)</p> <p>For instance, switching to a <a href="">cash-envelope system</a> makes it impossible to spend money you do not have. There is no agonizing over whether you can afford just one more charge on your card. There is no need for you to rely on willpower. Your decision has already been made for you.</p> <p>Another common suggestion for creating such a decision framework is to come up with <em>if&hellip; then</em> statements about your temptations. For instance, an alcoholic may say: &quot;If someone asks if I want a drink, then I'll order a club soda.&quot; An overspender might decide &quot;If my friends ask me to the mall, I'll invite them over to my house to play cards instead.&quot; Again, this means that the decision has already been made and there is no moment of choice or hesitation.</p> <p>The New York Times describes these strategies as using <a href=";pagewanted=1">behavior modification</a> rather than willpower. Basically, if you establish habits that take away the necessity of choosing, then you keep more of your mental bandwidth available for other issues. That way, you make the reasons behind your debt unimportant.</p> <h2>The Money Mind Game</h2> <p>Avoiding debt is pretty simple. We all know that we should be spending less than we earn, saving up for big purchases, and sending more than the minimum payment to our loans. The difficult part is getting around our own psychological hang-ups and quirks. But once you recognize just how your brain can lead you astray, it's easier to put in place the habits and responses that will get you where you need to go.</p> <p><em>Do any of these reasons ring true for you and debt? What's making it hard for you to pay it off?</em></p> <a href="" class="sharethis-link" title="3 Reasons Why You&#039;re Still in Debt" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Emily Guy Birken</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Life Hacks Debt Management debt saving spending Thu, 17 Apr 2014 08:36:25 +0000 Emily Guy Birken 1135749 at This Is How Donald Trump Builds Wealth (and You Can Too) <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-is-how-donald-trump-builds-wealth-and-you-can-too" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="cash magnet" title="cash magnet" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>For most people the name Donald Trump conjures up many images &mdash; the hair, the pout, the Tower, the casinos. And, of course, &quot;The Apprentice.&quot; He is certainly one of our culture's most recognizable personalities, and since the 1970s he has accumulated enormous wealth. But has that wealth made him financially independent? Not necessarily, at least not until recently. To see why, let's take a brief look at how his financial investments and priorities have evolved over the years. (See also: <a href="">Money Lessons From Millionaires</a>)</p> <h2>1970s to 1980s: The Asset Accumulation Years</h2> <p>In 1971 Donald Trump moved to Manhattan, where he quickly established a name for himself as a leading New York City real estate developer. At first, he focused on multi-unit residential complexes, but he then expanded into commercial properties, including hotels and office buildings. By the 1980s Trump's assets from real estate holdings, development activities, and property sales had grown significantly. There were liabilities (mortgage debt) associated with these assets, but at first they didn't appear to be excessive. As a result Trump had substantial net worth, or wealth. (See also: <a href="">Investing in Real Estate</a>)</p> <h2>1990s: The &quot;Bad Wealth&quot; Years</h2> <p>By 1990 Donald Trump had broadened his investment interests to include football, airlines, and casinos. It was the latter, in particular the Taj Mahal Casino in Atlantic City, that together with increasing debts on his other properties led to a serious debt problem. In fact, by the early '90s his personal debt had grown to $900 million and his business debt was nearly $3.5 billion.</p> <p>The problem? Despite having substantial assets, the liabilities were excessive. To make matters worse, the assets weren't generating sufficient cash flow to cover the debt payments. On paper, Trump might have still been a multi-millionaire, with total assets several million dollars more than total liabilities; so he had wealth. But negative cash flow meant he was far from financially independent. In fact, he was on the brink of personal bankruptcy. Hence, the &quot;bad wealth&quot; years.</p> <h2>2000s: The &quot;Good Wealth&quot; Years: The Apprentice to the Rescue</h2> <p>In 2003, NBC launched &quot;The Apprentice,&quot; a reality TV show hosted and produced by Trump. During the first season Trump was paid $50,000 per episode, or roughly $700,000 for the year. These days, Trump is reportedly paid $3 million per episode. Calling this venture a cash cow would be an understatement. It is a great example of &quot;good wealth:&quot; an asset (in this case a business) that generates substantial positive cash flow.</p> <h2>The Lesson? Cash Flow Is King</h2> <p>&quot;The Donald&quot; knows how to take a good thing and make it better. Starting with his real estate activities and especially now with his media success, Trump has established and fully leveraged the branding of his name. And he's done so with a particular focus on relatively low cost (and therefore low debt) ventures that generate multiple income streams. Some examples:</p> <ul> <li> <p>Books and tours</p> </li> <li> <p>&quot;The Apprentice&quot; memorabilia and game items</p> </li> <li> <p>Speaking engagements, where he reportedly receives up to $1.5 million per presentation</p> </li> <li> <p>Allowing (for a fee) his name to be displayed on buildings owned by others</p> </li> </ul> <p>These specific types of activities are generally beyond our reach. But the financial principles they illustrate are simple and relevant to us all: Seek to develop a portfolio of assets that <a href="">generate positive cash flow</a>.</p> <h2>How the Rest of Us Can Learn From Trump</h2> <p>What are some examples of cash flow-generating assets available to common folk like us who don't have Donald Trump's resources? Here are a four.</p> <h3>Retirement and Savings Accounts With Matching Contributions</h3> <p>If your employer offers a 401(k), employee stock, or savings program that includes a company match, you are being offered free money. Where else can you find a deal like that? It's a no-brainer. Contribute an amount that gets you the maximum match from your employer. (See also: <a href="">Valid Reasons Not to Contribute to Your 401(k)</a>)</p> <h3>Income-Generating Businesses</h3> <p>Yes, you too can start your own business without quitting your day job. The challenge, of course, is getting it to cash flow positive. Increase your odds of success by avoiding or at least minimizing the two biggest cash flow drags: paying employees a salary and paying rent. These two expenses are common to traditional retail businesses but not to service businesses, so think about providing a service.</p> <p>Some examples of service businesses include writing, conducting or coordinating webinars or live workshops, giving music or other lessons, and consulting. Or perhaps you have an invention, product, or service that can be licensed to multiple users, thereby creating multiple sources of income. (See also: <a href="">10 Great Home-Based Businesses</a>)</p> <h3>Dividend-Paying Stocks</h3> <p>Stocks are one of two major asset types owned by the financially successful, because in general stock growth outpaces inflation. Stocks that increase in price and also pay dividends offer the added bonus of quarterly cash flow payments (which, by the way, can be reinvested to compound the growth).</p> <h3>Income-Generating Property</h3> <p>The other major asset type owned by the financial elite is real estate. But not just any real estate. Remember, we don't want to fall into the debt trap, with excessive monthly mortgage expenses and other carrying costs. Generating rental income from a property can offset, or in some cases exceed, the negative cash flow. Being a full-fledged landlord isn't for everyone, however, so keep in mind that renting a room, a garage, or a parking space can create a regular income stream with a little less responsibility.</p> <p>Other types of properties can be rented, too. For example, trucks or trailers. So can specialty equipment and tools. Have a boat or a classic car? They can also be rented.</p> <p>So, what kind of apprentice will you be? Will you take advantage of opportunities to create &quot;good wealth&quot; &mdash; the kind that generates cash flow? Or will you accumulate assets with debts that spiral out of control? Having been there himself, The Donald has an expression for people who let that happen: &quot;You're fired!&quot;</p> <p><em>Have you thought about how to turn your assets into cash flow generators?</em></p> <a href="" class="sharethis-link" title="This Is How Donald Trump Builds Wealth (and You Can Too)" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Keith Whelan</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management Investment cash flow trump wealth Fri, 14 Mar 2014 10:24:07 +0000 Keith Whelan 1130798 at How I Erased $70,000 of Debt and Became an Eventual Millionaire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-i-erased-70000-of-debt-and-became-an-eventual-millionaire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="woman" title="woman" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Money can give you freedom or make you stuck. You have the power to change your future, and it all begins with your money. You want your money to work for you; you don't want to work for your money. I know, because I learned the hard way. (See also: <a href="">Money Lessons From Millionaires</a>)</p> <p>In my early- and mid-twenties, my husband and I always felt broke even though we both had good jobs and were doing the best we could. And to top it all off, I wasn't happy with my job at all because I wasn't in control. I worked really long hours for a video-on-demand company as a project manager, but I realized I was spending too much time and energy on something that I wasn't passionate about. I really longed to do something that I cared about. But I felt stuck because of the choices I had made, and I owed too much to be able to quit my job.</p> <p>Then I had the realization that only I could take control to change my situation. It was up to me and no one else. I could be the hero of my own story. (See also: <a href="">Become Your Own Hero to Make Your Fortune</a>)</p> <h2>Be Honest With Yourself</h2> <p>Ignoring your finances is so easy. It's normal to only pay attention when the next bill is due, or when you realize your bank account slipped below $100. We ignore our finances because we feel that it's too complicated to figure out, or we're afraid of what we might find when we actually do peek into Pandora's box. (See also: <a href="">Ways You're Lying About Your Money</a>)</p> <p>But you need to be honest with yourself. And that means uncovering things you don't want to uncover and admitting things you don't want to admit. Being honest is accepting where you are now, exactly as you are.</p> <p>You need to put it all down on paper; it can't just be a number in your head. It may be a hard thing to do but you need to find out how much you actually owe. This is a first step in controlling your money &mdash; you will figure out where the money you do have is going and then you can figure out different ways to bring more in.</p> <p>I did this by adding up all of my debt. I had no idea I owed more than $70,000. In fact, I thought I was pretty good with my money. It wasn't just credit cards either. It was a home equity loan, a new car, and student loans.</p> <h3>Action Item: Look Hard at Your Numbers</h3> <p>Take a hard look at all of your numbers. They are the facts, so take some time tonight to lay it all out on the table. Pull together every number you can, your debt, your income, your assets, and retirement. In the immortal words of GI Joe, &quot;Knowing is half the battle.&quot; (See also: <a href="">Ways to Track Debt</a>)</p> <h2>Be Value Conscious</h2> <p>Many millionaires know the value of a dollar. They know because many of them have been broke. Here's a question: What do you value? It's very important to figure out what you want in life and what's most important to you. Most of the time, it's not material items that you value. It's so much more than that. So after you figure out what you truly value, then your spending should reinforce that. You should start spending money in ways that make you happy. Here are a few key principles to make you happy. (See also: <a href="">Scientifically Proven Ways to Be Happier</a>)</p> <h3>Buy Experiences Instead of Things</h3> <p>Researchers have found that the happiness derived from experiences instead of things wears off slower. So when we think about that memory, we get to relive that experience all over again. It's like we get more bang for our buck over that &quot;thing&quot; we could have bought instead that loses its importance over time.</p> <h3>Help Others Instead of Yourself</h3> <p>Research also shows that whenever we improve our connections with others, we are happier. So when we get to spend money on others or help someone out, it brings us a sense of fulfillment. I have found a very common theme when asking people why they want to become a millionaire &mdash; it's usually something like, &quot;to help others and give more.&quot; (See also: <a href="">Easy Ways to Make Someone Happy</a>)</p> <h3>Buy Many Small Pleasures Instead of a Few Big Ones</h3> <p>Does eating one 12-ounce cookie give us twice the pleasure as eating a 6-ounce cookie? Studies show the answer is no. In fact, eating two 6-ounce cookies gives you more satisfaction. So the lesson here is to learn to break up your spending into smaller pleasures.</p> <h3>Acting on My Values</h3> <p>I realized that I was acting so out of control with my money. I would go to the store and not remember what I bought a day later (though I remembered spending over $100 on the trip!). I started to cut out all of those pieces that didn't really matter.</p> <p>I found that I really cared for experiences, so it was the act of going to the coffee shop that I liked. So instead of an expensive sugar-laden latte, I just bought the cheapest tea on the menu. We put in place a budget for extras (when we were getting out of debt it was $25 per month each!), and I learned how to stretch that $25 for the whole month.</p> <h3>Action Item: Identify What You Really Care About</h3> <p>Write down the last 10 items you purchased. What really made a difference to you? Was it being able to go to your favorite coffee house, or do you not care about coffee at all?</p> <h2>Numbers in Your Head Don't Count</h2> <p>To understand one's finances means that you understand the meaning behind the numbers, not just the basic figures themselves. We all need to seek to understand our finances. That means knowing the basics like your income and expenses and having them written down. But it's also knowing what those numbers mean to your life and goals. (See also: <a href="">Achieve All Your Goals in 6 Steps</a>)</p> <h3>Know Your Net Worth</h3> <p>The first number to figure out is your Net Worth. Your net worth is all of your assets minus all of your liabilities. This is simple math, just addition and subtraction. It just takes some time to find all of the numbers. It might be disheartening to see it in black and white after you figure this out, but at least you know where you stand and are being honest with yourself.</p> <h3>Develop a Budget</h3> <p>The second number to figure out is your Income and Expenses &mdash; a Spending Plan. No matter how much money you have coming in and going out, I firmly believe that understanding your finances is vital to having a healthy relationship with money. In other words, create a budget. (See also: <a href="">How to Have a Better Relationship With Money</a>)</p> <h3>Know Your Current Spending</h3> <p>The third number is your Current Spending. You need to know how much your spending matches the budget you set out for yourself. Budgeting helps you become very clear on your spending habits so you can start to predict what the future will look like.</p> <h3>My Results</h3> <p>We ended up realizing that the new car was a huge piece of the debt ($19,200). We also looked to see how long it would take us to pay off all of our debt. If we took out big chunks like the car, the number of months it took would be a lot less.</p> <p>So we first started to look at bigger chunks. We got rid of the new car and bought a cheaper $8,000 car. We also sold kayaks, a jeep CJ7, and just about everything we could.</p> <p>Then we looked at the smaller things in the budget. We did the standard things like canceling cable and negotiating our rates. Plus we really tried to raise our income every single month. My husband took on odd jobs. Every time we did a little more the length of time we had to do it got smaller. That was a <em>huge</em> motivation for us. (See also: <a href="">How to Stay Motivated When the Going Gets Tough</a>)</p> <h3>Action Item: Establish the Finish Line</h3> <p>Figure out your three numbers (or update them if you haven't lately!). Figure out that magic date, the day you will pay off all of your debt, or be able to quit your job, etc. It will set the goal in stone, and help you realize there is an end in sight!</p> <h2>Control Your Money</h2> <p>Now that you have all of the numbers in place and a plan of attack with your budget, you'll need to figure out what to do with your excess money! The goal at first is to reduce your expenses and increase your income so that the excess amount gets bigger.</p> <p>You need to take a hard look at everything and see what and where you can cut things. Be deliberate with your money and know where every penny is going. And remember, these cuts are a temporary way to creating the best setup for you to move forward on your goals.</p> <p>Keep reading sites like this one and finding stories similar to yours. That's how I persevered in getting out of debt. And that's how I'm on my way to a million dollars right now. I am interviewing millionaires who can tell me their stories of how they have done it, which inspires me to keep moving forward toward my goals.</p> <p>To me, an Eventual Millionaire is someone who has the goal to be a millionaire, eventually. But they want to do it on their own terms; they want an enjoyable business and an enjoyable life.</p> <p>I am an Eventual Millionaire.</p> <p><em>Which action step will you be committing to today?</em></p> <a href="" class="sharethis-link" title="How I Erased $70,000 of Debt and Became an Eventual Millionaire" rel="nofollow">ShareThis</a><div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>Jaime Tardy is a Business Coach and a Speaker who helps entrepreneurs to achieve their goals. She's the Founder of, a website that features a new millionaire interview each week and focuses on personal finance and entrepreneurship. You can grab The Eventual Millionaire Book at <a href=""></a> and also download the Eventual Millionaire Starter Kit for free right on the site. You can also listen in to all 100+ interviews with millionaires free on</p> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Jaime Tardy</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management budgeting debt debt elimination financial goals Mon, 24 Feb 2014 10:36:17 +0000 Jaime Tardy 1126855 at This Trick Could Help You Finally Pay Off Your Debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-trick-could-help-you-finally-pay-off-your-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="coins" title="coins" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>There are some people who are able to make and keep promises to themselves. When they say that they will stop eating ice cream every night or that they will send an extra $1000 to their credit card company every month, they do it. (See also: <a href="">Ways to Make Yourself Accountable</a>)</p> <p>I have never met one of these people.</p> <p>My guess is that you haven't either.</p> <p>For the rest of us mortals, the accountability that comes from making a promise to another person may be just what we need to stick to our commitments. After all, it's easy to blow off a promise to yourself, whereas disappointing someone else is another matter entirely.</p> <p>So why not try this trick with a commitment to pay off debt? Working with a debt partner who is focused on a similar debt-payoff goal can help you reach that finish line faster. (See also: <a href="">Pay Down $100 Worth of Debt This Week</a>)</p> <h2>The Importance of Accountability</h2> <p>A common piece of advice for goal-setters is to <a href="">tell everyone about the improvement plan</a>. That way, you'll face social consequences for not following through on your goal.</p> <p>However, just telling people that you plan to pay off your credit cards once and for all can backfire. According to career coach Shana Montesol Johnson, &quot;when we tell someone that we are going to do something big&hellip;the praise and positive reaction we get from our audience gives us a part of <a href="">the experience of having already accomplished</a> these things&hellip; And so we are less motivated to actually work toward these goals.&quot;</p> <p>This happened to me recently, when I told several friends that I planned to complete the National Novel Writing Month (NaNoWriMo) challenge to write a 50,000-word novel during the month of November. Everyone was very positive and supportive, and I felt great knowing that my friends thought so highly of my plan.</p> <p>Then I wrote a grand total of 3,000 words during the month.</p> <p>I thought I had given myself accountability by telling people about my writing plan, but I was missing a key ingredient: specific responsibility for my actions. While I had one or two friends who asked me in passing how the writing was going, no one was checking in on my progress.</p> <p>Had I vowed to complete the NaNoWriMo challenge with a writing buddy, I'd know that a particular person would be asking me on a daily basis where I was &mdash; as I would ask her. That would give me motivation to turn off the cat videos on YouTube and get back to crafting brilliant prose.</p> <p>When it comes to debt payoff, that kind of personal accountability will also have a motivating effect. If you find yourself tempted to spend money you don't have on something you don't need, thinking about the fact that you would have to tell your debt partner about your slip-up can be enough to stop you. (See also: <a href="">Frugal Promises I Haven't Kept</a>)</p> <h2>Staying Encouraged Is Easier With a Cheerleader</h2> <p>Debt reduction does not offer much in the way of instant gratification. The progress you make in paying off your large debt is incremental and not particularly satisfying. And since <a href="">willpower &mdash; like a muscle &mdash; can be exhausted</a>, you cannot simply force yourself to stay virtuous throughout the journey to debt freedom.</p> <p>So how do you stay the course when you feel like giving up? Ask your debt partner to be your number one fan. It's easy to forget how far you've come. But your debt partner can remind you how big an accomplishment it is that you have already paid down some of your debt.</p> <p>This is especially important when you hit a setback. Perhaps you forgot a payment due date and were hit with a late fee &mdash; and you feel like throwing in the towel since you'll never get ahead anyway. Your debt partner can remind you that before you started your debt payoff goal, you paid late fees all the time, and this is the first one you've seen in months. (See also: <a href="">How to Avoid Late Fees</a>)</p> <p>It is important, however, that your debt partner not just be a yes man. According to Mandi Ehman of The Art of Simple, &quot;if an accountability partner is just patting you on the back or nodding their head when you make excuses, then they're not really holding you accountable after all. An important part of being accountable to someone is giving them permission to be honest with you. They should be comfortable telling you when you've gotten off track or pointing out areas where you may want to focus more of your efforts.&quot;</p> <h3>Plus, It's More Fun</h3> <p>In addition, working with a partner can make the slow progress much more fun. You and your debt buddy can determine ahead of time how you will celebrate your small victories, and you can remind each other of those upcoming celebrations when you are feeling discouraged.&nbsp;(See also: <a href="">The Secret to Succeeding at Everything</a>)</p> <h2>Write Out a Contract</h2> <p>When it comes to the nitty-gritty of partnering with a friend to make a debt payoff plan, experts say that an important start is to create a contract. Not only does this exercise help you and your debt partner understand just what you are in for with your partnership, but it also makes clear from the beginning exactly what success will look like and how each partner will help the other to achieve success. (See also: <a href="">A Quick Guide to Agreements and Contracts</a>)</p> <p>You may have heard of these sorts of contracts for weight loss partners. They are very effective for weight loss, and can easily be adapted for debt reduction. According to Colette Bouchez of WebMD, a partner contract should &quot;spell out your mutual goals and the ways you plan to help each other achieve them.&quot; In addition, your contract should &quot;include both short-term goals and long-term ones.&quot;</p> <p>For instance, one of your short-term goals may be dining out less often in order to save money. You might write into the contract that you want to cook meals for the week every weekend so that you won't be tempted to order carryout after a long work day &mdash; and you could specify that you and your partner will cook together every Sunday and share your week's worth of food. Writing those short-term goals into your contract can help you to plan ahead for both potential setbacks and for the type of accountability you need in order to meet your goals.</p> <h2>Two Heads Are Better Than One</h2> <p>When it comes to self-improvement, promises you make to yourself will always be easy to break. After all, the only one affected is you.</p> <p>So find a friend who has a similar goal and work out a partnership to keep yourselves accountable. You'll both be better off for it, and you'll enjoy the process of improving yourself that much more.</p> <p><em>Have you worked with a debt partner to help you reduce debt? Were you successful?</em></p> <a href="" class="sharethis-link" title="This Trick Could Help You Finally Pay Off Your Debt" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Emily Guy Birken</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management debt debt elimination debt reduction Thu, 20 Feb 2014 10:48:54 +0000 Emily Guy Birken 1126680 at Your Debt Is Killing You — Here's the Cure <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/your-debt-is-killing-you-heres-the-cure" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="stress" title="stress" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>In the modern age, many people may think that debt is merely an unpleasant fact of life. Yes, debt is stressful, but it&#39;s not like owing money is going to kill you, right?</p> <p>Wrong.</p> <p>According to some recent studies, debt affects far more than just your finances. The stress of being in debt can cause mental and physical ailments that can shave years off your life. Here&#39;s what you need to know about the unanticipated health consequences of debt &mdash; and how to deal with them. (See also: <a href="">Easy Ways to Banish Stress</a>)</p> <h2>Debt and Mental Health</h2> <p>The link between money issues and stress is hardly controversial. It&#39;s natural that money &mdash; which is one of the most emotionally loaded issues we have to deal with on a daily basis &mdash; would be the source of stress and negative thoughts.</p> <p>However, researchers at the University of Southampton have recently found that there may be a strong correlation between mental health issues, such as depression and neurosis, and <a href="">being in debt</a>. In particular, individuals who were carrying debt were more likely to suffer from psychological conditions than those who had no debt. (See also: <a href="">Depressed? It Could Be Your Debt</a>)</p> <p>Of course, this research does not answer the chicken-or-egg question of whether people become depressed or anxious because they are carrying debt, or if people suffering from such disorders are more likely to incur debt. According to researcher Dr. Thomas Richardson, &quot;It might be that debt leads to worse mental health due to the stress it causes. It may also be that those with mental health problems are more prone to debt because of other factors, such as erratic employment. Equally it might be that the relationship works both ways.&quot;</p> <h3>Retail Therapy Backfires</h3> <p>Anyone who has ever used retail therapy as a way of cheering themselves up can understand how debt and depression can become a vicious cycle. You might spend money as a way to self-medicate when depressed, and then receiving the credit card bill could be enough to stress you out, continuing the cycle of depression.</p> <p>This may seem unfortunate, but not fatal &mdash; except that depression over debt can and does lead to suicide. The results of the Southampton study &quot;suggest that those who die by suicide are more likely to be in debt.&quot; While the specific statistics on the relationship between debt-related depression and suicide are difficult to determine, the <a href="">anecdotal evidence</a> of how out-of-control debt is behind many tragic suicides is enough to make all of us treat our credit cards with respect.</p> <h2>Debt and Physical Health</h2> <p>Of course, psychological issues have a nasty habit of affecting your physical health, as well. In particular, high stress can have a negative effect on your blood pressure &mdash; even if you are otherwise young and healthy. (See also: <a href="">15 Small Habits to Live Longer</a>)</p> <p>According to a recent study out of Northwestern University, carrying a large debt load is associated with higher diastolic blood pressure. This study analyzed data from 8,400 young adults between the ages of 24 and 32, and it found that higher <a href="">debt correlated with higher blood pressure</a>.</p> <p>Lead researcher Elizabeth Sweet, PhD, recognizes that these findings are somewhat surprising: &quot;You wouldn&#39;t necessarily expect to see associations between debt and physical health in people who are so young. We need to be aware of this association and understand it better. Our study is just a first peek at how debt may impact physical health.&quot;</p> <p>High diastolic blood pressure is associated with higher risk of hypertension and stroke &mdash; meaning your high credit card debt could be considered a medical problem. (See also: <a href="">What to Do If You Get a Huge Medical Bill</a>)</p> <h2>How to Protect Yourself From Debt</h2> <p>As with many health problems, it&#39;s certainly possible to simply live with high debt. But doing so can affect both your quality of life and its length. Rather than simply getting used to the stress, the depression, the anxiety, and the racing heart, it&#39;s far healthier for your mind and your body to do something about it.</p> <h3>Take Action &mdash; Any Action</h3> <p>In fact, just taking action can help to alleviate some of the symptoms of anxiety. That&#39;s because you are in effect changing your <a href="">locus of control</a> &mdash; your view of your ability to control events in your life. If you have an external locus of control, you may feel as though your debt is something that has happened to you, and something about which you can do nothing. (See also: <a href="">Pay Off Debt With Delayed Spending Tricks</a>)</p> <p>But having an <a href="">internal locus of control</a> &mdash; which is associated with lower stress and more happiness &mdash; will allow you to feel as though you can beat your debt problem. And that feeling can be enough to help chase away both your mental and physical symptoms.</p> <p>This is why people aged 51 to 64 tend to be particularly prone to depression over their debt, according to Lawrence Berger of the University of Wisconsin at Madison: &quot;That group is the most likely <a href="">to feel depressed about its debt</a>, which isn&#39;t surprising. They are in the period of life when the time clock is running &mdash; when retirement is nearing, when health or age discrimination might make it difficult to get or keep a job.&quot;</p> <p>In short, older individuals who are in debt have some very good reasons to have shifted to an external locus-of-control, even if they were more internally focused when they were younger.</p> <h2>Your Life Is in Your Hands</h2> <p>One good way to shift that locus of control is to break your debt down into manageable chunks. The &quot;<a href="">snowball method</a>&quot; coined by Dave Ramsey is an excellent way to turn around your feelings about your debt. In this method, you start by paying off the debt with the lowest balance. Once that is paid off, you will send that payment along with the minimum payment to your next lowest balance debt, and so on.</p> <p>This makes great psychological sense, since it gives you a quicker feeling of accomplishment, which allows you to stay the course, and helps you to feel as if you are in control.</p> <p>And feeling like you are in control is an incredible stress-reliever and mood-booster. Making the debt snowball something like the opposite of the debt-depression cycle.</p> <p>Getting out of debt may not be a simple or quick process, but doing so will improve your life &mdash; and possibly even save it.</p> <p><em>What steps have you taken to control your debt &mdash; and your health?</em></p> <a href="" class="sharethis-link" title="Your Debt Is Killing You — Here&#039;s the Cure" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Emily Guy Birken</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management Health and Beauty debt Health money and health Mon, 10 Feb 2014 10:48:28 +0000 Emily Guy Birken 1123801 at Now Is the Best Time in Years to Do a Credit Card Balance Transfer <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/now-is-the-best-time-in-years-to-do-a-credit-card-balance-transfer" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="credit card" title="credit card" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>One of the most frustrating realities in personal finance is the high rate charged on credit card balances. Even if you pay more than the minimum each month, the high interest rate severely limits the effectiveness of your payment. Whether you are trying to deal with holiday debt or take control of your finances, a balance transfer can be just the thing. (See also: <a href="">Why and How to Do a Balance Transfer</a>)</p> <p>And the best part? Now is a great time to do a balance transfer.</p> <h2>Why Transfer Balances Now?</h2> <p>Balance transfer deals have been ramping up in recent months. The <a href="">credit freeze is thawing</a>, and 0% APR balance transfers are being offered to more people.</p> <p>During and immediately after the Great Recession, you had to have practically impeccable credit to receive these attractive offers. Now, however, with <a href="">banks enjoying record profits</a>, they are willing to take a little more risk and expand the offers. Chances are that a 0% APR offer is coming to mailbox near you.</p> <p>Not only is the number of these offers increasing, but the deals are getting sweeter. The highest offers in the United States are at 18 months of that introductory rate. During the past few years, most of these offers were capped between six and 12 months. Now you have up to a year and a half to make a serious dent in your transferred debt. (See also: <a href="">The Worst Ways to Pay Off Credit Card Debt</a>)</p> <h2>Use a 0% Balance Transfer to Help Your Finances</h2> <p>Using a 0% balance transfer credit card helps you demolish your debt because your entire monthly payment goes toward reducing your principal. You don&#39;t have to worry about how big a chunk the interest payment is taking out of your payment. Here are some of the ways a 0% APR credit card can help your finances. (See also: <a href="">Best 0% Balance Transfer Credit Cards</a>)</p> <h3>Get Rid of Holiday Debt Fast</h3> <p>Even with the best intentions, many of us end up carrying balances following the holidays. It&#39;s so easy to get caught up in the season with sales, entertaining, and gift giving. Transfer your high-rate balances to a 0% APR credit card, and you have a little breathing room to pay off your holiday debt and keep it from dominating your life. Plus, you pay it off faster when everything goes toward principal. If you have cash back from rewards credit cards, apply that to your debt, too, for even faster results. (See also: <a href="">How to Deal With Post-Holiday Debt</a>)</p> <p>There&#39;s no reason to let holiday debt ruin the first few months of the new year. A 0% balance transfer will help you better manage that debt. And, since you have that breathing room, you can even start saving up for next holiday season now so that you aren&#39;t in this position again.</p> <h3>Reboot Your Personal Finances</h3> <p>You can reboot your personal finances no matter the time of year, and a balance transfer can help. When you&#39;re ready to take charge of your money situation, the first thing to do is organize a debt paydown plan. A 0% balance transfer card can help your efforts. (See also: <a href="">Which Debt Repayment Strategy Is Best for You?</a>)</p> <h3>Manage Your Debt Better</h3> <p>The great thing about long introductory rates with balance transfers is that you can tackle other high-interest debt without accumulating more due to interest. Take your highest-interest credit card balances, and transfer as much as you can to the 0% APR credit card. If you have balances left on other cards, you can call to ask for a reduction in the interest rate. Account holders in good standing can sometimes see a 1% to 3% reduction in rate just for asking. (See also: <a href="">What You Should Know Before You Do a Balance Transfer</a>)</p> <h3>Use the Snowball Method to Reduce Debt</h3> <p>Once you have re-arranged all of your debt, you can then tackle the high-rate debt while paying the minimum on the 0% APR card for now. The beauty of this method is that you are paying down your high-rate cards at a faster rate, and at the same time the minimum you put toward your balance transfer card is going toward reducing that balance. Here&#39;s an example, using three credit cards:</p> <ul> <li>Credit Card A has a balance of $2,500 and a rate of 19.99%</li> <li>Credit Card B has a balance of $1,500 and a rate of 15.99%</li> <li>Credit Card C has a balance of $3,000 and a rate of 13.99%</li> </ul> <p>You are approved for a 0% APR balance transfer card with a credit limit of $3,500 and an introductory rate of 18 months. The first thing you do is transfer the balance from Credit Card A and $1,000 of the balance from Credit Card B. Now you have balances of $500 (at 15.99%), $3,000 (13.99%), and $3,500 (0%).</p> <p>Call your credit card issuers and ask for rate reductions if you are in good standing. Let&#39;s say you are offered a reduction to 14.99% on the one card, and a reduction to 11.99% on the other card.</p> <p>After reviewing your finances, you discover that you can put an extra $300 per month toward debt reduction, on top of the minimum payments you are making on all of your cards. Start with the highest-rate card, which only has $500 on it. You put that extra $300 toward that balance and keep paying the minimum on everything else. (Don&#39;t reduce the amount you pay as the &quot;minimum&quot; as you progress. The minimum will drop with your slowly falling balance, but keep paying the level you started with.)</p> <p>After two months, you&#39;re ready to tackle the next card on the list. Bring the $300, plus the minimum you had been paying on your other card, and add it to the minimum you have been paying on the second card. It&#39;s important to transfer the original minimum you have been paying so that your payment snowballs and gets bigger. It takes another nine months to pay off the next debt, for a total of 11 months. (See also: <a href="">Guide to the Debt Snowball Method</a>)</p> <p>Now you&#39;re on to the balance transfer card. You still have another seven months to pay off this card before the 0% runs out. Remember, every penny that you&#39;ve paid in the minimum balance for the last 11 months has gone toward reducing the principal. So let&#39;s say you&#39;ve managed to knock off close to $1,100 of the balance. So you have seven months to pay of the remaining $2,400. Since you&#39;ve moved your other minimums over, along with your original $300, you should be putting $350 or so toward debt reduction on your final card. That should be enough to allow you to finish paying off your debt before the 0% introductory period ends.</p> <p>Adding a balance transfer card to the mix can be an amazing way to re-order your finances and fix your debt problem. Just make sure you create a plan that allows you to pay off the balance before the intro period runs out.</p> <p><em>Have you taken advantage of long introductory periods on balance transfers to reduce debt? Were you successful?</em></p> <a href="" class="sharethis-link" title="Now Is the Best Time in Years to Do a Credit Card Balance Transfer" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Miranda Marquit</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards Debt Management balance transfer credit card debt reduction Fri, 07 Feb 2014 10:36:41 +0000 Miranda Marquit 1123544 at Personal Finance Expert Michelle Singletary on Her New Book, and How a Financial Fast Can Help You <p>Michelle Singletary&rsquo;s nationally syndicated personal finance column appears in about 100 newspapers across the country, but that&rsquo;s not the most impressive thing about her &ndash; it&rsquo;s that she practices what she preaches. She lives well beneath her means and constantly reevaluates her own spending using tools like financial fasts. And recently, she wrote a book about exactly that.</p> <p>&ldquo;<a href="">The 21 Day Financial Fast</a>&rdquo; details a three-week program designed to help individuals figure out what are spending necessities and what aren&rsquo;t. If an expense isn&rsquo;t necessary, you&rsquo;re not allowed to make the purchase until the fast is over. The other purpose of the fast is to incorporate charitable giving, especially to one&rsquo;s church. In fact, much of the book is biblically based<strong>. </strong></p> <p>But you don&rsquo;t have to be Christian to benefit from Singletary&rsquo;s book.</p> <p>&ldquo;I read all kinds of books and philosophies to help me with my money, both spiritual and secular,&rdquo; says Singletary. &ldquo;What I&#39;m writing from a spiritual point of view is that your quest for prosperity has to be about more than yourself. Giving is important for your family, community, and the world. That&#39;s central to the [spending] fast for believers and nonbelievers.&rdquo;</p> <p>I asked Michelle six questions about spending, financial philosophy, and ways we can all make positive financial changes for ourselves and our communities.</p> <p><strong>Question 1: Do you think individuals are entitled to certain rewards?</strong></p> <p>Singletary's philosophy is that you should wait to reward yourself when you’re not in debt. For example, you don’t need a vacation if you have debt. However, small luxuries are OK in some instances, after the financial fast. If something keeps you sane, you should build it into your budget for when the fast is over, Singletary says. For instance, you could budget for your daily coffee fix. But don’t plan to go out for lunches, too. Prioritize.</p> <p><strong>Question 2: Can you leave your house and have fun? What do you do if you&rsquo;re going out to network or socialize?</strong></p> <p>During the fast, you have to eliminate any expense that is not a necessity, says Singletary. It&rsquo;s not that hard &ndash; remember, this is just for 21 days. Evaluate which events are really important. Meet someone in their office for business meetings instead of going out for lunch, and after work, you can find inexpensive ways to mingle, such as ordering a soda instead of alcohol. &ldquo;Don&rsquo;t pretend you can afford what you can&rsquo;t,&rdquo; Singletary says.</p> <p><strong>Question 3: How important is it to have a bare bones budget?</strong></p> <p>&ldquo;My expenses are not crazy,&rdquo; Singletary says. &ldquo;My husband and I live below our means. If I lost my job, I could find something with a lower salary, and we could still afford to meet our basic expenses.&rdquo;</p> <p><strong>Question 4: How do individuals who were recently divorced or separated adapt to finances for a single person?</strong></p> <p>&ldquo;Live by your financial values,&rdquo; says Singletary. &ldquo;These values should be followed no matter what your marital status is.&rdquo; When you enter a new relationship, you should take your financial values with you, too.</p> <p><strong>Question 5: When should you help your friends and family financially?</strong></p> <p>&ldquo;When you have your own debt paid off, and they&rsquo;re using the money in a productive way,&rdquo; says Singletary. For example, do help temporarily with groceries, or if you can afford to, help with a down payment on a home. Don&rsquo;t give money for unnecessary expenses. And always give without the expectation of getting the money back. Giving within your personal community can even be an item in your budget. The budgetary amount may be a percentage of income, such as one or two percent, or a set amount.</p> <p><strong>Question 6: When was the last time that you did the 21-day financial fast?</strong></p> <p>&ldquo;I do it every year,&rdquo; Singletary says. This year, she used the fast to make healthier food choices at home and on the road. She now eats more fruits and veggies and watches what she eats late at night.</p> <p><em>Are you going to take a financial fast this year? If so, what are your goals?</em></p> <div align="center"><a href=""><img src="" /></a></div> <p>&nbsp;</p> <p>This article is part of our <a href="">New Graduate Help Center</a> &mdash; a new Wise Bread section offering financial tips and life hacks to recent grads. This section is made possible by the support of Sallie Mae. Check out more great tips from this section:</p> <p>&nbsp;</p> <div class="newgrads-related"> <table> <tbody> <tr> <td class="related"><a href=""><img class="related-image" src="" />Why You Shouldn&#39;t Panic About Your Federal Student Loans</a></td> <td class="related"><a href=""><img class="related-image" src="" />3 Things You Must Know About Repaying Your Private Student Loans</a></td> </tr> <tr> <td class="related"><a href=""><img class="related-image" src="" />What Recent Grads Must Know to Repay Federal Student Loans</a></td> <td class="related"><a href=""><img class="related-image" src="" />15 Ways to Pay Back Student Loans Faster</a></td> </tr> </tbody> </table> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/personal-finance-expert-michelle-singletary-on-her-new-book-and-how-a-financial-fast-can-help-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <div class="field field-type-text field-field-blog-teaser"> <div class="field-items"> <div class="field-item odd"> Learn how a financial fast can make you a happier, healthier person. </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Reyna Gobel</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management Fri, 24 Jan 2014 11:36:09 +0000 Reyna Gobel 1115966 at Can Borrowers Still Pay Off Their Student Loans in 10 Years? <p>Absolutely. Not only is paying your student loan debt off in 10 years possible, I&rsquo;ll show you how to do it.</p> <h2>Putting Your Student Loan Debt in Perspective</h2> <p>First of all, let&rsquo;s discuss student loan debt in general. The average amount of student loan debt in America is $27,000. That might seem huge. But in fact, that amount is pretty manageable &mdash; especially when you consider that, according to the National Association of Colleges and Employers, the average starting salary of 2013 graduates is $44,928.</p> <p>Let&rsquo;s look at a hypothetical. Let&#39;s say that your career field has a lower starting salary than the national average, and you&rsquo;re only making $31,000 a year. If you were to make even payments for 10 years on $27,000 in federal student loans with the average interest rate of 6.8 percent, your payment would be about $310 per month. That&#39;s 1% of your annual income, and it&#39;s also the equivalent of a car payment &mdash; something that millions of Americans manage to budget for.</p> <h2>Remember, You Don&rsquo;t <em>Have</em> to Pay Your Loans Off in 10 Years</h2> <p>If that $310 a month still feels impossibly expensive &mdash; or your student loans are much larger than the $27,000 average &mdash; don&rsquo;t worry. The federal government offers several repayment options based on your income and student debt-to-income ratio. Whether you are unemployed, have a large salary but a large amount of debt to go with it, or otherwise have a difficult time paying your loans, these government programs should be able to help you out. See what you qualify for by visiting the Office of Federal Student Aid&rsquo;s <a href="">income-driven repayment plans page</a>.</p> <h2>How to Pay Off Your Student Loan Debt in 10 Years</h2> <p>So, what to do if you don&rsquo;t qualify for income-driven repayment, or you just want your student loans to be gone in 10 years? Follow these steps, and you&rsquo;ll be more likely to have your loans paid off within 10 years &mdash; or possibly sooner.</p> <p><strong>Track Your Spending and Make a Budget</strong></p> <p>It&rsquo;s difficult to know how much money you can put towards your student loans if you don&rsquo;t know how much space you have in your budget. That&rsquo;s why need to track what you spend &mdash; and then, set a monthly budget so you can keep your spending under control. You can use a spreadsheet or pencil and paper, but I recommend making it easy on yourself &mdash; use a budgeting site like <a href="">Mint</a> or <a href="">You Need a Budget</a>, which automatically track your spending for you.</p> <p>When you&rsquo;re making your budget, make sure you designate some money for fun every month, such as a couple of dinners out with friends or tickets to a concert. One sure-fire way to fail when budgeting is to not allow yourself funds for anything enjoyable &mdash; if you do that, you&rsquo;re more likely to break your budget and over-splurge (and be generally miserable).</p> <p><strong>Find More Money</strong></p> <p>Whether you don&rsquo;t have enough money free in your budget to make those $310 a month payments or you want to pay your loans off faster (because the longer you stretch those payments out, the more you&rsquo;ll pay in interest), reducing your monthly expenses and making more money can help.</p> <p>If you look up ways to save money, you&rsquo;ll see a lot of examples telling you to do this or that &mdash; cut your cable, get a roommate, etc. But here&rsquo;s the most important advice on cutting your expenses: Make a list of things that are truly important to you, and cut expenses elsewhere so you can afford those things. If you love watching sports, maybe you don&rsquo;t want to cut your cable &mdash; but you won&rsquo;t mind dining out less. Maybe having your own place without roommates matters to you, but you&rsquo;re willing to take public transit or ride a bike instead of owning a car.</p> <p>There are other ways to spend less too that don&#39;t require any lifestyle changes. Always make sure to turn off the lights when you leave the room, for example, so you&#39;re saving on electricity. Or if the price for your cable or internet jumps, call customer service and ask if there are any deals you can take advantage of &ndash; they&#39;ll almost always put you back on an introductory rate.</p> <p>Also consider looking for ways to earn more &mdash; after all, there are limits to how much you can cut your expenses, but you can always make more money. Get some <a href="">ideas for side jobs here</a>.</p> <p>Finally, check out of list of ways to <a href="">pay off your student loans off faster</a> &mdash; it has lots of ideas on how to reduce expenses, earn more money, and become debt-free.</p> <p><strong>Utilize Public Service Loan Forgiveness</strong></p> <p>There&rsquo;s another way to get rid of your student loans within 10 years &mdash; utilize the Public Service Loan Forgiveness program. If you work in a qualified public service job and make on-time student loan payments, the federal government will forgive the remainder of your loans after 10 years. To learn more about the program and see if you qualify, check out our PSLF article (LINK TO THAT WHEN IT IS UP).</p> <p><em>Are you planning to pay off your loans within 10 years?</em></p> <p>&nbsp;</p> <p>This article is part of our <a href="">New Graduate Help Center</a> &mdash; a new Wise Bread section offering financial tips and life hacks to recent grads. This section is made possible by the support of Sallie Mae. Check out more great tips from this section:</p> <div class="newgrads-related"> <table> <tbody> <tr> <td class="related"><a href=""><img class="related-image" src="" />Why You Shouldn&#39;t Panic About Your Federal Student Loans</a></td> <td class="related"><a href=""><img class="related-image" src="" />3 Things You Must Know About Repaying Your Private Student Loans</a></td> </tr> <tr> <td class="related"><a href=""><img class="related-image" src="" />What Recent Grads Must Know to Repay Federal Student Loans</a></td> <td class="related"><a href=""><img class="related-image" src="" />15 Ways to Pay Back Student Loans Faster</a></td> </tr> </tbody> </table> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/can-borrowers-still-pay-off-their-student-loans-in-10-years" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <div class="field field-type-text field-field-blog-teaser"> <div class="field-items"> <div class="field-item odd"> The answer is YES and we&#039;ll show you how to do it. </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Reyna Gobel</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management Education & Training Fri, 03 Jan 2014 11:37:06 +0000 Reyna Gobel 1102581 at The Best 0% Balance Transfer Credit Cards <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-best-0-balance-transfer-credit-cards" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Woman with credit card" title="Woman with credit card" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Those who live under a mountain of credit card debt quickly realize that their suffering has two components. First there is the principle, the actual amount of goods and services that was charged to their credit card. Secondly, there are the financing charges imposed each month on their balance. With each statement cycle, their average daily balance is multiplied by one twelfth of the card&rsquo;s Annual Percentage Rate (APR).&nbsp;Therefore, if you owe $10,000 on a card with an APR of 12%, you are incurring $100 in interest each month. Due to the effect of compounding interest, the finance charges incurred each month add to your balance, resulting in more interest being accrued with each passing month. (See also: <a href="">What You Must Know Before Transferring Credit Card Balances</a>)</p> <h3>How a Balance Transfer Works</h3> <p>To help relieve the burden of debt and acquire new customers, banks have long offered credit cards with a 0% promotional APR, for a limited time, on balance transfers. Applicants who qualify for a new card with these promotional rates can have their existing balance paid off by their new card. During the time that the 0% promotional rate applies, interest is not being accrued on the balance transferred; however, the amount transferred is almost always subject to a one-time balance transfer fee. This fee, typically 3% - 5%, is added to the new balance. Also, cardholders are still responsible for making minimum payments on their account. New transactions may incur interest at the standard rate, although in some instances, the 0% promotional rate also applies to new purchases as well. Finally, no matter how much you are struggling with your debt, it is critical that you continue to make all of your payments on time, as only applicants with the excellent credit will qualify for most of these excellent promotional credit card offers.</p> <h3>How to Save Money With a Balance Transfer</h3> <p>First, it is crucial that those seeking a balance transfer do so as part of a comprehensive plan to eliminate their credit card debt. Such a plan should focus on maximizing their income, minimizing their expenses, and regularly paying down their entire credit card before the promotional rate expires.</p> <p>As part of an overall plan to eliminate debt, the benefits of a balance transfer are clear. For example, if a cardholder has an existing credit balance of $10,000 on a card with a 15% APR, that cardholder is currently accruing $125 in interest each month. If the cardholder continues to pay interest while reducing the balance by $500 each month, that person will still have accrued $1,250 of interest over the 20 months it took him or her to pay off the balance (15% interest applied to an average daily balance of $5,000 over 12 months). Alternatively, that person could begin by accepting a balance transfer offer of 21 months at 0% interest with a 3% balance transfer fee. In this case, that person&rsquo;s old balance of $10,000 will be paid off, while they will incur a new balance of $10,000 plus $300 in balance transfer fees. If all goes according to plan, at the end of the 21 months, the new balance will be paid off and the cardholder will have saved nearly $1,000 in interest.</p> <h3>Top Five 0% Balance Transfer Cards on the Market&nbsp;</h3> <p>Like every aspect of the credit card industry, we are fortunate to enjoy an extremely competitive market for 0% balance transfer credit cards. Here are the top five offers currently available.</p> <p><b><span>1.<span> </span></span></b><b>Citi&reg; Diamond Preferred&reg; Card</b></p> <p><a href="" onclick="_gaq.push(['_trackEvent', 'afclick', 'cardimage', 'citdiapre']);" rel="nofollow" target="_blank"><img alt="credit card" src="" style="float: right; margin: 0px 5px 5px 10px;" width="154" height="98" /></a> This card currently offers a 0% promotional APR on both purchases and balance transfers for a market-leading 18 months (<a href="">review here</a>). After that, the variable APR will be 11.99% - 21.99%, based on your creditworthiness. There is no annual fee for this card, but there is a $5 or 3% balance transfer fee. Citi has this same offer available for their similar Platinum Select card as well. Nevertheless, I recommend the Diamond Preferred card, as it features perks such as trip cancelation insurance, lost luggage coverage, and a personal concierge service.</p> <p><a href="" onclick="_gaq.push(['_trackEvent', 'afclick', 'applytext', 'citdiapre']);" rel="nofollow" target="_blank"><strong>Click here to apply for the Citi&reg; Diamond Preferred&reg; Card</strong></a></p> <p><b><span>2.<span> </span></span></b><b>Citi Simplicity&reg; Card</b></p> <p><a href="" onclick="_gaq.push(['_trackEvent', 'afclick', 'cardimage', 'citsim']);" rel="nofollow" target="_blank"><img alt="credit card" src="" style="float: right; margin: 0px 5px 5px 10px;" width="154" height="98" /></a> This is another card from Citi that offers a 0% APR for 18 months on both balance transfers and new purchases (<a href="">review here</a>). After that, the variable APR will be 12.99% - 21.99%, depending on your credit. Instead of granting the <a href="" title="Free Travel With Credit Cards">travel benefits</a> of the Diamond Preferred, this card offers no late fees or penalty interest rates. Missing payments is still a bad idea, as your credit will suffer and your account may be closed. But at least your debt will not spiral out of control. There is no annual fee for this card, but there is a 3% (or $5, whichever is greater) balance transfer fee.</p> <p><a href="" onclick="_gaq.push(['_trackEvent', 'afclick', 'applytext', 'citsim']);" rel="nofollow" target="_blank"><strong>Click here to apply for the Citi Simplicity&reg; Card</strong></a></p> <p><b><span>3.<span> </span></span></b><b>Discover it&reg; Card</b></p> <p><a href="" onclick="_gaq.push(['_trackEvent', 'afclick', 'cardimage', 'discoverit']);" rel="nofollow" target="_blank"><img alt="credit card" height="98" src="" style="float:right;margin:0 5px 5px 10px;" width="154" height="98" /></a> The best offer for this card (<a href="">review here</a>) has a 0% introductory APR on balance transfers for 18 months. Balance transfers are subject to a 3% fee. Although the Discover card is not as widely accepted as some others, customers rave about their excellent service. Finally, I am reluctant to mention that this is also a rewards card. Those who carry a balance should ignore that aspect and focus on paying off their debt as quickly as possible. There is no annual fee for this card, and there are no foreign transaction fees on any of Discover&rsquo;s products. Plus, you get a free FICO® Credit Score on your monthly statement to help you stay on top of your credit.</p> <p><a href="" onclick="_gaq.push(['_trackEvent', 'afclick', 'applytext', 'discoverit']);" rel="nofollow" target="_blank"><strong>Click here to apply for the Discover it&reg; Card</strong></a></p> <p><b><span>4.<span> </span></span></b><b>Capital One&reg; Platinum Prestige Credit Card</b></p> <p><a href="" onclick="_gaq.push(['_trackEvent', 'afclick', 'cardimage', 'caponeplatpre']);" rel="nofollow" target="_blank"><img alt="credit card" height="98" src="" style="float:right;margin:0 5px 5px 10px;" width="154" /></a> Rounding out our list, this product offers a 0% introductory APR until July 2015 on balance transfers and 0% introductory APR until July 2015 on all purchases. Customers will have to pay a 3% balance transfer fee, but there is no annual fee for this card and no foreign transaction fees on any Capital One products.</p> <p><a href="" onclick="_gaq.push(['_trackEvent', 'afclick', 'applytext', 'caponeplatpre']);" rel="nofollow" target="_blank"><strong>Click here to apply for the Capital One&reg; Platinum Prestige Credit Card</strong></a></p> <p><b><span>5.<span> </span></span></b><b>Slate&reg; From Chase </b></p> <p>Chase shook up the market recently by returning to a type of balance transfer offer that had not been seen in years. With this offer, new cardholders will receive a 0% APR on balance transfers for 15 months, with no balance transfer fee on transfers performed within the first 60 days of opening an account. This offer&rsquo;s terms also include 15 months of 0% financing on purchases, but only for applicants with good and excellent credit. Applicants with average credit will only receive a six month, 0% rate on new purchases. Furthermore, this card is eligible to participate in Chase&rsquo;s fantastic BluePrint program, allowing cardholders with a balance to pay off new charges in full without incurring interest on them. There is no annual fee for this card.</p> <!-- <p><a target="_blank" rel="nofollow" href="" onClick="_gaq.push(['_trackEvent', 'afclick', 'applytext', 'chasla']);"><strong>Click here to apply for now</strong></a></p> --> <p>A 0% balance transfer is not an instant solution to the problem of credit card debt. <!--In fact, unless you receive the Chase Slate card without the balance transfer fee, you will actually owe more money after your balance transfer than you did before.--> You should think of these offers as a significant push up a big mountain, but you will still have to do most of the work yourself.</p> <p><a href=""><strong>To the Credit Card Guide</strong></a></p> <!--disclosure--> <p style="font-size:13px;font-family:Verdana;"><em>Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through the credit card issuer Affiliate Program.</em></p> <!--/disclosure--><a href="" class="sharethis-link" title="The Best 0% Balance Transfer Credit Cards" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Jason Steele</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards Debt Management balance transfer cards credit card debt interest rates Wed, 01 Jan 2014 11:36:22 +0000 Jason Steele 846038 at 5 Types of People Who Can't Avoid Debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-types-of-people-who-cant-avoid-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="empty pockets" title="empty pockets" class="imagecache imagecache-250w" width="250" height="178" /></a> </div> </div> </div> <p>We get into debt for a lot of different reasons &mdash; some beyond our control. A job loss might force you to live on credit for several months, and if a major home repair pops up while you&#39;re unemployed, pulling out the credit card may be the only option. (See also: <a href="">How to Weather a Financial Emergency</a>)</p> <p>Regardless of the reasons for it, debt can be a nagging headache &mdash; or much more painful. Some people dig themselves out of the hole and go on to live relatively debt-free or low-debt lives, but others aren&#39;t as fortunate.</p> <p>If you can&#39;t seem to shake your balances, or if you pay off debt only to find yourself debt-ridden a few years later, you may be one of the following types of people.</p> <h2>1. People Who Have to Keep Up With Others</h2> <p>Ask yourself &mdash; do you feel the need to buy something just because others have it? It&#39;s an uncomfortable conversation to have with yourself, but the answer might shed light on why you can&#39;t avoid debt.</p> <p>There&#39;s always going to be someone who has more than you, or who&#39;s able to do more than you. If you don&#39;t have a lot of money, yet you&#39;re constantly buying or doing things simply to look good to others, you&#39;re going to end up broke and in debt. It&#39;s a never-ending cycle. (See also: <a href="">Is Peer Pressure Making You Poor?</a>)</p> <h2>2. People Who Have to Have It All &mdash; Now</h2> <p>Who doesn&#39;t want to live in their dream home and drive their dream car? There&#39;s nothing wrong with reaching for the stars. However, a six-figure lifestyle on a $50,000 salary doesn&#39;t work no matter how you compute the numbers. If you&#39;re spending more than you&#39;re bringing in, you&#39;re probably using a credit card to close gaps in your budget. (See also: <a href="">5 Luxurious Substitutions That&rsquo;ll Help You Save</a>)</p> <h2>3. People Who Use Debt to Live the American Way</h2> <p>Getting a house, buying a car, and obtaining a college education typically involves some sort of loan. These types of debt are justifiable; and as long as you can pay the bills on time, they don&#39;t damage your FICO score.</p> <p>This, however, does not mean it&#39;s OK to ring up credit cards buying things you don&#39;t need &mdash; although others may feel differently. (See also: <a href="">What 20-Somethings Can Do About Their Credit Card Debt</a>)</p> <p>&quot;The average U.S. household with at least one credit card carries nearly $15,950 in credit-card debt (2012), and personal bankruptcies have hit record highs in recent years,&quot; according to</p> <p>Getting a handle on debt starts with changing your mindset. Debt might be the American way in some households, but it doesn&#39;t have to be your way.</p> <h2>4. People Who Don&#39;t Have a Savings Account</h2> <p>If you don&#39;t have a savings account, how do you expect to pay for unexpected expenses?</p> <p>Nearly 44% of American households don&#39;t have enough in savings to cover basic expenses for three months in the event of a financial emergency like losing a job or paying for unexpected medical care, reports the Corporation for Enterprise Development.</p> <p>And for those individuals living paycheck-to-paycheck with no savings account, &quot;one misstep can lead to financial disaster,&quot; says Justin King, federal policy liaison for the New America Foundation.</p> <p>With salaries unable to keep up with the rising cost of living, creating a comfortable nest egg isn&#39;t easy nowadays. From housing to health insurance, all your income may go to paying basic living expenses, which doesn&#39;t leave much for savings.</p> <p>You might not be able to increase your income, but can you decrease your expenditures? If you could free up $200 a month, that&#39;s $2,400 a year in your savings account. It&#39;s most likely not the three to six-month cash reserve financial experts recommend, but it&#39;s a start. (See also: <a href="">Which Type of Savings Account Is Right for You?</a>)</p> <h2>5. People Who Don&#39;t Budget</h2> <p>When was the last time you re-evaluated your budget? Better yet, do you even have a budget?</p> <p>&quot;Budget&quot; is an ugly word that implies financial restriction, and some people would rather go with the flow than sit down and create a weekly or monthly spending plan. But this approach can be extremely damaging to your finances. Without a clearly defined spending plan, it&#39;s too easy to overspend, at which time you may rely on credit cards to cover basic expenses. (See also: <a href="">How to Build Your First Budget</a>)</p> <p>Love it or hate it, a budget can be your best friend if you&#39;re serious about financial management, which includes avoiding debt.</p> <p>&quot;Disciplined financial planning and good budgeting is really how successful people become and stay successful,&quot; explains Rebecca Katz, who serves as a principal in Public Relations and company spokesperson for Vanguard.</p> <p>To get ahead, you have to first assess where your money goes and prioritize spending. It&#39;s only by putting your income and expenditures on paper that you can develop a plan to allocate more of your disposable income toward debt and savings.</p> <p><em>Any other types of people who commonly fall into debt?</em></p> <a href="" class="sharethis-link" title="5 Types of People Who Can&#039;t Avoid Debt" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Mikey Rox</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management debt debt habits financial habits Wed, 01 Jan 2014 10:49:07 +0000 Mikey Rox 1099975 at Best Money Tips: Pay Down Holiday Debt Quickly <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-pay-down-holiday-debt-quickly" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="holiday stress" title="holiday stress" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Welcome to Wise Bread&#39;s <a href="">Best Money Tips</a> Roundup! Today we found some awesome articles on paying down holiday debt quickly, getting your retirement plan back on track, and honey do&#39;s to start your New Year off right.</p> <h2>Top 5 Articles</h2> <p><a href="">How to Pay Down Holiday Debt as Quickly as Possible</a> &mdash; To pay down holiday debt quickly, stop using your credit cards! [Money Smart Life]</p> <p><a href="">10 ways to get your retirement plan back on track</a> &mdash; If you want to get your retirement plan back on track, stop giving money to your adult children. [Living on the Cheap]</p> <p><a href="">Complete these 5 Financial Honey Do&#39;s to Start Your New Year Off Right</a> &mdash; Start your New Year off right by finding health insurance to avoid the penalty. [Frugal Confessions]</p> <p><a href="">The Gift Budget</a> &mdash; Planning ahead in regards to gifts can help you avoid last minute expensive purchases. []</p> <p><a href="">How To Not Give Up On Your Goals Before They Get Enough Steam</a> &mdash; Setting reasonable goals can help you avoid giving up on them. [And Then We Saved]</p> <h2>Other Essential Reading</h2> <p><a href="" style="color: rgb(7, 130, 193); ">Seven Steps to Get Out of Debt</a> &mdash; Looking for ways to improve your cash flow and getting a basic emergency fund can help you get out of debt. [Free Money Finance]</p> <p><a href="">Throw a Last-Minute New Year&#39;s Eve Party on the Cheap</a> &mdash; When throwing a New Year&#39;s Eve party, consider making a photo booth! [PopSugar Smart Living]</p> <p><a href="">Do You Lie to Yourself About Your Finances?</a> &mdash; To improve your financial situation, slash your expenses and sell the extra stuff in your house. [Wealthy Turtle]</p> <p><a href="">How to Have a Kid-Free New Year&#39;s Eve</a> &mdash; If you want to have a kid-free New Year&#39;s Eve, find a New Year&#39;s Eve event just for your kids. [Parenting Squad]</p> <p><a href="">Is Medical Tourism a Viable Option? A Look at the Pros and Cons</a> &mdash; Medical tourism is cheaper but you have no legal recourse should something go wrong. [Cash Money Life]</p> <a href="" class="sharethis-link" title="Best Money Tips: Pay Down Holiday Debt Quickly" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Ashley Jacobs</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management best money tips debt holiday Tue, 31 Dec 2013 11:01:00 +0000 Ashley Jacobs 1104834 at How to Eliminate Holiday Debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-eliminate-holiday-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p><em>This post is brought to you by <a href=";dc_trk_aid=277387999;dc_trk_cid=56380682;ord=[timestamp]?;migSource=adsrv2&amp;migTrackDataExt=3744016;104476096;277387999;56380682&amp;migRandom=%25n&amp;migTrackFmtExt=client;io;ad;crtv&amp;migUnencodedDest=;sc=KCC4&amp;cmpgnid=dp_dca_inet-it-mcomfico&amp;dfaid=1">Discover it</a>.</em></p> <p>The holidays are a wonderful time, full of friends and family, good food and drink, and generosity. When you&#39;re caught up in the holiday spirit, it can sometimes be easy to overspend a little &mdash; even if you budgeted for the season.</p> <p>But if you have a little holiday debt, don&#39;t stress &mdash; you can eliminate it quickly and painlessly with these steps.</p> <h2>1. Make It a Priority</h2> <p>You don&#39;t want your holiday debt hanging around, growing larger throughout the year. Instead, make paying it off a priority. With focused effort, you might be surprised at how quickly you can pay off the debt you incurred over the holidays.</p> <p>Take a realistic view of your debt and consider your situation. Then, make a specific plan: Figure out how much money you will need each month to pay down your debt, and look for ways to free up that cash.</p> <p>Give paying down your debt top priority over entertainment expenses and other unnecessary spending. With that solid commitment (and hopefully your family on board with the plan), it will be much easier to accomplish your goal. Remember: The sooner you get your holiday debt paid off, the less it will cost you.</p> <h2>2. Transfer Your Credit Card Balances</h2> <p>Many credit card issuers send out special offers during the first of the year for balance transfer cards. With a 0% balance transfer, you can move your holiday debt off your current high-rate credit card to a card that won&rsquo;t charge you interest. This can help you more easily pay down your debt.</p> <p>However, it&rsquo;s important to note that a balance transfer isn&rsquo;t a permanent solution. It&rsquo;s not an excuse to continue spending. Instead, it&rsquo;s a chance for you to get a handle on the situation and plan a way to efficiently discharge your debt. And make sure that your debt pay down plan includes a way to pay off your 0% APR balance before the introductory period comes to an end &mdash; otherwise, the new card might charge you even more interest than your original one.</p> <p>If you can&rsquo;t get a 0% APR credit card, consider calling your creditor and asking for a lower interest rate. Good customers can often get a rate reduction just for asking.</p> <h2>3. Go on a Spending Diet, and Put the Savings Toward Your Debt</h2> <p>Just as many of us try to lose weight by changing our eating habits at the beginning of the year, the start of a new year is also a great time to go on a spending diet. This is when you reduce your spending so that you only buy what you truly need.</p> <p>Figure out how much you can cut from your budget &mdash; even if you only go on the spending diet until your holiday debt is paid off &mdash; and then apply the savings toward your debt. If you have also done a credit card balance transfer, this tactic can help you aggressively eliminate your post-holiday debt.</p> <p>Your spending diet can also help you prioritize your expenses and figure out if you might be wasting money on things that aren&rsquo;t important to you. If you don&#39;t miss expenses you eliminated during your spending diet, don&#39;t add them back to your budget when your diet is over.</p> <h2>4.Start a Side Gig</h2> <p>Starting a side gig has two benefits &mdash; it can help you pay down debt faster, and it might be able to help you earn more money after your debt is paid off as well.</p> <p>You can do something seasonal, like hauling your neighbors&rsquo; Christmas trees away; starting an online business; or writing some freelance articles on the side. If you have a hobby you love, like photography or jewelry making, consider trying to make money off it &mdash; who knows, someday, it could even become your full-time gig!</p> <h2>5. Clear the Clutter</h2> <p>Like getting a side job, clearing clutter also has multiple benefits. Not only does selling extra stuff help you earn more money that you can put towards your debt, but it also helps you clear out your house to begin the new year without extra stuff around.</p> <p>Look to sites like eBay, Craigslist, or Amazon Marketplace to sell items online, or if you live in a warm climate, have a winter yard sale. You can even sell your unwanted gift cards &mdash; check out sites like <a href="">Gift Card Granny</a>.</p> <p><em>Do you have post-holiday debt? How are you paying it off?</em></p> <a href="" class="sharethis-link" title="How to Eliminate Holiday Debt" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Miranda Marquit</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management Shopping Fri, 20 Dec 2013 11:35:47 +0000 Miranda Marquit 1100029 at The Definitive Guide to Pay As You Earn — A Federal Student Loan Repayment Plan <p>In the past few years, the federal government introduced several new student loan payback plans that base payment amounts on borrowers&rsquo; income, aimed at helping these borrowers pay back their loans without being crushed by debt. Perhaps the most enticing of these is the Pay As You Earn plan, which, for many borrowers, provides the lowest monthly payments of any plan &mdash; and, if you qualify, you can even have the remainder of your loans forgiven after 20 years.</p> <p>There are some criteria for qualifying. Unlike the other income-sensitive plans, Pay As You Earn borrowers had to be student-loan free as of October 1, 2007 and had disbursement of loans on or after October 1, 2011. You also have to demonstrate a &ldquo;partial financial hardship&rdquo; &mdash; but, as you&rsquo;ll learn below, that doesn&rsquo;t necessarily mean that you can&rsquo;t qualify for Pay As You Earn if you have a job &mdash; even a high-paying one.</p> <p>Read on to learn about the pros and cons of the plan, discover if it&rsquo;s right for you, and find out how to apply.</p> <ul> <li><a href="#whatispayasyouearn">What is Pay As You Earn?</a></li> <li><a href="#benefitsofpayasyouearn">Benefits of Pay As You Earn</a></li> <li><a href="#howtofigureout">How to Figure Out if Pay As You Earn Works For You</a></li> <li><a href="#estimatingyourpayments">Estimating Your Payments and How to Apply</a></li> <li><a href="#pros">Pros to Pay As You Earn</a></li> <li><a href="#cons">Cons to Pay As You Earn</a></li> <li><a href="#howpayasyouearncompares">How Pay As You Earn Compares to Other Repayment Plans That Consider Income</a></li> <li><a href="#whatyoushouldknow">What You Should Know After You&rsquo;ve Signed Up for Pay As You Earn</a></li> </ul> <h2><a id="whatispayasyouearn" name="whatispayasyouearn"></a>What Is Pay As You Earn?</h2> <p>Pay As You Earn is a federal student loan repayment plan that reduces your federal student loan payments based on financial hardship. The plan was developed as a way to help those struggling with sizeable student loan payments, and it went into effect December 21, 2012.</p> <h2><a id="benefitsofpayasyouearn" name="benefitsofpayasyouearn"></a>Benefits of Pay As You Earn</h2> <p>There are several benefits to the Pay As You Earn repayment plan.</p> <p><strong>How Much You Pay</strong></p> <p>For many people with federal student loans, Pay As You Earn is the payment plan with the lowest monthly payments. When you&rsquo;re on this plan, your payments are calculated as 10% of your discretionary income divided by 12. (More on how that discretionary income is calculated a bit later.)</p> <p><strong>Interest Subsidies and Capitalization Breaks</strong></p> <p>In addition to lowering your monthly payments, the Pay As You Earn plan also has other benefits. First of all, if you had subsidized federal loans (the kind where the government pays your loan interest for you when you&rsquo;re in school), for the first three years that you&rsquo;re on the Pay As You Earn plan, the government will continue providing an interest subsidy. They won&rsquo;t pay for all of your interest, but if the amount you pay each month doesn&rsquo;t cover all of the interest your loans are earning, the federal government will pay any leftover interest.</p> <p>Also, according to the government, when you have a partial financial hardship, &ldquo;...interest that accrues but is not covered by your loan payments will not be capitalized, even if interest accrues during a deferment or forbearance.&rdquo; Basically, this means that any interest accrued will not be added to the principal of the loan, and thus you won&rsquo;t be charged interest on the interest. And, furthermore, &ldquo;the total amount of interest that capitalizes while you are repaying your loans under the Pay As You Earn plan is limited to 10% of your original principal balance when you begin paying under Pay As You Earn.&rdquo;</p> <p><strong>Loan Forgiveness</strong></p> <p>If you always pay in full and on time and have a partial financial hardship every year, you can have the balance of your loan forgiven after 20 years. And if you work full-time in public service, you may qualify for the <a href="">Public Service Loan Forgiveness program</a>, where the balance of your loans can be forgiven after just 10 years.</p> <h2><a id="howtofigureout" name="howtofigureout"></a>How to Figure Out if Pay As You Earn Works for You</h2> <p>Unfortunately, not everyone can use the Pay As You Earn plan. Here&rsquo;s how to figure out if you qualify.</p> <p><strong>Do You Demonstrate a &ldquo;Partial Financial Hardship&rdquo;?</strong></p> <p>In order to qualify for Pay As You Earn, you need to have what the federal government calls a &ldquo;partial financial hardship.&rdquo; The Office of Federal Student Aid defines this as:</p> <p style="margin-left:.5in;">You have a partial financial hardship if the monthly amount you would be required to pay on your eligible federal student loans under a 10-year <a href="">Standard Repayment Plan</a> is higher than the monthly amount you would be required to repay under Pay As You Earn.</p> <p>That definition doesn&rsquo;t really say anything about what the payment would be. So, let&rsquo;s dig a little deeper.</p> <p>As I mentioned earlier, Pay As You Earn is 10% of your discretionary income. You might be familiar with the idea of &ldquo;discretionary income&rdquo; as the money you have leftover when you&rsquo;re done paying your monthly bills. In the case of Pay As You Earn, it&rsquo;s a similar concept, but the government calculates your discretionary income as your income minus 150% of the poverty guidelines for your family size.</p> <p>Even if you think you might not qualify by reading that definition, you might &mdash; because your debt-to-income ratio also matters. For example, if you make $100,000 a year but owe $200,000 in loans, you can qualify for income-based repayment.</p> <p>The best way to figure out if your income and debt-to-income ratio allow to apply for the plan is to plug your information into <a href="">this calculator</a>.</p> <p><strong>Do You Have the Right Kind of Loans?</strong></p> <p>Like all federal loan repayment plans, this program only applies to federal student loans. Specifically:</p> <ul> <li>Direct Subsidized Loans</li> <li>Direct Unsubsidized Loans</li> <li>Direct PLUS Loans made to graduate or professional students</li> <li>Direct Consolidation Loans without underlying PLUS loans made to parents</li> </ul> <p>And the following loans cannot be repaid with the Pay As You Earn plan:</p> <ul> <li>Direct PLUS Loans made to parents</li> <li>Direct Consolidation Loans that repaid PLUS loans (Direct or FFEL) made to parents</li> <li>FFEL Program loans</li> <li>Private education loans</li> </ul> <p>An additional note on FFEL loans &mdash; if you have FFEL loans, which are provided through a federal program but by private banks, the loans cannot be paid back with the Pay As You Earn program. But if you also have Direct Loans you&rsquo;d like to use the Pay As You Earn plan for, the amount of your FFEL loans can be taken into account when figuring out if you have a partial financial hardship. Moreover, FFEL loans <em>can</em> be consolidated with direct loans. When this happens, the new combined direct loan can be repaid under Pay As You Earn (provided the underlying FFEL and direct loans were disbursed on or after October 1, 2007).</p> <p><strong>Did You Get Your Loans During the Right Time Period?</strong></p> <p>In addition to the above criteria, your loans also have to fall within specific time constraints. You must:</p> <ul> <li>Be a new borrower (i.e., have no outstanding student loan balances) as of October 1, 2007</li> <li>Have received loan disbursement on or after October 1, 2011 (meaning that your loan funds were provided to your school on or after that date)</li> </ul> <p><strong>Are Your Loans Properly Consolidated?</strong></p> <p>If you consolidated loans that do qualify with Parent PLUS loans, which don&rsquo;t, this consolidated loan is not eligible for the Pay As You Earn plan.</p> <h2><a id="estimatingyourpayments" name="estimatingyourpayments"></a>Estimating Your Payments and Applying</h2> <p>If you fit all of the criteria listed above, visit the Office of Federal Student Aid&rsquo;s <a href="">Pay As You Earn payment calculator</a> to find out how much you would owe each month. Then, if you have any questions before signing up, contact your student loan servicer. Finally, when you&rsquo;re ready to apply, you can do so by logging in at <a href=""></a>.</p> <h2><a id="pros" name="pros"></a>Pros to Pay As You Earn</h2> <p>To recap what we&rsquo;ve discussed so far, if you qualify, there are several great reasons to consider the Pay As You Earn plan:</p> <ul> <li>Depending on your income, your payments might be less than any other payment plan &mdash; and, at the very least, they&rsquo;ll never be more than they would be on the standard 10-year repayment plan.</li> <li>You can have the remainder of your loan forgiven after 20 years of on-time payments, or after 10 years with the Public Service Loan Forgiveness program.</li> <li>If you have a subsidized loan, you will continue to get interest subsidies for three years if your monthly payments do not cover all of the interest you owe.</li> </ul> <h2><a id="cons" name="cons"></a>Cons to Pay As You Earn</h2> <p>There are some downsides to the plan.</p> <ul> <li>Pay As You Earn won&rsquo;t work for everyone. If you can&rsquo;t demonstrate a partial financial hardship as defined by the Office of Federal Student Aid, you can&rsquo;t qualify.</li> <li>You have to provide updated income and family size information every year to confirm that you still demonstrate a partial financial hardship.</li> <li>If you no longer demonstrate a partial financial hardship, you can choose the standard repayment plan and still potentially qualify for some loan forgiveness if you still have a balance after 20 years of combined Pay As You Earn and standard payments.</li> <li>Even if your loan is forgiven after 20 years, you may have to pay taxes on the amount that was forgiven. At this time, it is unclear whether or not congress will create an exception to this before any borrower has to pay these taxes.</li> <li>Since paying less per month could mean you&rsquo;ll extend the life of the loan, you could also owe more in interest. If you continue to qualify for Pay As You Earn, this is not a problem. But if you reach a point where you don&rsquo;t qualify, your interest will capitalize, and you could end up paying more overall than you would with a standard repayment plan.</li> </ul> <p>About that last point &ndash; here&rsquo;s an example of what I mean. Say that borrower named Joanne has $30,000 of unsubsidized student loan debt with an interest rate of 6.8%. Her income for the first three years out of college helps her qualify for a Pay As You Earn payment of $60 a month, which doesn&rsquo;t even cover interest. Since she doesn&rsquo;t have subsidized loans, the government doesn&rsquo;t pay the additional interest, and she still has her $30,000 student loan debt left. Now, in addition to that initial debt, she has to pay another approximately another $3,000 in interest accumulated. If her income increases enough, she will never be able to have loan forgiveness, because she&rsquo;ll pay off her loan well before 20 years.</p> <h2><a id="howpayasyouearncompares" name="howpayasyouearncompares"></a>How Pay As You Earn Compares to Other Repayment Plans That Consider Income</h2> <p>Pay As You Earn isn&rsquo;t the only option for paying back your student loans. There are also other income-related plans to consider. One of the biggest differences with all of these plans is that, while you&rsquo;ll almost certainly pay less on Pay As You Earn, these plans work for loans no matter when you got them. So, for example, if you received disbursement of loans before October 1, 2011, those loans would not qualify for Pay As You Earn, but could qualify for the plans below.</p> <p><strong>Income-Based Repayment (IBR)</strong></p> <p>Under IBR, you also need to demonstrate a partial financial hardship. Your payments are locked in as 15% of your discretionary income (compared to Pay As You Earn&rsquo;s 10%), and you can qualify for loan forgiveness after 25 years.</p> <p><strong>Income-Contingent Repayment (ICR)</strong></p> <p>Payments under ICR are based on your gross annual income, family size, and loan amount; and they change accordingly each year. Loan forgiveness is available after 25 years.</p> <p><strong>Income-Sensitive Repayment (ISR)</strong></p> <p>In this plan, your loan amount is based on your income. The plan is only available for 10 years, and there is no loan forgiveness.</p> <h2><a id="whatyoushouldknow" name="whatyoushouldknow"></a>What You Should Know After You&rsquo;ve Signed Up for Pay As You Earn</h2> <p>There are a few things to be aware of after you&rsquo;ve signed up for Pay As You Earn.</p> <p><strong>You Must Make Your Payments Every Month and on Time</strong></p> <p>If not, you risk defaulting and not being eligible for loan forgiveness.</p> <p><strong>You Have to Reapply Every Year</strong></p> <p>And, if you no longer demonstrate partial financial hardship, your monthly payment will change to a &ldquo;standard&rdquo; payment amount.</p> <p><strong>Any Questions?</strong></p> <p>If you have any questions, ask your loan servicer, or feel free to get in touch with me &mdash; I&rsquo;m only a tweet away at @<a href="">reynagobel</a>.</p> <p>&nbsp;</p> <p>This article is part of our <a href="">New Graduate Help Center</a> &mdash; a new Wise Bread section offering financial tips and life hacks to recent grads. This section is made possible by the support of Sallie Mae. Check out more great tips from this section:</p> <div class="newgrads-related"> <table> <tbody> <tr> <td class="related"><a href=""><img class="related-image" src="" />Why You Shouldn't Panic About Your Federal Student Loans</a></td> <td class="related"><a href=""><img class="related-image" src="" />3 Things You Must Know About Repaying Your Private Student Loans</a></td> </tr> <tr> <td class="related"><a href=""><img class="related-image" src="" />What Recent Grads Must Know to Repay Federal Student Loans</a></td> <td class="related"><a href=""><img class="related-image" src="" />15 Ways to Pay Back Student Loans Faster</a></td> </tr> </tbody> </table> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-definitive-guide-to-pay-as-you-earn-a-great-student-loan-repayment-plan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <div class="field field-type-text field-field-blog-teaser"> <div class="field-items"> <div class="field-item odd"> For many, this plan offers the lowest monthly payments and even forgives your student loan after 20 years. </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Reyna Gobel</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management Education & Training Tue, 17 Dec 2013 11:31:01 +0000 Reyna Gobel 1100564 at 10 Worst Ways to Pay Off Your Credit Card Debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-worst-ways-to-pay-off-your-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="finances" title="finances" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Do you find yourself swimming in debt? Are you willing to do whatever it takes (within reason) to rid yourself of this debt as a means of getting your finances back on track? (See also: <a href="">Which Debt Repayment Strategy Is Best for You?</a>)</p> <p>If you answered yes to both these questions, don&#39;t do anything just yet. There are good ways to pay off your debt, and bad ways.</p> <p>It goes without saying that the best way to pay off your debt is with cold hard cash. For example, if you have a $10,000 credit card bill, there is nothing better than using available cash, month in and month out, until your balance is gone.</p> <p>But if you don&rsquo;t have the savings, you might be tempted to look for &quot;quick fixes.&quot; However, these often end up causing more harm than good.</p> <h2>1. Credit Card Cash Advance, AKA &quot;Credit Card Shuffle&quot;</h2> <p>This is a great idea, right? Wrong! Don&#39;t get fooled thinking the rate for a cash advance is the same as your standard rate. It&#39;s usually much higher, and often doesn&#39;t come with a grace period. (See also: <a href="">How Your Credit Card Statement Keeps You in Debt</a>)</p> <h2>2. Borrow From Your 401(k)</h2> <p>You should never consider tapping into your retirement funds until you hang up your work boots for good. Even more so, you definitely don&#39;t want to do this as a means of paying off your debt. When you borrow from your 401(k), you have to pay the money back sooner or later (or pay taxes and a penalty).</p> <h2>3. Borrowing From Family or Friends</h2> <p>The problem is simple: If you don&#39;t repay the loan, on time or at all, it could strain your relationship. Is that a risk you are willing to take? (See also: <a href="">Borrowing From Friends Can Kill Your Relationship</a>)</p> <h2>4. Borrowing Against a Life Insurance Policy</h2> <p>There is a right way of doing this and a wrong way of doing this. If you go down the wrong path, this is one of the worst ways to pay off your debt.</p> <p>When you borrow against your policy, you can get the money you need to pay down higher interest debt. The problem is this: If you don&#39;t pay back the money before you die, the outstanding balance will be deducted from the death benefit. Subsequently, you leave your family in a bad spot. (See also: <a href="">How to Buy Affordable Life Insurance</a>)</p> <p>Since you never know what the future holds, you may want to put this idea on the back burner for the time being.</p> <h2>5. Cashing Out Your Retirement</h2> <p>This goes along with point #2 detailed above. Some people go one step beyond taking a loan and decide to cash out some (or all) of their retirement account. This is your right, but you need to be aware of the consequences:</p> <ul> <li>You will pay taxes on the withdrawal;<br /> &nbsp;</li> <li>You will be penalized if you take the money before the appropriate age;<br /> &nbsp;</li> <li>You will forego the growth potential of the withdrawn funds AND the funds you pay in penalties and taxes;<br /> &nbsp;</li> <li>You are jeopardizing your ability to retire at your target age.</li> </ul> <h2>6. Consolidate With a High-Interest Loan</h2> <p>Consolidating your debt under one &quot;umbrella&quot; loan may sound appealing, but doing so with a high interest loan can leave you in the same position (or even worse). Sure, you will only have one payment and one lender, but in the long run you may end up paying more money.</p> <p>Don&#39;t look at the monthly payment, which may be lower than the sum of your totals. Instead, look at how much you will pay over the entire repayment period.</p> <p>This is a solution for some, but only if you can get the loan at a favorable interest rate and term. (See also: <a href="">Why You Don&rsquo;t Need to Panic About Your Federal Student Loans</a>)</p> <h2>7. Using a Home Equity Loan the Wrong Way</h2> <p>This is one of the most common mistakes, since many people have equity in their homes but not much cash in the bank. With credit card debt, for example, you can get hit with interest and your credit score may even be dinged, if you make late payments, but it is not attached to your home.</p> <p>Be careful, too, about using home equity to fund your lifestyle as opposed to funding wealth generation, such as home improvements or education costs.</p> <h2>8. Selling Everything You Have</h2> <p>Can you imagine selling all (or most) of your belongings as a means of paying off debt? From your big screen television to your car, you liquidate it all to get out of debt.</p> <p>This is one of the worst ways to pay off debt if there&#39;s any likelihood you will go right back out and buy these items again on credit.</p> <h2>9. Filing Bankruptcy (Unless Absolutely Necessary)</h2> <p>It is easy to believe that filing for bankruptcy will solve all your issues. But did you know this can remain on your credit report for up to 10 years? Unless it is your absolute only option, avoid this at all costs.</p> <p>This is not an option for those who are dealing with small amounts of revolving debt; however, it is a responsible choice for those with serious debt and no other options. (See also: <a href="">Things to Avoid Before You File Bankruptcy</a>)</p> <h2>10. Turning to a Debt Settlement Company</h2> <p>These companies do a great job selling their services, but they don&#39;t bring much to the table in terms of benefits. There are <a href="">many issues with this</a> strategy, including the fact that you will be charged a high fee for the service. On top of this, after your debt is settled your credit score will be much lower, and you may owe the IRS quite a bit of money (settled debt counts as income).</p> <p>Note: There is a big difference between debt settlement companies and non-profit credit counseling. Non-profit agencies are more legitimate and many will work with you free of cost.</p> <p>The lesson in these 10 examples is that if you find yourself in debt, don&#39;t rely on any of these methods of digging your way out. There are better ways to do it. It may take longer, and a lot more work will likely be required, but you&#39;ll be better off in the long run without creating another problem along the way.</p> <p><em>Any other wrong ways to pay off debt? Let us know in comments!</em></p> <a href="" class="sharethis-link" title="10 Worst Ways to Pay Off Your Credit Card Debt" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Mikey Rox</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management debt money mistakes repaying debt Mon, 16 Dec 2013 10:49:13 +0000 Mikey Rox 1099977 at Say No! 7 Reasons Why You Shouldn't Get Married if You're in Debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/say-no-7-reasons-why-you-shouldnt-get-married-if-youre-in-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="stressed couple" title="stressed couple" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Few things in life bring as much joy as an impending engagement and marriage. The anticipation, the planning, the celebration &mdash; the promise of marriage &mdash; bring out the very best in friends and family. But for young couples in debt, that promise can be soured by the realities. If marriage is part of your short-term plans, here are seven reasons to avoid tying the knot until you&#39;re both debt-free. (See also: <a href="">How to Stay Married for 29 Years and Counting</a>)</p> <h2>1. Debt Is Stressful</h2> <p>Though the realities of marriage are often clouded by the rosy blush of love, the logistics of partnership can often be a challenge, especially for younger couples. Sharing a space, building relationships with in-laws, and managing new demands on your schedule can be stressful at times. Why add to it by bringing a load of debt into the marriage too?</p> <p>According to the results of a survey conducted by The American Institute of CPAs, <a href="">money is the number one topic that couples fight about</a>. Money conflicts outrank fights about kids, career, household chores &mdash; even sex. With eye-opening insights like this, getting off on the right foot financially is a big step in the right direction.</p> <h2>2. Weddings Are Expensive</h2> <p><a href="">The median price of a wedding in 2012 was $18,086</a>. That means that 50% of couples in the U.S. spent more that $18,086 on their weddings and 50% spent less. Faced with those numbers, being debt-free in all other financial areas, can help couples save for their wedding and avoid tapping a line of credit just to say &quot;I do.&quot; (See also: <a href="">How to Save $5000 on Your Wedding</a>)</p> <h2>3. Marriage Takes Money</h2> <p>Don&#39;t assume combining households will always be a money-saving move. After the florist is paid, a piece of the wedding cake is frozen, and the thank-you notes sent, your expenses as newlyweds are just beginning. You&#39;ll probably need a larger apartment or want to purchase a starter home, be tempted to buy a few key pieces of new furniture, become more social with other couples, or need another car for separate commutes. And it all takes money. Couples who are in the best position at the start of their marriage realize this beforehand, erase their debt, and are ready to invest in their future from day one. (See also: <a href="">9 Expensive Things New Homeowners Don&rsquo;t Prepare For</a>)</p> <h2>4. Babies Happen</h2> <p>In spite of our best intentions and most meticulous family planning efforts, sometimes babies just happen. And though these new additions to our world are wonderful surprises, they carry a host of new expenses and financial obligations. From diapers to formula and from childcare to clothes, those little bundles of joy cost a bundle, too. Couples who choose to marry only after they are debt-free are much more prepared to handle whatever the world throws (or the stork drops) their way. And as with any partnership, that kind of positive beginning can sometimes make all the difference in the world. (See also: <a href="">How Much Does It Cost to Raise a Child?</a>)</p> <h2>5. Debt Can Be a Sign of Deeper Issues</h2> <p>Not all debt is created equal. Some debts are the result of circumstances beyond our control; a sudden job loss, health problems not covered by insurance, and other emergencies can put us in the red in short order. Other debt is strategic and constructive; taking out a loan to invest in property or to get a specialized education to qualify for career advancement usually makes perfect sense.</p> <p>But chronic debt can be an signal of deeper issues like <a href="">compulsive behavior</a>, lack of fundamental fiscal understanding, or misaligned goals. It&#39;s important to understand how you or your partner&#39;s debt originated, how you each feel about it, and what each of you intends to do about it. Without this basic information, it&#39;s impossible to know if your marriage will be a new beginning or the start of a lifetime of debt servitude and financial struggle. (See also: <a href="">5 Money Questions That Couples Should Ask</a>)</p> <h2>6. Debt Is Shared</h2> <p>Any debt held before marriage is the responsibility of the individual who incurred it. But since most couples typically combine accounts and share expenses, old debt has a way of draining new budgets almost immediately. Over time, paying down our partner&#39;s debt can build resentment and replace marital bliss with marital stress.</p> <h2>7. Debt Is a Lasso</h2> <p>At the risk of sounding cynical, I have to include this important reality: Sometimes marriages don&#39;t work out. Every couple hopes to defy <a href="">divorce rate statistics</a> when they walk down the aisle, but often in spite of their best intentions and efforts, it&#39;s necessary to part ways. Though debt shouldn&#39;t prevent a divorce, it often does. Heavy financial burdens and debt can be a lasso that keeps couples tied together and stuck in unhealthy relationships for years. It sounds starkly pragmatic, but it&#39;s true: Being debt-free before marriage (and working to avoid high-interest consumer debt during marriage), can make transitions like legal separation and divorce much easier. (See also: <a href="">How to Rebuild Your Financial House After a Divorce</a>)</p> <p>Granted, money might not seem like the most romantic topic, but it&#39;s an essential one for couples to discuss thoroughly. Paying off debt, getting on the same page financially, and establishing clear and common goals for the future can help set you and your significant other up for a lifetime of success. And when you think about it, isn&#39;t that pretty romantic after all?</p> <p><em>Were you in debt when you married? What advice do you have for young couples trying to pay off debt before their big day?</em></p> <a href="" class="sharethis-link" title="Say No! 7 Reasons Why You Shouldn&#039;t Get Married if You&#039;re in Debt" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Kentin Waits</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management debt finance marriage Thu, 12 Dec 2013 10:31:17 +0000 Kentin Waits 1099002 at