Credit card balances are crippling households across the United States, giving them insurmountable debts that just keep on growing and never seem to go away. But there is some good news, as this problem has spawned a multitude of debt relief options, one of which is a credit card balance transfer. Balance transfers are a […]
Credit Card Balance Transfers is a post from Pocket Your Dollars.
When you have an international credit card, you can use it both in your home country and abroad. Itâs not uncommon to come across businesses abroad that only accept native currency. Thatâs when an international credit card comes in handy. If you want to avoid the hassles of carrying cash or travelerâs checks everywhere you… Read More
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Are you stressed by an income reduction? Try these budgeting tips to survive a pay cut and thrive during this challenging time.
The post How to Handle a Pay Cut: Budgeting in Uncertain Times appeared first on Discover Bank – Banking Topics Blog.
Here are some of the tried-and-true methods, along with benefits unique to each approach.
See dentists and doctors regularly
No one likes medical surprises in the form of emergency dental or medical attention. Working adults who neglect doctor and dentist visits are taking serious risks.
Living right and staying healthy means getting the medical attention you need, and getting it routinely. Especially after the age of 50, it's smart to have a full medical exam once per year. There's a reason medical coverage typically reimburses in full for annual check-ups and twice-yearly dental exams. Carriers would much rather pay for a relatively inexpensive wellness exam or check-up than fork over a sizable sum of money for long-term treatment regimens that could have been avoided with preventive care.
Buy life insurance
Purchasing life insurance does two very important things. First, it allows you to provide for your family's financial needs after you're gone. Second, if you get permanent coverage, like a standard whole life policy, you can sell it if you ever need money in an emergency, or for any reason at all.
There's genuine peace of mind that comes with knowing your loved ones are protected from financial stress after you pass away. And if you face unexpected bills and need a ready source of funds, you can simply go online and get several estimates on the sale price of your whole life policy.
The process is fast and simple. Plus, when you sell your life insurance policy, the only amount of the proceeds that are taxable are those that exceed the tax basis (the total amount of premiums you've paid to date). Selling can be a very wise move, too—often, when one spouse passes away, when there's a dire need to pay unexpected medical or other kinds of bills, or the premiums become too high.
Learn how to relax
Stress has the potential to cause medical problems, but it also can make you miserable. The good news is that there are effective ways to beat stress and minimize its effects. Learning to meditate or taking part in guided relaxation sessions are two popular strategies. Regular exercise, stretching, and yoga are other choices that many people find satisfying for keeping stress at bay.
Get enough sleep
When you get between seven and nine hours of sleep per night, it's much easier to wake up refreshed and feeling good every morning. Having the inner calm and physical relaxation that comes with regular, restful sleep means being able to take on the day with a positive outlook and a body that's ready to withstand 16 hours of activity. When you realize that sleep is part of your lifestyle, it's easier to make a commitment to get the amount you need.
Know what PMA stands for and learn to have one
There's an entire industry based on the concept of PMA, or positive mental attitude. Classic books about winning friends, influencing people, and simply thinking in order to grow rich point to the immense power of the human mind.
Of course, maintaining a positive attitude is easier said than done. It takes effort, patience, and persistence. But once you decide to cultivate a PMA, you're already finished with the first step of the journey. The upside is that there are hundreds, perhaps thousands, of books and no-cost online videos about how to create a positive outlook and attitude. The rewards are measurable and real and include things like being able to sleep more soundly, handle life's challenges more adeptly, and find solutions in the face of adversity.
Eliminate the negative
As the classic tune from the 1940s suggests, it helps to eliminate the negative and accentuate the positive. Those timeless words of wisdom contain some potent advice. One way to make your life better is to say goodbye to destructive, negative forces, habits, and ways of thinking.
What does that mean for everyday people who seek self-improvement? It means they have plenty to gain from banishing harmful behaviors like smoking, drinking too much alcohol, taking part in dangerous sports like cliff diving, base jumping, and amateur race driving.
That's not to say there's anything wrong or with those activities when you do them in moderation and with appropriate safety measures in place. But they carry enough risk to make insurance carriers raise rates or flat out deny coverage to participants. So, if you have the desire to purchase an insurance policy that pays a death benefit to someone when you pass away, steer clear of extreme sports and risky hobbies.
Take the time to plan
Planning, both long- and short-range, gives you options and advance warning about financial and other types of problems. Consider making written, detailed plans about buying a first home, your career path, educational goals, relationship goals, whether you want to have a family or not, long-term care insurance, etc. Planning makes things real and attainable. A lifestyle that incorporates planning is a sustainable, rewarding one.
So, you’ve finally found your dream house. Sure, it may need a little work — okay, a lot of work — but you’re confident it will all be worth it in the end. That is, until your home renovation projects start to go down the toilet (or worse, the toilet starts falling through the floor). Here’s how to know if the home you are considering could be a great investment, or just a great way to empty your wallet. Is A Fixer-Upper the Right Choice For You? The right fixer-upper can be a great investment and a lot of fun. The rise of seemingly simple, yet stylish home renovation television shows has made many homeowners eager to transform rough diamonds into neighborhood jewels. Couple this with the improved job market and an upswing in home values, and you have a tidal wave of homeowners willing to invest in fixer-upper dwellings. In 2018, homeowners reported an average of $7,560 or more on major home improvements, up 17% over the previous year. But that doesn’t mean that these projects always go as planned — not everything gets wrapped up as quickly and neatly as it does on television. The same Home Advisor study shows an average of $416 on emergency spending. What many homeowners believe to be a simple “fixer-upper” can quickly turn into a “money pit,” transforming a dream project into an expensive nightmare. Denise Krogman is a general contractor, designer and co-owner with her husband Rob, at RDK Design and Build, LLC. Krogman knows that whether you’re looking to buy a fixer-upper in the near future or remodel your current home, it’s worth paying attention to what separates a fixer-upper from an endless money pit. The right fixer-upper can be a great investment and a lot of fun. But with every remodel there will be the unplanned, unforeseen incidentals that arise. If it needs more than a little ‘fixing up,’ you could find yourself in the midst of a complete remodel or a total scrap. Fixer-Uppers vs. Money Pits The first step to understanding what makes a home a fixer-upper is defining the term. Generally speaking, a fixer-upper is a house that doesn’t have serious problems and can be quickly and inexpensively refreshed, says Thomas Baker, building technology editor at This Old House. Homeowners who have a big budget, a high level of DIY skills, and plenty of free time may reasonably see any house in deplorable condition as a “fixer-upper.” However, even these skilled, experienced homeowners who are initially excited about a big project may fail to properly plan for a remodel. Without thorough research and planning, many homeowners are likely to exceed their spending limit and wind up with a money pit. Baker separates remodel-ready homeowners into two personas: the visionary and the accountant. A visionary homeowner is someone who is emotionally invested in their property and can tolerate higher expenditures in order to execute their ‘vision.’ He or she isn’t worried about the resale value. An accountant weighs each cost of improvement against the likelihood of getting a return on investment at the time of sale. Ideally, homeowners should strike a balance between these two extremes, taking care not to risk their financial futures with unsustainable expenditures on improvements, but also acting as a steward, putting something back into the house so that future generations can enjoy what it has to offer. A professional home builder, general contractor, or home inspector can help a homeowner assess the condition of the home before breaking ground and help keep a project in line once it’s begun. Having that person come aboard your planning process is a great step to take. But what should they, and you, be looking for when it comes to fixer-upper warning signs? Looking to get started with your dream home project? Check out our guide to the financial documentation and other paperwork you’ll need to begin the home loan process. Fixer-Upper Red Flags If you are committed to buying a home with a few imperfections, how do you know when those imperfections go from fixable to serious deal-breakers? When purchasing a fixer-upper, a homeowner should always look beyond the surface, says Sarah Boardman-Miller, an interior designer and construction consultant. It’s important to distinguish between a home with a lot of “cosmetic” needs, as opposed to those that need major (think structural) overhauls. Depending on the ‘fix-up’ budget, one can look past a dated or poorly laid out kitchen or bath. I like a house that has not been touched. It might be dated and original everything, but these are usually good houses. Do your homework. Was the previous owner there for 40 years? Is it clean? Well-kept? When most people watch the [TV] shows, so much of the process is cosmetic … from new cabinets, to counter tops, lighting and tile. Often homes are simply outdated, are decorated in poor taste, or just in need of a little TLC. Cosmetic fixes can be quick and cost-effective, and completely change the look of the house. That being said, homeowners should stay on the lookout for any red flags. Both Krogman and Boardman-Miller say foundational issues, roofing repairs or replacement, and electrical or plumbing problems may require “gutting,” which can send a home remodeling project into an expensive tailspin. Krogman adds that her team is careful about homes that need footprint changes, such as the removal or addition of walls or entire rooms. It’s best if the changes are minor. To avoid any surprises, it’s important to invest in a thorough home inspection, says Krogman. Always request an inspection from a highly reputable company. It’s worth the extra expense. Be sure to ask a lot of questions and get documentation. When was the roof last replaced? Have there been any electrical or plumbing fixes? If there was any previous remodeling done, was it done by a reputable general contractor? And look for cracks in the foundation, sinking sidewalks, water spots or damages in the drywall. Those fixes or changes are rarely minor and can become quite costly. Frank Lesh, an experienced home inspector who works for the certifying agency American Society of Home Inspectors, has two potential problems he wants homeowners to check for within their possible fixer-upper. First, he says, examine the exterior. Take a look at the big picture. If it’s sitting in a valley, the home may be at risk for water problems. Then I look at the general maintenance of the house exterior. Not whether there’s new paint, or flowers, but if the gutters and downspouts are in good condition and directed away from the house and if the roof is in reasonable shape. Next, inspect for insects. Termites and carpenter ants can gnaw away at the bones of a home. It takes an expert insect inspection to discover the extent of the damage, to check behind finished walls and ceilings and to see if bugs are in the walls and subfloors. A house is made of wood, and that’s what they eat. A good pest inspector can hear them or use infrared to see if they’re giving off heat behind the walls. Manage Your Remodeling Expectations One of the biggest dilemmas homeowners face when dealing with a fixer-upper is managing their expectations. Even when a home remodel is expertly planned, problems may still arise, Boardman-Miller says. It is all about expectations and the ability to roll with what is happening. You have to focus on what needs to be done and cut out the extras that you may have been planning. Be realistic and stay on budget. If you do your homework, you could end up with a fair amount of equity in the finished house and get what you really want. Baker says one of the most important things homeowners can do to avoid these costly issues is research, first into the home purchase process, then into contractors, home designers, and home improvement costs. Find a contractor/carpenter who loves to work on houses and whom you can trust to make good decisions on your behalf. Without trust, these projects can become a nightmare. Take your time. Watch home TV shows, read magazines, talk to contractors, and go to the web to become an expert on the topic [of remodeling]. When homeowners embark on a home renovation the risks are great, but the rewards are even sweeter when everything is well planned and executed, Krogman says. One man’s junk is always another’s treasure, so not only can you benefit financially, but you can give back by creating a beautiful home for your own family, or for someone else. CHECKLIST: Tricks for Separating Fixer-Uppers from the Money Pits Get a thorough home inspection Determine whether improvements are structural or cosmetic Do your research on what you’d specifically like done Talk to your contractor/designer and get a plan in writing Financially prepare for unforeseen issues Manage your expectations and stay on budget How do you know a home’s true value? Get a fast, no-obligation home estimate using our free tool. Getting From ‘Before’ to ‘After’ Without Going Broke At the end of a well-planned remodeling project, you can end up with the home features you want for a lower cost than the amount of equity you gained. It’s also possible that a lack of insight into your process and potential costs could leave you with an underwater (and maybe even unfinished) home, so it’s essential to make sure you know the facts before you swing a single hammer. But don’t let those potential pitfalls scare you away from a great opportunity for a smart investment. Just make sure you follow the checklist above and do the necessary homework to give yourself the best chance to come out ahead of the game. Have you done your research and know of a great home you can benefit from investing in? If you are ready to explore buying your own fixer-upper, take the first step and get pre-approved online or contact a PennyMac Loan Officer today to discuss your options. The views, information, or opinions expressed in this blog do not necessarily represent those of PennyMac Loan Services, LLC and its employees. The inclusion of links to third party sites is not intended to assign importance to those sites or to the information contained therein, nor is it intended to endorse, recommend, or favor any views expressed, or commercial products or services offered on these third party sites, or the vendors sponsoring the sites.
I've received several questions from Money Girl podcast listeners about paying off credit card debt. It's a fundamental goal because carrying card balances come with high interest, a waste of your financial resources. Instead of paying money to card companies, it's time to use it to build wealth for yourself.
7 Strategies to Pay Off Credit Card Debt Faster
1. Stop making new card charges
If you're carrying card balances from month-to-month, it's essential to understand what it costs you. As interest accrues, it can double or triple the original cost of a charged item, depending on how long it takes you to pay off.
The first step to improving any area of your life is to acknowledge your mistakes, and financing a lifestyle you can't afford using a credit card is a biggie. So, stop making new charges until you take control of your cards and can pay them off in full each month.
As interest accrues, it can double or triple the original cost of a charged item, depending on how long it takes you to pay off.
Yes, reining in your card spending will probably require sacrifices. Consider ways to earn extra income, such as starting a side gig, finding a better-paying job, or selling your unused stuff. Also, look for ways to cut costs by downsizing your home, vehicle, memberships, or unnecessary expenses.
2. Consider your big financial picture
Before you decide to pay off credit card debt aggressively, look at the "big picture" of your financial life. Consider any other debts or obligations you should prioritize, such as a tax delinquency, legal judgment, or unpaid child support. The next debts to pay off are those already in default or turned over to a collection agency.
In many cases, not having a cash reserve is why people get into credit card debt in the first place.
Assuming you don't have any debts in default, focus your attention on your emergency fund … or lack of one! I recommend maintaining a minimum of six months' worth of your living expenses on hand. In many cases, not having a cash reserve is why people get into credit card debt in the first place.
3. Make more than the minimum payment
Many people who can pay more than their monthly minimum card payment don't do it. The problem is that minimums go mostly toward interest and don't reduce your balance significantly.
For example, let's assume your card charges 15% APR, you have a $5,000 balance, and you never make another purchase on the card. If your minimum payment is 4% of your card balance, it will take you 10½ years to pay off. And here's the worst part—you'd have paid almost $2,400 in interest!
4. Target debts with the highest interest rates first
Make a list of all your debts, including credit cards, lines of credit, and loans. Include your balances owed and interest rates charged. Then rank your liabilities in order of highest to lowest interest rate.
Getting rid of the highest interest debts first saves you the most.
Remember that the higher a debt's interest rate, the more it costs you in interest per dollar of debt. So, getting rid of the highest interest debts first saves you the most. Then you can use the savings to pay more on your next highest interest debt and so on.
If you have several credit cards, evaluate them the same way—tackle them in order of highest to lowest interest rate to get the most bang for your buck. And if a credit card isn't the most expensive debt you have, make it a lower priority.
In general, debts that come with a tax deduction such as mortgages, home equity lines of credit, and student loans, should be paid off last. Not only do those types of debt have relatively low interest rates, but when some or all of the interest is tax-deductible, they cost you even less on an after-tax basis.
5. Use your assets to pay off cards
If you have assets such as savings and non-retirement investments that you could use to pay down high-interest credit cards, it may make sense. Just remember that you still need a healthy cash reserve, such as six months' worth of living expenses.
If you don't have any or enough emergency money saved, don't dip into your savings to pay off credit card debt. Also, consider what you could sell—such as unused sporting goods, jewelry, or a vehicle—to raise cash and increase your financial cushion.
6. Consider using a balance transfer card
If you can’t pay off credit card debt using existing assets, consider optimizing it by moving it from higher- to lower-interest options. That won’t make your debt disappear, but it will reduce the amount of interest you pay.
Balance transfers won’t make your debt disappear, but they will reduce the amount of interest you pay.
Using a balance transfer credit card is a common way to optimize debt temporarily. You receive a promotional offer during a set period if you move debt to the account. By transferring higher-interest debt to a lower- or zero-interest card, you save money and use it to pay down the balance faster.
7. Consolidate your high-rate balances
I received a question from Sarah F., who says, “I love your podcast and turn to it for a lot of my financial questions. I have credit card debt and am wondering if it’s a good idea to get a personal loan to pay it down, or is that a scam?”
And Rachel K. says, "I love listening to your podcasts and am focused on becoming more financially fit this year. I have a couple of credit cards with high interest rates. Would it be wise for me to consolidate them to a lower interest rate? If so, will it hurt my credit?"
Depending on the terms you’re offered, using a personal loan can be an excellent way to reduce interest and get out of debt faster.
Thanks to Sarah and Rachel for your questions. Consolidating credit card debt using a personal loan is not a scam but a legitimate way to shift debt to a lower interest rate.
Having an additional loan added to your credit history helps you build credit if you make payments on time. It also works in your favor by reducing your credit utilization ratio when you reduce your credit card debt.
If you qualify for a low-rate personal loan, here are some benefits you get from debt consolidation:
- Cutting your interest expense
- Getting a fixed rate and term (such as 6% APR for 60 months with monthly payments of $600)
- Having one monthly debt payment
- Building credit
A couple of downsides of using a personal loan to consolidate debt include:
- Being tempted to continue making credit card charges
- Having potentially higher monthly loan payments (compared to minimum credit card payments)
While it may seem counterintuitive to use new debt to get out of old debt, it all comes down to the interest rate. Depending on the terms you’re offered, using a personal loan can be an excellent way to reduce interest and get out of debt faster.
What should you do after paying off a credit card?
Credit cards come with many benefits, such as purchase protection, convenience, and rewards. Don't forget that they're also powerful tools for building credit when used responsibly. If maintaining good credit is one of your goals, I recommend that you keep a paid-off card open instead of canceling it.
You don't need to carry a balance from month to month or pay interest on a credit card to build excellent credit.
To maintain or improve your credit, you must have credit accounts open in your name, and you must use them regularly. Making small purchases charges from time to time that you pay off in full and on time is enough to add positive data to your credit reports. You don't need to carry a balance from month to month or pay interest on a credit card to build excellent credit.
To learn more about building credit and getting out of debt, check out Laura’s best-selling online classes:
- Build Better Credit—The Ultimate Credit Score Repair Guide
- Get Out of Debt Fast—A Proven Plan to Stay Debt-Free Forever