debt relief

8 Wise Money Moves to Make With Your Bonus

February 18, 2016 by editor

Did you just receive bonus at work and the first thought is “splurge”? This can be a great mistake. Though you are free to use your funds as you please, making wise money moves can lessen unseen future financial burdens.

[Read: 3 Unconventional Money Moves That Will Lead to Money Saving Habits]

If you engage the money to pay debts or for savings, make a suitable plan and follow it promptly; this way, the bonus won’t grow legs and depart. The longer you remain with the money, the more you will be tempted to spend it on wasteful purchases. Here are some ideas on how to use the bonus optimally.

What you should not do

Accumulate credit card debt prior to your bonus with an aim of paying it off.
Spend it to treat your friends and family with extravagant gifts.
Use the entire amount on purchasing electronics and clothing that you’ve always wished to have.
Concentrate on planning your finances around the same bonus availing the following year.

Tackle credit card debt

Settling down debts can save your money that is otherwise spent on interest payments. According to debt snowball method, you should consider tackling the smallest balance first; as recommended by some financial experts. However, it makes financial sense to settle the debts with higher interest first. For more details on how to effectively and quickly eradicate these credit balances, read “7 Steps to Get Ruthless about Paying off Your Debt.”

Get caught up on past-due bills

If you have any bills that are due, settling them should always be your top priority. Pending bills will put you at risk of interest and slew late fee penalties. Past bills can wreak havoc upon your credit score for not paying them off.

Boost your emergency fund

You may also use the bonus money to boost your emergency savings fund. This way, medical emergency, a layoff or the unexpected event can never cripple your financial well-being.

If you settled on this plan, seek financial institutions that offer great returns for your savings accounts. Remember to check out “9 Ways to Build an Emergency Fund When Money’s Tight.”

Beef up your nest egg or other investments

If you have not considered making contributions to the 401(k), then this is your golden opportunity to get going. You do not wish to miss the free money that comes in form of match contributions by your employer, or tax breaks arising from your contributions. Failure to build a nest today could surely mean that you’ll be poor in you golden years. You should always try to maximize the Social Security benefits.

Yet another advantage of loading your nest egg is the promise of compound interest. It always favors early, smart investors. Once you’ve maxed out your retirements, invest your funds in nonretirement accounts. If you feel intimidated by the entire thought, please seek a good financial advisor. Money Talks News financial expert Stacy Johnson avails some tips on how to find a reputable financial adviser.

Establish a college fund

Do you intend to incur higher learning expenses for you or your children in the near future? Be ahead of time by securing a 529 plan, which will allow your money to grow steadily while saving for college. Furthermore, 529 plan withdrawals are usually tax-free as long as you intend to cater for university or related expenses.

Before subscribing to the 529 plan, consult a financial expert to gage whether alternatives such as the Coverdell higher education savings account, could suit your needs accordingly.

Home improvements

The bonus you received could also fund repairs for those with ancient air conditioning units, have a leaky faucet, install a new safety gate or garage door. Utilize the funds now to handle these problems early enough before they cost you a fortune in the long run. Such home improvements can offer you great pleasure and add the value of your property.

Donate to charity

Donating your bonus money to a worthy course will reduce your tax liability and ultimately warm your heart. To isolate the tax-deductible contributions, consult the IRS Publication 526, or utilize the IRS online eligibility tool.

[Read: Credit Card Moves To Prepare For Raised Federal Interest Rates]

Reward yourself

While it’s worth investing your money wisely, it is only human that you live a little. Allocate a fraction of your bonus such that you self-motivate for all your smart, hard work. You have been working so hard until this point, thus this should your reward. Come up with something you think will make you feel happy and go for it.

How Easy It Can Be To Owe Money: Several Surprising Sources of Debt

January 22, 2016 by editor

Whether you’re looking into the market for a new house, or you’re attempting to purchase a new car, debt is everywhere. There are things that we expect to owe money for. Our homes, our cars, our shopping addictions, and our medical bills can all lead us to owe money. Big purchases can take a serious toll on our bank accounts and our credit score. However, there are several tricky, and surprising sources of debt that can catch anyone off guard; especially when you think you’re going to make some money while doing it.

[Read: The Facts about Confronting Debt Collectors]

Be Careful With Financial Windfall

Just like getting a new job, financial windfall doesn’t appear as if it would take us anywhere but up. But, windfalls can also wreak havoc on our budget and our debt.

Whether you managed to gain a substantial amount in the lottery, by inheritance, or by a divorce settlement, it takes a very strong-willed individual to not mentally picture all the new things they’re going to buy. Most financial advisors will agree that mental buying is probably the worst mistake anyone can do with a large amount of money, though it happens very frequently. This can lead to a surprising source of debt.

Here are some good tips to avoid wasting your windfall

Give yourself some time to think before deciding how to spend the money
Talk with financial experts and family before committing to a purchase or investment
Know how much money you’ll have after taxes
Consider all possible uses for your money (like bills, school, investments, charity, and/or retirement)
And review your estate plan

New Job Does Not Mean Better Pay

Nothing can possibly be more empowering then the last two weeks you have at work. You know you don’t have to be there; your boss knows you don’t have to be there. And, you know that at any time, you can walk right out the front door with little to no consequences.
Yes, getting a new job certainly has its perks. However, most people forget the stress and financial uncertainty that accompanies your new title. Lack of understanding a preparation for a new job and budget can lead to a surprising source of debt.
While venturing optimistically towards your new job, you are overwhelmed by how wonderful you expect everything to be. You fantasize about this job being your big break out of the monotonous day to day. In most scenarios, this is not the case. Having a new and better paying job is great and may not seem to have any surprising sources of debt; but if you use your new job as an excuse to spend more, you can end up back in the same position.
Getting a new job can be a fun and exciting change of pace in an otherwise mundane routine. But, it is important to be aware of all the challenges starting and maintaining a new job can cause. Just because you’re making more money, does not mean it’s a smart idea to spend more. Instead of spending away more money, you can use your new job as an excuse to budget as you would if you were working at your previous job and put the rest away for a rainy day or a big budget goal.

Leasing a Car is a Surprising Source of Debt

Many people seem to forget about the many risks in leasing a car. While it may seem like a great way to save money, contracts can often include very expensive conditions that do not make it any easier to turn the car in and can prove to be a surprising source of debt.
Contracts for leasing a car contain very strict mileage limits and can cost you an extra .10 to .20 cents for every extra mile. In addition to the ridiculous driving limits, drivers who lease a car can also be faced with various different fees. Acquisition fees and early termination fees are things that most leased car drivers get stuck with in an attempts to save money.
In order to avoid stuck in a never ending cycle of monthly leasing fees, read the fine print and prioritize your spending.

Purchasing a New House

Buying a new house is one of the more obvious ways to find yourself in debt. A mortgage can be very expensive, especially if you have a low credit score. And, paying off your mortgage can take years. Even though it is expected to go acquire some form of debt through buying a house, most people do not consider the surprising sources of debt that can go beyond just normal mortgage payments.

The problem is the expensive renovations and furnishing that people often insist upon before moving in.

[Read: Is Your Debt Out Of Control?]

While already spending thousands of dollars on a house, people often don’t estimate the true cost of the furnishing. Some people can spend 20,000 dollars or so on furnishing without consideration for what they already have to pay for the mortgage on the house. The solution is to have a firm and reasonable idea of the interior of your new home before buying the house. This will allow you to assess how much money you can put aside for furniture and renovations and will usually be a lot cheaper.

Easy Ways To Eliminate Your Credit Card Debt

November 19, 2015 by editor

In the twenty-first century, being in debt is widely accepted as a part of life. As a student myself, I’m facing the beginning of my life with my net worth in the negatives, and it’s incredibly daunting. My parents are years away from retirement; throwing themselves into their work as they try to battle debts they never anticipated having. It’s an overwhelming, stressful struggle, and a cross I believe all of us have to bear and some point or another. While debt can feel crippling, as it did for me, it isn’t the big bad life ruiner it’s believed to be. There are ways to eliminate your credit card debt.

[Read: Tips To Deal With The High Interest Of Credit Card Debt]

As much as we all wish for the ability to wave a wand and watch our debt disappear, it unfortunately is not that easy. Nothing ever is. But it can be done, and my goal today is to give you a few options to help you eliminate your debt in the most painless way possible. Sorry to say, it may involve a little sacrifice of some of the finer luxuries in life, but lucky for us we live in a world full of loopholes and backups. There’s five of everything, each with it’s own unique price tag. A little trimming of your budget here, a switch-a-roo there, and your debt should shrink before your eyes.

Money Savers Hiding Right Under Your Nose

There are twenty-four hours in a day. Minus eight hours for a full nights sleep, and two or three hours of ‘down time’, and you are left with thirteen prime time, money making hours. Taking on a second job, even if it’s part time, can be surprisingly helpful when it comes to lifting that stress off your shoulders. Yes, I am well aware of how intimidating the idea can be; it’s not as difficult nor as challenging as it once was. With the vast reach of the Internet shrinking the world mile by mile, job opportunities and openings have become more globally accessible. It is now possible for a mom to make money from her kitchen table, virtually assisting a fortune five hundred company from the other side of the country. A tech savvy college kid with a looming five-digit debt ahead can shave off a few zeros offering tech support from the comfort of his dorm room. So set those fingers loose on that Google search bar; those seemingly simple skills you posses can be put to good use!

The other benefit of the extensive reach of the Internet is its amazing capability to bring people together. Countless websites have been created to re-unite family members, spread knowledge an information amongst peers, and (most importantly in this scenario) connect buyers to products up for sale. Majority of us are used to surfing the web from the buyers perspective, but put on your salesman suit, and have a look around you. How many objects stick out to you? How about all the stuff you’ve boxed up and stashed in storage? When was the last time you riffled through your attic? Your garage? Those hidden gems you’ve tucked away could put a serious dent in you debt.

Budgeting Tips And Tricks

As I previously mentioned, there are many areas of our lives that suck the money right out of our wallets. That’s money that could be put to use eliminating your debt! And in this modern era, everything is a marketing campaign, so it becomes a battle of wills. Here’s your secret weapon: budgeting. Budgeting on the surface is incredibly deceiving; it appears to be simple – common sense, right? But when one sits down and seriously tries to budget, it can be trickier then expected. Let’s see if we can’t simplify the subject.

[Read: Best Option For Credit Card Debt Relief]

Though we all love a fun night out, try bringing that five star meal home. Save yourself hundreds of dollars by buying a book full of delicious dishes, and becoming the chef.
Direct T.V, Xfinity, and all their brothers and sisters have slowly but surely become obsolete with the rise of sites such as netflix, amazon video, and hulu. For a fraction of the price, you get all the shows you love and movies you crave before they hit the t.v screen.
Cellphones take up a major chunk of our daily lives, but that doesn’t mean they have to take up a big chunk of our cash. There are plenty of plans out there that can offer you the same converge as a pricey company, but without the big price tag.
Bills are big money grabbers, but believe it or not we can “budget” those too. Get in the habit or turning your lights off when you leave the room. Time your showers and see how many seconds you can shave of to save your water and shrink your bill.

Is It Wise To Pay Down Debt Early?

November 2, 2015 by editor

Many may think this a surprising question, but the answer isn’t always a simple yes. Depending on your situation, it is not always the best idea. Everyone needs to ask themselves the following questions before paying down their debts early.

[Read: What Are Your Debt Relief Options?]

Are you in dangerous debt?

Some people are surprised by this question, thinking that debt is just debt. But this is not true; the type of debt you are in can vary enormously. Dangerous debts should always be a first priority and should be paid as soon as possible. These types of debt include –

Child support payments
Court judgments
Delinquent taxes.

These are the type of debt that if unpaid could result in your wages being garnished, or you could even find yourself in jail. Do not ignore this sort of debt until it is too late, whatever your circumstances.

Do you have enough savings?

Having savings can be far more beneficial than paying off debt early. When all your dangerous debt is paid, think about your cash reserve. When an unexpectedly large expense occurs, having paid more than you needed to for your student loan repayment is not going to be much help to you. Or if the worst happens and you lose your job, you will need an emergency fund to live on in the meantime, even if you manage to find a new job fairly quickly. Aim to build savings that are at least the equivalent of three months living expenses – and put them in an account that is not easy to access. If it is quickly accessed then you may be tempted to transfer a small sum occasionally when you are a bit strapped at the end of the month, or if you need to buy something on top of extra expenses. Having savings can make you feel safe, even when you have debt, but remember not to overdo this principle of saving and refuse to pay off debt. You need to strike a balance and compare interest rates to check the correct course of action. If you have $27000 in a basic savings account barely earning any interest when you have $10000 worth of credit card debt accruing interest at 10%, it is probably with your while using for savings to overpay that debt. The remaining $17000 is still a good buffer for emergency situations.

Could you invest Instead?

If you have spare money each month, investing might be a far better use for it than overpaying your debts. This may seem counter-intuitive at first, but if your investments can earn more after taxes than the after-tax interest rate of your debt, investing could be a far better idea. Student loans are often a good example for this as the interest rates are comparatively low. If you can find an investment fund that gives an after tax return greater than the after tax rate of interest for a loan, then investing for the greater return may be better use of your money. This is of course risky as investments are by no means guaranteed, but less risky funds are out there and still give good returns. In some cases, even very low risk investing can be more beneficial than paying off debt early. Some savings accounts such as ISAs can have very good rates of interest. Various accounts are partly linked to stocks and shares, adding slightly to the risk but potentially adding greatly to the reward. Higher risk investing (i.e. equities trading) is not recommended when you have large amounts of debt. It is fine to do some trading if you wish, but don’t use the majority of your spare income, try to use less than 20%.

If your main source of debt is a mortgage, this can cloud the issue somewhat, as paying off more of a mortgage is beneficial if house prices rise. But if there is a chance of negative equity then overpaying is not worthwhile.

[Read: Secrets To Create A Successful Debt Management Plan]

If you are struggling with whether to invest or not, seeking independent financial advice may help you see your way forward. There are many more examples of situations when you might want to invest over paying off debt.

There are many online calculators that will also help you to decide between investing and paying off debt early. But it is not always a mathematical decision. Investments may be personal in nature (say a friend’s business) and so may take priority, or you may feel like your debt is hanging over you. If only a small margin is gained by investing, your wellbeing should come first.

Ways to Save Money

April 5, 2015 by editor

With the economy fluctuating on a daily basis, it is important save money. One day the gas prices are low and the next day they’re high again. The stock market is never consistent so depending on your mutual funds to be there for you isn’t always a guarantee. Finding other ways to save money is very important and also easy.

Emergency Fund

This is one of the most important ways to save money. Save your change. Putting away a dollar every week for a year will give you a savings of $1378. This is just a portion of an emergency fund. It is suggested that we save at least 6 months’ worth of expenses for a short term emergency fund. This money is set to the side in case of a job loss, illness or other major expenses. It is important to a debit card and checks attached to this account so that it can be easily assessed when an emergency occurs.

A long term emergency fund should be enough to cover an emergency such as a natural disaster or extended job loss. It is also important to be able to access these funds easily, but you may want to start investing with these funds since the likelihood of a disaster occurring may be rare.

Control Impulse Shopping

One way to destroy a budget is to be an impulsive shopper. Controlling those impulses is a great way to save money. When on the road to practicing self-control, keep these things in mind:

Think before you act – Think about the cost. Is this item really something you need or is it just a want?
Don’t buy on credit – if you don’t have the money at the time of the purchase, then you probably don’t need it.
Stick to a list – Plan out your shopping trip before you leave the house. Bring only the amount of money you need for the trip and enough for taxes. That will keep you from overspending or grabbing a last minute item at the register.
Don’t save card information on your favorite sites – If you are an online shopper, one way to deter you from making an impulsive purchase is not keeping credit card information saved for the site.

Discounts and Incentive Programs

Another way to save money is by taking advantage of discounts and incentive programs. Many grocers have ways to save money programs. Sign up for loyalty cards. Using these cards at the register give you the opportunity to enjoy discounts on the products that you have purchased.

Use incentive apps and websites such as Groupon and LivingSocial. These sites offer deals on vacations, goods and services, and so much more. It’s also easy to access the sites through apps using your smartphone. Another app to take advantage of is RetailMeNot. This is an app that shows you every retailer that has a sale going on promotion codes that give you a chance to save even more.

Create a Nonessentials Account

What is this exactly? Well it’s an impulse account, and not that kind. This is an account that you fund when you have the urge to buy a nonessential item or an indulgence. For example, you have the urge to go out and buy a bottle of wine because you’re sitting at home alone with nothing to do. Think of how much that bottle will cost you and put it aside. Or maybe you’re exhausted on your way to work and you have desire to stop at Starbucks and get a cup of coffee even though there’s coffee at work. How much will that cup cost you? Set that amount of money to side in your nonessentials account.

Divide and Conquer

Let’s factor in your wages in this next tip for ways to save money. This is a simple equation. Let’s say you make $12 per hour. That outfit you have been wanting is $60. Now take the amount of the purchase and divide it by your hourly wage. The answer is 5. Now think about it. Is this outfit really worth more than half a days’ work to you? For 5 hours out of your day, is that all you’re worth, just a $60 outfit?

Looking at it from this perspective will definitely keep you in line and focused on the bigger goal ahead which is saving money for the long term. It’s alright to make purchases and treat yourself, but a gift isn’t supposed to make you feel like you’ve made the wrong decision.

Ways to save money are easier than you think. You don’t to have a big lump sum of money to set to the side in order to start saving money. With these tips you will realize just how much money you’re spending on a daily or weekly basis and it will change your perspective. You don’t have to stick to these tips. It’s always important to do what’s comfortable for you. To learn more ways to save money, check out the America Saves website.

Protecting Your Accounts from Bankruptcy

November 5, 2014 by editor

Having bankruptcy protection is important when you have one or a number of accounts that houses your hard-earned money. Bankruptcy protection comes in handy in case you find yourself in the situation of recovering from a financial crisis by way of filing for bankruptcy. Thanks to the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, also known as the BAPCPA, certain accounts are eligible for bankruptcy protection and will not be touched in the case of needing to file for bankruptcy. Read on for more information on the BAPCPA and the certain accounts that qualify for bankruptcy protection.

What Happens During Bankruptcy?

Having some accounts that are covered under bankruptcy protection are important when you find it necessary to file for bankruptcy. During the process of bankruptcy, you report all financial information, including income earnings, expenses, and monetary and physical assets. So, during the process, the financial institution where you are filing bankruptcy determines what assets can be used by creditors to take care of your debts. These assets can include valuable property, merchandise, and even savings stashed away in accounts. It is already difficult to know that bankruptcy will strip you of your valuable assets, but to be stripped of your hard-earned saved money could be too devastating to bear. That is where savings accounts that is under bankruptcy protection come into play. These beneficial accounts are covered under the BAPCPA and certain aspects may qualify you to obtain one of these accounts.

More Information on BAPCPA

In accordance to the law, BAPCPA aims toward adjusting the federal bankruptcy law and to restate specific requirements that take care of the discharge or alteration of a Chapter 7, 11, or 13 filing. The BAPCPA also includes guidelines for retirement funds that include the various types of IRAs and qualified plans, and also educational savings accounts. In some cases, limitations and unlimited protection do apply under the act. Continue reading for an explanation of such cases.

Employee Retirement Income Security Plans

One of the accounts that qualify for bankruptcy protection is retirement plans that meet the qualifications under the Employee Retirement Income Security Act or the ERISA. All plans that are qualified under the ERISA can be excluded from assets that must be reported when filing for bankruptcy. Determined by a Supreme Court ruling in 1992, ERISA plans are not included in individual’s bankruptcy assets. Under the Federal Bankruptcy Code, the BAPCPA has guaranteed that under this act, all accounts that qualify are under bankruptcy protection for no specific number of accounts sponsored by employers.

At one point in time, whether or not a plan qualified under ERISA depended on if the plan was sponsored by employers or not. Plans that qualified that covered business owners only did not meet the specific requirements of the ERISA. So, the plans were not qualified for bankruptcy protection. Now, qualification for bankruptcy protection is according to the BAPCPA and the plans are not to be included with assets that are assessable through bankruptcy.

The Different Types of IRAs

Because of the BAPCPA, IRAs are also eligible for bankruptcy protection. There are many types of IRAs that are protected during the bankruptcy protection. Below is an explanation of each type:

Traditional and Roth IRAs exclude up to $1 million. The specified amount must be looked over every three years to figure out if the $1-million dollar amount should increase or not. The increase depends on the consumer price index.
SEP and Simple IRAs exclude all figures from the bankruptcy’s estate for no specific amount.

529 Plans and Educational Savings Accounts

Other plans and accounts that are under the bankruptcy protection provided under the BAPCPA are 529 plans and education savings accounts. Below are the limitations that are applied to covering the education saving accounts and 529 plans:

Contributions toward ESAs that are in excess or that are not eligible are not excluded from the bankruptcy estate.
Any amount that is put into an ESA during a 365-day period before you file bankruptcy is not left out of the bankruptcy estate.
Any amount that is put into an ESA or 529 plan during the 365-day to 720-day period before you file bankruptcy are limited to exclude $5,000.
Although any can add to the account on behalf of the account’s beneficiary, only additions to the account of the debtor’s children (step-children and grandchildren included) are excluded.

In conclusion, the BAPCPA is an act that is threatening to the process of filing for bankruptcy because it puts a limit on what assets can be taken during the process. Having these certain accounts will be beneficial for you if you have to file for bankruptcy because despite you losing a ton of assets in order to get back on financial track, you will still have the money you put into the bankruptcy protected accounts.

Evaluating Debt Reduction in California

July 23, 2014 by editor

About California

The state of California has the biggest population with about 40,000,000 residents living there. It comes third after Alaska and Texas. It also holds three of some of the largest cities in the United States, namely:-

San Jose
San Diego
Los Angeles.

L.A contains the most amounts of people, with approximately 3,792,621.

San Diego comes in at number two with a population estimated to be of 1,307,402.

Third biggest population in a city is San Francisco with a population of 805,235 people.

The debt reduction in California would come in handy because its total labor force is 18,590,400. Apparently, the non farm jobs are the ones leading the line.

California is known for its diversity and endless possibilities in film, dance and music. It is home to the famous Hollywood stars and sign and it serves the people well to know that their individual debts are being taken seriously.

California also is the home of almost all of America’s Vegetables and fruits. It also grows Almonds, which is the biggest export. They even grow Cotton, table grapes and wine. You would be surprised that this sunny state is home to rice irrigation and export.

The debt situation

The average credit score for the average Californian is 687. This is because the average Californian has about 4927 dollars in credit card debt.

According to FICA, this score is below the line that determines good or bad credit, since 723 is the approved score for good credit going upwards. Looking for solutions for debt reduction in California would not be such a bad idea.

Unemployment rate

There is an alarming unemployment rate in California whereby in November of last year, it showed that it was at 8.5%. L.A has the highest percentage of people who are unemployed, while all the other cities like San Francisco, San Jose and San Diego are all rated above the 6 percent bracket.

It was even higher than that of the whole of the U.S which was at 6.7%.

At Last, Good News!

Finally, there is a way that debt reduction in California can be minimized.

Debt relief services have been set up in California to aid those that are overwhelmed with unsecured debts.

How it works

If your statute of Limitations is up and you no longer owe anyone, then this isn’t for you. You are debt free and you don’t have to worry about paying your creditors back. But for those of you who still have to pay their creditors, the debt reduction in California will work like this; they will provide debt settlement to reduce debts from the collection agencies or your original creditors. This will help tremendously because you only have to pay a little sum of the money you originally owe. It works for both parties; the lender and the creditor are both happy and satisfied.

California has federal Laws that deal with collection agencies which are called FDCPA (Fair debt Collection Practices Act)

The creditors must follow the rules and regulations of the FDCPA.

Expanding on the Statute of Limitations in California

Debt reduction in California is a task that many are willing to engage in due to the current situation of household incomes. People are trying to stay above water as they try to figure out how they can feed their families while trying to battle the debts they have accumulated over the years. With the never ending increase of gas prices and food stuffs, it is not easy to take care of a family and at the same time, pay for debts. The average household income countrywide is sustainable, but it is never enough. Debt reduction in California would help families with low income and supply relief to their bank accounts.

The statute of Limitations is a life saver because it helps in debt reduction in California. This law states that there is a maximum amount of time in which creditors and collection agencies can run after you for their money. After this period of time expires, you no longer owe your creditors.

Keep in mind though, that the statute of limitation applies to consumers that have become delinquent in their monthly payments. They consider you delinquent not from the date of last payment, but on the day you went past due. Your debt reduction in California is not considered until then.

However, this law varies in every state. If you were to move and go to another state and you had taken the loan in California, they will consider it and apply the law for your previous residential state.

Most of these contracts that consumers sign are mostly designed to last for 4 years, so if you have a delinquent account, you should be able to reduce and do away with it altogether in that duration of time.

Why Taking out a Private Student Loan is Not a Good Idea

June 27, 2014 by editor

If you are a student who is looking into a private student loan, then you are at the right place, as the whole idea may not be as good as it actually seems. The clear example below cases a scenario of a former student and includes the problems the individual faced with their private student loan.

Scenario

The student graduated in college during the year 2001 with an estimate of $22,000 in student loans. The bulk of their debt was from a federal loan, which was $20,000. The student also had a small $2,000 private student loan. Even though the private student loan was like a tenth of the federal loan, it was actually a bigger headache, which took much more work and effort to be paid off. Without notice, the lender raised the individual’s payment without notifying them and increased the interest rate. In this individual’s situation, the payment amount was not so high, as it was an estimate of $60 per month. The individual considered paying off the total loan instead of facing stressful situations, which would arise every six months.

Luckily and thankfully in this case, this was the only private student loan the individual had. However, private loans can be a total nightmare to overcome, as they are never what they seem.

Rates

The rates are never what they seem to be and can be a little, let’s just say misleading. When you are in this position you may consider a private student loan over a federal loan due to the fact that the interest rates that are advertised are much less. However, this is just something that is shown in advertisements, just to attract people into borrowing. Underwriting is needed for private loans and not federal loans. What this means is that the bank that provides you with the private student loan assesses the risk of loaning you money. Due to this, only those individuals with best credit will be given these low rates. Another problem with a private loan is that the interest rate on it changes and variable rates are offered, whereas federal loans come with fixed rates.

Cosigners Are Being Put At Risk

A cosigner will need to be with a student for a private student loan. What this means is the cosigner, which is usually the parents, will put their credit at risk if their child fails to pay. Due to this, it is important both cosigners and students understand the consequences, as it may seem easy at the start, but just gets tougher with a private loan. If the student does consider a private loan and fails to pay, then the cosigners are in for harassment, potential calls, and a hit to their credit.

Possible Chance of Being a Falling Victim to Trickeries

If you have a few loans from the same lender, then what you will do is pay off the one with the highest rate first. However, the Consumer Financial Protection Bureau (CFPB) has found that some companies may not allow this sensible strategy. It was also found by the CFPB that servicers usually divide the overpayment and relate it to the unpaid loans, which as a result takes the borrower much longer to pay back the loan.

Another problem arises for those borrowers that fall back on payment. The lender will always say to the borrower to pay how much they can afford, but will not let them know that at the same time they are adding to all the loans, and not just the one with a high interest. This can have a negative impact on a borrower’s credit and at the same time develops penalties and late fees the lender places on the borrower.

Higher Limit on Lending

Regardless of whether you are in the position to fund the whole cost of your education with multiple loans or not, this really does not mean that is something you should do. If you choose to take out higher loans, this means the interest on that loan will also be high. With more interest, you will be paying much more on your loan than the overall amount that you took out.

Your Loan Depends On Your Credit Score

If your credit score is low or nonexistent, then you may be at a disadvantage. If you are in this situation, then you may also find it difficult to get the loan and if you are lucky, then you may only be able to acquire one loan with some ideal terms. These include fees, less flexible repayment plans, and high interest rates.

The Bottom Line

If you want some help with college costs and wish to make them possible, then a private student loan can be possibly helpful. However, if a student choses a federal student loan, they will face a better experience and one that is much safer to the private loan.

How to Spend Your Tax Return This Year

June 9, 2014 by editor

The season for tax return is here and many of us are hoping for a refund. In fact, the IRS has reported that there are 15 percent more tax returns this year compared to any other year. If you are one of those people that will get a tax return, instead of squandering and misusing it, spend your tax return on better things such as on paying bills.

Financial Freedom

Many people wish for a time in their life when they could be financially free. If you are one of them, then the main aim of your tax return, however small or big it is, should be to help you strive towards becoming financially free.

Important Tips on Spending Your Tax Return

The following section will give you tips in order to help you get the most out of your tax refund for 2014. The best formula to spend your tax return should be to use as little of it as possible and save a little more of it in order to be financially free.

Use it to pay off debts. When you receive your tax return, use it to start paying off debts especially the largest ones. Your largest debt could be one that you have on a credit card that is charging you the highest interest rate. For example, if you have a debt of $4,000 on a credit card that charges you 15% interest and another debt of $1000 on a credit card that charges you 20% interest, spend your tax return to start paying off the latter card. It is always good to pay off any kind of debt despite the size but to get out of debt faster, you need a good strategy and to know which debt needs to be paid off first. Paying the minimum balance required does very little to reduce the debt that you owe even if it helps you avoid late notices and stress from creditors.
Pay off your loans. A great way to spend your tax return is to use it towards paying off your loans such as your car loan. This can give you a head start in paying off the secured debt that you have. It does not matter whether it gives you only a few months ahead, as this will ensure that you are in a position to keep up on your monthly payments. The best thing to do is to spend your tax refund in paying more than the minimum amount payment required on your debt and then keep paying the monthly amount required. This is the surest way to pay off any debt faster. The tax refund can also help you negotiate the best interest rates deal available if you want to use it as down payment for a new car.
Put the tax refund in an emergency savings account. Another way to spend your tax refund is to save it in an emergency account. Statistics from money experts reveal that around 75 percent of Americans live from paycheck to paycheck and struggle to make ends meet. An emergency fund will help you prepare for emergencies that are unexpected and also provide you with the peace of mind. The temptation to squander your tax refund should be less as it is an income that you did not expect and which you did not include in your budget for 2014 at the beginning of the year. If you cannot put the whole tax refund amount in the emergency savings account, consider setting aside a third of it as it takes some time to build an emergency fund. Have clear goals that will help you save a little bit more every month as this figure will grow after several months of consistently saving.
Save and spend. The best way to spend your tax return is to split the money so that if you must spend some of it, some is left for you to save. Remember that almost everyone goes through seasons of unexpected financial difficulty and needs a fund that they can dip into when this happens. The money you save can help you pay debts and bills so that you do not get to a stage where you are overwhelmed by them.
Go on a family vacation. You can spend your tax return on a family vacation if you still have some money left after paying debts and putting a portion of it in a savings account. Be careful not to be extravagant when using the tax refund to have a good time on holiday as often people feel that any money they receive that was unexpected is free money and can be wasted. Financial freedom requires people to be disciplined and to always spend any money that they receive wisely.

Four Money Challenges for Veterans and How to Conquest Them

May 23, 2014 by editor

Due to a latest book by a past army analyst, veterans are told how they need to get on their feet financially in the resident world. The change from army to resident life tends to be fraught with emotional trials, but things that are more practical like searching for a place to live, getting a job and paying bills can also be just as challenging. The majority veterans entered the army at a young age and without receiving enough help about money management, which is why this article about money challenges for veterans discusses the challenges they face and how to overcome them.

Mechel Lashawn Glass and Money Challenges

At the time Mechel Lashawn Glass came back from her placement as an army intelligence expert, she moved back with her parents. She joined the military and left her home at the age of 17. When she returned, she was an adult without a job or a home. She said during that time they were given a two year changeover before leaving the service. This was so they could put a strategy in place and figure out what it is they want to do with their life and where they want to live. Now; however, with drawdown, veterans are given a 30-60 day notice in order to leave the military and begin a new life. When it comes to money challenges for veterans, there are behavioral, physical and emotional challenges as they have been overseas for such a long time that they don’t usually know where to start.

A Hard Return
In Glass’ case she lived with her parents for some time, but due to the emotional disturbance of her placement, she was left withdrawn and it was also tough to communicate with her. Due to this, her mother requested her to leave the house. She then started to overcome the money challenges for veterans and found an entry level job, using her military benefits for college. Today, Glass is a vice president.

Glass says there are four major money challenges for veterans:

Looking for civilian employment

The major problem here is linking military experience with that of private employment. In Glass’ case her resume wasn’t excellent, but her IBM included her military knowledge, which showed her work ethic and sense of discipline. For those in need of help should visit the Veterans Affairs Sector, where they will find a career center and programs helping them to find jobs. The Sector of Labor also has a program, which helps vets to work on their summaries, explaining how their experience and knowledge can benefit a private employer.

Managing credit card debt

Glass also mentioned those in deployment tend to face a stressful setting, which makes it a common situation for them to spend a lot of money during the time they are not on duty. Their day-to-day living expenditures and clothes do not need to be paid for, which means they just ‘blow’ the money. This is another one of the money challenges for veterans, as private employers can sometimes check applicant’s credit to ensure there are no large financial problems. In the military, credit checks are not usually required until you wish to apply for a job that requires a security clearance. The debt should be tackled at one balance at a time and any further help can always be obtained from a non-profit credit counseling service.

Dealing with house problems

Many participants of the army tend to buy a home near the location they are based, which they then sell in 2-3 years’ time, when they move. However, it is not as easy as this housing crisis left the majority of service personnel unable to sell their home and underwater. This issue causes a lot of veteran’s difficulty when maintaining their mortgage payments; however, one solution is refinancing with a VA home loan. When it comes to mortgage money challenges for veterans they should go to their lender and enquire about programs, which will help to keep their home. If for some reason this doesn’t work, the next place to go would be a non-profit counseling agency, which acts as an intermediate. The situation can then be worked through with a lender.

Signing up for benefits

Some of the money challenges for veterans can be hard to overcome as the majority of veterans don’t want to ask for help. When it’s the first time, coming out of deployment, paying for everything alone and finding employment quickly can be difficult. When it comes to where to start from, then the first place to start looking is VA Gov. Here, you will find a variety of benefits and programs that will help veterans to get on their feet.

Money challenges for veterans can be overcome and veterans do not have to face them alone. Assistance is available through military programs and the government, which can help to ease the pressure of coming back to civilian life.