Posts tagged debt
BillFloat Pays Your Bills When You Can’t [Personal Finance]
Aug 23rd
If money’s tight and you need a little extra time to cover a bill, service Billfloat can take care of it for you and you can pay them back later. More »
5 Loan Options for Those With Good Credit
Aug 20th
One of the nice things about having good credit is the ability to secure funds for a variety of reasons and through a variety of channels. The hard part is figuring out the best types of loans that will help you maintain your good credit rating while still getting you the money you need to accomplish your goals. Having excellent credit will allow you to have your pick of cheaper loans with potentially higher limits. If you’re in any need of financing, here are a few suggestions where you can seek out credit lines:
Credit Cards
So you’ve worked hard to make sure your credit remains clean. Even in this difficult credit climate, it should still be relatively easy for you to use credit cards. However, credit cards may not be the best option for financing because revolving credit is costly and is easily abused. When utilizing a credit card to make purchases or to cover an emergency, it is always best to plan to pay your bills in full by the end of the month to avoid having to pay expensive interest charges. Refrain from making any unnecessary purchases on credit cards even if you’re faced with cards that sport 0% intro APR rates. The temptation to only pay the minimum payments on the debt is high, and there’s that possibility to pile on the debt over time. Use your plastic wisely. If you want to place a limit on your spending or want to avoid taking out debt but want to enjoy the convenience of using plastic, then why not turn to prepaid debit cards instead?
Peer to Peer Loans
A relatively new way to borrow is by taking out a peer to peer loan. It’s a form of personal loan that you can apply for through a peer to peer lending network like Lending Club or Prosper. You can simply sign up to become a member of the network and find out if you’ll be accepted as a borrower. The service requires that you have a fairly strong credit history and a credit score of at least 680. Lenders who are also members of the network will have the chance to review your loan specifics to determine if they are willing to fund your loan. Here’s more on how to apply for such a loan.
Cash Out Refinancing
If you have existing debt, then here’s an option to consider. If you have equity in your home, one of the best ways to get yourself out of debt is to refinance your home and take cash out. The interest rates on a primary mortgage are far lower than on any other type of loan product available on the market today. Plus, there are no restrictions on how you use the money. You can pay off other debt, remodel your home or whatever else tickles your fancy, but since you’re taking equity out of your home, make sure that the debt you’re taking is worth the loss in equity and the additional interest you’ll be paying.
Personal Loans
Borrowers with good credit can secure a personal loan or a signature loan from their banking institution. This is an installment loan, just like a car loan, except that the funds are dispersed to you instead of the car lot. If you meet the credit thresholds for your lender, your loan will be secured by only your signature and your vow to pay them back, which is nice if unforeseen circumstances make paying back the loan difficult.
Home Equity Line of Credit (HELOC)
If refinancing is out of the question for you, or just the mere thought of starting over on a 30-year mortgage turns your stomach, then you may want to consider taking out a home equity line of credit, or HELOC. This loan product is commonly known as a second mortgage because it uses the value of your home to determine what your credit line will be and places a lien against your home, just like your primary mortgage, to protect the lender against default. As with a refinance, a HELOC offers the homeowner a pool of funds at a great interest rate and does not require the money to be used for a specific purpose.
However, you should be very careful about taking out this type of loan. Having a HELOC adds another payment to your budget every month and may put your home at risk if you have trouble keeping up with payments. Remember that your house is used as collateral, so be careful when going down this route. Also, the funds are only available for a specified amount of time, known as the draw period. After that, you’ll have to start paying back the loan and may no longer have access to your pool of funds.
These are just a sampling of loans you can obtain when you have good credit. The bottom line here is that if your credit record is in great shape, then you have a lot of options for financing. Whichever method you choose, make sure that you approach the process with care. Don’t bite off more than you can chew: Only borrow what you can comfortably pay down over time.
I Am Doing Well Financially. Now What?
Aug 17th
"Eventually, you can afford to better your life."
You’ve worked hard all your life, saving up while making sensible decisions about your finances. You built a sizable nest egg and is currently in a stable job, earning doodles of money.
Now what?
If you’ve been reading personal finance literature for a while, you might have thought that you live amongst a bunch of money slaves. And who could blame you? We talk about saving, getting out of debt and never spending a dime more than our fair share of the time. Sometimes it seems there are no other pastimes than checking our bank balances.
But what if, after years of saving, you are actually on track for a comfortable retirement? Is there anything you can do to make your life just a little bit better?
The answer, of course, is yes. Here are a few suggestions, and while this is by no means a comprehensive list (nor something you might want to do), it will get you started on the right track.
Go on that vacation.
Quite a few of you already go on vacations every once in a while, but I know of too many people who are always stuck in their hometown using staycations as an excuse for their laziness in organizing a trip somewhere fun. Experiencing different cultures could be a life changing event. If you are worried your new passion may cost too much, here are 50 ways to save money on your travels.
Start hiring.
Strong entrepreneurs understand the importance of getting help for their businesses, but few apply the same concepts to their everyday lives. With the internet these days, you can pretty much find someone to do virtually anything you ever want for a small fee.
Do you not like to clean the house? Find a house cleaner. Can't cook? Look for a chef that will come to your house. You can even find people to sort through mail for you. It's amazing how much better life could be if you pay a bit of money for someone else to do what you hate. This whole "expense" may sound ridiculously to you, but when you are happy, you may spend less on stuff, or you might end up being more energetic at work and get a promotion! After all, it's your money, and your choice!
Give them that 1%.
You may think that more money will make you feel richer, but chasing a number is really a never ending game. Feeling rich is all about not worrying about money, and one way to do this is to hire a financial adviser who will worry about your money for you.
Now, this isn’t as easy as it sounds of course. It takes considerable effort to find a competent individual who is at least somewhat interested in helping your finances. But once you find that person you can bond with and trust, they are worth every penny he/she will charge for managing your assets.
All wealthy families have wealth managers. If they are willing to pay a much higher amount than you for the same privilege, shouldn’t you at least consider the same?
Change careers.
Finding another job, especially in this economy, might sound drastic. But if you can afford it and you aren’t happy at work, perhaps this is the best advice anyone could ever give you. For most of you, 40+ hours feeling miserable every week is just way too much! If you can find another job that you can be passionate for, even if it pays less, why not?
Think of it as an expense. You buy something because it makes you happy. How much is working in a happier environment worth to you?
Look. Everyone’s situation is different, so it’s hard for general advices to always make sense. All I ask is for you to look, think about the pros and cons and make a conscious decision. If you can practice that all the time, you are well on your way to financial freedom. [Click Here to Find Out Why You Don't Need $12 Million to Retire]
Debt Repayment Is a High-Interest No Risk Investment [Debt]
Aug 13th
The best debt is no debt. When you find yourself with some hanging over your head, however, repayment is the best “investment” you can make. More »
6 Great Reasons for Paying off the Mortgage on Your Home
Jul 29th
Should you pay off the mortgage on the home you are living in? Mortgage interest rates are at historic lows and a fixed rate mortgage seems to be a deal of a lifetime right now, so why would anyone pay it off? Here are six reasons why paying off your mortgage is still worthwhile in the current economic climate.
A Mortgage Is a Cost
Even with a tax deduction, the interest you pay on a mortgage is still a cost. I don’t think it makes sense to continue to sending the banks interest just so that the government returns a little portion of it back to you. It is really only a great deal for the bank if you keep your mortgage for its full term.
Cash Flow
One reason many people do not pay off their mortgage is that the extra money you put into your house isn’t as liquid as cash sitting in an account. However, once the mortgage is completely paid off, you will free up the amount of money you used to send to the bank. That money can be saved or spent on other things as you wish.
High Investment Returns Are Rarely Guaranteed
I know that many folks would argue that today’s low interest rate mortgages mean that you can use the money to invest and earn a yield higher than the mortgage. However, it is fairly impossible to find a guaranteed investment that pays more than the average mortgage rate right now. Money markets are yielding near 0%, and the stock market is quite volatile and has long periods of stagnant or negative return as we have seen in the past decade. Basically, there is no guarantee that you will beat your mortgage rate with your investments.
Security Against Income Loss
If you have a paid off home, then you are much better insulated against income or job loss because you do not have that liability every month. Many people take 30 year mortgages these days, but how many people actually have a job guarantee for 30 years? My guess is that most of us will go through a period of reduced income in three decades. The sad thing is that if the mortgage isn’t paid off then the bank could take back the home after three or four missed payments even if the homeowner has been paying on time for years.
Home Equity Is Accessible
One argument against paying off the mortgage is that money put into a home is illiquid. This is true to an extent. There are ways to release the home equity as long as you have equity in the home. Home equity lines of credit are relatively cheap compared to credit cards, and seniors can opt to take a reverse mortgage. It usually costs some money to release the equity in your home, but it is possible to still live in the home if you really needed to tap your home equity. For some people, the fact that home equity is less liquid is actually a good thing because they would be less likely to spend it. I think of home equity as an emergency fund, and it should only be tapped when absolutely necessary.
Debt Is Bad During Deflation
Although mortgage rates are near historic lows right now, I think that deflation is a possibility in the near term. In the face of deflation any type of debt is getting greater in real terms. Basically, your wages will probably decrease in the current economy while your debt is just as large or grows even larger. It is better to retire the mortgage or be a renter in the face of deflation.
Although I completely understand that it is possible to keep a mortgage on your home and then make a profit on investing, I feel that it is a gamble on your residence. The stock market has had long terms of zero or negative growth so unless you have a guaranteed investment that pays more than your mortgage rate, then it is probably best to retire that debt once and for all. Once you are free from a mortgage you will actually be a homeowner, and no longer a homedebtor.
The Real Damage Calculates the True Cost of a New Purchase on Your Credit Card [Personal Finance]
Jul 19th
Webapp The Real Damage calculates the true price of adding another purchase to a credit card that’s already carrying a balance. More »
Mint Goals Attaches Real-Life Plans to Your Accounts [Personal Finance]
Jun 30th
Mint.com has always offered a great view of your money, but you made the call on where it all went. The free webapp’s new Goals section bridges the gap, offering smart tools for setting up plans and attaching accounts to them. More »
Freedom from the Day Job
Jun 24th
Would you work if you didn’t have to? When that topic came up among coworkers the conversation used to go at cross purposes, until I figured out that I needed to start by explaining that my work was my writing. The point of freeing myself from from my day job was to be able to do more work, not less.
Understanding the question correctly depends on using the word "work" correctly. When I use the word, I'm thinking in the sense of a work of art or literature or science or engineering. Used properly, the word "work" refers to the stuff that you do that's worth doing. Who wouldn't want to do that?
Too many people, though, use the word "work" to mean what they do at their job, especially if it's tedious or unpleasant. They use "work" to mean flushing their life away in 40-hour increments in exchange for enough money to keep a roof over their head, put food on the table, and buy the occasional electronic gadget to distract them from how miserable their lives are.
If that’s what you think work is, then it’s no surprise to imagine that no one would do it unless they had to.
If you think that way, then there's a certain perverse logic to the way people are guided toward debt—student loan, car loan, mortgage. There are plenty of people out there—even Wise Bread readers—who aren't at all sure that most people would do any work, if they didn't have debts to pay off. If most people could cover their bare minimum expenses without a day job, who knows what they might do?
I don’t know about you, but I’d like to find out.
Are Your Financial Habits Just Bad?
Jun 22nd
I own one of those electric toothbrushes, and I brush my teeth for the full two minutes that the manufacturer suggests. This is easily accomplished, because the unit comes with a timer, which tells you when 60 seconds have elapsed. It even sends me an indication every 30 seconds so I can further divide the time to brush the four areas of my teeth evenly. I love the idea, but I realize that it's got a flaw — a pretty big one actually. You see, I always start with the top left hand corner, and go clockwise. Without knowing, I always exposed the ones in the top left the most toothpaste, and the bottom left the least. Sorry bottom left!
Another example involves cutting cakes. I always start out with huge pieces, and progressively cut smaller and smaller because I continually overestimate how big each slide should be. My engineering friend once told me that a circle has 360 degrees, so if you want to evenly cut any number of pieces, you just divide 360 by the number of pieces…never mind. This is a personal finance article actually. Way off topic!
Do you do this with your finances?
Luckily, this is never a problem with my finances. I don’t ever run out of money a few days before my next paycheck, and I never spend more on the Friday that paychecks come. Disclaimer: I am a business owner and don’t receive regular paychecks anymore. But I never had this problem even when I was a salaried employee either.
There are a zillion reasons why this situation hasn’t happen to my finances, but here are five few major ones worth discussing.
1. I am conservative.
I am generally a careless person and thus take big risks every once in a while without knowing simply because I haven’t thought it through and went ahead to take action anyway, but I definitely try to be conservative at most times. I’m definitely a saver, and that helps me build a big enough cash reserve that weathers any emergencies.
[Click Here for Six Neat Ways to Build an Emergency Fund]
2. I live below my means.
It’s simple math. If you always live below your means, then you will never run out of money. The excess is saved, which helps give me comfort that even if something were to happen to my business, my family will be okay.
3. I am a simple person.
Simplicity is not only beautiful but inexpensive to maintain. If you like simplicity, you don’t like to accumulate stuff. If you like simplicity, you don’t need to buy six different machines that does a similar job. If you like simplicity, you will simply spend less.
4. I love my work.
Enjoying my work as much as anyone would a hobby allows me to spend more time on it than anyone could in a 9-5. When you are thinking about your business all the time, you just don’t have much time to think about spending, even if you just got the biggest check ever.
[Find out why a recession is a great time to start a business.]
5. But most importantly, I am happy.
There was a time when I was buying way more than I do now. Eventually, I realized that I was trying to fill an emotional need by making purchases when the root of the problem was simply because I just wasn’t happy. I am now happily married and my wife just gave birth to our beautiful girl named Sara. My life is predictable, in the best possible way.
How about you?
There really is no need for me to spend much and money is not really a concern anymore. But how about you? Do you worry about money? Do you find a need to spend more as soon as your paycheck arrives? Why do you think that’s the case?