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Just Married? Here’s 4 Things to do About Personal Finances

June 19, 2017 debtmanagement

Tackle these issues first

You may find it difficult at least early on to agree on everything having to do with personal finances. But It’s possible to minimize – if not eliminate – the stress over finances is to tackle the important issues early on. Here are four administrative and financial tasks you should resolve fairly quickly so that you can get back to enjoying your marriage.

1. Decide how you will handle bank accounts

You may want to combine your checking and savings accounts but no rule says you have to. What’s important is to talk about your preferences to make sure your bills get paid when they’re due. If you decide to keep your finances separate, you will need to set up a new account to cover your common expenses. Sit down, list the expenses you’ll both need to contribute to, such as housing, utilities, and groceries. Then, figure out how to split these costs. You might split them equally or on a proportional basis depending on your incomes. Once you determine this, your final step should be to set up automatic transfers of these amounts to the new joint account.

2. Agree on your financial terms both short- and long-term

If you already haven’t done it, then now is the time for you and your spouse to compare your income, debt load, spending habits and credit scores. It’s particularly important to discuss the joint goals you should be working on. For example, if one of your goals is to buy a home together then massive debt or poor credit could stop you. If this is the case, you may need to make a credit repair or plan to pay off your debts – maybe with the help of a consumer financial counselor or a certified financial planner. In addition, you should develop the habit of talking about your other priorities as well. Issues you might want to discuss include whether you’re putting enough away for retirement or how much you want to spend on vacations.

3. Update your beneficiaries

Your idea of wedded bliss might not be to sit down and do a bunch of paperwork but if you just got married, expect there will be a lot. And one of the first things you need to do is update your life insurance policy’s beneficiaries (if you have one), as well as your retirement accounts. If you die, federal law dictates that your spouse will get whatever is in your 401(k) unless the surviving partner has signed a waiver.

If you have an individual retirement account, you can name anyone as your beneficiary. But suppose you live in a state with community property laws (California, Arizona, Louisiana, Idaho, New Mexico, Nevada, Washington, Texas, and Wisconsin), and get a divorce. In this case any property you purchased during the marriage must be split equally regardless of who acquired it.

Each of you will also need to fill out a new W-4 at work. This is because getting married will probably change your tax rate. You both will need to fill out a new W-4 form so that your employer will begin withholding the right amount of income tax. You also need to decide which filing tax status will be best. Now, you’re married, you’ll probably want to file jointly as this may mean paying less taxes. However, circumstances may determine that filing separately could be best.

4. Discuss a postnuptial agreement

It’s possible you may want to have a prenuptial agreement though this can turn into a real sticking point. A better idea is to create a postnuptial agreement which will determine how assets are divided in the case of death or divorce. The difference between it and a prenup is that a postnuptial agreement can be created any time during the marriage. The reason to do this is because if you don’t have such an agreement, then your state’s laws will determine who owns what, and this may not be what you had wanted.

A postnuptial agreement is especially useful if you live in one of the community property states listed above. It can be also an especially good idea if one of you have children from a previous marriage or relationship. It can also be a good idea if one of you are anticipating a big inheritance or if there is a large disparity in your incomes. If this is the case, one of you may have an interest in keeping certain of your assets separate, or identifying how – in the event of divorce – you and your spouse would split shared property.

In conclusion

Sitting down and talking about finances shortly after your marriage may not be one of your most pleasant tasks. However, addressing these four issues early on can save a lot of arguments and disagreements later on. Plus, you may find it’s easy to agree on most of these.

5 Pieces of Advice That Could Help You Become Debt Free

June 13, 2017 debtmanagement

You would like to get out of debt, right? Of course, you would. But if you’re struggling with debt it’s probably due to overspending in three categories: 1) too much house, 2) too much car, 3): too much entertainment.

If you truly want to get out of debt, the first thing you need to do is take a hard look at your spending in these three categories. If you’re not sure of your spending in these categories, you need to track your spending for at least a month. A number of free apps are available that make this drop-dead simple. Three of the more popular of these are Mint, Xpenser, and Pennies.

Be prepared to sacrifice

Reducing your spending in the three categories mentioned above won’t be easy. It can be especially hard if your problem is too much house. This means either finding a cheaper place to rent or worse, yet selling your home and buying a less expensive one. It can also be hard to reduce how much you spend on your car or cars. You might have to sell your current vehicle and buy something cheaper. You might feel great driving around in that Lexus SUV but it could feel even greater to drive around in a car where the payment was less than $100 a month. It might feel even better if you could pay cash for that cheaper car.

The easiest area to reduce your spending is on entertainment. The simple answer to this is just don’t go out so much and don’t eat out so often. You also may find you’re spending a lot more than you thought on just the “little” things like that drive-through latte you get every morning.

Have a goal

It’s practically impossible to save money unless you have a good reason to do so. This means having a worthwhile goal. In this case, it will be to get out of debt. Other times it might be to create an emergency fund or to save up enough to make a down payment on a house. Then, whenever you get the urge to go out for dinner or to buy that great sweater, take a minute to remind yourself that if you spend the money, you will be that amount further away from becoming debt free.

Develop self-discipline

This is where a budget can help. Mint is a great budgeting tool as is HomeBudget with Sync and Spendbook. In fact, if you are committed to becoming debt free, you must have a budget. Even more important, you need to stick to it, and this is where the self-discipline comes in. No budget can help you take control of your money if you’re constantly busting it.

If you just can’t stand the idea of making a budget, there’s an easier solution. It’s using the 50/30/20 rule of thumb.

The way this works is that you dedicate 50% of your net pay to your “needs.” This could include your rent or mortgage payment, automobile payment, utilities, groceries, and health insurance. In other words, those things you absolutely need. The 30% is for your “wants” – dinner at that great Italian restaurant, those fabulous shoes, or a weekend in the mountains. Last, is the 20% which is the percentage of your net pay you should save and use to pay down your debts.

Learn to live on one income

Two may not be able to live as cheaply as one, but if there are two of you, and you can live on just one income, you can become debt free in just a matter of months. Banking one of your incomes could also get you that down payment on a house in just a few years or could allow you to pay cash for a decent car. This should also mean money you could stick away in an IRA. If your employer offers a 401(k), you could increase your contribution, which could mean retirement sooner rather than later.

Consider settling your debts

You might also consider settling your debts. This is a process where you contact a lender and offer to pay a lump sum for less than the debt’s balance. Some people have been able to settle their debts for 50% or 40% of their balances. This, in fact, is the only way to pay off debts for less than you owe. However, you need to have the cash available to make those lump-sum payments, and you need to be a very good negotiator. This is wy many people turn to a professional debt settlement company like National Debt Relief. This eliminates the need to have money for lump sum payments, and the company does all the negotiating for you.

In conclusion

Getting out of debt isn’t easy. But if you’re committed to the idea, you can do it. Just follow the advice you’ve read in this article, reduce your spending, use some self-discipline, and you could be debt-free in just a few years.

Things You’ll Need to Give Up to Become Debt Free

June 5, 2017 debtmanagement

How good would it feel to be debt free? Some people say it would feel like getting out of prison. Others say it would feel like they’d gotten a 500-pound monkey off their backs.

Regardless of how it would feel to you, make no mistake about this. Becoming debt-free requires work, patience, and discipline. You need to have a budget and the self-discipline required to stick with it. You have to be patient because it won’t happen overnight, and you need to be willing to work at it. If you owe $20,000, or even more then becoming debt-free won’t be a sprint. It will be more like a marathon. In addition, things you will need to give up include one that may be very painful.

Checking social media obsessively

Are you addicted to checking social media like Facebook, Twitter, and Snapchat? Many people are. But if you truly want to become debt free, you need to break the habit as it can just lead to spending more money. Avoid checking to see what everyone else is doing. It’s easy to get in trouble when you see one of your friends has taken a fabulous vacation and you want to have one too. Turn off your social media and learn to live simply. You’ll likely find this is much easier said than done due to the addition of filtered content and targeted ads on Facebook, Instagram, and TV. The only way to beat this is through self-discipline – just stop checking your social media accounts except for maybe once a day.

Eating out

Eating out several times a week – for lunch or dinner – can add up to a lot of money. If you don’t believe us, get one of those money tracking apps like Mint, BillGuard, or DollarBird. Use it for a few weeks and you may be astonished to see how much you’re spending on eating out. If you’ve been in the habit of going out for lunch, stop it. Start packing a lunch instead. It’s easy to do if you just spend a few hours on Sunday preparing a large batch of food that you can then eat throughout the week.

Denial

As the old saying goes, denial isn’t just a river in Egypt. If you tell yourself you have your debt under control when you don’t, you’ll only prolong things and pay more in interest. Do you feel as if your debt wasn’t your fault, that you were tricked into debt? If this is the case, you’ll need to tell yourself a new story – that you are responsible for your debt, that you don’t have it under control, and that there are things you must do. For example, is your problem student loan debt, and you’d like to pay it off quickly? Then, you need to find ways to earn more money and reduce your spending. Doing just one of these things won’t get you there.

Your other financial goals

If you’re really serious about becoming debt-free, you’ll need to give up on your other financial goals like buying a house. You will need to be very single-minded and focus exclusively on getting your debts paid off. This may mean sacrificing Starbucks and giving up your health club membership. If you’re investing, you may have to stop. You may even have to raid your emergency fund. None of this will be easy, and you’ll need to keep reminding yourself how good it will feel when you’re debt free.

Your job

Eliminating those morning drive-throughs, those restaurant lunches, and trimming your grocery bill can only get you so far. At some point, you’ll need to look at the other side of the equation, which is how to increase your income. Some people have been able to do this very successfully by moving out of the corporate world and becoming entrepreneurs. Of course, this may not be for you. You may have to work for a promotion, get a new job at a better salary or take on a side gig. It’s easy to make extra money these days thanks to the Internet. It’s also easy to get part-time jobs like driving for Lyft or Uber, or in retail. Spend a few minutes thinking about how you could tweak your income, and it’s likely you’ll come up with a number of other ideas.

In summary

As you have read, it’s not easy to become debt free. However, if you give up the things mentioned here and are willing to be patient and exercise some self-discipline, you will become debt free. It’s not a matter of if, it’s just a matter of when.

Tips for Making a Debt Management Plan Work

May 30, 2017 debtmanagement

Being deeply in debt is no fun at all. You’re probably receiving calls from your lenders, or worse, yet from debt collectors. You may be lying awake nights worrying, and even suffering health problems caused by the stress of dealing with your debts.

One solution that’s helped many people is consumer credit counseling. If you’re lucky, there’s a good, non-profit consumer credit counseling agency near where you live. (Note: To see if one is near you, go to the National Foundation for Credit Counseling’s website and click the link Find An NFCC Agency.). Otherwise, you may have to find an online source. Just make sure it’s a non-profit, has been reviewed by certified credit counselors and offers its services either free or at low cost.

What to expect from your credit counselor

A credit counselor will first review your overall financial picture. He or she may then help you prepare a budget designed to get your debts under control and paid off. If it turns out a budget isn’t the answer, you will be offered a debt management plan.

Don’t be fooled by the term debt management plan (DMP). Its goal isn’t just to help you manage your debt, it’s to get it paid off.

The way it works is that your credit counselor negotiates with your lenders to get your interest rates reduced or frozen and any fees waived so that your monthly payments will be more manageable. Then, instead of paying your creditors you pay the credit counseling agency each month until all of your debts have been paid off. This service may cost you $25 to $35 a month, and the process will take four to five years depending on the size of your debt.

Understand the downsides

It’s important to know the downsides of a DMP before choosing this option. The biggest of these is that once your lenders learn you are in a debt management plan, they will most likely close your accounts. You could be left with no credit cards save the one you might be allowed to keep to use in the event of an emergency.

You’ve already read the second biggest downside, which is the amount of time it takes to complete a DMP. Five years is a long time and things can change, including your financial situation. Many people who start a DMP never complete theirs for this reason.

Make sure you can afford the monthly payment

Once your credit counselor creates your DMP, take a hard look at the monthly payment required. It needs to be something you can easily afford because if you can’t, you’re doomed to fail. Be honest with your counselor. If you believe you would have a hard time making the suggested monthly payment, tell your counselor this. She or he should be able to redo your DMP to get to a monthly payment that would be easier for you to make.

Get everything in writing

If you choose a DMP, make sure you get it in writing. Don’t rely on any verbal promises. The credit counseling agency should provide you with a contract containing all the pertinent information including your monthly payment, the fees, and how long it will take to complete the plan.

Continue making your payments

You need to continue making payments until your lenders have accepted your credit counselor’s proposal. If you can’t make all of your payments, try to at least pay something on them. If this is impossible, call your lenders and let them know you’ve enrolled in a DMP. Most will work with you. Keep paying as much as you can until you’re certain they’ve accepted your DMP. The critical thing here is to communicate with your lenders.

When to make your first monthly payment

Don’t make your first monthly payment to the credit counseling agency until you’re sure your lenders have accepted your DMP. Don’t take your credit counseling agency’s word for this. Contact each of your lenders to make sure they’ve accepted your DMP and verify they understand its terms.

Continue paying your other bills

All of your debts won’t be included in your DMP. For example, it won’t include secured debts like your mortgage or automobile loan, and your utilities. It’s important to know which debts are included in your DMP and which aren’t. Continue paying on the ones that aren’t. You should find it easier to make these payments now that you have just the one affordable monthly payment on your other debts.

Make sure your payments were received

Your credit counseling agency should provide you with a statement each month. It’s almost certain that the statement will be accurate but you should check with your creditors to ensure that they have received the agreed-upon payments. This is especially important in the first few months. In fact, you may want to call them instead of waiting for monthly statements from each of them.

In conclusion

If you’re truly committed to getting out of debt, a debt management plan can be a good solution. Just make sure you understand both the pluses and minuses before signing up for one. If you choose to go this route, make all of your payments and on time. Fail to do this, and you’ll end up in more trouble than before you signed up for the plan.

Three Common Mistakes That Can Trash Your Credit and How to Fix Them

May 18, 2017 debtmanagement

However, there are other things you could do that will trash your credit practically instantly. The problem is that these are actions that can seem to make good sense at the time but can have consequences that are tough to foresee. Here are three of them and what you could do to limit or undue the damage.

Taking money out of your 401(k)

It can be tempting to cash out your 401(k) to pay off your debts or to make a down payment on your first house. But it can be a mistake to even withdraw small amounts, and the younger you are, the worse the damage is. The mistake here is misunderstanding that when you cash out even a portion of your 401(k) this triggers penalties and taxes that can eat up as much as $500 for every $1000 you withdraw. All you have to do is click a button and the money is gone, and with it goes all the tax-deferred gains it could’ve earned going forward..

The downside is any you withdraw from your 401(k) isn’t earning tax-deferred returns any longer. Plus, those returns can’t earn returns any longer. When you the keep money in your 401(k), compounding works miracles. But when you withdraw money, it works against you, and what it costs you only grows worse over time.

So, the way to undo the damage is easy. Never withdraw money from your 401(k) – until you’re ready to retire.

Missing a credit card payment

The problem with credit card payments is that they’re just so darn easy to forget. You’re busy, life is hectic, the credit card statement disappears under the sofa, and so the bill doesn’t get paid. You figure that’s not a problem. You think you’ll catch up next time and all you’ll just get hit with a late fee. Better think again. If there’s a payment where you’re 30 days or more late this could drop your credit score by 100 points or even more. You could go from having good to poor credit, and even end up getting hit with higher interest rates.

In addition, the odds become greater that you’ll be turned down for credit. Recovering from this can take up to three years, and the damage it dues can go well beyond your credit accounts. In fact, an investigation done by Consumer Reports found that people who had “good” credit may be paying hundreds of dollars a year more for their auto insurance than those with “excellent” credit. This means the penalty for having “poor” credit could be $1000 or more.

The way to eliminate the damage from missing a credit card payment is to pay your bill late but before the account is 30 days overdue. This will turn things into a non-event.

Failing to file your income taxes

Owing a great deal of money to the IRS is very bad. It’s even worse if you don’t file a return when you owe money. If you don’t pay your taxes on time, there will be a penalty of 0.5% per month of the unpaid amount. If you fail to file, the penalty is 10 times that or 5% per month. Plus you’ll owe interest on your balance.

How can the IRS tell what you owe if you don’t file a return? It can sort of “Frankenstein monster” one together based on information from financial institutions, other government agencies, and employers. It will then pursue you relentlessly for what it believes you owe. The IRS can put liens on your home, seize your bank accounts, and your wages,, and even file criminal charges against you.

How can you restrict the damage from failing to file a return? File your missing returns and pay whatever portion of the debt you can. Then, work with the IRS to set up an installment plan for the rest.