At the end of Q2, household debt in America raised to $16.15 trillion. This jump was largely driven by the rise in mortgage balances across the nation. Credit card and auto loan debt are also climbing in the United States. So, what is the average American (like you and me) supposed to do if we want to pay off our debt? It seems impossible. The best advice I can give you is do you best to continue to avoid debt when possible.

Debt In The United States

The staggering numbers don’t stop there either. Overall delinquency rates continued to rise in Q2 as well, albeit moderately. Researchers said that they will be more concerned if they see the overall delinquency rates rise drastically or return to pandemic levels.

Some more of the jaw-dropping figures can be found listed below.

• Mortgage debt went up to $11.39 trillion.
• Credit card balances climbed up by $$6 billion.
• New auto loans increased by $33 billion.
• The interest rate for a 30-year fixed-rate mortgage skyrocketed up to 5.74%.

“All debt types saw sizable increases, with the exception of student loans,” regional Fed bank’s researchers said of the increases. This is due to increased borrowing, which can be attributed to the higher prices everyone is the nation is seeing.

How To Avoid Debt Right Now

It may seem impossible to make progress on your debt-free journey right now. You are not alone in feeling that way. Many people have had to take on debt to be able to keep up their bills or cover emergencies due to the economy. A large number of people had already emptied out their practically non-existent savings during the pandemic. So, when something comes up, they are taking out loans or swiping cards to cover the cost. How do you avoid doing that when everything seems to be working against you right now?

1. Re-establish your emergency savings (and then some).
2. Don’t treat debt as an option. Take it off the table completely unless it is life-or-death.
3. Delay gratification. If you put off gratification, it can help you avoid debt. You will take the time to think your purchases over and save the money rather than making impulsive decisions.
4. Continue to focus on long-term goals. With everything going crazy in the world of finance right now, it is easy to focus on the short-term. I implore you to keep your eyes on your future and keep working to build your dream. That means avoiding debt!
5. Downsize your life where it is possible. The price of everything has gone up recently. It’s more important than ever to stick to your budget and be frugal where you can to save money.

Readers, what are you doing to avoid credit cards and loans right now with household debt in America on the rise? Let me know in the comments!

Read More

• Making Changes to Our Financial Plan
• When Are Student Loan Payments Coming Back?
• Reflecting on the ‘Cost of a Baby’
• You Might Be Surprised By Our August Update (We Were)!

Amanda Blankenship

Amanda is an editor and writer. She has a passion for sharing information that helps people and communities to better themselves in some way. In addition to writing online, she also freelances for local newspapers in her hometown of Charlotte, NC.

www.savingadvice.com

Every year or two, you should take the time to review your family’s financial plan and assess whether it is still relevant. There have been a plethora of changes for our family over the last several years. Because we hadn’t reviewed our financial plan since before our daughter arrived last August, it has been a topic of discussion in our household fairly often recently. So, what’s next for the Blankenships?

While much of our financial plan remains the same, some things have changed. Overall, we still aim to be debt free (minus our future mortgage). However, several things have changed for us.

Changes To Our Financial Plan

A couple of weeks ago, I updated our debt numbers here on the blog. We were pleasantly surprised with our progress. It is easy to feel like you are standing still in your debt journey, especially if you’ve been paying on a loan for years. Looking at the numbers re-motivated us in our financial journey.

However, if we want our financial plan to be successful, we need to be honest with ourselves. We don’t have all of the same goals we did four years ago when we started our planning (hell, four years ago we said we weren’t have children). A lot has changed, so changes need to be made to accommodate! Here are the things we are adding and taking away from our current plan…

• More savings – Saving money has become increasingly important for our family since adding our daughter last year. We want to be prepared for emergencies, have cash for her educations, money for a down payment on a home, etc. So, we are hoping to establish a five-figure emergency fund, open a 529 savings account, and set aside money in a separate back for our down payment. We also plan to have separate accounts for different savings (sinking funds).
• Investing – I’m not overly comfortable with the investing world, but we are educated enough to know that investing is how we become wealthy. We are going to learn more about what investments make since for our family and make them.
• Retirement – This kind of goes hand-in-hand with saving but neither of us has any retirement savings set aside (panic). I’m about to be 30 and my husband is 33. So, we need to get started ASAP!
• Debt – Pay more than the minimum on everything until it is gone. Have savings for unexpected expenses so we don’t stack up more debts.

Final Thoughts

As mentioned above, our bottom line is still the same: we want to be financially free. On top of that, we want to be able to work for ourselves and work on projects we care deeply about. Being financially free will make that possible. Having more money in savings will also help make that possible. We will have more peace of mind and, better yet, we will be setting a positive example for our little one.

Readers, when is the last time you reviewed your long-term financial plan? 

Read More

• When Are Student Loan Payments Coming Back?
• Reflecting on the ‘Cost of a Baby’
• You Might Be Surprised By Our August Update (We Were)!
• Researching 529 Savings Plans and the Benefits

Amanda Blankenship

Amanda is an editor and writer. She has a passion for sharing information that helps people and communities to better themselves in some way. In addition to writing online, she also freelances for local newspapers in her hometown of Charlotte, NC.

www.savingadvice.com

When I initially planned on writing this post this month, student loan payments were scheduled to restart in late September. However, the Biden administration has announced more recent changes to loan cancelation. They have also announced an extension to the repayment pause. Here is what you need to know.

Word From the White House

Everything you need to know in detail about the changes to student loan repayment can be found at StudentAid.gov. I’ll break it down for you, highlighting the main points:

1. There has been another extension on the student loan repayment pause. Payments will pick up again in January 2023. This pause will happen automatically. No action is needed from the borrower.
2. Borrowers who did not receive a Pell grant to attend school will receive up to $10,000 in debt cancelation if they make less than $125,000 ($250,000 for couples).
3. Individuals who received Pell grants to go to college will receive up to $20,000 in debt cancelation if they meet the income requirements above.
4. The amount of your relief will depend on the amount you owe. For example, if you are eligible for up to $20,000 in cancelation but you only owe $15,000, you will only receive $15K in canceled debts.
5. New rules will also improve the system for current and future borrowers. Debt will be forgiven after 10 years, rather than 20, if the balance on your account is under $12,000. They are also making changes to interest and monthly payment requirements.

The application process is expected to become available by early October. After completing the application for debt cancelation, borrowers can expect relief within four to six weeks.

It has been advised to submit your application prior to November 15 so that the relief hits your account before the payment pause ends on December 31, 2022. However, the Department of Education will continue to process applications as they are received, even after the payment pause deadline. Nearly 8 million borrowers will benefit from the changes being made by the Biden-Harris Administration, myself included.

How This Impacts My Student Loans

Personally, the changes being made to cancel out student loan debt will help our family tremendously. As I mentioned in our recent debt update, I owe a little more than $24,000 in federal student loans. Because I received Pell grants in college, $20,000 in my student debt will be canceled. That leaves the grand total to be paid off at $4,135.

Seeing that is encouraging. That amount is more manageable. It gives me less financial anxiety and it means that we can start truly building wealth sooner. While there are mixed feelings about canceling the debt, I know there are plenty of people throughout the United States who this will help. For those like us, congratulations! Take the windfall and be glad for it. Review your finances and get on track so you are where you need to be when payments pick back up again.

Readers, are you benefits from the cancelation of student debt? Let me know your thoughts in the comments below.

Read More

• Reflecting on the ‘Cost of a Baby’
• You Might Be Surprised By Our August Update (We Were)!
• Researching 529 Savings Plans and the Benefits
• Self-Care is Crucial to Maintaining Financial Wellness

Amanda Blankenship

Amanda is an editor and writer. She has a passion for sharing information that helps people and communities to better themselves in some way. In addition to writing online, she also freelances for local newspapers in her hometown of Charlotte, NC.

www.savingadvice.com

Our daughter is turning one next week and it has had me in a reflective mood. I’ve been thinking about how much has changed over the past year. We became parents and, every day since then, we’ve gotten to watch our little one grow. A lot has changed financially as well.

Last year, I wrote a blog post delving into the true cost of having a baby. IVF and fertility treatments set aside, it costs tens of thousands of dollars to deliver a baby. Then, you have to consider the costs of the first year. So, does my post from last year still hold true?

Labor & Delivery Cost

I updated the blog when we received the bill from labor and delivery. When all was said and done, my out-of-pocket cost wasn’t that much. My insurance covered most of the medications and procedures leading up to and during delivery. For many people, this is not the case and they wind up having a bill in their mailbox for $30K two months after giving birth.

Our Monthly Budget Changes

The biggest change for our family has been the increased monthly spending. Specifically, our food and home costs have increased. There is a monthly clothing budget that wasn’t there before because kids grow so fast. Other additions to the budget have included formula ($300/month), diapers ($70/month), wipes ($15/month), plus all the extra food that seems to be consumed in the house these days.

Not to mention, all three of us are home every day. So, the electric and gas bills are higher than they used to be. In truth, this has been the true cost of adding a child to our family. We’ve seen more monthly budget changes than anything else.

Thankfully, my husband and I are both working full-time and can meet the changes to our finances as they come. We’ve even had the cash to cover several emergencies more recently. Our dryer quit and we had to pay $390 for a new one to be installed. We had to pay landscapers to take care of a bush on our property ($250). No worries, our EF saved us! (Focusing on saving during pregnancy and since the birth of our daughter was definitely the right move for us.)

Being ‘Prepared’ For Children

My mom always told me that if I waited “until I was ready” to have children that I’d never have any. That’s the truth! If you want to have children, it is a good idea to make sure you have a relatively stable financial life. However, don’t think you have to have surpluses and everything perfectly in place before starting your family. Because, in all honesty, things will never be 100% perfect. You’ll have to adjust to your new baby’s needs and your own needs as well.

You can prepare and never actually be prepared for having kids.

Read More

• You Might Be Surprised By Our August Update (We Were)!
• Researching 529 Savings Plans and the Benefits
• Self-Care is Crucial to Maintaining Financial Wellness
• Do You Need an Online Course to Improve Your Finances?

Amanda Blankenship

Amanda is an editor and writer. She has a passion for sharing information that helps people and communities to better themselves in some way. In addition to writing online, she also freelances for local newspapers in her hometown of Charlotte, NC.

www.savingadvice.com

It has been a little while since I’ve dropped debt numbers here on the blog and, honestly, that is because it hasn’t been a main focus of ours. We’ve been working on establishing our family and our financial goals have mostly aligned with that (emergency fund and ensuring we have everything we need). Being new parents is challenging! However, we’ve been navigating everything fairly well. Here’s our latest debt update…

Breakdown of the Numbers

It has been about a year since our last big financial update on the blog. Two weeks before our baby was scheduled to arrive, we took another look at our finances, knowing it would be a while before we had time to really review them again. I am glad we did a serious review then because we truly haven’t sat down and reviewed the numbers until now. There have been so many changes in our finances over the last year and we’ve rolled with every single one. Some of the highlights have been:

• My husband landed an amazing full-time remote job. We are both able to work from home full time and keep our daughter home as well.
• We’ve got side hustles making us steady cash to put towards paying off debts.
• Having a child lowered our tax liability considerably. Our home office deductions were helpful too!
• We are credit card debt free!!
• Inflation has been interesting to navigate, but we are able to stick to a budget.

All of that being said, our main focus has been addressing our needs as a family, paying medical bills, and padding our savings. So, our debt numbers haven’t moved significantly. Below is a recap of what they were last August.

• Credit cards: $451 – This will be paid off in full soon.
• Collections: $1,213 – We are working on getting these removed.
• Car loans: $16,398
• Student loans: $24,185

Now, what are the numbers this year?

• Credit cards: $0
• Collections: $1,205
• Car loans: $11,858
• Student loans: $24,185

What’s Next

I’ve fully taken advantage of the pause on student loan payments. Once we have our emergency fund fully funded, we will be paying those off as soon as possible! That said, our EF is our main focus right now. We are also getting some items that we’ve needed around the house that are bigger purchases. So, we are using sinking funds for things like a dining table, new clothing, etc.

Once our EF is fully funded though, we plan to snowball our debt. The items in collections will get knocked out, then our car loan, and then the student loans. After we have accomplished that, we will start saving for a down payment on our first home.

All in all, we’ve made significant progress, especially when you consider where we started four years ago. We’ve cut our debt in half (and then some). I can’t wait to see all those balances hit $0.

Read More

• Researching 529 Savings Plans and the Benefits
• Self-Care is Crucial to Maintaining Financial Wellness
• Do You Need an Online Course to Improve Your Finances?
• An Honest Blue Apron Family Plan Review: Is It Worth It?

Amanda Blankenship

Amanda is an editor and writer. She has a passion for sharing information that helps people and communities to better themselves in some way. In addition to writing online, she also freelances for local newspapers in her hometown of Charlotte, NC.

www.savingadvice.com

After welcoming our daughter into the world almost a year ago we have been looking into things we can do to set her up financially. In addition to improving our own financial wellness, we plan to do things to help her in the future. That brought us to researching 529 savings plans and their benefits. I wanted to bring what I learned to the blog.

What is a 529 Plan?

According to SavingForCollege.com, a 529 plan is an investment account that provides tax benefits to the accountholder when used for qualified education expenses. Now, what are qualified education expenses, you ask? The include the following:

• College tuition
• K-12 tuition
• Apprenticeship programs
• Student loan repayments

Types of 529 Plans

Every state in the U.S. offers some kind of 529 savings plan except for Wyoming. These types of savings plans are typically categorized as a college savings plan or a prepaid tuition.

A prepaid tuition plan allows you to pre-pay all or part of the costs of education at an in-state public institution. These plans can be converted to be used at private colleges or out-of-state universities as well. For individuals interested in private college education, there is a separate prepaid tuition plan called the Private College 529 Plan.

College savings plans, on the other hand, work like a 401(k) or IRA. It puts your contributions into mutual funds and other similar investments. Before opening this kind of account it is a good idea to take a look at how each 529 savings plan investments are performing.

Benefits of a 529 Savings Plan

There are a few clear benefits of having a 529 savings plan. First, having a 529 savings account does not impact your eligibility for financial aid. So, even with that money set aside, the student can apply for grants and other aid. The money in the 529 won’t be taken into consideration.

Another one of the benefits that draws most people in is the tax breaks you receive for having this type of account. The money grows on a tax-deferred basis and you don’t have to pay taxes on the money when it is withdrawn if it is being used for a qualified education expense. Depending on where you live, you can also get additional deductions and credits for contributions made to your 529 savings plan.

Education savings plans also have generally low contribution amounts. Once you have deposited the initial required amount of money, the upkeep on the account can be as low as $25 per month. You simply need to find the right 529 plan for you.

Cons of 529 Plans

One of the only cons I can see is that your 529 savings plan is an investment account. When the market is performing poorly, so is your child’s education fund. During the economic chaos of 2008, my grandfather lost much of my college tuition money in the stock market. So, I do have that lingering in the back of my mind as we make our decision about moving forward with a 529 plan.

Our Decision

At the end of the day, we’d like to either homeschool or send our daughter to private school. Public school in our area just isn’t what it used to be. Knowing that we could stash away money for her K-12 tuition at a private school with some tax benefits is great. Additionally, if we decide to homeschool, we can put money into the account for college or whatever she decides to do after high school.

Readers, do you have experience with this kind of account? What are your thoughts about 529 savings plans? 

Read More

• Self-Care is Crucial to Maintaining Financial Wellness
• Do You Need an Online Course to Improve Your Finances?
• Will We Ever Get to Buy a Home?
• An Honest Blue Apron Family Plan Review: Is It Worth It?

Amanda Blankenship

Amanda is an editor and writer. She has a passion for sharing information that helps people and communities to better themselves in some way. In addition to writing online, she also freelances for local newspapers in her hometown of Charlotte, NC.

www.savingadvice.com