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Here’s Why to Have a Date With Your Money

May 24, 2017 debtmanagement

Do you think of your money as a friend or an enemy?

You really should think of it as a friend. After all, would an enemy pay your rent or mortgage? Would an enemy buy you a car or pay your utilities?

Money is not only a friend, it has superpowers. It can take you on vacations and even give you peace of mind.

Given the fact it’s such a good friend, why not ask it out on a date?

Have a recurring date

Get out your calendar and set a recurring date. This could be as frequently as once a month or just once a quarter. The idea here is to set aside time to brainstorm things you could do with your current cash flow to have more money. If you implant an idea about money in your subconscious, it will go to work in the background analyzing opportunities. It’s likely that you’ll notice and remember articles on investing. You might spot the opportunity for a business venture. You’ll find this happens almost automatically once you have that recurring date in place.

What to do pre-date

This may sound silly but you should dress up just as you would for any date. Put on your makeup or comb your hair and put on a nice shirt. The trick is to make this feel like a special occasion. Then, set your intentions for the next couple of hours. For example, you might say, “I am putting my finances in order, and I’m going to think creatively about money.”

Next, set aside a limited amount of time. It would be a mistake to spend many hours pouring over your bills and end up feeling lost and overwhelmed. Three hours could be a good place to start.

Turn off your phone and maybe play some soft music to get in the mood.

Finally, make a list of the tasks that you want to perform that day.

The date itself

The first thing you need to do for your money date is assemble all your personal monthly and household expenses. Take a look at the previous month. What was your largest expenses? Do you foresee a big expense coming up in the future like a dental bill or car repair?

Check your transactions – credit cards, PayPal, checking account, purchases on Amazon, direct debits, etc. Mistakes can happen so look for overcharging or purchases that weren’t yours.
Think about your financial goals. You say you don’t have any yet? Then, sit down and define some. Is your goal to pay off your mortgage, save for a big trip, or a sabbatical year? It’s critical to visualize these goals and then track your progress.

Do you have stuff that doesn’t bring you any joy? If there’s something you haven’t used for 6-plus months, think about getting rid of it. You could donate, sell, or trash it.

Are there services like that health club membership you no longer use? Either cancel them or call the providers to see if you can get a better deal.

Think about side hustles or what you could do to earn extra money. We understand that Uber and Lyft can be good ways to do this, and that driving for Jimmy John’s can mean big money.

Look for things you can automate. Do you have an expense tracking app? Two of the best of these are Mint and Toshi. How about your bank? Does it offer options you have not yet used like automatic bill paying?

Finally, check out your investments to see if they need rebalancing. If you have not yet started investing, get to it.

Why hav a long-term relationship with your money

You don’t want your money date to be a one-night stand. It’s important to create a long-term relationship by doing things like reading money books. Keep in mind that you need to both enjoy and appreciate your money. Choose an activity or an item that you want to spend your money on that will give you a lot of pleasure. You’ll have more money coming so treat yourself to something like new athletic shoes or an expensive dinner with a loved one. It won’t exhaust your checking account if you do it just once a month, and it will enhance your life.

Lastly, pick a money or success goal for the upcoming month. This could be something as small as packing healthy food for your lunch instead of eating out. Or it might be something as big as a new outfit.

In conclusion

Having a recurring date with your money can be a very good thing. It can help you focus on your finances now and set your brain to working on them subconsciously. Your life and your money will thank you.

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.

Trapped in a Quagmire of Debt? Take This Tip to Get Out

April 25, 2017 debtmanagement

If you’re faced with an unmanageable amount of debt, It can affect you emotionally and physically. This is due to the stress related to dealing with those debts. A 2009 Associated Press/AOL health poll found that 27% of people stressing out over their debts had ulcers or digestive tract problems. A total of 44% reported they had migraines or other headaches, while 29% suffered from severe anxiety.

If you’re experiencing one of these physical problems, drugs probably won’t help. You need to get to the root of the problem, which is your debts.

Fortunately, a fairly simple path out of your debt exists. It’s called consumer credit counseling.

How to find a good credit counseling agency

Reputable credit counseling agencies generally belong to the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). Some are actually sponsored by local Better Business Bureaus.

How it works

Reputable, credit counseling agencies are nonprofits. If you go to one of these agencies, you will need to take your household budget (if you have one), and a list of your debts with each one’s interest rate. You will also need to take a list of the debts you are behind on, your assets and what you could sell them for.

The agency will assign you a trained and certified credit counselor who will go over all this information. She or he will review your budget to determine if it’s realistic, and may suggest improvements or additional cuts. Your counselor will also show you a realistic picture of where you stand financially and may suggest you revise your budget to generate more cash flow.

You could get a debt management plan

If your counselor finds that your finances are in really bad shape, he, or she may suggest you pay them off via a debt management plan (DMP. If this happens, he or she will explain how a DMP works and will discuss its pluses and minuses. You should also be given a general idea of how much you will be required to pay on your debts each month.

It will work with your lenders

Your counselor will figure out exactly how much you can afford to pay your unsecured creditors each month to eliminate your debts over a three- to five-year timeframe. She or he will then contact your lenders to see if they will agree to let you pay those amounts. Your counselor will likely ask your lenders for other concessions like lowering your interest rates, and waiving or reducing any fees you owe.

Before signing off on your DMP

When your counselor has prepared the final version of your debt management plan, be sure to get a copy. Don’t sign your DMP until you have read it very carefully, understand it all, and are sure you can live up to it.

Paying the credit counseling agency

Once you sign off on your DMP, you will be required to pay the credit counseling agency each month, and it will then distribute the appropriate amounts of money to your lenders. You will get regular monthly updates as to the status of your DMP, and this should include confirmation that your creditors were all paid per the terms of your plan.

What consumer credit counseling agencies cost

The advice and counsel you’ll get from your credit counselor will be free. However, if you sign up for a debt management plan, the agency may charge you a small monthly fee of $25 or $35 to administer your plan. Or, it may do it free. This varies among credit counseling agencies. Be sure to ask if you will be charged anything to administer your plan before you sign off on it.

Alternatives to consumer credit counseling

Good alternatives to consumer credit counseling exist but whether they would make sense will depend on your financial situation. For example, if most or all of your debt is credit card debts, you might consolidate them by transferring all of their balances to a new card with a lower interest rate. Or, if you qualify, you could transfer them to a 0% interest balance transfer card, where you would have as many as 18 months interest-free.

Other options for debt consolidation include a home equity loan and a homeowner equity line of credit. Of course, you would need to have equity in your home to qualify for either of these loans.

Debt settlement

Finally, there is the alternative of debt settlement. It’s grown a lot in popularity as it represents the only way to pay off debts for less than what you owe. The trustworthy debt settlement firms such as National Debt Relief are usually able to get debts cut by as much as 50% or even 60%. Of course, they are for-profit firms and charge for their services. However, if you owe more than $10,000, then using a debt settlement firm could still save you money.

The Best Debt Management Tips of 2017

April 18, 2017 debtmanagement

Being deeply in debt can skew your entire financial life. If your problem with debt becomes serious enough, it will affect your credit score. In turn, this can mean higher interest rates, higher insurance premiums, and even problems renting a house or apartment. What debt amounts to is borrowing from your future self, and your future self could end up being very disgusted with you due to all that debt you now have to pay off.

Ignoring your debts won’t make them go away any more than ignoring a bad tooth will make it go away. You need to take steps now to do a better job of managing your debts, and here are eight tips that could help.

1. Pay down your debts sooner

The easiest way to get out of debt is to pay down your debts quicker. Are you making just the minimum payments on your credit card debts or other revolving debts? Try doubling down on as many of them as you can, or at least paying significantly more than the minimum. In addition, if you pay half your monthly bill every two weeks, you’ll be making one extra payment over a year, which will help you pay off that debt sooner.

2. Set up automatic payments

You should be able to set up automatic bill pay through your bank. If not, you will need to go to your individual lenders, and arrange automatic payments through them. Automatic bill paying accomplishes two things. First, it eliminates the possibility of missing a payment. And second, it relieves you of the burden of having to remember when your payments are due.

3. Make a budget

Trying to manage your finances without a budget is like trying to assemble an IKEA desk without the instructions. You may get the job done but only by luck. If you truly want to do a better job of managing your finances, you need to create a budget or at least a spending plan. One of the simplest ways to budget is to divide your net income into three categories. The first should be your essential expenses (think utilities, rent, or mortgage payment, etc.). This should be 40% of your net income. The next 30% should be your savings. The final 30% is for your discretionary spending or the fun things in life.

4. Pay off the debt with the lowest balance

This is called the snowball method. The financial guru Dave Ramsey introduced it.. The psychology behind this is that you should be able to pay off the debt with the lowest balance very quickly. This will give you momentum (as well as more money) to pay off the debt with the second lowest balance, and so on. It’s like how a snowball rolling downhill gathers momentum.

5. Understand your limits

Maxing out your credit limits can do serious damage to your credit score. Keep the balances on your credit cards as low as possible. If you can keep their total below 30% of the total amount of credit you have available, your credit score will improve. And, of course, always make your payments on time.

6. Check your credit reports

You can get your credit reports free once a year from the credit reporting bureaus – TransUnion, Experian, and Equifax. Or you could get all three simultaneously on the site www.annualcreditreport.com. The reason to keep an eye on your credit reports is to spot errors that could be dragging down your credit score. Many people choose to get a free credit report every four months. This is a way to kind of monitor credit year-round, without having to pay a credit monitoring service.

7. Create an emergency fund

You can never know when you’ll run into a financial emergency, but you can bet you’ll have one. You could lose your job, your automobile could require an expensive repair, or you could suffer a serious illness. The only way to buffer yourself against one of these emergencies is to have an emergency fund. While many experts feel your fund should be the equivalent of six months’ of your living expenses, most people find this undoable. If you fall into this category, try for at least three months’ worth.

8. Stop using your credit cards

Unless you’re paying off your balances at the end of every month, using your credit cards means piling on more debt. So, stop using them. Try to pay cash for all your purchases. If you don’t have enough cash to pay for something, don’t buy it. We understand that takes a serious amount of self-control, but it’s the only way to keep from adding on debt. When you stop using your credit cards be sure continue making your monthly payments, This will improve your credit utilization rate, and will help your credit score.

In summary

Here were eight tips that could help you better manage your debts. If you don’t feel you can implement all of them this month, at least pick a couple and try to use them. Doing something is better than doing nothing – especially when it comes to your debts.

Four Signs You Have a Serious Problem with Debt

April 4, 2017 debtmanagement

Have you thought much about your debt lately? The thing about debt is that it can creep up on you. You charge a couple of lunches here, a new coat there, and then an overnight stay at a nice hotel. You haven’t paid any attention to what these charges are doing to your total debt. Why not continue to ignore it?. After all, what you don’t know can’t hurt you, right?

Wrong.

Trying to ignore your debt is like trying to ignore your shirttail relations. Neither is going to go away and in the case of debt, things are only going to get worse.

Are you in serious trouble with debt?, Here are the signs to look for.

Your debts are growing

If your debts are not shrinking, the odds are they’re growing. As painful as it might be, you need to add them up, and then compare this total with where you were A month ago and two months ago. If you find your debts are increasing, there’s one simple reason. Your spending more than you earn. Fortunately, there’s an easy fix for this. You need to either find ways to increase your income, or you need to reduce your spending.

You’re getting hit with late payment fees

Late payment fees mean you’re not paying your bills on time. This is a sure sign that you’re having a problem with debt, plus it’s costing you money. Let’s say you’re being charged a late fee of $25 on your credit card payments. While that may not seem like much, it can add up over time. Get more than 180 days behind on a payment and you’ll be in default. The odds are that your lender will then sell your debt to a collection agency, which is something you definitely don’t want to have happen.

You have a “bad” credit score

Have you checked your credit score recently? If not, you absolutely need to. You can get your score free on-site such as CreditKarma.com or CreditSesame.com. You could also get it from one of the three credit reporting bureaus – Experian, TransUnion, and Equifax. If you find your score is below 600, you have at best a “poor” credit score. This is costing you money in the form of higher interest rates and higher insurance premiums. It’s also a big sign you’re having a problem with debt.

You live from paycheck to paycheck

When you’re two or three days away from a paycheck, do you wonder if you have enough money left in your bank account for a drive-through latte? Do you have to postpone having lunch with a friend because you’re close to flat broke? This means you’re living from paycheck to paycheck, and that’s never a good thing. It’s not only a sign you’re having a serious problem with debt, but it’s also just no way to live.

What happens if you pay off your debt?

Paying off your debt can be an amazing stress reliever. For that matter, the stress related to dealing with your debts can actually cause you to experience physical problems.

When you pay off your debt, you’ll no longer be required to pay interest fees and late charges. A second important benefit is that this frees up your future income. Whether you’ve thought of it this way are not, when you create debt you’re borrowing money from your future self. Stop running up debt, and you’ll have more money in the future and probably a better life.

Once you get your debt paid off, you should be able to use the money you now have to create an emergency fund. Most experts say your fund should be the equivalent of six months’ living expenses. However, that’s just not doable for most people. Try for three months of your net income instead. If even this seems out of reach, try to save at least $1000. Do this and you’ll have money available to help in the event you become ill, lose your job, or the transmission in your car falls out.

Finally, when you pay off your debt, you’ll have money to invest or to save for retirement. If your company’ offers 401(k), be sure to participate. If not, open either a traditional or Roth IRA and start socking money into it. If you have money left over after this, invest it in something safe like a low-cost index fund, and then never touch it.

In summary

If you find you are seriously in debt, you need to go to work and get rid of it. It’s not only the best thing you can do for your future self, it’s an easy way to get a raise without having to wait for your employer to give you one.