debt http://www.wisebread.com/taxonomy/term/805/all en-US Everything a First-Time Home Buyer Needs to Buy a House http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/everything-a-first-time-home-buyer-needs-to-buy-a-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_home_buyers_000062916622.jpg" alt="Couple learning what they need to buy a house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The number of people buying homes for the first time is falling, according to the most recent data from the National Association of Realtors.</p> <p>According to the association's 2015 Profile of Home Buyers and Sellers report, only 32% of buyers in 2014 were purchasing a home for the first time. That's the second-lowest percentage of first-time buyers since the survey's start in 1981, beating out only 1987's survey, in which just 30% of all buyers were first-timers.</p> <p>However, this still means that plenty of first-timers are in the market today. And they are entering a housing market in which prices in major markets are continuing to rise.</p> <p>What do these buyers need to successfully land that first home? Here are five of the most important advantages that a first-time buyer can bring to the house hunt.</p> <h2>A Large Down Payment</h2> <p>Mortgage interest rates remain at historically low levels. According to Freddie Mac's Primary Mortgage Market Survey, the average interest rate on a 30-year fixed-rate mortgage loan stood at 3.59% as of April 7. That's the lowest this figure has been in 2016.</p> <p>But to qualify for such a low rate, first-time buyers &mdash; and all buyers, really &mdash; will need a solid down payment. In general, the larger the down payment you can provide, the lower your mortgage interest rate will be.</p> <p>There's a reason for this: When you have more money invested in your home at the start, lenders believe that you'll be less likely to stop paying your mortgage should you run into financial challenges. This makes lending you mortgage money less of a risk. And when you're less of a risk, lenders don't need as high of an interest rate to protect themselves.</p> <p>Ideally, you can come up with a down payment of 20% of your home's purchase price. That's a lot of money, though; for a home costing $200,000, such a down payment would cost $40,000. Fortunately, you can still qualify for solid rates even with a down payment as low as 5% of your home's purchase price, if your other financials are strong.</p> <h2>A Good Credit Score</h2> <p>Your FICO credit score is a key number when buying a home. Lenders rely on this number to gauge how well you've handled credit and paid your bills in the past. In general, lenders consider a FICO credit score of 740 or higher to be a good one.</p> <p>Realtor.com reports that the average FICO credit score of approved mortgage borrowers stood at 718 during the last six months of 2015 and the first three of 2016. If your score is near that level, then, you should have a good chance of qualifying for a mortgage loan.</p> <p>The higher your score, the lower your interest rate will be. Getting to that 740 level isn't always easy. According to Realtor.com, the average U.S. adult with a credit score had a score of 695 during the last six months of 2015 and the first three of 2016.</p> <p>A host of factors determine your credit score. The <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">key to a good score</a>, though, is relatively simple: Pay your bills on time every month, cut down your credit card debt, and never close a credit card account, even when you don't use it.</p> <h2>Plenty of Cash</h2> <p>You'll need plenty of cash to buy your first home. First-time buyers, in fact, typically need <em>more </em>available funds because unlike repeat buyers, they can't count on any cash from selling a home.</p> <p>You'll need cash for your down payment, of course. But you'll also need it for closing costs. Closing costs are the fees that lenders and other third-party sources, such as title companies, charge for closing your mortgage loan. Closing costs can vary, but in general they average about 2.5% of your home's purchase price.</p> <p>If you are buying a home that costs $180,000, you can expect to pay about $4,500 in closing costs.</p> <p>The good news? You can accept gifts from relatives or friends to cover your closing costs. The key, though, is that these gift funds have to truly be gifts. The person gifting you the dollars can't expect you to pay them back. Otherwise, your lender will count your gift as a loan, and that will boost your monthly debt obligations.</p> <h2>A Low Debt-to-Income Ratio</h2> <p>Your debt-to-income ratio is another key number when you're buying a home. As the name suggests, this ratio compares your monthly debt obligations with your gross monthly income. Lenders today want your total monthly debts, including your estimated new mortgage payment, to equal no more than 43% of your gross income.</p> <p>If your debt-to-income ratio is too high, you'll struggle to qualify for a mortgage. Lenders will worry that adding a mortgage payment to your already high debt obligations will boost the chances that you'll fall behind on your home-loan payments.</p> <h2>A Steady Income</h2> <p>Lenders prefer that you have a work history of at least two years at your current employer or, at the least, in your current field. Not having this history isn't usually a deal-breaker, but it can cause lenders to hesitate before approving you. And if you have any other financial challenges &mdash; high debts or a middling credit score, maybe &mdash; a shaky job history will increase your odds of a mortgage rejection.</p> <p>When you apply for a mortgage loan, you'll have to provide lenders with a signed letter from your employer stating your position and annual salary. Lenders want to make sure that your monthly income is high enough to support the addition of a mortgage payment.</p> <p><em>Anything we've overlooked? What else does a first-time buyer need to buy a home?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-a-30-year-mortgage-is-a-smart-financial-choice">Here&#039;s Why a 30-Year Mortgage Is a Smart Financial Choice</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-you-shouldnt-rush-to-pay-off-your-mortgage">5 Times You Shouldn&#039;t Rush to Pay Off Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit score debt down payments first-time buyers mortgages new homeowners Thu, 28 Apr 2016 10:01:08 +0000 Dan Rafter 1697849 at http://www.wisebread.com What to Expect When You're Expecting a Huge Credit Card Bill http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-expect-when-youre-expecting-a-huge-credit-card-bill" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_writing_bills_000083882473.jpg" alt="Woman learning what to expect with a huge credit card bill" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've been splurging the last few months &mdash; dining out, ordering online gifts, and booking a vacation you sorely need. And you put all of these purchases on your credit card.</p> <p>You know you won't be able to pay off this debt within a few months, but you've justified it by reasoning you <em>can </em>pay it off <em>very soon</em>. But these purchases you've made &mdash; well they couldn't wait until you could actually afford them.</p> <p>Maybe that's true. Maybe an unexpected but critical expense came up. Maybe everyone was booking flights for your family vacation and you had to commit. A little debt isn't going to kill your finances, right? Okay, so you'll just pay a little in interest.</p> <p>Unfortunately, it's likely to be more than a little interest &mdash; and there's a lot more at stake than paying more interest.</p> <p>Consider these financial challenges that you might not be expecting with a big credit card bill. You'll struggle with each of them until you <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">eliminate your credit card debt</a>.</p> <h2>Tons of Interest</h2> <p>The biggest problem with credit cards? All that interest you'll pay if you carry a balance each month. Say you owe $5,000 on your credit card at an interest rate of 16.5%. If you make a payment of $100 every month on that debt, it will take you 86 months, or more than seven years, to pay off that $5,000.</p> <p>Why so long? Because of interest. By paying just $100 a month, you'll pay an additional $3,517 in interest alone before you erase your debt. This means you'll pay a total of more than $8,500 to pay off $5,000 worth of charges.</p> <p>The lesson here is simple: The interest you'll pay is never worth the instant gratification of getting something when you can't afford it. It'll just start a never-ending cycle of not being able to afford the <em>next</em> thing you want because you're still trying to pay off that other thing you bought. If you must carry a balance for a period of time, pay as much as you can (not just the minimum) to avoid more interest piling on (interest gets calculated based on your daily balance so get it down as much as possible, as quickly as possible).</p> <p>Even better &mdash; if you know you'll have to make a large purchase but can't pay it off right away, get a credit card with a <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases">0% promotional APR for purchases</a>. That will buy you some time, but you still have to pay it off before the promotional period ends. If you already have a balance you're paying interest on, try a credit card with a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% APR for balance transfers</a>.</p> <h2>No More Grace Period</h2> <p>Most credit cards offer a grace period to pay off your purchases before they charge interest. Pay off your balance during this grace period and you're golden &mdash; you've borrowed money for free, and perhaps even made a little if you used a <a href="http://www.wisebread.com/5-best-cash-back-credit-cards">cash back credit card</a>. But when you leave a balance, you'll not only get hit with interest for those purchases, you lose your grace period on all future purchases. Meaning, the minute a charge gets through, interest can start accruing.</p> <p>It'll take several billing cycles before your grace period is reinstated, so make sure you don't lose it in the first place.</p> <h2>A Lower Credit Score</h2> <p>If you have too much credit card debt, your credit score will suffer. That's because lenders consider you more of a risk to not pay back your debts when you are saddled with high amounts of credit card debt.</p> <p>Something called your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">credit-utilization ratio is a key factor</a> here. If you use too much of your available credit, your credit score will drop. For instance, if you have $20,000 worth of credit available to you and you owe a total of $17,000 on your credit card accounts, you have a credit utilization ratio that is far too high. A high ratio will drop your credit score.</p> <p>You may not think much about your credit score until you need it. If you're hoping to buy a house, a car, or even a new job, your credit score may determine whether you get it or not.</p> <p>(See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=seealso">15 Surprising Ways a Bad Credit Score Can Hurt You</a>)</p> <p>No matter how much credit available you have, it's never a good idea to use it all up at any one time. Spread out your purchases and pay them down quickly.</p> <h2>A High Debt-to-Income Ratio</h2> <p>In addition to your credit score, lenders rely on your debt-to-income ratio. This ratio examines the relationship between your monthly debts and your gross monthly income. Lenders factor in your minimum required monthly credit card payments as part of your debt obligations. If these minimum payments are high, it could throw your debt-to-income ratio out of whack.</p> <p>For instance, if you're applying for a mortgage loan, lenders want your monthly debts &mdash; including your estimated new mortgage payments &mdash; to equal no more than 43% of your gross monthly income. If your credit card payments push that ratio up past 43%, you might not qualify for that home loan.</p> <h2>Sky-High Interest Rates</h2> <p>With a large credit card debt and a low credit score, you can expect to pay higher interest rates on whatever loans &mdash; including auto and mortgage &mdash; for which you do qualify. Lenders charge higher rates to borrowers whom they deem higher risks. If your score is low &mdash; in part because of your huge credit card bill &mdash; get ready to be hit with interest rates higher than the market average.</p> <p>That's too bad. Higher rates can make a significant difference in the amount you pay each month on loans. Say you take out a 30-year fixed-rate mortgage loan of $200,000 to finance a new home. If your interest rate is 3.95%, you'll pay about $949 each month, not counting whatever you'll need to pay for homeowners insurance and property taxes.</p> <p>If you have a lower score your interest rate on the same loan could be more like 5.5%, which means you'll pay about $1,135 each month, again not including insurance and taxes.</p> <p>That's a difference of $186 each month or $2,232 a year, simply because you owe too much on your credit cards.</p> <h2>More Hurdles to Renting</h2> <p>Even if you don't want to finance a home or a new car, high credit card debt can cause problems. Say you want to rent an apartment, your possible landlord will run your credit. If this search turns up high credit card debt, a landlord might hesitate before leasing you an apartment. The landlord might worry that with all the debt you're already facing, you won't be able to pay your monthly rent on time.</p> <h2>Contain the Pain</h2> <p>The first step is to curtail spending, but if the horse is out of the barn, here are a few steps to take to minimize the sting.</p> <h3>1. Stop Digging</h3> <p>Stop spending more than you can pay off every month! You can't begin to chip away at your debt balance if you keep adding to it.</p> <h3>2. Pay More Than the Minimum</h3> <p>Paying the minimum maximizes the amount you pay in interest over time. Whittle away at your debt overhang by paying more of it off, whenever you can. Changes to the law a few years ago mean that any extra you pay will go toward the highest interest debt on the account.</p> <h3>3. Make Multiple Payments Per Month</h3> <p>You can ease the burn of bill paying day by breaking up your payments as your paychecks or income arrive. Since your interest charge is based on your daily balance, cutting down your balance whenever you have funds available, rather than waiting until the bill is due, can help reduce the interest you pay, too.</p> <p><em>Have you ever dreaded the arrival of a credit card bill? Did it change your behavior?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-debt-payoffs-that-boost-your-credit-score-the-most">The 7 Debt Payoffs That Boost Your Credit Score the Most</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-5-costly-credit-card-mistakes">Stop Making These 5 Costly Credit Card Mistakes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards bills credit history credit score debt debt to income ratio interest Wed, 27 Apr 2016 09:30:22 +0000 Dan Rafter 1696224 at http://www.wisebread.com 6 Money Moves to Make When You Move Back Home With Your Parents http://www.wisebread.com/6-money-moves-to-make-when-you-move-back-home-with-your-parents <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-money-moves-to-make-when-you-move-back-home-with-your-parents" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/mother_and_daughter_000065344549.jpg" alt="Woman making money moves after moving back in with parents" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Somewhere between 30% and 50% of Millennials are currently <a href="http://time.com/4108515/millennials-live-at-home-parents/">living with their parents</a>. While there are a lot of different ways of thinking about this statistic, most of the folks I know who have had to move back home don't feel great about it.</p> <p>No matter how you frame it, moving home often feels like failure, at least at some point in the process. But if you make the right financial moves from the beginning, you ensure that the process is as painless as possible, and you set yourself up for financial success in the future.</p> <p>Whether you're moving home because you lost a job, can't find a job, or your job doesn't pay a living wage, take these steps as soon as you can. (See also:&nbsp;<a href="http://www.wisebread.com/7-ways-millennials-are-better-with-money-than-you-are?ref=seealso" target="_blank">7 Ways Millennials Are Better With Money Than You Are</a>)</p> <h2>1. Know the Financial Expectations</h2> <p>If possible, sit down with your parents before you move home and talk about your mutual financial expectations. Do your parents want you to pay rent? To buy your own groceries or contribute to a household budget? Will you pay any of the utilities while you're living there?</p> <p>Most people who move home continue to pay the bills that pertain only to them. This includes things like covering your own phone bill, health insurance premiums, and other, similar bills. Some people, though, find that going on their parents' cell phone plan, for instance, is cheaper than having their own.</p> <p>The point is to hash out these things before you move home and write them down. That way, everyone will be on the same page and it will be easy to ensure that everyone is holding up their end of the bargain. This also allows you to keep some measure of independence and feel more dignified about the whole thing, because you will be able to pay for as much of your own stuff as possible.</p> <h2>2. Set Goals and Make Plans</h2> <p>Moving home can feel like a dead end, but it doesn't have to actually be one. Most young people don't want to live with their parents long-term, which can be a relief both for you and your folks. Before you move in, or soon after doing so, decide how you want to proceed.</p> <p>This will depend a lot on your current situation. If you're carrying debt, you might want to focus on paying that off before you move out. Or you may want to land a job that pays more, or finish your education.</p> <p>Having goals will make you feel better about moving home, because you will be able to see your move as a step forward in your overall financial life, rather than a move backwards.</p> <p>Goals alone are not enough, though. Once you know where you're going, draw up a blueprint for how to get there. Decide which classes you're going to take, start making extra payments on that debt, or begin applying for jobs that meet your criteria.</p> <p>Not only will this empower you and move you forward, but it will help your parents see that you are a responsible adult, even though you moved back into your childhood bedroom.</p> <h2>3. Agree on Boundaries</h2> <p>While it will be important for you and your folks to hash through all sorts of boundaries, the ones I'm thinking of here are financial in nature. Unless you're in truly dire straights, decide that you will not borrow money from your parents. And even if they won't take your money for rent, find ways to contribute to the household. You can buy food, pay for meals out, purchase cleaning supplies and clean, etc.</p> <p>Let your parents know what boundaries you're setting. Let them know that you plan to clean the bathrooms every week, that you're available to run errands on the weekends, or that you don't need anything more from them than what has already been agreed upon.</p> <h2>4. Get a Job</h2> <p>This won't apply to folks moving home because they are underemployed but, for everyone else, this is not a free ride. The goal of moving home is to get yourself into a better financial place for later on, so you should be working.</p> <p>Even if the only job you can get is the one you had during high school, take it. Since you're at home, you probably don't need as much money as you would otherwise, and some income is always better than none. Working will also make you feel better about yourself, and will show both your parents and future employers that you are willing to do whatever it takes to move forward.</p> <h2>5. Pay Off Debt</h2> <p>If you have debt, start paying it off as soon as you can. Moving home can save you quite a bit of money and, instead of putting this toward your own pleasure, take steps to make your financial future brighter. Even if you only have student loans, start putting more towards them every month. A couple of extra payments now can mean huge savings in interest later!</p> <p>Paying off debt should probably be your first goal upon moving home. Make a concerted effort to pay off as much as possible, and you will feel better about your decision to not live on your own. Even if you have a crappy job, you should be able to make some extra payments when you're saving money on things like rent.</p> <h2>6. Start Saving</h2> <p>Don't have debt? Great! Start saving. If you're not spending money on rent, you should be putting it towards something useful, and an emergency fund (or a move-out-of-my-parents'-house fund) is a great way to feel good about your decision to move home.</p> <p>If you play your cards right, you can use your time living at home to get a nice little nest egg. That way, you'll be able to cover all of your moving expenses when you move out, and you'll have enough left over for other things that come up (like car problems, paying for a wedding, etc.).</p> <p>Moving home doesn't have to be a death sentence. Even if you feel like you've failed financially, these moves can set you up for future success. Take the long view and you will be happier with your decision.</p> <p><em>Why did you move home? What financial moves did you make when you did?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/sarah-winfrey">Sarah Winfrey</a> of <a href="http://www.wisebread.com/6-money-moves-to-make-when-you-move-back-home-with-your-parents">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-everything-breaks">My 2016 Budget Challenge: Everything Breaks</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-job-creation">My 2016 Budget Challenge: Job Creation</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/flashback-friday-the-95-best-ways-to-get-fit-for-free">Flashback Friday: The 95 Best Ways to Get Fit for Free</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-6-rules-of-frugal-living-you-need-to-know">The Only 6 Rules of Frugal Living You Need to Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living bills debt housing millennials moving back with parents saving money student loans Tue, 19 Apr 2016 09:30:29 +0000 Sarah Winfrey 1689032 at http://www.wisebread.com 10 Reasons You Should Really Fear an IRS Audit http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-reasons-you-should-really-fear-an-irs-audit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retro_calculator_000017912650.jpg" alt="Learning reasons why you should fear an IRS audit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's that time of year again. We all do our best to comply with the vast array of tax laws out there, while trying to get the deductions and rebates we're owed. But what if you make an honest mistake, or try to cheat the IRS, and get a dreaded audit? Is it really as bad as people say? Well&hellip; sometimes, it can be even worse, as these 10 reasons show.</p> <h2>1. The IRS Can Take Money Directly From Your Bank Account</h2> <p>Do not think, for one second, that the money in your bank account is safe and sound. The IRS has incredible power, and if they choose to do so, they can simply place a levy on your account and take your money. This happened to Joan Smith, a 52-year-old artist from Philadelphia. In 2010, she was preparing to go into the hospital for spinal surgery, when the IRS put a $10,000 tax lien on her account. This was, in fact, more money than she even had in the bank. And all because she did not receive an audit memo that was sent to the wrong address. It took her 11 months to dig herself out from that tax hole.</p> <h2>2. The IRS Now Has Six Years to Audit You</h2> <p>You may have been told that the IRS statute of limitations was three years from the date you filed your taxes. Not anymore. The IRS now has a series of exemptions that increase the amount of time they have to audit you. For example, if you omitted more than 25% of your income, the IRS can now hit you up six years after you filed. And, if you forgot to file certain forms, the IRS can audit you at any time in the future. Basically, 30 years from now, you could get a letter in the mail from the IRS. And if you no longer have records, you could be in trouble. Which brings us to our next point.</p> <h2>3. You'd Better Have Meticulous Records</h2> <p>If the IRS does come after you (and luckily, there's less than a 1% chance they will), they will want to examine certain records, receipts, proof of income, and anything else that may have triggered the audit. We all do our best to keep track of everything, filing it away in a safe place, and often storing copies electronically. But, if you lose some of those records, which can happen when you move, if you have a fire or burglary, or even by just misplacing them, you can wind up in real trouble. That big deduction you took for your home business? If there's no longer proof, then you can't have it. All that money you gave to charity? No receipts, no deduction. It really does pay to scan as much as you possibly can and store it on several hard drives and a cloud-based service. (See also: <a href="http://www.wisebread.com/i-lost-my-tax-documents-now-what?ref=seealso">I Lost My Tax Documents&hellip; Now What?</a>)</p> <h2>4. One Audit Can Lead to Another</h2> <p>So you get the dreaded audit notice. And in this case, it's not one that is handled by mail. You actually have to meet face-to-face with an auditor. Even if you are fully prepared, and have all your ducks in a row, you could say or do something that leads the IRS to audit more of your tax returns than the one in question. For instance, saying something like, &quot;Well, I have taken that deduction before and it was fine,&quot; could lead the investigator to look into several returns, not just the one that has been flagged. In the case of an audit, you may want to look into getting some legal help.</p> <h2>5. Auditing Can Take Years &mdash; And Cost Thousands of Dollars</h2> <p>Don't think that an audit is simply a few weeks of gathering up paperwork and checking a few boxes. Audits can sometimes take years. Take the case of <a href="https://www.mainstreet.com/article/tax-audit-horror-stories-will-haunt-your-dreams">Tim and Tracey Kerin</a>. Their accountant hadn't correctly evaluated their expense categories, which led to an audit. But, it didn't go smoothly. In fact, they ending up spending over 30 months battling the IRS to prove their innocence, spending over $95,000 in legal fees.</p> <h2>6. You Are Guilty Until Proven Innocent</h2> <p>Unlike the justice system, the IRS operates on the principle that if you have done something wrong on your tax return, you are guilty. You owe them money. You have to provide the paperwork to prove you are innocent, or you will face the full wrath of the system. If you cannot comply, you can literally wake up to find out your bank account has been frozen, and there's not much you can do about it.</p> <h2>7. If You Owe Money, the IRS Applies Penalties and Interest</h2> <p>So, you made a genuine mistake. You owe the IRS money. Well, you don't just owe them the unpaid taxes. You also have penalties to pay, and interest, too. As the <a href="https://www.irs.gov/uac/Newsroom/Eight-Facts-on-Late-Filing-and-Late-Payment-Penalties">IRS states on its website</a>, the &quot;penalty starts accruing the day after the tax filing due date, and will not exceed 25% of your unpaid taxes.&quot; That means if you owe $4,000, you may end up owing $5,000. Rather than incur the penalties from the IRS, find another way to pay, and get them their money quickly. You could arrange a home equity loan at a very low rate. Just get them their money, or the debt can really start to add up.</p> <h2>8. The IRS Can Garnish Your Wages and 401K</h2> <p>If you owe money, and don't have any way to pay back the sum of money owed, the IRS has the power to garnish your wages. Your employer has to comply fully with the IRS, and you will suddenly find your monthly paycheck has become smaller. Not only that, the IRS can also levy your retirement accounts, rental income, life insurance policies, or anything else of value. And this is all stated right there on the IRS website. This is a warning. If you have any doubts, ask Willie Nelson, Nicolas Cage, or Ja Rule.</p> <h2>9. The IRS Can Seize Anything of Value</h2> <p>One way or another, the IRS will get their money. If the audit reveals that you owe money, and you have no way to pay, then the IRS will start looking into your assets. If you own your vehicle, they can seize it, sell it, and apply the funds to your tax debt. Worse still, if the debt is large enough, they could actually take your home, sell it (they won't hold out for the best price), and apply that to your debt. If you do owe a large sum of money, you need to get professional advice. You do not want to be left homeless and penniless because of an IRS audit.</p> <h2>10. You Could Go to Prison</h2> <p>If worse comes to worst, you may actually find yourself behind bars. This is unlikely unless you are found guilty of major tax fraud and evasion, owing more than $100,000. But if it does happen, you have committed a federal crime and that can come with a hefty prison sentence; in some cases, up to five years. What's more, the fine could be as much as $250,000. Your whole life could be ruined, all because of a genuine mistake, an oversight, or because you put your trust in a bad accountant. When it comes to taxes, you do not want to mess around.</p> <p><em>Do you have any IRS horror stories? Or any advice on how to deal with an audit? Please share your experiences in the comments. </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-choose-the-best-tax-preparer">How to Choose the Best Tax Preparer</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-your-chances-of-getting-audited-by-the-irs-your-guess-is-probably-wrong">What are your chances of getting audited by the IRS? Your guess is probably wrong</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ring-ring-ka-ching-lying-about-your-telephone-tax">Ring. Ring. Ka-ching! Lying About Your Telephone Tax</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-survive-a-tax-audit">How to Survive a Tax Audit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/worried-about-an-audit-six-irs-red-flags">Worried About an Audit? Six IRS Red Flags</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes accountant audit cpa debt expenses IRS receipts tax evasion tax fraud Fri, 15 Apr 2016 10:30:10 +0000 Paul Michael 1689021 at http://www.wisebread.com 10 Credit Card Truths You Wish You Could Tell Your Younger Self http://www.wisebread.com/10-credit-card-truths-you-wish-you-could-tell-your-younger-self <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-credit-card-truths-you-wish-you-could-tell-your-younger-self" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_credit_card_000043691962.jpg" alt="Woman wishing she could tell her younger self credit card tips" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>As a teenager, I associated credit cards with adulthood, so naturally I couldn't wait to get my first one. But like so many young adults, I didn't know much about credit management, and I made several costly mistakes in the beginning. The good news is that I woke up and saw the error of my ways before completely ruining my finances, although I didn't come out the other side completely unscathed. Looking back on my early credit years now, however, I know exactly what I did wrong &mdash; and here's what I would tell my younger self about credit cards.</p> <h2>1. Don't Apply for Too Many Cards at Once</h2> <p>It wasn't long after my 18th birthday &mdash; literally, like days &mdash; that credit companies were calling me with the great news that I qualified for their cards. I worked part-time (as much as someone still in high school could), yet every student credit card issuer was eager to give me plastic. So I took the bait, and I applied for one credit card after another, not realizing the danger of applying for too many credit cards. Being young, I didn't know that each inquiry lowered my credit score by a few points, which, if I'm honest here, didn't mean jack to me at the time. I was approved for most of the cards I applied for, which ultimately led to another problem &mdash; the temptation to spend. Cause and effect should help you deduce that I learned from an early age that the more available credit you have, the easier it is to get into debt.</p> <h2>2. Only Charge What You Can Afford</h2> <p>As a young adult, I didn't always have money to hang out with my friends or go on group trips. I didn't want to feel left out, so I began using credit as an extension of my income. <em>Biiiig </em>mistake. I think a credit card is an excellent way to build credit as a young adult, but I would definitely advise my younger self to set a budget. I'd take a look at my finances and determine what I could realistically afford to spend each month, and then stick with this limit. I could have saved myself a lot of financial heartache had I been as wise back then.</p> <h2>3. Pay Off Balances in Full</h2> <p>If I could rewind time, I would definitely pay off balances in full every month, which also goes hand-in-hand with only charging what I could afford. Now that I'm older, I realize that paying off balances is a surefire way to never get into deep credit card trouble. It's easy to accumulate credit card debt, but not as easy to pay it off.</p> <p>Of course, even if we pay off a card in full, a large unexpected expense might result in carrying a balance. There were times when I had to use a credit card for an emergency car repair and then carry the balance from month to month. Another mistake I made was only paying my minimums, even at times when I could afford to pay more. I recall spending $500 for new brakes and rotors for my car, yet it took more than two years to pay off the balance because I was only making $20 minimum payments. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How a Smart Balance Transfer Will Help Pay Off Your Debt</a>)</p> <h2>4. Never Pay Late</h2> <p>Early on, I was more than just late on payments &mdash; I ignored them altogether because I was young, dumb, and incredibly broke. In hindsight, I would tell my younger self to track down due dates, or better yet, pay credit card statements as soon as they come in the mail to avoid a late arrival, which is what I do today. A $35 late fee increases the amount owed and results in additional interest. To put this in perspective, 10 late fees a year equals an extra $350 in credit card fees.</p> <h2>5. Avoid Cash Advances</h2> <p>I relied heavily on cash advances from my credit cards as a college student, especially during my freshman year. I didn't go crazy or borrow thousands of dollars, but I would take $20 or $50 here and there to tide me over until payday. I didn't realize until later that I paid a cash advance fee each time I tapped the ATM. It was also a shock to learn that cash advances carried a higher interest rate than standard purchases. Between the fee and the higher interest rate, it took longer to pay off the card.</p> <h2>6. Don't Let Friends Borrow Your Credit Card</h2> <p>I made the mistake of lending my credit card to a friend. He had permission to purchase one item, but used the card for much more. The card was in his possession for less than a week, yet there were charges for restaurants, movies, fuel &mdash; he even had the audacity to purchase a video game in my name. He eventually paid me back, even though it took nearly two months.</p> <h2>7. Don't Exceed Your Credit Limit</h2> <p>Because of new credit card rules, a credit card issuer can only charge an over-the-limit fee if you opt-in for this fee. If you don't opt-in, any transaction over your limit will be declined. Unfortunately, this wasn't the case in the late '90s when I applied for my first credit card. If I could go back in time, I would tell my younger self to carefully monitor spending and don't go over a credit card's limit. I made this mistake and was hit with an over-the-limit fee plus additional interest. I exceeded the limit by more than $100, and because I didn't have extra money to bring my balance below the limit, I paid the over-the-limit fee for three months.</p> <h2>8. Know What You're Paying</h2> <p>Using a credit card can be expensive if you choose a random card and you don't know what you're paying. Before applying for any credit card, I wish I would have compared interest rates, annual fees, cash advance fees, late fees, etc. Credit card fees add up quickly and increase the cost of using credit.</p> <h2>9. Check Your Credit Score</h2> <p>I didn't get serious about credit monitoring until my mid-20s. When I finally checked my credit report for the first time, there were a couple of mistakes. Mostly minor, but there was one major error dragging down my credit score. Knowing what I know now, I would make a point to check my credit report at least once a year and not rely on my credit card companies to detect fraudulent activity. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=seealso">Credit Cards that Offer Free Credit Scores</a>)</p> <h2>10. Make Sure the Bank Reports to the Bureaus</h2> <p>Despite the mistakes I've made, I'm happy that I established credit in my late teens. I was able to learn from my mistakes and repair my credit before financing a car or buying a house. But with regard to applying for credit, I'd also encourage my younger self to get a credit card from a bank that regularly reports activity to the bureaus. One of my earlier cards didn't report my credit activity, which meant that my history of timely payments didn't show up on my credit file, nor help my credit score.</p> <p><em>We all have credit card horror stories. What are some of yours? What can you tell your younger self about credit cards now that you're an adult?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/10-credit-card-truths-you-wish-you-could-tell-your-younger-self">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-cosign-your-teenagers-credit-card-application">Should You Cosign Your Teenager&#039;s Credit Card Application?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-its-okay-to-close-a-credit-card">5 Times It&#039;s Okay to Close a Credit Card</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-a-solid-credit-score-saves-you-money">How a Solid Credit Score Saves You Money</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/can-you-talk-to-your-friends-about-debt">Can you talk to your friends about debt?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards advice credit score debt overspending paying bills teens younger self Fri, 08 Apr 2016 10:30:08 +0000 Mikey Rox 1683694 at http://www.wisebread.com The Only 6 Rules of Frugal Living You Need to Know http://www.wisebread.com/the-only-6-rules-of-frugal-living-you-need-to-know <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-only-6-rules-of-frugal-living-you-need-to-know" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_blueprints_piggy_bank_000031080438.jpg" alt="Woman learning only rules of frugal living she needs to know" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We humans have a knack for complicating the simplest of ideas. Our lives are filled with shortcuts that aren't short, tips and tricks that trip us up, and helpful hints that are anything but. The same is true when it comes to frugality. Let's scrap all the circular talk and bottom-line it. Here are the only six rules of frugal living you need to know.</p> <h2>1. Know Your Money</h2> <p>By whatever means necessary, become ridiculously well-acquainted with how much you earn, how much you spend, and where every dollar goes. It's the foundation of frugal living. Without this baseline knowledge, successful budgeting and saving will always be out of reach.</p> <h2>2. Live Below Your Means</h2> <p>Living within your means is a great start, but living <em>below</em> your means is where the real magic happens. The surplus it generates is the capital for saving and investing and the fuel behind long-term wealth building. If you're unable to run a surplus a majority of the time &mdash; either by cutting expenses or growing your income &mdash; you'll never get ahead of the game.</p> <h2>3. Know the Difference Between Spending and Investing</h2> <p>Spending and investing might feel like the same thing, but they're completely different animals.</p> <p>Investing is the outlay of cash in exchange for a tangible asset (think job training, a primary residence, or shares in a mutual fund). Spending, on the other hand, is the outlay of cash for something that will likely depreciate in value and not provide any long-term benefit (think dinners out or a new summer wardrobe).</p> <p>Being frugal doesn't mean you always have choose investing over spending (after all, spending is part of living), but it does require that you understand the difference and know how to put your income to work a majority of the time.</p> <h2>4. Buy for Quality</h2> <p>Frugality isn't about always buying the cheapest product; it's about diligently seeking out the best value. Sometimes that means <a href="http://www.wisebread.com/quality-over-price-15-items-to-spend-more-on">choosing quality over price</a>. A pair of shoes that cost $20 might seem like a great deal, but they're not if you have to replace them every three months. A $75 pair that will last two or three years will be a far better value in the long run.</p> <h2>5. Avoid Consumer Debt</h2> <p>Frugal folks know it: Interest on consumer debt is a tax people pay for living beyond their means. And while a credit card can save the day from time-to-time, embracing easy credit as a way to pad your lifestyle can have disastrous consequences. Interest and other charges will bleed your budget and choke your chances at real financial security. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso">The Fastest Method to Eliminate Credit Card Debt</a>)</p> <h2>6. Know the Difference Between a <em>Want</em> and a <em>Need</em></h2> <p>As I write this, there are throngs of advertisers plotting new ways to help consumers confuse wants and needs. It's big business. In reality, our needs are fairly straightforward (nourishing food, secure shelter, good healthcare, etc.).</p> <p>But what about that self-cleaning, solar-powered, lavender-infused kitty litter box that you can control with your smartphone? What sort of primitive existence would you be reduced to without this life-changing gadget?</p> <p>Let's face it: Being able to distinguish what we want from what we need is a prerequisite for making wise buying decisions. If you can't master this skill, your needs will be endless and your paycheck will never keep up. (See also: <a href="http://www.wisebread.com/25-products-you-think-you-need-but-really-don-t?ref=seealso">25 Products You Think You Need, But Really Don't</a>)</p> <p>Here's the curious thing: Today, when we talk about the rules of frugal living, aren't we really talking about basic financial literacy? It seems over the past couple of generations, common fiscal sense has been reframed as an extreme lifestyle. Maybe it's time to change the conversation about saving and managing money &mdash; and make frugal living a far more fundamental skill.</p> <p><em>Are you frugal-living pro? Which rules were the hardest for you to learn? Which have we missed?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kentin-waits">Kentin Waits</a> of <a href="http://www.wisebread.com/the-only-6-rules-of-frugal-living-you-need-to-know">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-do-a-spending-fast-in-16-easy-steps">How to Do a Spending Fast in 16 (Easy!) Steps</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/pets-old-cars-and-3-other-common-money-pits">Pets, Old Cars, and 3 Other Common Money Pits</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-champion-of-savings-over-spending">A champion of savings over spending</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-9-people-in-your-life-who-are-keeping-you-poor">The 9 People in Your Life Who Are Keeping You Poor</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-many-reasons-to-make-do-with-less">The Many Reasons to Make Do with Less</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living debt investing lifestyle living below means money needs spending wants Fri, 08 Apr 2016 10:00:14 +0000 Kentin Waits 1683756 at http://www.wisebread.com The 7 Debt Payoffs That Boost Your Credit Score the Most http://www.wisebread.com/the-7-debt-payoffs-that-boost-your-credit-score-the-most <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-7-debt-payoffs-that-boost-your-credit-score-the-most" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/happy_man_computer_000083101755.jpg" alt="Man finding debt payoffs that boost his credit score the most" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your credit score can be a baffling thing. Your score goes up, it goes down, and it's not always clear what is responsible for the movement.</p> <p>If you have a FICO credit score that is too low, there are some ways to improve your score by tackling your debts head on. But it helps to have a plan, as not all debt payoffs will help you. In fact, credit bureaus like to see people who have some revolving debt but are still capable of paying their bills.</p> <p>So how can you give your credit score a boost? Here are the kinds of payoffs that will be helpful.</p> <h2>1. Anything That's on Time</h2> <p>Nothing helps your credit score more than your ability to make payments on time. If you can pay off your credit card balance in full each month, that helps. If you make your monthly mortgage payment every month without delay, that's <em>huge</em>. In fact, these types of payments are viewed more positively by credit bureaus than any other factor.</p> <h2>2. Debt With the Highest Interest Rates</h2> <p>Cards with the highest interest rates are the ones that place you at the most risk of racking up more debt, thus hurting your credit score. By <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">paying these cards off first</a>, you are reducing your debt risk and ultimately will see your score rise. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Credit Cards with the Best APRs</a>)</p> <h2>3. Credit Cards With the Lowest Credit Limits<strong> </strong></h2> <p>Credit card bureaus will not only analyze your total debt, but the amount of debt relative to your total limit. If your debt is low relative to what you are allowed to borrow, that's good. But if you're close to maxing out a credit card with a low limit, pay that one off first. This way, if you choose to close the credit card, your debt load is reduced but your limit doesn't shrink as much.</p> <h2>4. Anything That Gets Your Credit Utilization Under 30%</h2> <p>Just because credit card companies let you borrow up to a certain amount doesn't mean you should always charge up to the limit. Even if you pay credit cards on time, your credit score can be negatively impacted if you have high revolving balance. Generally speaking, if you are using more than 30% of your available credit, that's a problem. So even if you can't get your balance down to zero, work to make sure you're borrowing less than <em>a</em> <em>third </em>of what you are allowed. You will continue to see improvement until your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">credit utilization</a> is down to 10% or less.</p> <h2>5. Your Student Loans (But Not Always)</h2> <p>Paying off your student loans is <em>usually </em>a good thing, because you're reducing your debt-to-income ratio. And because student debt is not dischargeable in bankruptcy, your wages could be garnished if you don't pay up. The fact that you have a long history of making your loan payments on time will continue to help your score, even after the debt is paid. But it's worth noting a debt payoff in this case <em>could </em>result in a change to your debt mix, thus impacting your score negatively. Student loans are considered installment loans, because you pay a fixed amount each month, while credit cards are a vehicle for revolving debt. Credit bureaus like to see both types in your file.</p> <h2>6. Small Balances on Numerous Credit Cards</h2> <p>You may think your credit score should be fine if you have only small debts. But if those small debts are on multiple credit cards, your score may be suffering. One of the things that FICO looks at when evaluating credit is how many credit cards have balances. So if you have debt on more than one card &mdash; even if it's a small amount &mdash; it's best to get those card balances down to zero.</p> <h2>7. Any Past-Due Bills</h2> <p>If you have debts that are very late, it's best to still pay back what you owe. This may not ultimately boost your credit score significantly right away, according to FICO, but new lenders will still want to see that you paid back what was owed. Prioritize the most recent past-due bills first.</p> <p><em>How do you prioritize debt repayment?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/the-7-debt-payoffs-that-boost-your-credit-score-the-most">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-improve-your-credit-score-fast">5 Ways to Improve Your Credit Score Fast</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-credit-score-affects-your-job-search">Here&#039;s How Your Credit Score Affects Your Job Search</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-a-solid-credit-score-saves-you-money">How a Solid Credit Score Saves You Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bills borrowing credit score credit utilization ratio debt fico Wed, 23 Mar 2016 10:30:04 +0000 Tim Lemke 1677888 at http://www.wisebread.com My 2016 Budget Challenge: Job Creation http://www.wisebread.com/my-2016-budget-challenge-job-creation <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/my-2016-budget-challenge-job-creation" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/femaile_photographer_camera_000067998371.jpg" alt="Max Wong figures out how to create jobs to make money" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p><em>[Editor's Note: This is the latest episode in Max Wong's journey to find an extra $31,000 this year. Read the whole series </em><a href="http://www.wisebread.com/topic/max-wongs-budget"><em>here</em></a><em>.]</em></p> <p>If there's one aspect of my personality that defines me as an American, it's my ability to convert desire into employment. I wanted to be a documentary filmmaker, so I started making a film and got a grant to complete it. I wanted to become a beekeeper, so I got bees, and now I own a tiny but profitable honey business. I am obsessed with brutalist architecture, and my pure, sincere love of misunderstood concrete buildings has led me to paying work as an <a href="https://www.instagram.com/myromanapartment/">architectural photographer</a>.</p> <p>Every job of value I've ever had, I invented. (This includes my job as a staff writer for Wise Bread!) The main reason why I have all these weird side jobs and businesses is that I am really good at finding solutions to problems. This is what people pay me for. This is why my editors challenged me to solve my $31,000 budget shortfall publicly, as a serial writing assignment. They know I will find a solution or, worst case scenario, provide a gruesome, yet entertaining, spectacle for readers.</p> <h2>You Can Be a Job Creator, Too</h2> <p>Although politicians constantly talk about job creation in the context of big business or big government, they never talk about the legions of babysitters, gardeners, anonymous <a href="http://www.wisebread.com/5-surprising-ways-social-media-stars-make-money">YouTube stars</a>, eBay antiques dealers, graffiti artists, cake decorators, breast milk dealers, and other everyday people who have quietly created income streams for themselves and others through talent and sheer force of will. There are so many niche jobs that need to get done everywhere. It's all about asking to be paid to do something that you are good at and already doing for yourself. Here are my two invented jobs of the week.</p> <h2>Invented Job of the Week #1: Car Parts Finder</h2> <p>Currently, two out of our three cars are in the shop waiting for parts. Because our mechanic is fantastic and he's so popular, there's always a wait time for him to get jobs done. A parts search only adds to the wait time</p> <p>Here's a short list of what my mechanic likes to do:</p> <ol> <li>Work on cars.</li> <li>Drive cars.</li> <li>Go to classic car shows.</li> <li>Read Swedish crime novels.</li> </ol> <p>Here's a short list of what my mechanic does not like to do:</p> <ol> <li>Spend hours scouring the Internet for car parts.</li> </ol> <p>After waiting weeks for him to find a reconditioned mass air flow sensor for less than $765, I had an epiphany about how to speed up the repair schedule on my vehicles: Although I cannot control the popularity of my mechanic or accelerate <em>his </em>workflow, I <em>can </em>speed up the hunt for replacement parts.</p> <p>I called my mechanic and told him to email me a Most Wanted list of parts that he suspects I will need to replace in the near future. From now on I am going to source all my own parts, in advance, to prevent my current situation of three simultaneously broken cars from ever happening again. I am banking on the idea that buying reasonably priced Volvo parts in advance, as I come across them, will keep me from paying emergency prices for car repair down the road.</p> <h3>I &quot;Earned&quot; $720 on My First Car Parts Hunt</h3> <p>The local independent parts dealer has a reconditioned mass air flow sensor for $765. My mechanic and I agree that, even in my bad car situation, this amount is highway robbery. So I am very pleased that in just a few hours of searching online, I found a new-in-box mass air flow sensor from an overseas eBay seller <em>for $45</em>.</p> <p>Not only did sourcing my own parts save me $720 in parts costs, but it gave me a possible new side gig idea &mdash; my mechanic was so impressed with my parts hunting ability that he told me that I should advertise my parts finding service to his vintage car collecting customers. While I'm not sure if I want to operate a boutique car parts emporium for the rich and famous out of my house, this self-sourcing of car parts ensures that <em>I</em> will get faster service from my mechanic and potentially save me a lot of money.</p> <p>(At this point in the story, I must give a big thank you to friend and Wise Bread reader Bob who found me a new EGR valve for our Volvo station wagon for $285.07. Thanks, Bob!)</p> <h2>Invented Job of the Week #2: Photographer's Assistant</h2> <p>My mentor, the very fancy architectural photographer whom I occasionally assist, was shooting a job in Los Angeles last week. Although there was no money in the job budget for an assistant, I offered to work for free so I could have the opportunity of observing his workflow up close, especially since I have no experience using a digital, tilt-shift lens. I spent four sleep-deprived days lugging equipment, moving trash cans, fetching coffee, breaking parking laws, and generally living in fear that I was going to forget a key piece of equipment at a location, get us lost in the hills of Los Angeles, or run down my boss with the rental car. I constantly worried that I was screwing up the workflow I was supposed to be observing.</p> <p>Apparently, I didn't suck at the job as much as I'd thought. At the end of the weekend, my boss loaned me his old camera body to use for my first professional architectural photography job.</p> <p>The loaner is a 21-megapixel camera, which is far from the current professional architectural photography standard of 50 megapixels. However, 21 megapixels is <em>vastly </em>superior to what I am currently shooting &mdash; the eight-megapixel camera on my iPhone. Also, the 21-megapixel camera fits the same lenses as my dream camera, so I can immediately start practicing with a tilt-shift lens, a piece of equipment that has a steep learning curve. A full $4,000 of the $31,000 I'm trying to find this year is earmarked to purchase the 50-megapixel camera body of my dreams, so this camera loan will not save me from buying a camera. But, this equipment loan will save me $180 per day in camera rental fees, and allow me to start my first pro job with a lot less financial stress. I won't have to buy my camera package on credit in one fell swoop.</p> <h2>Progress So Far</h2> <p>While I wish that my two invented jobs of last week had provided me with an income, my sweat equity resulted in, at the minimum, $1000 in savings on car parts and camera equipment. A little house-sitting job for a friend netted me $100 in cash and a $100 Trader Joe's gift card. I used the gift card to purchase groceries for the month of March and used the $100 in cash to replace worn out equipment for our vegetable garden. My cash contribution to the $31,000 budget challenge: $0.</p> <p>My husband, however, managed to save $1000 during the month of February from his paychecks and earn an additional $700 from a DJ gig. (Good job, cutie.)</p> <p>Due to the broken cars we spent $373.07 on car parts and $56.75 for work-related Uber rides and $10 for work-related metro tickets.</p> <p><strong>Goal: </strong>$31,000</p> <p><strong>Amount Raised: </strong>$8,800.00</p> <p><strong>Amount Spent: </strong>$3741.82</p> <p><strong>Amount Left to Go: </strong>$25,941.82</p> <p>All my savings aside, it's obvious that we will not make my $31,000 Budget Challenge if I don't start earning more income immediately. As it stands, we will have to make and/or save an additional $2889 per month to make our goal by the end of the year. It's time for me to start inventing jobs that pay me up front, and not down the road. I'll keep you posted.</p> <p><em>What's your best job creation story? Tell us about it in comments.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/my-2016-budget-challenge-job-creation">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-everything-breaks">My 2016 Budget Challenge: Everything Breaks</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-affording-education">My 2016 Budget Challenge: Affording Education</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-why-i-need-to-find-31k-this-year">My 2016 Budget Challenge: Why I Need to Find $31K This Year</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-moves-to-make-when-you-move-back-home-with-your-parents">6 Money Moves to Make When You Move Back Home With Your Parents</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-finding-food">My 2016 Budget Challenge: Finding Food</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living budget challenge debt max wong max wongs budget personal stories saving money Fri, 18 Mar 2016 11:00:14 +0000 Max Wong 1675202 at http://www.wisebread.com Should You Sell Your Home to Pay Down Debt? http://www.wisebread.com/should-you-sell-your-home-to-pay-down-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-sell-your-home-to-pay-down-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/balacing_mortgage_debt_000042650836.jpg" alt="Wondering if you should sell your home to pay down debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've made one of the biggest financial mistakes of all by running up thousands of dollars of credit card debt. And because of the cards' high interest rates, the debt continues to grow every month that you don't pay it off.</p> <p>But there might be a solution &mdash; if you own a home. You can sell that property, take the proceeds from the sale, and pay off your credit card debt. It's a drastic solution. But if you have no other options for paying off your credit card debt quickly, selling your home might be a sound choice.</p> <p>&quot;If there is no light at the end of the tunnel, or game plan to pay it off, the best solution might be to sell your home and rent,&quot; said Peter Grabel, managing director of Luxury Mortgage Corp. in Stamford, Connecticut. &quot;Over the last decade, we've learned that real estate doesn't always go up in value. Taxes go up, and there can be endless maintenance costs connected with ownership. For folks in this position, selling might be an attractive solution.&quot;</p> <p>But before you decide to place your home on the market, realize that selling off real estate won't work for every person who is struggling with debt. In many cases, owners won't even make enough money from a sale to eliminate all of their high-interest-rate debt.</p> <h2>When Selling Makes Sense</h2> <p>For this plan to work, you must have enough equity in your home. If you owe $150,000 on your mortgage loan and your home is worth $220,000 in today's market, you could, in theory, expect to earn about $70,000 when you sell your home.</p> <p>Fortunately, more homeowners today are probably in position to earn solid profits when selling their homes, said Joe Parsons, senior loan officer with PFS Funding in Dublin, California.</p> <p>&quot;As the housing market recovers from the crisis of 2008 and its aftermath, many homeowners discover that they have equity where before they had none,&quot; Parsons said. &quot;Those who are carrying large amounts of consumer debt may find that they can sell their homes and become renters, using that windfall equity to retire the consumer debt.&quot;</p> <h2>Some Rental Markets May Be Too Pricey</h2> <p>While this might be appropriate for some homeowners, it won't be a good choice for many others, Parsons said. Once owners sell their homes, they are at the mercy of the rental market. Apartment rents are soaring across the country, especially in large metropolitan areas. This can make renting an expensive proposition.</p> <p>&quot;In many areas, owning a home, even at today's prices, is less expensive than renting an equivalent property, even without considering the large tax advantages that come with owning,&quot; Parsons said. &quot;Rents will increase in the future.&quot;</p> <p>Selling a home is expensive, too, and involves a long list of fees, most of which the sellers pay out of the proceeds of the sale. The largest of these is the commission that owners have to pay to their real estate agent, one that is typically 6% of a home's final sales price.</p> <p>Parsons gives this example: If you owe $270,000 on your mortgage and you sell your home for $300,000, you might generate less than $15,000 cash on the sale after paying out commissions.</p> <h2>Other Debt Reduction Options</h2> <p>Greg Cook, mortgage consultant with First Time Home Buyers Network, said that he has worked with customers who did face enough consumer debt that they were considering selling their home. Cook said that he advised these customers to take other measures before giving up their homes.</p> <p>&quot;My advice to them has always been to 'stop the bleeding' as soon as possible,&quot; Cook said.</p> <p>That's why Cook has recommended debt-management programs offered by reputable credit counseling agencies as a way for struggling homeowners to get their debts under control. In such programs, consumers work with an agency that creates a repayment plan for them, allowing them to repay all or part of their debt in monthly payments that they can actually afford.</p> <p>Cook said that it often makes financial sense even for consumers <a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">struggling with debt</a> to hold onto their homes. That's because if these owners want to one day return to the housing market, they will most likely be doing so at a time in which housing prices, and possibly interest rates, have increased.</p> <p>If consumers do sell their homes to pay off their debt, they then need to take a close look at their bad financial habits to make sure that they don't run up their credit-card debt again, Cook said.</p> <p>&quot;Assuming they used all their equity to pay off the consumer debt, the next step is to initiate a long-term savings plan so they will have the funds required to buy a home in the future,&quot; Cook said.</p> <p>While selling a home should be a last-resort plan, Cook said he has seen this move work out for some consumers. He points to clients who last year sold their home and used $78,000 to wipe out all of their consumer debt. These owners, Cook said, had been drowning in debt.</p> <p>The clients were also military veterans. They were then able, using a VA loan, to buy a new home with no money down once they eliminated their debts.</p> <p>&quot;They, however, are an exception,&quot; Cook said. &quot;Most families end up not being homeowners again for a long time.&quot;</p> <p><em>Have you ever sold a home to get out from under consumer debt?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/should-you-sell-your-home-to-pay-down-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-11"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-simple-way-to-decide-how-much-rent-you-can-really-afford">The Simple Way to Decide How Much Rent You Can Really Afford</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-3-best-cities-with-rent-control">The 3 Best Cities With Rent Control</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-important-things-you-need-to-know-about-the-housing-market-in-2016">6 Important Things You Need to Know About the Housing Market in 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-tips-for-getting-your-security-deposit-back">20 Tips for Getting Your Security Deposit Back</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing debt equity housing market renting selling your home Wed, 16 Mar 2016 10:30:05 +0000 Dan Rafter 1673867 at http://www.wisebread.com The 10 Biggest Lies We Tell Ourselves About Money http://www.wisebread.com/the-10-biggest-lies-we-tell-ourselves-about-money <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-10-biggest-lies-we-tell-ourselves-about-money" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_cash_mouth_000051776556.jpg" alt="Man telling biggest lies to himself about money" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When it comes to personal finance, honesty is the best policy. Be honest with banks, be honest with your family, but most of all, be honest with yourself.</p> <p>It's a frequent occurrence that people find themselves in financial trouble because they weren't honest about their money situation. But recognizing the most common lies is one key to moving toward a more honest &mdash; and profitable &mdash; future.</p> <p>Here are some of the biggest money lies we tell ourselves.</p> <h2>1. &quot;It's Good Debt&quot;</h2> <p>It's often said that there's such a thing as &quot;good debt&quot; and &quot;bad debt.&quot; The so-called &quot;good debt&quot; may stem from student loans or your mortgage, which can play a role in building long-term wealth. &quot;Bad debt,&quot; on the other hand, is most commonly from credit cards with high interest rates. But by separating debt in this way, it's easy to rationalize having debt in the first place. It's true that some kinds of debt are worse than others, but it's wisest to try to avoid debt altogether. Only by having an &quot;all debt is bad&quot; attitude will you aggressively try to rid yourself of of it.</p> <h2>2. &quot;I'm Earning a Return of X%&quot;</h2> <p>When we place money in the stock market, we often assume it's generating a certain amount of return, based on historical averages. It's good to be aware of these historical returns in order to understand the potential of stock market investing, but you must remember that past performance does not guarantee future results. It's also important to have a true understanding of how well your investments are doing. Thornburg Investments issued a report in 2014 outlining how the S&amp;P 500 Index earned an <a href="http://www.thornburginvestments.com/pdfs/th1401.pdf">11% annualized nominal return</a> over 30 years, but that return was actually 6% annually once taxes, fees, and inflation were factored in.</p> <h2>3. &quot;I'll Start Saving Later&quot;</h2> <p>Retirement always seems like such a long way off. We tell ourselves that we have plenty of time, and many years ahead before we need to start putting money away. But before we know it, retirement age is on our doorstep and we've hardly saved at all. And because we waited, we missed out on the power of compounding returns. It's easy to come up with reasons not to save money, but very few of them are valid. Consider your retirement fund to be the first bill you need to pay each month. You won't miss the money now, but you'll be happy to have it down the road when you stop working.</p> <h2>4. &quot;I'll Be Earning More in the Future&quot;</h2> <p>When planning our future, we often do a good job of predicting expenses, but operate under the faulty assumption that our incomes will increase. I know people who have purchased larger homes than they can truly afford, justifying the expense by arguing that they'll be getting pay raises down the road. We all want to assume we'll be earning more as time goes on, but there are no guarantees. Your company may freeze wages, or even lay off workers. You may decide to stop working to raise your family. To achieve financial freedom, work to ensure your spending is less than your actual current income. This way, any pay increases you receive are like bonuses.</p> <h2>5. &quot;I Don't Have Enough to Invest&quot;</h2> <p>If you have money for that morning trip to Starbucks, then you have money to invest. If you have money for Netflix, or those pricey new shoes, or that bottle of wine, you have money to invest. The key to financial freedom is ultimately about what we choose to spend our money on. And if you prioritize long-term saving over buying non-essential material goods, you'll find that you have much more money to invest than you think.</p> <h2>6. &quot;I Deserve This&quot;</h2> <p>One common way people end up overspending is that they rationalize the purchase of things they don't need. Splurging on things like an expensive dinner or even a pricey Caribbean vacation is followed by an explanation like &quot;I've worked hard this year,&quot; or &quot;I need a treat.&quot; This is not to say that you should never splurge or celebrate, but when this type of spending becomes routine, it can really put a dent in your savings. If you change your thinking and instead give yourself a pat on the back for avoiding an impulse purchase, you'll be better off financially.</p> <h2>7. &quot;I Saved Money on This Purchase&quot;</h2> <p>It's impossible to save money if you are spending it. If you rationalize a purchase by pointing out that it was on sale, or that you used a coupon, you are ignoring the fact that money still exited your wallet. Remember that retailers roll out coupons and sales to encourage people to spend money. The only way to determine if you truly &quot;saved&quot; money on an item is if it was something you were planning to purchase anyway.</p> <h2>8. &quot;I Got Approved for This Credit Card, So My Debt Can't Be Too Bad&quot;</h2> <p>If a credit card company is sending you an application for a new card, they must think you're financially responsible, right? Wrong. Even people with horrendous credit can get approved for cards. And if you already have credit card debt, the last thing you want to do is open a new card that will allow you to rack up even more. While it's true that credit card companies would prefer that you not go bankrupt, they're more than happy to keep accepting your payments with high interest rates.</p> <h2>9. &quot;I'm Young, I Don't Need Health Insurance&quot;</h2> <p>If you're in your 20s and rarely get sick, it may seem like health insurance is an expense you don't need to bother with. But tell that to the guy who got into a car accident or who tore his ACL in the pickup soccer game. Without health insurance, you're exposing yourself to potentially catastrophic medical expenses if something bad occurs. Make sure to sign up for insurance through your employer or search for low-cost plans on HealthCare.gov.</p> <h2>10. &quot;I Get Paid Well, So This Crappy Job Is Worth It&quot;</h2> <p>Stories abound of people who stayed in jobs they hated, simply because it offered financial security. Don't get us wrong &mdash; financial security is huge , and it's not necessarily smarter to take a job you love if you can't pay your bills. But if you live sensibly and spend wisely, you may be able to find a middle ground where bills get paid and you're also happy in your work. Remember, too, that well-paying jobs can sometimes lead to lifestyle inflation, where you buy larger and more expensive things just because you can.</p> <p><em>How many of these lies have you told yourself? How many others we haven't included?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/the-10-biggest-lies-we-tell-ourselves-about-money">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-inspiring-people-who-each-paid-off-over-100000-in-debt">5 Inspiring People Who Each Paid Off Over $100,000 in Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/21-things-that-young-adults-absolutely-need-to-know-about-money">21 Things That Young Adults Absolutely Need to Know About Money</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-ways-to-increase-your-net-worth-this-year">10 Ways to Increase Your Net Worth This Year</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/73-easy-ways-to-save-money-today">73 Easy Ways to Save Money Today</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-rules-you-should-be-breaking">15 Personal Finance Rules You Should Be Breaking</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance debt investing lies we tell ourselves myths overspending saving Splurging Tue, 15 Mar 2016 11:30:05 +0000 Tim Lemke 1670512 at http://www.wisebread.com 11 Steps to Take When Bankruptcy Is Your Only Option http://www.wisebread.com/11-steps-to-take-when-bankruptcy-is-your-only-option <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/11-steps-to-take-when-bankruptcy-is-your-only-option" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000021941715.jpg" alt="Learning steps to take when bankruptcy is the only option" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Filing for bankruptcy can provide a welcome solution for anyone who simply cannot keep up with their debts and credit obligations. But it's never something that should be taken lightly. Bankruptcy can remain on your credit for up to 10 years, making it nearly impossible to apply for credit in the meantime. Having a bankruptcy on your record can even affect your ability to get a job.</p> <p>That's why we've covered the main steps you'll need to take if you're filing for bankruptcy. Consider them before deciding whether bankruptcy is right for your situation.</p> <h2>1. Get Serious About What Bankruptcy Means</h2> <p>Before making the decision to file for bankruptcy, make sure you've explored all other options, like debt consolidation or credit counseling. You will also need to determine if Chapter 7 bankruptcy is right for you (as opposed to Chapter 11, 12, 13, or 15). Most individuals choose Chapter 7 bankruptcy, which will release the debtor from some, or all, financial obligations.</p> <p>According to LegalZoom, the entire bankruptcy process should take four to six months to complete. However, keep in mind that a discharge is not guaranteed. Even after filing your petition in bankruptcy court and going through all the motions, your creditors can still object to your discharge. You might also not receive a discharge if you don't fill out all the necessary documents correctly and on time, if you fail to attend any required credit counseling courses, or if you did not fill out the paperwork truthfully.</p> <h2>2. Complete the Means Test</h2> <p>It is important that you complete what's known as the <a href="http://www.uscourts.gov/forms/means-test-forms/chapter-7-means-test-calculation">means test</a>. This standard test will compare your income to your debts to help you determine if you should file for Chapter 7 or Chapter 13 bankruptcy.</p> <h2>3. Hire an Attorney, if Necessary</h2> <p>A bankruptcy lawyer can be invaluable when you're filing your case. A lawyer can explain your options, answer your questions, make informed recommendations, and even fill out the forms for you and make sure they are filed before the court deadlines. At the very least, call a bankruptcy attorney for a free consultation. You will definitely have questions throughout the process and probably need some form of advice.</p> <p>But you don't necessarily need a bankruptcy attorney for the entire process, and many people are able to successfully file for bankruptcy on their own. Filing on your own can save money on attorney's fees, but first consider whether it's the best course of action in your case.</p> <p>Filing for bankruptcy on your own can be very difficult and confusing. There are a number of complicated legal concepts and terms, as well as regular court requirements that you need to keep up with. A bankruptcy attorney can help you get through the process in far less time and stress. Use a free consultation to determine whether you'd benefit from hiring a bankruptcy attorney.</p> <h2>4. Pay the Fees</h2> <p>While bankruptcy can help to eliminate your debt, it can be an expensive process in and of itself. For starters, you'll be responsible for filing the application fees. On average, debtors who file for bankruptcy on their own can expect to spend approximately $300&ndash;$500 filing for bankruptcy. On the other hand, debtors who file for bankruptcy with an attorney usually spend around $2,000 total. Once you schedule your free initial consultation, you can get more information on the fees and when you would be responsible for paying them.</p> <h2>5. Assemble Your Information</h2> <p>Regardless of whether or not you hire an attorney, you'll need to have all of your financial information gathered and organized. You need to analyze your income, expenses, assets, and debts, and determine your property exemptions. You will also need to have basic information like your average monthly income during the previous six months.</p> <p>In order to have a debt discharged, it needs to be listed on your bankruptcy forms. If it is not listed, you may still be responsible for it after the bankruptcy. This is why it's so important to carefully assemble your financial information before you ever file paperwork or attend any credit counseling programs.</p> <h2>6. Determine Which Debts Are Excusable</h2> <p>Bankruptcy can wipe the slate clean when there is simply no way you can pay off your obligations. However, there are still some debts you may be responsible for, such as student loans, child support, and tax debt. It is also important to keep in mind that anyone who cosigned or guaranteed a loan for you will still be obligated to pay.</p> <h2>7. Attend a Credit Counseling Program</h2> <p>Within six months before filing your petition, you will need to attend a credit counseling program at a court-approved agency. The counseling can usually be completed online or over the phone and will only take about an hour or so. There is a fee for credit counseling, but it is usually under $100. When you file your petition, you will need to provide proof that you have completed this program.</p> <h2>8. File the Forms</h2> <p>There are a number of <a href="http://www.uscourts.gov/forms/bankruptcy-forms">bankruptcy forms</a> that need to be correctly filled out and filed on time. Once the packet of forms (also known as a bankruptcy petition) has been filled out, the debtor will normally receive a discharge of their debts approximately a few months later (if your petition is accepted).</p> <h2>9. Automatic Stay</h2> <p>Once you have filed all the necessary paperwork, an automatic stay will go into effect. This prohibits almost all creditors from continuing collection actions against you.</p> <h2>10. Attend the Meeting</h2> <p>Chapter 7 bankruptcies rarely go to court. However, you will need to attend a mandatory meeting (also known as a 341 meeting) with the creditors and court-appointed trustee. During this meeting, your trustee will ask questions pertaining to your bankruptcy petition and finances. Your creditors may also choose to attend the meeting to question you or the trustee, but this usually doesn't happen. If all goes well, you can expect a bankruptcy discharge within approximately 60 days after the meeting.</p> <h2>11. Post-Bankruptcy Obligations</h2> <p>Once you have successfully filed for bankruptcy, you will need to attend post-bankruptcy credit counseling. This is to help you more successfully manage your debts going forward so that you are not in the same position again. They can also help you rebuild a healthy credit history. Once you have completed the debtor's education course, you will get your discharge. At this time, the automatic stay will end and your case will be closed.</p> <p><em>Do you have any other advice for debtors considering filing for bankruptcy? Please share your thoughts in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/11-steps-to-take-when-bankruptcy-is-your-only-option">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-times-bankruptcy-is-the-right-move">3 Times Bankruptcy Is the Right Move</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/peak-debt">Peak Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/uk-banks-are-blocking-customers-credit-cards-will-the-usa-be-next">UK banks are blocking customers&#039; credit cards. Will the USA be next?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-the-best-way-to-get-out-of-debt">What&#039;s the Best Way to Get out of Debt?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/recession-journal-part-i-fast-money-in-the-09">Recession Journal Part I: &#039;Fast&#039; Money in the &#039;09</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bankruptcy chapter 13 chapter 7 credit debt fees means test Fri, 11 Mar 2016 10:30:33 +0000 Andrea Cannon 1660233 at http://www.wisebread.com Stop! Don't Cut Up Your Credit Cards http://www.wisebread.com/stop-dont-cut-up-your-credit-cards <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stop-dont-cut-up-your-credit-cards" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_cutting_card_000037695864.jpg" alt="Woman deciding not to cut up credit cards" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's a dramatic statement: You've vowed to finally pay off your credit card debt. To prove your point, you grab those scissors and cut your plastic into tiny pieces.</p> <p>That probably feels good, but it's really not a smart move. And going one step further and canceling those credit cards once you do pay off your debts is an even worse move. Why? If you never use your credit cards, the financial institutions behind them will eventually consider them inactive. They will then close those accounts. When banks close your credit card accounts, your FICO credit score will fall.</p> <p>&quot;We live in a world in which using credit cards is actually important,&quot; said Dolph Janis, founder and owner of Clear Income Strategies Group in Charlotte, North Carolina. &quot;If someone has given you credit to use, you might not need it today. You might not need it tomorrow. But you might need it one day.&quot;</p> <h2>Credit-Utilization Ratio</h2> <p>Lenders today rely on your FICO credit score to determine if you qualify for loans and to decide the interest rates you'll pay on them. A high credit score will result in lower interest rates, with a FICO score of 740 or higher yielding the best results.</p> <p>Your score will fall if you pay certain bills late, miss certain payments, or run up too much credit card debt. But many consumers don't know that their score will fall, too, if they or their banks close unused credit card accounts.</p> <p>This is because of something called your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">credit-utilization ratio</a>. Your credit score will be higher if you use less of your available credit. Say you have four credit cards with a total credit limit of $10,000, and you have $3,000 in credit card debt. If you close one of your accounts or your bank closes an inactive credit card with a credit limit of $3,000, you will suddenly have that same $3,000 worth of credit card debt on a total credit limit that has fallen to $7,000.</p> <p>This means you are using more of your available credit, and that your credit-utilization ratio is worse &mdash; all without you making a single new credit card charge.</p> <h2>Keeping Your Cards Active</h2> <p>To prevent a closure of your card, Janis recommends that you use each of your credit cards at least once a month.</p> <p>But don't carry a balance on these cards. Instead, charge items that you know you can pay off at the end of the month. Then pay your card balance in full by its due date. This way, you keep your credit cards active without suffering the pain of traditionally high credit card interest rates. Of course, you can't follow Janis' plan if you've already cut up your credit cards.</p> <h2>Look at Your Spending Habits</h2> <p>There's another flaw with the cut-the-cards strategy. It doesn't really change your spending habits.</p> <p>Sure, cutting up your credit cards might feel good. But if you don't determine why you've run up your debt, the odds are that this will only be a temporary solution. Once you get the urge to use your plastic again, you'll simply call your bank and ask for a replacement card.</p> <p>A better approach is to figure out what causes you to overspend and then resolve whatever those issues might be.</p> <p>If you are battling credit card debt, know that you are not alone. Many consumers struggle with credit card debt. The Federal Reserve Board in May of last year said that total credit card debt in the United States hit $901 billion. That was up 3.19% from a year earlier. A study by NerdWallet found that as of July of last year, households with credit card debt carried an average of $15,863 on their cards.</p> <p>If you, too, have thousands of dollars of credit card debt, you'll have to do more than just cut those cards. You'll have to do the hard work of changing your spending habits and learning how to use your credit wisely. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Pay Off Credit Card Debt with a Balance Transfer</a>)</p> <p><em>Have you you ever chopped up your credit cards in order to cut your spending?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/stop-dont-cut-up-your-credit-cards">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beware-of-adding-another-user-to-your-credit-card">Beware of Adding Another User to Your Credit Card</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt">The Fastest Method to Eliminate Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-debt-payoffs-that-boost-your-credit-score-the-most">The 7 Debt Payoffs That Boost Your Credit Score the Most</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-dirty-secrets-of-credit-cards">The Dirty Secrets of Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards credit reports credit utilization ratio debt spending habits Thu, 10 Mar 2016 10:00:12 +0000 Dan Rafter 1670332 at http://www.wisebread.com My 2016 Budget Challenge: Everything Breaks http://www.wisebread.com/my-2016-budget-challenge-everything-breaks <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/my-2016-budget-challenge-everything-breaks" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_car_breakdown_000085418651.jpg" alt="Couple taking budget challenge because everything breaks" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>[<em>Editor's Note: This is the latest episode in Max Wong's journey to find an extra $31,000 this year. Read the whole series </em><a href="http://www.wisebread.com/topic/max-wongs-budget"><em>here</em></a><em>.</em>]</p> <p>Everything breaks when I'm poor. Or at least, it seems that way. Maybe things break all the time and I just don't notice when I am flush with cash. But I do think it cycles. Every time I come off a big job I make a point to fix my house, fix the car, fix my shoes, etc. The longer I go without a big payday, however, the more time my material goods have to break down.&nbsp;</p> <p>It's been a long time since I have had a big payday. And that's too bad, because my household needs to come up with an extra $31,000 this year. In this second installment of my 2016 budget challenge, I'll illustrate how much-needed repairs are eating into my progress.</p> <h2>When It Rains, It Pours</h2> <p>Let me explain my last 48 hours: I was awakened yesterday morning by my mortgage company calling to tell me that I am late on my mortgage payment (I already know). It's nearing the end of the month, and I am still about $500 short of paying this month's bills and will need another $528 for next month. Also, because I am late paying this month, I am sure that I am going to get stuck with a $100 late fee. So I need at least $1,100 by the first of the month. Which sucks. Because other than selling a ton of stuff on eBay, something I currently have no time for, I don't know where I am going to find that money.</p> <p>But then, out of the blue, one hour later, the Hollywood studio that hasn't contacted me with any work for literally two years, calls me with a gig. It's an emergency job that needs to be completed by <em>the first</em> of the month! They will pay me $5,000 to do 100 hours of work in the next six days.</p> <p>Even though the work offered is soul crushing, brain hurting, and extremely stressful, I take the job. I can suck it up because voila! Emergency cash has just fallen from the sky. I am elated.</p> <h2>A Television Is a Computer Monitor, Right?</h2> <p>But the elation only lasts 12 hours. My elderly laptop computer breaks. The screen literally fades to black in front of my eyes. I need my computer to do my emergency job. My computer is ancient. It's almost nine years old. At this point it's actually better to replace it rather than fix it because it is so old, I can't even upgrade it to the latest operating system.</p> <p>After attempting every reboot known to mankind, I finally decide that no combination of button pushing is going to fix the screen. I suspect it's the inverter, a $15 part inside the hinge of the screen. I briefly consider experimenting with home computer surgery that could result in an even more broken laptop. I decide that this is one of those situations where I know enough to get myself into trouble, but not enough to get myself out. And since I am not 100% sure what part is broken, I could just be spending money on parts that don't need to be replaced and wasting precious work hours as my emergency job deadline ticks down to zero.</p> <p>Instead of dismantling my laptop, I buy a $15 HDMI cable and a $13 DVI to HDMI adapter, with the hope that I can use my television as an external monitor. If this strategy doesn't work, I am only out $28 for standard accessories that can be used on other machines.</p> <p>The cable solution works (phew). I am possibly sitting too close to the television for good eye health, but I am, right now, typing away on my dead-screened laptop keyboard and using my TV as a monitor. My living room has a new, inconvenient furniture layout, but at least I can stave off purchasing a new computer until next year, (or until the something huge like the motherboard breaks. Whichever comes first).</p> <p>While the computer situation is irritating, I am comforted by the knowledge that I am now $3,872 up on our goal of paying down our $31,000 debt, so I can stop panicking about how I am going to pay my newly expensive house insurance costs.</p> <h2>Mr. Fancypants Takes a Break From Fancy Lunches and Saves Big</h2> <p>My husband actually shocked himself and saved $2,000 last month. He tells me that he did this mainly by being extremely frugal with food.</p> <p>At this point, I have to ask: Up until last month, what has he been eating for lunch? Gold bullion?</p> <p>All joking aside, he has been extremely frugal. Due to demented work hours this month, I've pretty much only seen my husband while he's sleeping. We ate dinner together just once in the last 30 days, a restaurant meal for my birthday. We also haven't had time to grocery shop in weeks, but he's been diligently eating through our pantry and scavenging leftovers from work lunches, down to the little packets of pepper from the office pizza party.</p> <p>However, I suspect that part of the huge savings comes from the fact that he's been using his holiday gift cards to make purchases. If he can keep up this level of saving next month, I will be very impressed.</p> <p>With my husband's extra $2,000 we are up $5,872 on our goal of paying down our $31,000.</p> <p>Except we're not. Because everything breaks when I am cash-strapped.</p> <h2>Of Course the Cars Break Down Now, Too</h2> <p>We own three old automobiles. I will just say it: Owning a classic car is adorable in theory, but annoying in practice. Old car parts are hard to source and can be wildly expensive. We own three vintage cars. Three.</p> <p>Currently, two out of our three cars are in the shop. The transmission of our 1960 Rambler Cross Country station wagon needs a complete rebuild. This will cost $2,000. Our vintage Volvo 240 station wagon needs a mass air flow sensor. Due to the notoriously cautious driving of Volvo 240 drivers, there are only three 240 parts cars in all of Los Angeles county and they have been picked clean. This local parts crunch has naturally led to price gouging. The local independent parts dealer who specializes in 240s has a reconditioned mass air flow sensor that he is willing to part with for a measly $765. I tell him that I will keep looking.</p> <p>But I can only keep looking for so long before waiting for cheaper parts starts costing more money than taking the price gouge. Our third car really should be in the shop too, but we live in Los Angeles and need a car for work. Our third car is drivable&hellip;most of the time. She only fails to start once every 20 times we get in the car. It's like Russian roulette only completely tedious. I have to drive from Los Angeles to Palm Springs for a photography class next week and I have rented a car, at the cost of $54 plus $20 in gas, for the commute. Because if I had to bet on a time and a place where our third car will break down completely, it would definitely be 100 miles from home in the heat of the desert.</p> <h2>Progress So Far</h2> <p>So, two steps forward, one step back is still progress, right?</p> <p><strong>Goal</strong>: $31,000.00</p> <p><strong>Amount Raised</strong>: $7,000.00</p> <p><strong>Amount Spent</strong>: $3,202.00</p> <p><strong>Amount Left to Go</strong>: $27,202</p> <p>We managed to reach 12% of our goal so far due to a surprise windfall, but near-future car repairs could completely eat up our surplus. The goal for next month: Figure out more ways to reduce our crushing car costs.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/my-2016-budget-challenge-everything-breaks">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-job-creation">My 2016 Budget Challenge: Job Creation</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-affording-education">My 2016 Budget Challenge: Affording Education</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-why-i-need-to-find-31k-this-year">My 2016 Budget Challenge: Why I Need to Find $31K This Year</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-moves-to-make-when-you-move-back-home-with-your-parents">6 Money Moves to Make When You Move Back Home With Your Parents</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-finding-food">My 2016 Budget Challenge: Finding Food</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living budget challenge debt max wong max wongs budget personal stories saving money Fri, 04 Mar 2016 11:30:05 +0000 Max Wong 1666376 at http://www.wisebread.com 8 Tax Mistakes Millennials Make http://www.wisebread.com/8-tax-mistakes-millennials-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-tax-mistakes-millennials-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_reading_stressed_000058019024.jpg" alt="Millennial man making common tax mistakes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Claiming deductions and organizing receipts isn't fun for anyone &mdash; least of whom Millennials, who might be filing taxes for the first time or experiencing changes in their finances.</p> <p>And while making mistakes might at times be unavoidable, it's not a legitimate defense if the tax man comes knocking. Consider these eight common errors Millennials make when preparing and filing taxes.</p> <h2>1. Not Hiring a Tax Professional (If You Need One)</h2> <p>Not everyone needs a CPA or other tax professional. In fact, if your taxes are straightforward, you can easily file them yourself for free, or use low-cost services such as TurboTax. But not hiring a CPA is one of the biggest mistakes you can make if your taxes are complicated. Accounting professionals are all too familiar with legal loopholes, tax credits, and qualifiable exemptions, and they will work on your behalf to understand your particular situation and get you the maximum return.</p> <p>A simple rule of thumb: If your taxes seem too challenging to file on your own, they probably are. Seek expert guidance before you make costly mistakes.</p> <h2>2. Spending Tax Refunds</h2> <p>Before most people have received their tax refund, they've already decided how they're going to spend it. Most often it's on a depreciating asset like a car, clothes, or electronics. If tax season is exciting to you for this reason, you definitely should not be spending your refund. I know this not what people want to hear, but you should find more financially constructive uses for this money &mdash; such as investing, tackling debt, or making truly necessary purchases. (See also: <a href="http://www.wisebread.com/8-smart-things-to-do-with-your-tax-refund?ref=seealso">8 Smart Things to Do With Your Tax Refund</a>)</p> <h2>3. Allowing High-Interest Debt to Linger</h2> <p>If you're carrying high-interest debt on anything &mdash; including car loans, student loans, or a mortgage &mdash; you may want to use your annual tax refund to knock it out fast. This just depends on your personal situation. First, see if you qualify for ways to reduce your interest rate and/or monthly payments, such as mortgage refinancing, a student loan forgiveness program or income-sensitive repayment. If you can't, paying the debt off quickly might make sense. Put your refund in a savings account, divide it by 12, and take small monthly withdrawals of this amount to include with your regular payments each month. Use this strategy for any debt you wish to repay early. (See also: <a href="http://www.wisebread.com/4-times-student-loan-refinancing-can-save-you-big?ref=seealso">4 Times Student Loan Refinancing Can Save You Big</a>)</p> <h2>4. Not Using Retirement Accounts to Lower Your Tax Bracket</h2> <p>Taxes are by far one of the biggest obstacles normal people face when trying to build wealth. If you don't believe me, here's a simple example. If $1 invested doubled every year for 20 years, it would end up being worth $1,048,576. If the same $1 invested doubled every year for 20 years and was subject to a 28% tax bracket, it would be worth a modest $51,353. Now you see the importance of investing to the max inside of tax-advantaged accounts such as 401Ks and 403Bs in order to reduce your tax bracket.</p> <h2>5. Forgetting to Claim Capital Losses</h2> <p>Whether you invest inside of your retirement accounts, or trade on investing platforms such as E*TRADE, if your capital losses offset your capital gains the difference can be claimed as a tax deduction. Let's say you decided to trade penny stocks &mdash; and I'm not saying penny stocks are necessarily a bad investment, but let's say this year you lost $2,000 with no other capital gains from other investments. Your $2,000 loss on risky stocks can be deducted from your other income. In fact, you can deduct up to $3,000 of Capital losses in any tax year. Anything over $3,000 can carryover to the following tax year.</p> <h2>6. Failing to Claim Student Loan or Mortgage Interest Payments</h2> <p>Mortgage and student loan interest payments are generally tax deductible, within certain limits. If you qualify for these deductions, don't forget to claim them. It could otherwise cost you thousands of dollars at tax time.</p> <h2>7. Not Using an FSA for Childcare Costs</h2> <p>If your employer offers an FSA, make sure to take advantage of it. The annual contribution limit to <a href="https://www.healthcare.gov/flexible-spending-accounts/">Flexible Spending Accounts (FSA)</a> is $2,550, and money saved inside a FSA is tax-advantaged and can be used for health-related costs and dependent care expenses. Any money saved inside your FSA is taken from your pre-tax income, reducing your annual income by the subsequent amount. However, there are time limits on using FSA funds so, be careful not to lose the money you've saved. In <a href="http://www.wisebread.com/8-ways-to-spend-your-last-minute-health-care-fsa-funds">8 Ways to Spend Your Last-Minute Health Care FSA Funds</a>, I explain how to avoid losing your hard-earned dollars.</p> <h2>8. Not Claiming the Cost of Moving</h2> <p>Millennials move more than any other group. And the majority of them move due to career opportunities. Well, did you know that if you change residences due to work, you can claim the expense of your move as a tax deduction? The IRS states that if you meet certain requirements, the cost of your <a href="https://www.irs.gov/taxtopics/tc455.html">work-related move</a> may be tax-deductible.</p> <p><em>Have you made any of these tax-time mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/8-tax-mistakes-millennials-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-moves-to-make-when-you-move-back-home-with-your-parents">6 Money Moves to Make When You Move Back Home With Your Parents</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit">10 Reasons You Should Really Fear an IRS Audit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes capital losses debt interest millennials Mistakes refunds tax deductions Thu, 03 Mar 2016 11:30:07 +0000 Qiana Chavaia 1665767 at http://www.wisebread.com 5 Ways to Strengthen Your Finances Before Retirement http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-strengthen-your-finances-before-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/thrifty_woman_money_000033605098.jpg" alt="Woman finding ways to strengthen her finances before retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If retirement is only a few years down the road, hopefully you already have the right <a href="http://www.wisebread.com/how-much-should-you-have-saved-for-retirement-by-30-40-50">retirement savings</a> in place. And nothing can beat a well-funded retirement account that was started early in your career.</p> <p>There <em>are</em> a few more moves you can make before you close the door on your career for good, though. Doing these five things will ensure you have a more comfortable retirement and help stretch your nest egg a little further. (See also: <a href="http://www.wisebread.com/6-retirement-products-that-arent-worth-your-money?ref=seealso">6 Retirement Products That Aren't Worth Your Money</a>)</p> <h2>1. Get Rid of Debt</h2> <p>How much debt do you have right now besides a mortgage? If you have any credit card or other loan debt, now is the time to take serious steps to getting rid of it. Once you move to a fixed income, you do not want your precious savings to fund debt repayment or to be <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">wasted on interest payments</a>.</p> <p>Treat your debt seriously. Taking debt into retirement is like entering a marathon with a broken leg. You will exert too much energy dragging your bad leg around, and might not even cross the finish line.</p> <p>First things first: calculate how much debt you have. Consider transferring your high-interest credit card debt to a promotional credit card that offers 0% APR and <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% balance transfers</a>. This will allow you to pay more towards your debt without wasting money on interest payments. A word to the wise, however: Only transfer as much debt onto our 0% APR card as you can pay off during the promotional period. Otherwise, you'll find yourself in the same position again once the 0% APR promotional period ends and your rate rises.</p> <h2>2. Rethink Your Mortgage and Home</h2> <p>Take a look at your current home and assess it. How much do you still owe on it &mdash; and is it too much house for your retirement needs? Will this be a good home for you when you are in your 80s and have difficulty going up and down stairs?</p> <p>Before you retire, consider the benefits of downsizing your home and mortgage. A smaller home will be less work to maintain and cost less to live in. Not only do smaller houses generally come with smaller mortgages, but they also cost less to heat and cool.</p> <p>If your home is the right fit for your retirement needs, then focus on the mortgage. Paying off your mortgage before retirement is not a small task, but it will free your budget significantly each month.</p> <h2>3. Build an Emergency Fund</h2> <p>Just because you're retired doesn't mean you don't have a need for an emergency fund any longer. Your Social Security benefits, retirement savings, and/or pension are meant to cover your daily living expenses. But how will you pay for an emergency, such as an unexpected hospital visit or car expense? Even a $1,000 emergency can derail your budget and land you into debt if you aren't careful.</p> <p>While you're still working, start saving money in a separate account for emergencies. This money should be easily accessible for small financial disasters that occur before and after retirement.</p> <h2>4. Boost Your Retirement Savings</h2> <p>If you have five to 10 years left until you retire, you still have the special opportunity to boost your retirement savings. Of course, your retirement savings will have seen the most benefit from investing in your 20s and 30s, but taking advantage of catch-up contributions are also wise.</p> <p>Once you turn 50, you become eligible to make additional catch-up contributions to your retirement plan of up to $6,000 more per year. Take advantage of this opportunity to correct for lackluster retirement savings.</p> <p>Remember, temporary cutbacks now can mean a more comfortable and worry-free retirement. Don't forget that contributing the full $24,000 each year after you turn 50 allows you certain tax benefits that can make the extra contributions less burdensome on your budget.</p> <h2>5. Draw Up a Budget and Do a Trial Run</h2> <p>When you first enter retirement, $1&ndash;$2 million dollars can seem like a luxurious amount. But retirement isn't the time to throw out your budget. In fact, your should stick closely to your budget to ensure you don't outlive your money.</p> <p>Once you draw up a realistic retirement budget, try adhering to that budget before you actually need to. Work out your budget kinks before you retire.</p> <p>While many individuals have established retirement savings funds, many have also underestimated what their financial needs will be during the last 20&ndash;30 years of their life. Applying these principles before entering retirement can ensure that your finances stay strong and healthy.</p> <p><em>What are your plans to better yourself before you retire? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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