Reasons Many People Stay in Debt

Why People Stay in DebtWhy People Stay in DebtDebts are sometimes inevitable in life. For most people, it would be next to impossible to own a home, a car, pay bills or even get an education without credit. Federal Bank of New York released a report that put household debt and credit at $13.29 trillion in the second quarter of 2018.

Do people end up repaying all these debts? Unfortunately no; many people are up to their necks in debt and quite a large number of them are doing nothing towards repayment. There are numerous reasons why many people stay in debt. Here are several:

Living Beyond Means

This simply means that you are spending more than you are bringing in. If what you are earning cannot comfortably cater for house and car payments, insurance, other fixed costs and house expenses, then you cannot afford that kind of a lifestyle. It is even worse if you freely use your credit cards to pay for what your income cannot support. What happens is that debts start accumulating and accruing interest month after month and before you know it, you are swimming in debt with no way to escape.

Spending Without a Budget

According to a recent study, only 41% Americans use a budget. This means that most people cannot track their spending habits leave alone plan for the future. Without a budget and with several credit cards at your disposal, it is easy to spend your money uncontrollably and end up depending on credit as you wait for the next pay. The repeated cycle leads to failed repayments which consequently increases the outstanding debts.

Job Loss or Reduced Income

Having a job gives you the confidence to use credit knowing that your income is able to cover the repayments. Should you unexpectedly lose the job, it becomes impossible to make your repayments which may also attract additional interests and penalty fees. Even if you end-up getting another job, it is possible that your credit card debts will have soared to levels that you may no longer sustain. Similarly, a pay-cut or reduced income may also make you lag behind on your repayments leading to accrued debts.

Unwillingness to Sacrifice

If you are deep in debt and you still fight to maintain the same life style, chances are that you will never repay your debts or worse still, they will keep increasing. The ability or inability to save for debt repayments may depend on your willingness to forego a few things like holidays, cable, birthday gifts, a big house and a luxurious car among others. The question is; are you willing to make the sacrifice?

Struggling to Keep up Appearances

It is just human nature to want to fit into certain statuses set by the society, family, friends etc. In an effort to fit, you may end up spending beyond what you can sustain with your income. Unfortunately, the demands may keep going higher and higher and unless you can tell yourself to stop, you will be up to your neck in debt within no time. The fact that you are keeping up appearances means that things are not good financially in the first place so unless you win a lottery or come into some huge cash, you will stay in debt for a long time.

Financial Illiteracy

In a quest to understand how financially literate the world is, people were asked 4 simple questions regarding risk, inflation and interest. Out of 150,000 adults from over 140 countries, only a third could answer 3 out of the 4 questions correctly. If you have no idea of how credit works, you keep on making mistakes that will increase your debts in the long run. Such include; late repayments, carelessly requesting for credit top-ups, and falling for the wrong lines of credit among others. This also comes with the inability to manage the credit hence leading to heaps upon heaps of debts.

Final Take

While it is normal for people to find themselves in debt at some point or another, not all of them end up paying. The reasons why many people stay in debt range from genuine ones to outright selfish ones. Debt accumulates little by little and before you know it, you are too debt ridden to do anything about it. On the other hand, with proper planning, a little sacrifice and commitment, it is possible to disentangle yourself from the debt cycle one step at a time.

Source: creditabsolute.com

Amazon Prime Day 2021: How to Get the Best Deals

In typical years, Amazon Prime Day falls in mid-July, perfectly placed to interrupt the midsummer retail doldrums.

But 2021 is not a typical year.

The ongoing COVID-19 pandemic continues to disrupt global supply chains in an echo of 2020 when Amazon temporarily refocused its energies on essential business lines like food and personal care products. Prime Day 2020 didn’t happen until October, ahead of a nasty second wave of the pandemic that upended global trade again.

To complicate things further, the arrival of reliable vaccines in early 2021 spurred millions of Americans to make ambitious summer plans. Many people who’d normally jump at the opportunity to capture once-a-year deals in July might not be anywhere near a computer at that time.

That could be why Amazon has decided to move Prime Day 2021 to June.

When Is Amazon Prime Day 2021?

Amazon Prime Day 2021 will take place on Monday, June 21 and Tuesday, June 22.

Be forewarned that Prime Day deals aren’t guaranteed to last the entire 48-hour span. When they’re gone, they’re gone.

Despite its new position on the calendar, Prime Day 2021 is shaping up to be no different from past Prime Days in at least one crucial respect: offering a vast array of attractive deals and discounts on sought-after consumer goods, household products, and small-business essentials.

In the past, Prime Day shoppers have enjoyed discounts of 50% or more on high-demand products. According to Amazon, Prime Day shoppers collectively saved about $1.4 billion in 2020, equivalent to 700 million pairs of socks.

This year, they’ll get in on the action early. Amazon has already announced a slew of pre-Prime Day sales that could be gone before the main event begins.

Best Amazon Prime Day Deals for 2021

What can shoppers expect from Amazon Prime Day 2021? Its Prime Day 2021 flyer offers some tantalizing clues.

The retail giant has already instituted some stealth price drops on popular items like the Fitbit Sense, Instant Pot multicooker, Apple products like iPads and AirPods, and Amazon-branded daily essentials like multivitamins and nonperishable food staples.

It’s also promoted specific early deals on the Amazon Halo wellness band ($69.99, down from $99.99) and the controller for Amazon’s all-new Luna gaming device ($48.99, down from $69.99).

Other early Prime Day 2021 deals include:

And on Prime Day 2021 itself? Prime members can look forward to a host of category- and product-specific deals like:

A general word of advice: Don’t wait to jump on specific Prime Day deals. Once inventory runs out, the deal is gone for good.

Tips to Prepare for Amazon Prime Day & Maximize Your Savings

Want to save as much as possible on Amazon Prime Day without impulse-buying items that you don’t really need? Careful preparation is key to a successful, budget-friendly Prime Day shopping experience.

That means becoming an Amazon Prime member (if you’re not one already), making and sticking to a concise shopping list, and using the proper payment method.

1. Join Amazon Prime

Prime Day deals are only for Amazon Prime members.

That means becoming a Prime member is an essential prerequisite for anyone with big Amazon Prime Day shopping plans — and anyone interested in taking advantage of the $119-per-year subscription’s considerable benefits during the rest of the year.

These benefits include:

  • Free two-day shipping on all eligible Amazon purchases
  • Free one-day or two-hour delivery on eligible purchases in select areas
  • Free no-rush shipping with bonus reward credits against eligible future Amazon purchases
  • Free grocery delivery through Amazon Fresh in select areas
  • Access to Amazon Prime Video’s library of thousands of movies and shows, including exclusive features and series not available anywhere else
  • Unlimited e-books through Kindle Unlimited
  • Unlimited access to more than 2 million digital songs through Amazon Music
  • Free games, in-game content, and subscription to Twitch.tv through Amazon Gaming
  • Exclusive savings (and delivery in select cities) from Whole Foods Market
  • Deals and discounts up to 20% on select products (such as diapers) through Amazon Family

If you’re a first-time Amazon Prime subscriber, opt into the 30-day free trial right before Prime Day. If you’re not satisfied with the service, you can always cancel after Prime Day and before the trial expires, paying nothing for the trouble.

That said, Prime membership is definitely worth the cost for frequent Amazon shoppers able to take advantage of its content and delivery perks.

For additional savings, read up on more tips to save shopping on Amazon.

2. Familiarize Yourself With Last Year’s Deals

Use actual examples from last year to familiarize yourself with the sorts of deals Amazon is likely to offer on the big day.

For example, CNET highlighted a slew of deals on electronics and home goods, some of which remain available (albeit at different price points) in 2021:

Prior-year availability won’t predict with 100% accuracy what Amazon has up its sleeve this year, especially in light of the ongoing pandemic-related supply chain disruptions that delayed Prime Day 2020. But it can and should form the basis of informed guesswork.

3. Set a Reasonable Shopping Budget

Next, set a reasonable Prime Day shopping budget. It’s essential you do so before compiling your shopping list. Otherwise, the temptation to overspend on things you desperately want but don’t need becomes too powerful to resist.

As you likely know from budgeting for Black Friday and Cyber Monday, your retail holiday budget — in this case, your Prime Day budget — should fit neatly into your larger discretionary budget. Avoid the temptation to use Prime Day as an excuse to expand it.

For example, if you typically earmark $500 per month to spend on luxuries or nice-to-haves like restaurant meals and electronics, don’t spend $700 on Prime Day.

In fact, unless you’re willing to go without any other luxuries that month, you need to spend considerably less — perhaps $250 or $300 in this example.

4. Make & Stick to a Needs-Based Shopping List

Making a list is a vital step to take ahead of planned shopping events of any significance, not just Prime Day. The objective is clear: avoiding impulsive purchases you don’t need and could regret in hindsight.

Using clues gleaned from prior Amazon Prime Day deals, your list should include everything you both plan to buy before the end of the year (or, if you prefer and your shopping budget allows, within the next six months) and those reasonably likely to be discounted on Prime Day.

On Prime Day, stay disciplined and condition your purchases on value. If a particular item on your list isn’t discounted for Prime Day, don’t buy it. You’ll likely find better deals later in the year.

5. Use a Browser Extension to Find a Better Deal

Before Amazon Prime Day 2021, add Capital One Shopping, a free browser extension that automatically searches competing merchants’ inventories for a better price when you shop Amazon.

If Capital One Shopping can’t find a better price elsewhere, simply complete your Prime Day purchase as planned. If another retailer has a better price, shop with them instead.

Capital One Shopping isn’t the only browser extension that can save you money on online purchases you’d make anyway. It’s one of the best around, but legitimate and potentially lucrative alternatives abound.

Capital One Shopping compensates us when you get the browser extension using the links provided.

6. Ask Alexa for the Best Deals

Fair warning: This is an easy way to blow through your Prime Day budget. But it’s also incredibly convenient.

If you have an Alexa-enabled device like the Echo Show 5, wake up early on June 21, 2021, and pop the question: “Alexa, what are my Prime Day deals?” Just resist the temptation to purchase them all in one go.

7. Shop Early

Amazon makes no guarantees that any given Prime Day merchandise will remain available for the event’s duration. Quantities are always finite, and unexpectedly high demand for specific products could cause certain deals to sell out sooner than expected.

Your best bet is to shop early, logging on right away on Prime Day morning and getting as much of your shopping list out of the way as possible before the day begins.

You can always return later to complete your list or take advantage of last-minute deals (known as lightning deals) as your budget allows.

8. Look for Prime Day Badges

If you happen to be browsing Amazon anyway during the Prime Day period, look for the little blue badges denoting Prime Day deals. These highlight limited-time opportunities that aren’t likely to remain after June 22.

9. Download the Amazon App for Mobile Purchases

Amazon’s main website works just fine on desktop and mobile devices, but don’t overlook its user-friendly app.

The app is especially useful for shoppers stuck at work during Prime Day’s peak hours, as many employers frown on workers shopping (or conducting any personal business at all) on work-issued devices.

Beyond the obvious perks of a crisper shopping experience in a smaller package, Amazon’s mobile app offers:

  • Voice-assisted shopping using the Amazon Alexa assistant
  • Real-time order tracking and notifications
  • Direct chat support from Amazon’s customer assistance team
  • Single-tap shopping with your smartphone camera

10. Use a Rewards Credit Card (Preferably the Amazon Prime Rewards Visa Signature Card)

The Amazon Prime Rewards Visa Signature card is the best cash-back credit card for frequent Amazon patrons, period. Its three-tier cash-back program earns:

  • 5% cash back on qualifying Amazon and Whole Foods purchases with an eligible Prime membership
  • 2% cash back on eligible purchases at gas stations, restaurants, and drugstores
  • 1% cash back on all other eligible purchases

If you’re not an Amazon Prime member, the otherwise identical Amazon Rewards Visa Signature card earns 3% cash back on Amazon and Whole Foods purchases.

Of course, Prime Day sales are for Prime members only, so you must become a Prime member before the big event. But if you already have the Amazon Rewards Visa Signature card, you don’t need to reapply for the Prime Rewards card — the upgrade is automatic and immediate.

But if you have no interest in applying for an Amazon card or don’t qualify, use one or more of these Prime Day-friendly credit cards if you can:

Final Word

Amazon and Whole Foods aren’t the only retailers worth patronizing on Prime Day. Many big-name sellers — Walmart and Target among them — slash prices to compete with Prime Day deals and offer price-match guarantees that may cover Amazon Prime Day deals (though be sure to read the fine print on these policies carefully).

If you play your cards right, your Prime Day shopfest could turn into a multi-retailer blowout that saves you hundreds on purchases you planned to make anyway while supporting your favorite non-Amazon merchants. Talk about a great way to get everything you need for less.

You can make your purchases count by joining the Amazon Smile program before the big day. Shop through the Amazon Smile site — not Amazon’s main site — to ensure Amazon donates 0.5% of eligible purchases to the charity of your choice.

You can also purchase actual products to give to thousands of registered Amazon Smile charities using the Charity Lists feature. It lets you buy frequently needed products, such as paper towels and cleaning supplies, preselected by participating charities, which are then shipped directly to them, putting your dollars to work right where charities need them most.

Source: moneycrashers.com

Top 4 Things I Love About Dave Ramsey Baby Steps (And 4 Things I’d Change)

Dave Ramsey has helped thousands of people around the world through the 7 Baby Steps for financial peace and freedom.

The process works.

His book titled the Total Money Makeover has had some impressive sales numbers. The book has sold over 5 million copies and has been on the Wall Street Journal Best-Selling list for over 500 weeks. (That data is from August 2017, over 4 years ago, so it’s sold more by now.)

So, we know that the 7 Baby Steps work. There’s a lot to love above the process, and we will address 4 of those attributes here. We will also cover 4 things that we think could be updated this year (as it has been almost 30 years since the Baby Steps were created).

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7 Baby Steps really do work. There are three great reasons why the plan actual works:

a. The Baby Steps Force You To Get Gazelle Intense When It Comes To Paying Off Debt

I’ll mention this later, but I really appreciate that Dave Ramsey keeps the emergency fund smaller to force you to be gazelle intense. Having such a small emergency fund of $1000 really does force you to get out of debt faster because having too much money in the bank can cause you to stagnate. 

b. Dave Strongly Encourages Your Behavior Modification

Too many financial gurus don’t give it to you straight. They may tell you that you need to invest in real estate or cryptocurrency.  It often feels like a lie that you can achieve financial freedom without putting in a lot of work.

Dave Ramsey comes off as blunt many times, but he forces people to confront that the debt is often our fault (with some exceptions). His bluntness, along with the Baby Steps, forces you to self-reflect.

c. The Plan Is Simple And Shows How You Need To Focus On One Step At A Time

I’ll mention this more below, but it’s evident that his focused intensity on the Baby Steps plan helps you stay focused on the task. You complete the first 3 steps consecutively and the following 4 steps concurrently in a prioritized order. 

You don’t have to multitask. Also, you don’t need to think about another step. You just need to focus on the step at hand.

2) Dave Ramsey Is Right That You Need A Plan

Dave Ramsey has many helpful quotes. One of my favorite of Dave Ramsey’s quotes is, “You must plan your work and then work your plan”. 

Too often we go through life without a plan, but we expect that everything is going to work out just fine. I remember the first time I budgeted.  I thought that I spent a certain amount of money on eating out each month, only to realize that number was much higher.

We need plans. It could be a debt payoff plan to stay on top of your debt. It could also be a budget to understand your income and expenses. Or it could be a plan to pay off your home early as per Baby Step 6.

Dave Ramsey understood that which is why the Baby Steps plan is so useful. You stick to the plan and you get out of debt. Voila.

3) The Baby Steps Get Progressively More Challenging

One thing I noticed early was that the Baby Steps seems to get progressively more challenging. This helps build momentum. It is much easier to save $1000 than to pay off your house early. By starting and taking baby steps, the baby steps themselves actually don’t feel very babyish. 

Paying off your home early per Baby Step 6 feels much more like a big kid step, but it’s still just a Baby Step like the others. It’s impressive how Dave structured these baby steps.

4) The Community Around Dave Ramsey Baby Steps Is Incredible

You don’t have to look far to realize that the community around Dave Ramsey is incredible. You can take a Financial Peace University class at your local church. These classes are excellent to encourage you and help keep you accountable while you eliminate debt. You’ll learn the baby steps inside and out with others in your community. 

You can also be a part of a vibrant Dave Ramsey Facebook Community. Personally, I am a part of many of these communities where I receive a ton of encouragement when sharing wins and losses in the process of debt elimination.

There’s a lot to love about the Dave Ramsey Baby Step method.

Now, let’s cover a few things that could use a refresh.

1) Can Creating A Budget Be Baby Step #1?

I am a budget fanatic. I would love to see a Baby Step dedicated to budgeting. Why? Because budgeting helps you understand where every dollar goes. I used “every dollar” like that on purpose because Dave Ramsey himself created a budget app called EveryDollar for that very purpose.

What better way to understand how much money you have to put towards your emergency fund than starting with a budget.

I am not sure why Dave doesn’t start with a budget, but I would be keen to start the Baby Steps with creating one.

2) Dave Ramsey’s Emergency Fund May Need A Refresh

Dave Ramsey’s emergency fund calls you to save $1,000 in Baby Step 1. Is $1,000 enough? It really depends. 

First, adjusted for inflation, $1,000 in 1990 is now worth $2,043.26 per the US Inflation Calculator.

Dave Ramsey's emergency fund needs to be larger due to inflation

There’s a plethora of questions you can ask yourself when considering whether the emergency fund is big enough, such as:

  1. How much debt do you have to pay off?
  2. Do you own a home?
  3. How old is your car?
  4. How many kids do you have?
  5. Do you have insurance?

Another question I like to ask is, “where do you live?”. Personally, my family and I live in the Bay Area, California where the cost of living tends to be quite high. $1,000 wouldn’t get us very far.

3) Is The Snowball Method The Best Way To Pay Off Debt?

As a refresh, the debt snowball method means that you line up your debts from smallest to largest and pay your monthly extra to your smallest debt first then snowball into higher debts. The debt avalanche method is where you line up your debts from the highest interest rate and use your monthly extra to pay off the highest interest first. The savvy debt method is where you pay off 1-2 of your smallest balances first via snowball before reverting to the avalanche method to save the most in interest.

Dave Ramsey loves the debt snowball method. It has worked for many people, so why wouldn’t he? He feels the opposite for the debt avalanche where he mentions that it doesn’t work.

The challenge is that you could lose thousands in interest if your smallest debts also have the smallest interest rates. This can be possible because higher debt amounts carry a higher risk to the lenders, meaning potentially higher interest rates.

You can see how much the snowball method loses in comparison through this debt payoff calculator which compares interest paid from snowball to savvy methods. For reference, we are comparing 4 debts: $23,000 at 22%, $18,000 at 19%, $12,000 at 9% and $8,000 at 7% interest rate. The monthly payment is $1,825.00

debt snowball versus other debt payoff methods

In this example, you would lose over $3,500 in interest by choosing the snowball method.

Does that mean that the snowball method is always worse? Absolutely not. The snowball method may provide the psychological benefit that you need to exterminate your debt.

You choose the debt payoff app and debt payoff method that is best for you.

4) Should You Follow Dave Ramsey’s Advice And Pay Off Your House Early Or Invest?

Dave Ramsey loves mutual funds and paying off your home early. My question is what if your mutual funds are making so much more in interest than paying off your home would save you?

Wouldn’t the prudent thing be to continue to pay off your home and then get the higher interest from investing in mutual funds?  It’s not a one size fits all solution, but it is something to consider.

There are also often benefits of not paying off your home early such as interest paid being tax-deductible. That said, you would really need to determine whether you would make more money from mutual funds than saving from interest payments to determine what’s best for you.

What Do You Think About The Baby Steps?

The Dave Ramsey Baby Steps have helped thousands around the globe. What do you like about the Baby Steps? Do you agree or disagree with what we would change in 2021?

4 things I love about Dave Ramsey's baby steps and 4 things I'd change

Top 4 Things I Love About Dave Ramsey Baby Steps (And 4 Things I'd Change)

Source: biblemoneymatters.com

Is it Wise to Use Personal Credit for Business Finances?

Whether you want to start a business or to finance one that is already functioning, you may find your financing options reduced to taking a loan. In such a case, you have the option of taking either a personal or a business loan.

Given the unpredictable nature of businesses, it may not be wise to mix your personal and business finances. This advice notwithstanding, there are some circumstances in which using personal credit for business finances makes sense.

When to use personal credit for business finance

Starting a BusinessStarting a BusinessWhen your personal credit is more attractive

Credit score is among the main factors that determine the amount and rate of a loan. If your venture hasn’t established a good credit, a business loan may not be advisable.

Such a loan will probably be denied or approved under restrictive terms and high rates. On the other hand, you can still access finances by going for a personal loan if your credit score is more attractive.

When you are setting up

Lenders will require proof of the revenue generated by the business to determine its capability in repaying the loan. This requirement puts you at a disadvantage when you’re setting up. Without any experience or books to show, a personal loan maybe the only way to go.

When you have no collateral

Business loans are mostly offered as secured loans. This means that collateral is required before approval. When starting a business you probably have no asset that can be tied to the loan or may not want to risk other existing assets due to the risk associated with businesses.  In such a scenario, a personal loan will do since it requires no collateral.

When the loan is within personal credit limit

Business loans attract higher interest rates than personal credit. However, personal credit comes with a lower limit compared to that of a business. The question you should ask yourself is; how much do you need and what will it cost you?

When the amount you need can be covered by personal credit, then go for it. You will avoid paying heftier interest that could run into thousands of dollar if you were to take a business loan.

When you don’t have a business plan

Another requirement for a business loan is an elaborate business plan. That’s easier said than done. The passion and hard work that you are ready to put into your venture cannot be captured on paper. What lenders want to see is an actionable plan that shows how capital will be utilized and the expected returns; to the last dollar!

In addition to this, lenders set stringent measures on how a business loan is to be utilized. Instead of allowing these requirements and terms to curtail your venture, you can tap into your personal credit as you get a feel of the business environment.

That said,

Personal credit might be cheaper and a good alternative to a business loan, but there are a few things to consider;

The major drive of setting up of a business is to generate profit. You inject part of the returns back into the business, and with time it grows into greater heights. If successful; what started out as a small business will one day grow into a huge venture.

To achieve that major boost, you may find yourself in need of a sizable amount. When self-funding can’t cover this, you may have to turn to lenders for a business loan.

Lenders will be more willing to finance your business if they have taken part in its growth. The point here is that, your bank needs to recognize your business as separate entity.

This kind of recognition is only possible if you take and manage business loans with them. Not only will this push your loan applications to the top of the pile, but you will get financial advice from the bank.

Final Take

Using personal credit for business finances is wise if it makes business sense to your specific venture. If it comes down to letting your business go under or abandoning your dream business for lack of financing, you have a winner. However, you should also be aware that personal credit does not elevate your business credit, something which may come in handy for future financial needs.

Source: creditabsolute.com

Which Bills to Pay Off First (or Cancel) When Money Runs Tight

Whether it’s from job loss due to a recession, a drop in income, or an unexpected major expense, there may come a time when you struggle to pay your bills. What can you do when your income and expenses don’t match up?

It’s essential you prioritize your bill payments and what you owe, paying the most important bills first.

Bills to Prioritize When You’re Low on Money

The most important bills are those that cover the necessities: shelter, food, water, and heat, for example.

The next most important are bills that cover things that make it possible for you to get where you need to go, such as your vehicle expenses.

Last on the list are bills that can ding your credit history, but not much else, if you fall behind on them.

Although you can make some adjustments to the order you pay bills based on your circumstances, it’s usually best to focus on paying your housing bills first, then paying what you can with the money you have remaining.

1. Mortgage or Rent

If you fall behind on mortgage payments, you risk having the lender foreclose on your home. If you fall behind on rent, your landlord can evict you.

Even though the foreclosure or eviction process can take months, it’s not something you want to risk happening. Keeping up with your housing payments is a must if you want to stay in your home.

When money is really tight and you’re not sure you can pull together enough to make a payment one month, the best thing to do is talk to your landlord or lender.

Many mortgage lenders have programs in place to help homeowners who are facing financial hardship. Your lender can review your options, such as forbearance or loan modification, with you.

During forbearance, you stop making payments on your loan, but interest continues to accrue. If a lender agrees to modify your loan, they adjust your interest rate or otherwise make changes to lower your monthly payment.

The United States Department of Housing and Urban Development (HUD) also has programs available to homeowners struggling with their mortgage payments. You can contact HUD to connect with an approved counseling agency. The counselor can work with you to create a plan to help you avoid foreclosure.

If you’re a renter, talk to your landlord as soon as you know you’ll have difficulty paying rent. Explain the situation to them in detail, including whether you think you’ll be late with payment, won’t be able to pay all your monthly rent, or won’t be able to pay at all.

Many landlords are willing to work with you to come up with a solution. You can help the situation by suggesting solutions.

For example, if you’re going to pay late, tell the landlord when you plan to make the payment. If you can’t pay the full amount this month, tell the landlord how you’ll make up the difference. For example, you can add an extra $100 or so to subsequent payments until you pay off the balance.

If you’re renting and your landlord can’t or won’t be flexible about payments, you might have more wiggle room than a homeowner.

Depending on how much time you have left on the lease, you can simply wait it out, then look for a less expensive place to live. Another option is to try to find someone to take over your lease so you can move somewhere that costs less.

2. Utilities

After your mortgage or rent payment, the next most important bills are your utility bills: gas, water and sewage, and electricity. Although some people count TV and the Internet as utilities, those services aren’t essential for everyone.

Fortunately, many programs exist to help people who need emergency financial assistance paying bills. The first place to look is your local utility provider. Many utility companies have programs to help people pay their bills.

Another option is the Low Income Home Energy Assistance Program (LIHEAP), a federally funded program that provides financial assistance to help people pay energy bills. LIHEAP has specific income requirements and is grant-funded, meaning only a set amount of money is available each year.

If you think you qualify for LIHEAP, the sooner you apply for it, the better your chances of receiving aid.

3. Insurance Premiums

Having insurance is always a good idea, as it provides financial protection against the worst things life can throw your way, such as illness, fire, or accidents. Paying your insurance premiums even when money is tight is a smart move. Without insurance, medical bills can easily add up.

If you’re struggling to afford your premiums, you do have some options, particularly when it comes to health insurance.

If you purchased a plan from the Healthcare.gov marketplace, you qualify for a special enrollment period if you’ve recently lost your job and associated coverage, if you’ve had a change in income, if you’ve gotten divorced, and for a few other reasons.

During the special enrollment period, you can apply for Medicaid or CHIP if your income is below the threshold or a credit on your insurance premiums based on your income. Doing so can lower the cost of your health insurance considerably.

4. Food & Household Necessities

Food, soap, and paper products are up there with shelter, heat, and hot water on the list of essentials.

Luckily, you have more wiggle room when it comes to adapting your food and household supply costs compared to your mortgage or rent payments and utility bills.

When money’s tight, there are many ways you can trim your food and supplies bill:

  • Limit Shopping Trips. Plan your meals for the week, make a list of the ingredients you need, and go to the store once. The more you go to the store, the more likely you are to buy things you don’t need.
  • Buy Store-Brand Items. Store-brand products usually taste the same as or similar to their brand-name counterparts, but they cost a lot less. If you typically purchase branded foods and supplies, try switching to the store brand. It’s likely the only place you’ll notice a difference is in your wallet.
  • Limit Packaged Products. Packaged foods, such as grated cheese, bagged salads, and prechopped vegetables are convenient, but that convenience comes at a cost. You can save a lot if you buy whole, unprocessed foods and prepare them at home.
  • Skip Bottled Water. If you live in the U.S., it’s highly likely your tap water is safe to drink. According to the CDC, the U.S.’s water supply is among the safest in the world. Bottled water is expensive and terrible for the environment and is often little more than repackaged municipal water.
  • Buy In-Season Produce. Pay attention to seasons when shopping for fresh produce. Fruits like strawberries and blueberries are usually in season and inexpensive during the summer but cost more in the winter. You can cut your grocery costs if you buy what’s in season.
  • Grow Your Own. Another way to cut your food bill is to grow your own fruits and vegetables. Herbs and green vegetables are usually the most cost-effective edible plants to grow, as you can get an entire plant for the price of a handful of herbs or greens at the grocery store. You don’t need a ton of outdoor space to start a garden. You can grow plants in containers on a small balcony or patio.
  • Use Your Freezer. Frozen vegetables and fruit often cost less than fresh, so it pays to purchase those when money is tight. You can also prep double batches of meals to freeze for later. That way, if you run out of money before the end of the month, you have a supply of ready-to-eat meals waiting for you.

Note too that depending on your income, you can qualify for financial assistance with groceries. The Supplemental Nutrition Assistance Program, aka food stamps, helps to cover the cost of groceries for people with income below certain thresholds.

Pro tip: Make sure you’re saving as much money as possible on your grocery trip. Apps like Fetch Rewards and Ibotta allow you to save money on purchases by simply scanning and uploading your receipts.

5. Car Loan & Other Expenses

Your car gets you to and from work and other important places, such as your kids’ school, the grocery store, and the doctor. If you have a monthly car payment, it’s crucial to find a way to pay it.

Just as you can call your mortgage company to work out a deal, you can call the lender behind your car loan to see if you can come to an agreement. Like mortgage companies, these lenders can also offer you loan modifications, refinancing, or forbearance.

Loan modification or refinance can lower the amount of your monthly payments, making it easier for you to afford the car. Forbearance means you don’t make payments for a set period.

Another option is to sell your current vehicle, use the proceeds to pay off the loan, then purchase a less expensive model. If you decide to sell, look for a replacement car that has a low cost of ownership to keep your expenses low. Some vehicles are more reliable than others, meaning you don’t have to worry about expensive repair or maintenance bills.

6. Unsecured Debts

Although you should make every effort to repay your debts, when money is tight, unsecured debt, such as credit card debt and personal loans, should move to the back burner. While these debts typically have the highest interest rates, they also have the lowest impact on your daily life.

You don’t go hungry if you miss a credit card payment, nor can your credit card company take your home or car if you pay late.

That said, it’s still best to pay what you can toward unsecured debts, such as the minimum due on a credit card. If even that is too much for you right now, contact the card company or lender. Sometimes, credit card companies are willing to work with you to create a debt repayment plan or let you temporarily pause payments.

7. Student Loans

While you should make every effort to pay your student loans when money’s tight, the loans often have the most flexibility when it comes to repayment, particularly federal loans.

If you have federal student loans and you’re struggling to keep up with payments, you have multiple options. You can request a deferment or forbearance from your loan servicer, or you can switch to an income-driven repayment plan, which adjusts the amount you pay each month based on your income.

The situation with private student loans is a bit different, as they don’t have the same protections as the federal student loan program.

If you’re having trouble affording private student loan payments, your best option is to contact the lender to see if it offers forbearance, repayment plans, or loan modification.


What to Cancel When Money Is Tight

While some monthly bills are essential, others are considerably less so. Budgeting often involves deciding what you need to spend money on and what you can live without.

When it’s a struggle to make ends meet, here’s what you can consider cutting:

Subscription Services

Netflix, print or digital newspapers, and meal kits are all things that can go. In many cases, you can find free alternatives to the subscriptions you were paying for. For example, some local libraries give you access to streaming movies and local or national newspapers for free.

Make sure you don’t miss any subscriptions that you might have forgotten about. Services like Truebill will find subscriptions and either cancel them or negotiate lower rates for you.

Cable and Internet Service

You may not want to disconnect your Internet completely, but see if you can switch to a slower, less expensive plan.

If you have data on your phone, some providers, like Xfinity Mobile, let you use your phone as a hotspot to get online. In this case, you wouldn’t need a separate home Internet plan.

Phone Service

While you do need your phone to stay connected, you most likely don’t need both a landline and a cellphone. You probably don’t need the most expensive cellphone plan, either.

Shop around with companies like Mint Mobile or Ting to see if you can get a better deal.

Gym Memberships and Wellness Services

Maintaining your well-being is important, especially when money is tight. But if you’re worried about having enough money to pay your most important bills, you shouldn’t have to worry about paying for a monthly gym membership or studio pass.

There are plenty of ways to work out for free from the comfort of your home. For example, you can find workouts available for free on YouTube.


Final Word

When money is tight, it’s vital you focus on paying for the things that can help you sustain your life and well-being, such as food and shelter, when times are tight.

While a missed payment can affect your credit history, in desperate situations, your health and safety are more important than your credit score.

Along with prioritizing your monthly bills, talk to your lenders and service providers. Many companies have programs in place to keep you from sinking deeper into debt and to help you avoid repossession of your home or vehicle. Keep the lines of communication open, and remember you’ll get through it.

Source: moneycrashers.com

How to Maintain a Good Credit Score in College

College life brings a host of new and exciting experiences in the various aspects of your life. Financial independence and responsibility also come to play. While your achievements are important in putting you in your right career path, a good credit score is paramount in bettering the deals you will get when renting or buying a home, purchasing a car, getting a cellphone plan, applying for a student loan or in some instances, getting employment.

This calls on your effort to not only build but also maintain a good credit. It may sound complicated and intimidating especially when you don’t know how to go about it. Below, is all you need to know on how to maintain a good credit score in college.

Good Credit in CollegeGood Credit in College

Taking Advantage of your Parent’s Good Credit

This is commonly referred to as ‘piggybacking’. It allows people with bad or no credit to enjoy a spillover of other people’s good credit. It is a great way of establishing and maintaining your credit especially if you need a little help in managing your budget. For you to qualify for this, you have to become an authorized user of your parents’ accounts.

This comes in handy especially if you can’t get your own credit card; according to Oct 1st 2013 Credit Act report, students and other persons below 21 years of age cannot get their own credit cards without proof of income or at least a co-signer. Apart from the credit boost you get from your parent’s account, your credit card use is forwarded to credit bureaus in your name.

Get the Most Suitable Credit Card

Your ability to qualify for a credit card opens you to the opportunity to choose from a variety of cards. You should research and shop around to find out what these cards have to offer before making your choice. Some of the benefits to look out for include low interest rate, no annual fees, convenient credit limits and other competitive incentives.

Better still, you can opt for student credit cards. These come with incentives such as cashback rewards, limited credit history requirement, no annual fees and 0% introductory APR among other benefits. Your own credit card comes with sole responsibility. This means that it’s up to you to stay on top of your billing statements so as to improve and maintain a good credit

Always Pay your Credit Balance

Your payment history accounts for 35% of your credit. Good credit of course depends on timely and full payment of your balance. Inability to pay or late payment may attract additional interest, accrue more debt and negatively affect your credit.

This can take a long time to repair. Besides this, it is also a sign that you are living beyond your means. Ideally, your credit balance should be about 30% of your credit limit or below.

Tip: The higher your credit balance in relation to your limit is, the worse your credit becomes.

Pay your Bills on Time

Late or failed payment of rent, utility bills, parking tickets, library or school fees and other payments can harm your credit; especially is if they are sent to collection agencies and reported to credit bureaus. Ways of beating this include setting up payment reminders and electronic billing. You can also organize for auto payments with your bank to ensure that timely payments are done.

If you live in an apartment, you might get credit for full and timely payments. You can take advantage of eRentPayment which transfers your payment reports to the three major credit bureaus; Experian, Equifax and TransUnion. This consequently improves your credit. However, your landlord needs to be registered and the lease needs to be in your name.

Limit Applications and Inquiries for New accounts

Numerous credit inquiries negatively impact your credit score. In the event that you need to make new credit applications that warrant hard inquiries, concentrate them into period of 14 days in which they will factor as one inquiry.

Once you decide to get a credit account, get all the facts right to avoid the urge to close and open others every now and then. Short credit histories with several new accounts are seen as riskier compared to a few accounts with long credit histories. When you close a credit card, you not only lower your available credit but also shorten your credit history both of which can reduce your score.

In a Nut Shell

Maintaining a good credit score in college is important if you are going to get any good deals in personal credit in the future. This requires vigilance on your part to ensure that you do not do anything that can have negative impact on it. When all is said and done, it all comes down to personal financial responsibility.

Source: creditabsolute.com

What is a balance transfer and how do they help?

What is a Balance Transfer Title Image

A balance transfer happens when you move your debt
from one or more sources to a single credit card with a lower interest rate. By
paying less interest, more of your payment goes toward the principal balance.

Balance transfers aren’t always the best way to get debt relief, however. You should carefully consider the benefits and downsides to balance transfers before initiating the process.  

How a balance transfer works

With a balance transfer, you transition the amount you owe from one card
to another. You can also move other types of debt to a credit card. For
example, some issuers may allow the transfer of auto and personal loans.

Here are the five steps to completing
a balance transfer.

1. Choose a
balance transfer card:
You can either open a new credit card for the transfer or
transition your debt to a card you already have. Look at interest rates,
balance transfer fees and other terms to make the best choice.

2. Decide on your transfer amount: Look at the credit limit you have and ensure the balance will be less than your limit. Ideally, the transfer is much lower than your credit limit and lowers your credit utilization ratio in the process.

You’ll also want to look at balance transfer fees,
which are usually around three percent of the amount you’re transferring. Some
cards also have limits on transfer balance amounts. Check your card details
carefully.

3. Review the
terms and conditions:
Make sure you’ve read all of the terms, fees and official
agreements before transferring the balance. While the fine print can be
lengthy, you need to know exactly what it is you’re agreeing to.

4. Initiate the transfer: There are a few different ways you can initiate a transfer—through your credit card’s online account, or calling the customer service line of your credit card company, for example—but how you do so will depend on the policies of your credit card company.

5. Pay off your debt: Make monthly payments toward your balance transfer. Create a plan to pay your debt off within the introductory period, so you don’t have to pay any interest on it.

Balance Transfer Process Image

How a balance transfer affects credit score

Balance transfers can either improve or lower your
credit score, depending on multiple factors. Here’s how:

Your credit utilization rate: If you’re able to pay off more of your debt due to the lower interest rate, your credit score will improve. By paying off debt, you’re using less of your available credit, which lowers your credit utilization ratio.

Making on-time
payments:
Paying your credit card bill on time boosts your credit
score, as payment history is the most significant factor in scoring models like
FICO®. Balance
transfers can help in this area if the transfer makes it easier to pay.

Number of hard
inquiries:

Your credit score takes a hit when you apply for several credit cards at once
because they each trigger a hard inquiry.

Hard inquiries aren’t bad in and of themselves and are a necessary part of applying for credit. That being said, if you have a large number of hard inquiries on your credit report within a short time frame—if you apply for many credit cards at once, for example—it signals to lenders that you may not be responsible with your credit.

Average age of credit: Your credit score is also based on the average age of your credit. It would be more beneficial to your credit to keep your old accounts open even after you’ve transferred the balance. This will increase the average age of your credit accounts. More open cards also help keep your credit utilization rate low.

Credit Factors Balance Transfer Affect Image

When to consider a balance transfer

A balance transfer can help you pay off debt faster
and pay less overall. Here are the main scenarios when a balance transfer can
help.

You have debt with a high-interest rate: If you have a credit card—or many cards—with high-interest rates, it may be good to transfer the balance to a card with a lower rate. By lowering interest, you’re able to pay more toward the principal balance and pay off debt faster.

It’s difficult
to juggle multiple payments:
You can combine debts by transferring them all to a single
card, which will allow you to only have to keep track of one payment every pay
period.

You can get a good promotional offer: Many credit cards offer low or no interest rates during the introductory period (usually six – 18 months). By transferring your debt, you can save money in the long run.

How to choose the best balance transfer card

Balance transfer credit cards compete with other
credit cards by offering good introductory APRs (annual percentage rates) to
attract new cardholders. Generally, the better your credit, the more options
you have for low introductory rates and no transfer fees.

Here are a few other things to consider when shopping
around.

Balance
transfer fee:
A fee for transferring a balance is common. It’s usually about three
percent of the balance amount (like we stated above). If you have a good credit
score, it’s possible that the balance transfer fee might be waived entirely.

Interest rate: Interest rates vary
significantly between cards. Some promotional incentives may offer introductory
zero percent APR. However, be sure to look at what the APR is after the
introductory period, in case you don’t pay off all your debt in that timeframe.

Length of
promotional period:
The introductory promotional period for balance transfers is
usually six – 18 months. A longer promotional period allows you more time to
pay off the debt before a higher interest rate is applied.

Annual fee: Some cards charge a fee each
year to keep the card active. Be on the watch for high annual fees.

Credit limit on
a new card:
A
higher credit limit can help you maintain a lower credit utilization rate. If
you’re transferring a balance, make sure your credit card limit far exceeds the
balance you’re transferring.

Basic requirements: It’s best to apply for a card that you have a good chance of being approved for. When you apply for a credit card and aren’t approved, the hard inquiry will remain on your credit report. As we said above, too many hard inquiries occurring in a short time period can lower your credit score.

Key Balance Transfer Card Features to Compare Image

Generally, if the amount you save with a lower interest rate is higher than the balance transfer fee, it may be worth transferring the balance. It’s also ideal if you can pay off the balance during the zero percent interest period, and avoid paying interest on any of your debt.

What to do after you’ve transferred your balance

After you’ve transferred your balance, there are a few
things you can do to improve your credit score and pay off your debt.

Make timely
payments:

On-time payments boost your credit score. Any late or insufficient payments can
potentially invalidate lower interest rates and harm your credit score.

Note important
dates:
Set
reminders for when the introductory period ends. Any debt you don’t pay off
during that period will be charged with greater interest rates. You’ll also
want to make sure you complete the transfer within the given timeframe.

Create a plan
to pay off debt within the zero percent timeframe:
Design a budget that works for you to
pay off your debt, ideally within the zero percent interest timeframe. This
might include scaling back on expenses or picking up extra shifts at work. In
the long run, it could save you quite a bit.

Don’t make purchases on your new card: When you make a payment, the funds go to your purchases first, then your transfer balance. Try to use a different method of payment to make purchases, so your credit card payments only go toward your older debt.

Keep your old cards open: By keeping other cards open, your total available credit limit is higher—meaning your utilization ratio is lower. Having older cards also increases the average age of your credit accounts.

Why you should check your credit report after a balance transfer

Mistakes sometimes happen when there is a lot of
activity on your credit report, such as data errors and information that should
no longer be on your report.

These inaccuracies can unfairly affect your credit score. For example, some of your credit reports might not reflect the balance transfer properly. Credit repair can help you review your report, identify errors, and work to correct—giving your credit score a boost. Contact the credit repair consultants at Lexington Law to learn how we can help you.

Source: lexingtonlaw.com

How to Protect Yourself From a Mechanics Lien

Every homeowner who’s considering hiring a contractor to do some work in or around their house should make sure they’re familiar with their state’s mechanics lien laws before making a decision. Never heard of a mechanics lien? You’re not alone. Let’s uncover what it is and why you should protect yourself from it.

Think Twice About Not Paying

If you wind up having a beef with the contractor you employ for builds or repairs – poor workmanship, perhaps, or maybe they walked off the job before it was completed or failed to finish the work in a timely manner as promised – and you decide not to pay, that contractor can respond by attaching your house to a legal claim for unpaid work until some kind of settlement is reached.
That could turn into a waiting game if you are not considering selling your home. But, if you intend to put your home on the market in the near future, that lien could stop you in your tracks.
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What EXACTLY is a Mechanics Lien?

Sometimes known as a materialmans lien, every state has a a mechanics lien law granting tradespeople a way to protect themselves from those who fail to pay them for services and time rendered.
Here’s how Rusty Adams, a research attorney for the Texas Real Estate Research Center at Texas A&M University, described it in a recent edition of Terra Grande, the Center’s monthly magazine:
“It is an equitable interest that gives its holder the right to have satisfaction out of the property to secure payment on a debt. It is not title to the property, and a lien holder does not have ownership rights. Rather, it is an equitable interest that gives the lien holder the right to have satisfaction out of the property to secure the payment of a debt.”
In other words, it is an encumbrance the property owner must deal with, one way or another. Otherwise, it could result in a foreclosure and forced sale of your house.

How Mechanics Liens Work

None of what follows should be considered legal advice. Rather, it is intended only as a brief, mile-high overview.
A mechanics lien can be filed by anyone with a claim against the property. This concept isn’t new; for example, Uncle Sam can place a lien if you fail to pay your taxes, as can your state. Your homeowners association can do the same if you don’t pay your dues or a special assessment.
In the case of work done to your house, the contractor can file if you fail to pay, even if you feel you’re justified in withholding. The company from which he or she gets their supplies – roof shingles, for instance – can also file against your house if the contractor doesn’t pay them. And if the contractor uses subcontractors, they, too, can go against the house if the contractor doesn’t pay them.
The “very broad” law in Maryland “covers almost everything,” attorney Harvey Jacobs says. For example, if the developer doesn’t pay the paving company hired to cover your cul-de-sac, the company can file a mechanics lien against every house that touches that street. Ditto for the outfit hired to landscape, sod and plant shrubs.
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How to Protect Against Mechanics Liens

Fortunately, lien laws afford owners some protections. In some places, the amount owed must be of at least a certain amount. They also must be filed within a certain number of days from when the work was completed, and may require the property owner to be notified within a specified time that a lien has been filed.
The rules, which also apply to subs and suppliers, can be somewhat tricky for an owner to decipher. But the absolute best way to protect yourself is to require the contractor to provide lien releases before you pay anything more than your down payment. In other words, no draws or final payment until he or she certifies that everyone in the chain has been paid.
Often, says Texas attorney Adams, a notice of intent to file or the actual filing is enough to resolve the debt attached to the property without going through the process itself.
Once payment has been received, a contractor has a duty to remove the notice or the lien itself from public records. Failure to do so allows the property owner to file a lawsuit against the contractor to compel the lien’s removal. But to avoid that, Adams suggests making sure the release has been recorded.

(READ MORE: The Difference Between a Handyman and a Contractor)

Some Important Distinctions

A lien release is not the same as a lien waiver. Nor is it the same as a lis pendens. While a release removes an existing lien, a waiver is an agreement that prohibits a contractor or supplier from placing a lien on the property. But some states don’t permit waivers at all.
A lis pendens, which is Latin for “suit pending,” is a written notice that a lawsuit has been filed in the county land records office involving either the title to the property or a claimed ownership interest in it. The notice alerts a potential purchaser or lender that the property’s title is in question, making it less attractive, if only because the buyer or lender is subject to the suit’s ultimate outcome.
Beyond this, it is crucial for a homeowner to ensure the contractor, subcontractor or supplier has followed the rules of the road.  In Texas, said Adams, the claimant must give the appropriate preliminary notices, make the proper filing and give filing notice to the property owner.
mechanics lienmechanics lien
In Maryland, the unpaid amount must be at least 15% of the property’s assessed value. So if the house is assessed at $100,000, the lien must be for $15,000 or more. “Small jobs don’t count,” Jacobs said. Contractors must also file a lien within 180 days of performing the work in Maryland, but subs must file within 120 days.
In neighboring D.C., though, there is no minimum to file, and the contractor, supplier or sub has only 90 days to file.
(Note: In the case of mechanics liens, property value is an evidentiary question. Courts often use assessed value in deciding whether a lien can be brought.)
In Texas, though, contractors aren’t required to provide a preliminary notice, but they are required to present a list of all subs and suppliers before starting work. But subs and suppliers who have a contract with the original contractor must send notices to both the contractor and the homeowner by the 15th day of the second month.
As you can see, once you get into the tall grass with mechanics liens, it becomes fairly complicated. It’s at this point that it may be time to consult legal counsel.


Lew Sichelman

Syndicated newspaper columnist, Lew Sichelman has been covering the housing market and all it entails for more than 50 years. He is an award-winning journalist who worked at two major Washington, D.C. newspapers and is a past president of the National Association of Real Estate Editors.

Source: homes.com