. debt

Our Debt Free Family

Commit. Plan. Take action.

The ‘YOLO’ Mindset is a Dangerous Thing

| Leave a Comment

yolo

 

 

What is the Meaning of YOLO?

The “You Only Live Once” (YOLO) mindset has gained popularity in recent years, often celebrated for encouraging people to embrace spontaneity and take risks. While there’s value in living life to the fullest, it’s important to recognize that an unchecked YOLO mindset can also be dangerous.

While the Canadian rapper Drake often gets credit for coining the phrase “YOLO,” it actually originated in 1993. Ben Zimmer was actually the man who trademarked the phrase and had it added to a line of apparel. It wasn’t until 2011 when Drake put it into a rap song that the phrase gained popularity though. Five years later, the Oxford English Dictionary entered YOLO into the dictionary as a word.

For many people, the idea of “YOLO” became a way of life. If you wanted to call out of work, YOLO. Maybe you wanted to head to the beach on a whim, YOLO. You finally quit that toxic job, YOLO. Someone asks you out for drinks after work  although you need to get stuff done at home? You say yes., because YOLO!

We’ll dive into the potential risks and drawbacks associated with a “You Only Live Once” mentality.

 

Immediate Gratification vs. Long-Term Planning

The YOLO mindset prioritizes immediate gratification over long-term planning. While it’s healthy to enjoy life’s pleasures, constantly indulging in spontaneous decisions without considering future consequences can lead to financial, emotional, and physical troubles. Neglecting to plan for the future, such as saving for retirement or investing in education, can result in long-term difficulties that could have been avoided with careful consideration.

 

What is a risk of constantly having a yolo mindset when making financial decisions?

Embracing the YOLO mindset without financial restraint can lead to reckless spending and financial instability. Impulsive purchases and lavish expenditures may provide temporary satisfaction but often lead to debt, stress, and limited financial security. A lack of financial responsibility can hinder opportunities for growth and limit one’s ability to navigate unexpected emergencies.

Don’t Miss: Dave Ramsey’s Financial Peace University Review: Is it Worth the Money?

 

Risking Personal Safety

The YOLO mindset can lead to risky behaviors, including engaging in dangerous activities without considering potential hazards. Engaging in extreme sports without proper training, experimenting with drugs, or engaging in reckless driving are examples of how the YOLO mindset can compromise personal safety. Prioritizing thrill-seeking over precaution can result in life-altering injuries or even loss of life.

Relationships and Emotional Well-being

Adopting a YOLO mindset without considering the impact on relationships can strain personal connections. Having fun with your loved ones is a great and memorable feeling, but acting solely on personal desires without thought for the feelings or needs of others can lead to broken relationships and a sense of isolation. Additionally, constantly seeking instant gratification might hinder the pursuit of deeper, meaningful connections that require patience and effort to develop.

Limited Growth and Development

The YOLO mindset might discourage individuals from pursuing personal and professional growth that requires sustained effort and dedication. Avoiding challenges or responsibilities in favor of short-term enjoyment can hinder personal development and limit one’s potential. Growth often demands stepping out of comfort zones, setting goals, and embracing delayed gratification.

Health Consequences

Neglecting health and wellness due to a YOLO mindset can lead to long-term health consequences. Poor dietary choices, lack of exercise, and neglecting regular health check-ups can contribute to preventable health issues down the line. Prioritizing instant pleasures over long-term health can result in a reduced quality of life in the future.

Missed Opportunities

An unchecked YOLO mindset can blind individuals to opportunities that require planning and preparation. Educational pursuits, career advancements, and personal goals often demand a degree of dedication and foresight. Focusing solely on immediate pleasures might lead to missed chances for personal and professional growth.

 

YOLO Mindset and Depression

You may be wondering how can a thrilling YOLO mindset leave you feeling depressed and empty. The issue is that you can only YOLO for so long. Think having a wild night out drinking with friends. It eventually comes to an end and you’re then greeted with a headache and other alcohol induced symptom. You may even develop a dependency or deep desire for that tipsy or intoxicated feeling, and when you’re unable to feed that desire, you become depressed. The same applies to a YOLO mindset. Placing your wellbeing and happiness in constant impulsivity and spontaneity will eventually leave you in a depressed stat once you’re unable to maintain the YOLO lifestyle.

Read our article on being debt free and bored.

 

Finding a Balance

Balancing a “You Only Live Once” (YOLO) mindset requires a thoughtful approach. Embrace spontaneity and adventure, but do so with mindfulness. Set clear priorities, both short-term and long-term, to guide your choices. Budget responsibly, saving for the future while still indulging in experiences. Surround yourself with positive influences who encourage responsible decision-making. Learn from past experiences, making calculated risks instead of impulsive choices. Recognizing the potential dangers of an unchecked YOLO mindset can help individuals make more informed decisions. By practicing mindfulness, setting achievable goals, and embracing a holistic approach to well-being, you can navigate life with a more balanced perspective while still having fun.

 

READ MORE:

Mom Pays Son’s Debt: Should You Consider Paying Your Child’s Debt?

| Leave a Comment

<p>Most of us have heard a story about a mother, father, or family members stepping forward and paying someone’s debt. When it comes down to it, reading a title such as “mom pays son’s debt” can be pretty disheartening. Why not give your child the tools to better their finances on their own, a strategy that will undoubtedly help them for years to come.</p>::Pexels

Mom Pays Son’s Debt: Should You Consider Paying Your Child’s Debt?

When faced with the reality of your child struggling with debt, many parents feel the urge to step in and help. But is paying off your child’s debt the right move? While it can provide immediate relief for your child, it’s important to weigh the long-term benefits and drawbacks of this decision. Here’s a look at both sides, including some 2024 financial debt trends and the potential dangers your child may face if they’re overwhelmed by debt.

 

Benefits of Paying Your Child’s Debt

  1. Immediate Relief from Financial Strain One of the most obvious benefits of paying off your child’s debt is the immediate relief it provides. Financial stress can take a toll on your child’s well-being, causing anxiety and affecting their ability to manage their day-to-day responsibilities. By offering financial help, you give your child space to focus on improving their situation without the constant pressure of debt.
  2. Teaching Financial Responsibility Paying your child’s debt can be a valuable teaching opportunity. When done thoughtfully, you can use this moment to help your child better understand financial responsibility. Set clear expectations for budgeting and managing money in the future, ensuring they avoid repeating the same mistakes that led to debt.
  3. Protecting Your Child’s Credit Score If your child is struggling with overdue bills or high-interest payments, their credit score can suffer. In 2024, credit reports are increasingly being used not only for loans but also for rental applications and even job prospects. Protecting your child’s credit score by helping with debt can ensure they have a better chance at future financial opportunities.
  4. Strengthening Family Bonds Offering financial support can reinforce family financial support and show your child that they can count on you during tough times. This can strengthen your relationship and foster open communication about money, creating a healthier dynamic when it comes to discussing finances.

Drawbacks of Paying Your Child’s Debt

  1. Risk of Enabling Poor Financial Habits While paying off your child’s debt may provide temporary relief, it could also reinforce poor financial habits. If your child knows that they can rely on you to bail them out, they may continue to make irresponsible financial decisions. This can lead to a cycle where they fail to learn financial lessons and continue to rely on you for help.
  2. Strain on Your Own Finances Paying off debt, especially if it’s significant, can place a strain on your own finances. It’s essential to consider whether you can afford to help without sacrificing your own financial security. Family money matters, and jeopardizing your own financial well-being could affect your future stability and retirement plans.
  3. Missed Opportunity for Growth Struggling with debt can be a powerful learning experience. Your child may need to go through the process of debt repayment on their own to fully grasp the consequences of their actions. Bailing them out may rob them of the chance to develop resilience, responsibility, and problem-solving skills.
  4. Creating Dependency Offering too much financial help can lead to a sense of dependency, where your child may expect you to step in every time they face a financial challenge. It’s important to find a balance between helping and encouraging your child to take ownership of their financial responsibilities.

2024 Debt and Credit Statistics for Young Adults

 

In 2024, young adults in their 20s and 30s are carrying a significant amount of debt, primarily due to student loans and credit cards. According to recent statistics:

  • The average credit card debt for young adults under 30 is approximately $4,200.
  • Around 1 in 5 young adults have a credit score below 600, classifying them as subprime borrowers.
  • The total student loan debt in the U.S. has exceeded $1.8 trillion, with the average borrower owing nearly $37,000.

With inflation and rising living costs, many young adults are resorting to credit cards to cover basic expenses, which only increases their financial burden. These numbers highlight the significant challenges young adults face when trying to manage their debt, which can put them in dangerous financial situations if left unchecked.

Extreme and Dangerous Measures to Pay Off Debt

For some young adults, overwhelming debt leads to extreme actions. Here are some risky behaviors that could result from a desperate attempt to eliminate debt:

  1. Taking High-Interest Payday Loans
    In an effort to pay off credit card debt or student loans, some young adults resort to payday loans. These loans often come with interest rates exceeding 400%, trapping borrowers in a vicious cycle of debt that’s nearly impossible to escape.
  2. Participating in Risky Investments
    Desperate to make quick money, some young adults turn to speculative investments, such as cryptocurrency or day trading. While these strategies promise quick returns, they can also lead to significant losses, further worsening their financial situation.
  3. Selling Personal Belongings
    Another extreme measure includes selling valuable possessions, such as electronics, jewelry, or even cars, to pay off debt. While this may provide short-term relief, it can negatively impact their quality of life and create additional stress.
  4. Undertaking Multiple Jobs or Gig Work
    In a bid to make extra cash, many young adults take on multiple jobs or participate in gig economy work. While this can help them manage debt, the long hours and physical toll can lead to burnout, affecting their mental and physical health.
  5. Risky Personal Loans from Friends or Family
    Some may seek personal loans from friends or family members, risking relationships if they’re unable to repay. This can create long-lasting tension within families, and borrowing money can sometimes become a pattern of dependency.

Finding a Middle Ground

If you’re on the fence about whether to pay off your child’s debt, consider alternatives that offer support without full financial rescue:

  • Debt Repayment Advice: Guide your child through creating a budget or negotiating with creditors. This way, you offer support without paying their debt directly.
  • Set Conditions: If you decide to help financially, set clear conditions. For example, you could require that they take a financial education course or stick to a strict budget.
  • Help in Smaller Ways: Instead of paying the entire debt, consider offering a partial payment or assisting with a specific debt, such as a high-interest loan.

Conclusion

Deciding whether to pay your child’s debt is a deeply personal choice that depends on your financial situation, your child’s habits, and your family dynamics. While parental financial help can offer immediate benefits, it’s essential to consider the long-term impact on both your finances and your child’s financial independence. Striking the right balance between supporting your child and fostering their financial responsibility is key to helping them succeed in the future.

The Complete Guide to Getting Out of Debt

| Leave a Comment

,getting out of debt

In total, Americans owe about $986 billion in credit card debt alone. For mortgages, the average borrower in the US has $236,443 in housing-related debt. Student loans also pack a punch, leaving the average borrower owing around $39,351. With so much debt piling up, many households are desperately trying to reduce their balances and eliminate their debt. If you want to conquer your credit cards, ditch your mortgage, free yourself from student loans, and otherwise remove creditors from your life, here is a look at the steps you can take to get out of debt.

Create a List of Your Debts

Before you take any steps beyond making your minimum payments, you need to understand your debts. Create a list that includes all of the lender names, debt types, interest rates, minimum monthly payments, and remaining balances.

As you compile the information, you should end up with a table that looks like this:

Lender Name Account Type Interest Rate Minimum Monthly Payment Remaining Balance Owed
Bank of America Auto Loan 6.25% $336.21 $18,112.36
Wells Fargo Mortgage 5.5% $925.00 $174,536.14
Capital One Credit Card 17.9% $181.40 $7,256.18
Best Buy Store Credit Card 25.9% $64.67 $2,586.88
Sallie Mae Student Loan 6% $168.16 $23,472.01
Credit Union Personal Loan 12.9% $50.47 $1,499.98

After gathering those details, you also want to total up your monthly payments to see how much you owe every month as well as your total balance owed. Using the example above, the total minimum monthly payments would be $1,725.91, and the total balance owed would be $227,463.55.

The idea is to get an incredibly clear picture of what companies you are paying, how much you are directing toward debt payments each month, and how much you owe.

If you are worried that you are overlooking a debt, head to AnnualCreditReport.com and request a free copy of your credit reports. The website is officially supported by the government, and you can get a copy of each of your reports from every major bureau every year at no cost. Then, you can review the reports for information about your creditors, including who you owe and other details.

Know Your Rights

If you have fallen behind on your debt payments, you might be stuck dealing with debt collectors. If so, it’s important to understand that all debt collectors have to follow certain laws.

Review the details of the Fair Debt Collection Practices Act if you want the most in-depth understanding of your rights and the various rules. If you want a solid overview using simplified language, the Federal Trade Commission’s Debt Collection FAQs is a good place to start. Along with information about what is and isn’t allowed, you can find out how to report a debt collector who violates the laws.

It’s important to note that individual states may have additional regulations regarding debt collection practices. In many cases, your state’s attorney general’s office can provide you with further details about your rights under your state’s laws. You can find contact information for your state attorneys general office through the USA.gov State Attorneys General search page.

Make Sure You Actually Owe on the Debts

There are instances where a person is subjected to billing or collection efforts even though the debt isn’t actually theirs. A company or debt collection agency might say that you need to pay when, legally, that isn’t the case.

At times, these attempts to get you to pay for a debt aren’t nefarious. In some cases, it is simply a mistake. A debt was associated with you on accident, such as through a technical error or an employee incorrectly entering customer information. If you believe one of the debts you are dealing with may fall in this category, contact the company or vendor. For additional support, you can also reach out to the Consumer Finance Protection Bureau, Better Business Bureau, or the Federal Trade Commission.

It is also possible that you have been the victim of identity theft. In these cases, someone else pretended to be you or used your personal information – such as your name, Social Security Number, and birthdate – to fraudulently open an account, making it appear that the debt is yours. If you might be the victim of identity theft, the Federal Trade Commission’s Identity Theft website can give you details about how to address the problem.

If a lender or debt collector says that you are responsible for a deceased loved one’s debt, they are usually incorrect. Debt can’t typically pass from one generation to the next if the surviving family member isn’t listed as an official borrower, such as by being a cosigner. Instead, any repayment is handled through the deceased’s estate. However, if you aren’t sure about your liability, you can consult a lawyer. Inheritance laws may vary from one state to the next, so it is wise to speak with a professional to confirm you aren’t responsible.

There are also situations where the debt was genuinely yours, but you are no longer obligated to pay it based on its age. There is a statute of limitations for many kinds of debt, and, once that period ends, the unpaid amount is time-barred. How long that time period is varies based on the type of debt and state law. If you aren’t sure if one of your debts is time-barred, contact your state attorney general’s office.

Understanding Your Interest Rates

Most people have heard debts being referred to as “high interest” or “low interest.” However, there isn’t usually a clear line that identifies what rates fall in which categories.

Since common repayment advice usually tells borrowers to focus on high-interest debts, it’s important to have some form of benchmark. One of the easiest ones is to compare the interest rate to what you could earn as a return if you invested the funds. If the interest rate is above the average return on an investment, consider it high-interest. If it is below, then consider it low-interest.

For example, the average S&P 500 return over the years has been about 10 percent. Using that example, all debts with a higher rate would be high interest. Any debts below 10 percent would be low interest.

Negotiating Principal and Interest Rates

Some borrowers are surprised that negotiating on debt principals and interest rates is an option. If you are struggling with your debt but have managed to stay current on your payments, you might have a decent credit score. If that is the case, you might be able to request a lower rate, reducing how fast interest builds up and potentially lowering your minimum payment.

If you do get any reductions in interest rates, update your debt list to reflect the new interest rates and minimum payments. Additionally, recalculate your total monthly payments and total amount owed, ensuring the information is current.

Additionally, if you can offer a substantial lump sum that is slightly below what you owe, the lender or debt collector might accept that amount as payment in full. Contact them, let them know what you can pay, and see if they will settle the debt for that amount. If so, get their commitment to closing everything out in writing before you send the payment. That way, you are protected if they try to avoid living up to their end of the bargain.

Just keep in mind that, if you settle the debt for less than you owe, there may be tax implications. You could receive a 1099-C (cancellation of debt tax notice) from the company. That means the difference between what you paid and what was owed might be considered income by the Internal Revenue Service (IRS), impacting your tax obligations. If you want to find out if the canceled debt is taxable, review IRS Topic No. 431 for additional information.

Create a Household Budget for Tackling Debt

Once you know who you owe and how much, have confirmed that you are responsible for the debts, and have negotiated when possible, you need to create a new household budget. Use your debt list as a starting point.

Next, add any more monthly expenses you have to handle. For example, this could include rent payments, utility bills, home or renter’s insurance, auto insurance, and any other recurring bills.

Then, put in details about your other living expenses that aren’t bills. For instance, groceries and fuel for your car would fall in this category.

The goal is to get a holistic view of where your money goes every month. If you spend money in one area on a monthly basis, write it down.

If your expenses exceed your income, then it’s time to make some cuts. See what costs you can reduce or eliminate. For example, eliminate cable television, reduce the number of streaming services you use, and pare down your food budget.

If you do not have a budget template, you can get one here.  Here is a handy screenshot so you can see what a good budget looks like.

While you might have to live a bit uncomfortably for a while, this process will help you live within your means and pay off debt. Otherwise, you’ll need to find options for augmenting your income if you want to make serious headway.

Increasing Your Earnings to Defeat Debt

Whether you have a budget shortfall or simply want to tackle your debt as fast as possible, increasing your income is always a smart move. Begin by examining all of your household items and decide if there is anything you could sell or donate for a tax deduction.

After that, consider if you can enhance your earnings. Is getting a raise at your current job a possibility? Could you take on a second job? What about some freelance gigs? If increasing your income from work is possible, explore it.

Finally, you can also see if there is any assistance available that might allow you to pay off your debts faster. Check to see if you are eligible for government programs based on your income. Reach out to area non-profits, particularly if you might miss a rent, mortgage, or utility payment. While you might not find any options here, it is worth checking out if you are genuinely in dire straits.

Creating a Debt Payoff Strategy

Before you go beyond making your minimum debt payments, you need a payoff strategy. This will help keep you focused and prepare you to tackle your debt in the best manner possible.

There are two effective and popular strategies for paying off debt.

1) Debt Snowball. The Debt Snowball strategy was popularized by Dave Ramsey, a personal finance expert. In this approach, you focus on the debt with the smallest balance.

Essentially, you pay the minimum payment on every debt but the smallest. Next, you send every extra dollar you can toward the smaller debt. Once you tackle it, you get the mental boost of having a success. Then, you focus all of the money that was going to that debt to the new smallest debt, continuing the cycle until everything is paid off.

2) Debt Avalanche.  The second option, the Debt Avalanche, concentrates on the highest interest rate debt first instead of the smallest. You make the minimum payment on every debt, only sending extra cash to the highest interest debt. Once that one is conquered, you focus on the new highest interest account. This approach is the best financially, as you’ll pay less in interest than if you use the Debt Snowball method in many cases. However, if your high-interest debts are large, you don’t get a mental win as quickly, which can be tough on your motivation.

Either approach is viable, as they both help you get out of debt. Consider if you need the mental boost of a quick win. If so, the Debt Snowball is for you. If not, then use the Debt Avalanche to save on interest.

Sometimes, it is easier to decide if you can see the difference. Luckily, you can find easy to use debt snowball and avalanche calculators that will do the math for you, allowing you to input information about your debts and see exactly how the results differ.

Keeping Yourself Motivated

Paying off your debt takes time. As a result, you need to find methods for keeping yourself motivated that don’t involve unnecessary spending.

Many people enjoy having a visual aid. For example, you might create a debt thermometer that you can color in as you pay down your balances. This can help you see how far you’ve come, making it clear that progress is happening.

Additionally, updating your balance owed on your debt list to show the lower amounts can be encouraging. You get to put in smaller balances every month, an that can help keep you motivated.

Don’t Look for Shortcuts

While nearly everyone wishes that there was some kind of shortcut that can lead to debt elimination, there usually isn’t. It takes time, work, and dedication.

While there are reputable debt management organizations out there that can help make the process more manageable, there are also a ton of scams. Any company that touts their supposed ability to work a miracle and make your debt disappear should be considered highly suspect. If you are considering a formal debt management plan, research the organization heavily to make sure it is legitimate and doesn’t charge high fees that make your tough situation worse. If you have any doubts about their credibility, walk away, and get out of debt on your own.

Similarly, while many would suggest debt refinancing or consolidation, that isn’t always an ideal road. If you don’t have stellar credit, you might get a worse interest rate than you are dealing with today. Plus, it could potentially open the door for accumulating more debt, and that could make your situation worse.

This is especially true for balance transfer credit cards. Even if you could get a 0 percent rate for a period of months, using the service typically comes with a fee (around 3 percent of the amount transferred). Plus, if you miss a payment, you might lose the promotional rate, leaving you stuck with the regular (or even a penalty) rate instead. Unless you can be genuinely diligent and pay off the entire transferred amount before the promotional period ends, it usually isn’t worth pursuing.

Helpful Resources

There are plenty of helpful resources that can make your journey easier to manage. For example, online communities can give you moral support and might share tips that can help you get out of debt. Here are a few worth checking out:

There are also tons of Facebook groups dedicated to getting out of debt. You can perform a simple search and find people who are on the same debt conquering journey, which can be very beneficial.

Additionally, there are a bunch of personal finance experts that dole out helpful advice, including:

While you might not agree with everything they say or recommend, all of those experts can help you start thinking about personal finance in a new way.

Ultimately, it is possible to get out of debt. While it does take time and diligence, it is a journey worth taking. Assess where you are, figure out where you want to be, and create a strategy that will let you get from point A to point B over time. In the end, you’ll be happy that you started on the journey and elated once you are done.

What To Do If Debt Is Accrued By Identity Theft

| Leave a Comment

<p>It is recommended you check your credit score at least once a year. However, those of us on debt freedom journies may check it more often. What happens when you look at your report and find something you don’t recognize? What if there is a debt on your report you didn’t authorize? Here’s what to do if debt is accrued by identity theft.</p>::Pexels

It is recommended you check your credit score at least once a year. However, those of us on debt freedom journies may check it more often. What happens when you look at your report and find something you don’t recognize? What if there is a debt on your report you didn’t authorize? Here’s what to do if debt is accrued by identity theft.

What To Do If Debt Is Accrued By Identity Theft

You’ve noticed something out of the ordinary on your credit report. First thing’s first, breathe. You will want to keep a level head and get all of the information on how to move forward clearly. Identity theft could cost countless dollars if not handled correctly, so you want to be sure to do it right.

File an identity theft report with the Federal Trade Commission (FTC). Next, you’ll want to place a minimum of a one-year (up to seven years) fraud alert on your credit report. This way, you’ll be alerted to any and all activity on your behalf.

Once you’ve reported the activity and moved forward with monitoring your credit, take the steps necessary to remove incorrect information. If needed, dispute the fraudulent accounts and request that creditors stop reporting them. To do this, send copies of proof of identity theft, which you will receive from the FTC.

If a debt collector is harassing you during this time, you also have the right to block them from contacting you (if all else fails).

Credit Monitoring Best Practices

Of course, you want to avoid identity theft altogether, if possible. It is a good idea to employ some credit monitoring best practices. For instance, services like Credit Karma and many credit card companies offer free credit monitoring. Many will also alert you if there has been a change. Sign up for alerts so you can be aware if there is anything abnormal taking place.

Additionally, it is always important to stay on top of what kind of scams are circulating at the time. Don’t fall victim to schemes aiming to destroy your credit and finances by being uneducated about them.

Lastly, if you do find anything out of the ordinary on your credit report, call the company right away and discuss what your next steps should be. The sooner you take action against identity theft, the better.

Readers, do you have any identity theft nightmare stories you’d like to share? Comment below! I’d love to feature you on the blog. 

Read More

When Should You Take On New Debt?

| Leave a Comment

I bit the bullet and took on some new debt last month. Over a year and a half ago, I sold my 2002 PT Cruiser for $150 in grocery money (seriously). Since then, I’ve been using bike sharing, car sharing, public transportation, and just walking everywhere I’ve needed to go. Last month, I made the decision to buy myself a new car.

I’ve been working on my credit for some time (pulling it up from a 424 to a 650 in one year) and have been contemplating getting a car for myself. My pup has gotten a bit too big for the two-seater Miata my boyfriend and I shared. So, I got a new car in February.

<p>I bit the bullet and took on some new debt last month. Over a year and a half ago, I sold my 2002 PT Cruiser for $150 in grocery money (seriously). Since then, I’ve been using bike sharing, car sharing, public transportation, and just walking everywhere I’ve needed to go. Last month, I made the decision to buy myself a new car. I’ve been working on my credit for some time (pulling it up from a 424 to a 650 in one year) and have been contemplating getting a car for myself. My pup has gotten a bit too big for the two-seater Miata my boyfriend and I shared. So, I got a new car in February. </p>::Pexels

Before doing so, I was overwhelmed with stress and anxiety over pulling out a loan. I worked really hard to pull my credit score up and wouldn’t want a car loan wrecking it.

Questions to Asked Yourself Before Taking on New Debt

This got me thinking. What questions should you ask yourself before taking on new debt? It can be absolutely nerve-wracking. So, here is a list of questions to ask yourself before taking out a new loan or opening a new credit card:

Will taking on the new debt hurt your credit? Don’t take on any new debt that will hurt your current financial situation. Although this seems like a no-brainer, items you want may cloud your judgment. If the new debt will hurt your score, move on.

Can you use cash instead? If you’re able to use cash and avoid taking on new debt although, do so. Sometimes saving for the item, and having delayed gratification, is more rewarding financially.

What are the repayment terms? And are the payments affordable? Identify how much you can afford to pay on your loan or credit card per month. If the new debt is outside what is affordable for you, don’t open the account. You will also want to be sure to read all of the repayment terms and conditions. For instance, make sure you know whether or not there are any fees for paying it off early.

Will the item last beyond the repayment term? This is especially important if you are in the market for a car. Many new cars cost around $20,000. If you pull out a 6-year loan, it isn’t always guaranteed your car will last throughout (or much past) the loan term. Do research about the item you are buying and be sure it is quality. You’ll be paying for it, and using it, for years to come.

Have you compared services offered by other lenders? Is the new debt you are taking on the best interest rate you can get? To make sure, you’ll want to call around and see what types of rates you can receive at other institutions. Be careful though – running your credit too often can hurt you!

When it comes to taking on new debt, nothing should be taken lightly. Be sure you are asking yourself the right questions and answering them honestly. You don’t want to be drowning in debt with no clear way out.

Have you taken on new debt recently? Did you ask yourself these questions?

5 Things to Avoid to Live Debt-Free

| Leave a Comment

<p>Reaching financial freedom is far from easy. Only 29% of Americans consider themselves to be financially healthy. Once you obtain debt freedom, you want to be able to stay there. So, there are several things you’ll want to avoid to live debt-free.</p>::Pexels

Reaching financial freedom is far from easy. Only 29% of Americans consider themselves to be financially healthy. Once you obtain debt freedom, you want to be able to stay there. So, there are several things you’ll want to avoid to live debt-free.

1. Budgeting is Always Crucial to Your Financial Health

You had to budget to get out of debt. That doesn’t stop just because you no longer have creditors to pay off. In fact, budgeting is even more important once you’ve paid everything off. If you don’t set a budget you run the risk of racking up debt again if an emergency arises.

Remember that your budget needs to be 100% cash. Don’t consider your credit cards or any other form of money spendable.

2. Overspending is a No-No If You Want to Live Debt-Free

That directly ties into overspending. If you start considering the money available on credit lines to be spendable, it is more likely you’ll restart the cycle of debt in your life. You certainly don’t want that after all of your hard work to get where you are.

Instead, plan for bigger purchases and save up for what you want. You should also have a set budget for recurring expenses and other plans. Don’t deviate from that budget.

3. Don’t Stop Saving Your Money

Saving money isn’t just important during your debt freedom journey either. As mentioned in the point above, it is important to save money for large purchases and planned expenses. However, it is also always a good idea to keep money saved.

Having an emergency savings fund will keep you from tapping into credit lines if something comes up. Additionally, saving money can help you secure your financial future and ensure you’ll be able to retire someday.

4. Giving Up on Investing Isn’t an Option

When it comes to saving for retirement, you should also continue to invest while you live debt-free. Even though you may not have as much cash flow or you may be tempted to spend cash, it is a good idea to invest in a diversified portfolio.

Not only will this allow for you to have financial freedom throughout the rest of your life but it can help you expand your current finances. Avoid being afraid of the stock market once you’ve paid off your debts.

5. Neglecting Insurance Will Cost You

Renter’s insurance, homeowners insurance, car insurance, and health insurance. Purchasing coverage is important to protect your finances. In the event of an accident or emergency, these policies can help you avoid racking up debt.

Even though the monthly cost of insurance may seem like a pain, it can help you replace damaged items, restore your health, and protect your belongings. Without it, it is easy to swipe your credit card. Insurance is crucial if you want to live debt-free.

Readers, what else would you add to the list? How do you live debt-free?

Read More

A Few Things to Know About Loans

| Leave a Comment

<p>The current life standards have forced many people to think about the option of getting a loan whenever they want to buy something or enjoy a good holiday abroad. Even though people are paid much better than 20 or 30 years ago, the standards have risen to a point where you need to apply for loans several times throughout your life. This is not something that we should be ashamed of. After all, those are things that we have to get used to. Some research has shown that more than 60% of the people in the world are living in some kind of debt. There are many things to know about loans and paying them off, but we wanted to share a few interesting facts about them which are highly informative.</p>::Pexels

The current life standards have forced many people to think about the option of getting a loan whenever they want to buy something or enjoy a good holiday abroad. Even though people are paid much better than 20 or 30 years ago, the standards have risen to a point where you need to apply for loans several times throughout your life.

This is not something that we should be ashamed of. After all, those are things that we have to get used to. Some research has shown that more than 60% of the people in the world are living in some kind of debt. There are many things to know about loans and paying them off, but we wanted to share a few interesting facts about them which are highly informative.

Debt Consolidation

When you get a loan, it’s important to have a plan on how to pay it off. If you don’t have a plan, you might end up not being able to keep up with the monthly payments which can lead to a lot of trouble. One way to manage to overcome a problem like this is debt consolidation.

Debt consolidation is a form of refinancing in which you take a loan which will pay off all other loans. There are many advantages to it, like lower interest rates, fresh start on monthly payments, etc. But, these advantages come only if you get this type of loan form a good and credible company. So, it’s extremely important to choose a good company which will help you deal with your financial difficulties.

The overall lower interest rate is what makes debt consolidation loans so popular and handy for anyone who is having trouble paying off their debts. With this type of loan, the repayments can spread over to a larger period.

They Are Available Online

As we all know, there are plenty of advantages that came with the rise of the Internet. Many services have been made available online. Such is the case with online loans. Many online lenders hand out loans to people all around the world and they became extremely popular lately. The reason for that is that they are very easy to deal with.

Online lenders are flexible with their clients. To make things even better, their approval rates are much higher than the ones of the banks. Online lenders have a 70-75% approval rate, whereas the banks have around 55-60%. The applying process is also much faster – all you need to do is fill out an application and wait a few days for feedback.

Countries With Low Interest Rates

The top 3 countries with the lowest interest rates in the world are Switzerland, Denmark, and Japan. The good economic state, as well as the politics of the countries, have been huge contributors in making them stable and ‘affordable’ to the people. Feel free to check out the top 5 list here.

Side Jobs Can Help You Pay Loans

This may sound a bit funny, but many people around the world take up some side jobs as a way to help them pay off their debts. And they can extremely helpful, a lot more than you would think. There are plenty of easy profit-making side jobs that can better your financial status and ease your worries when thinking if you are able to pay off your debt. Going online to make money is also a good idea.

When is Debt Consolidation a Realistic Option?

| Leave a Comment

 

p>When it comes to paying off debt there are multiple approaches you can take. For some, debt consolidation seems to be the answer but is debt consolidation the best answer?</p>::Pexels

 

When it comes to paying off debt there are multiple approaches you can take. For some, debt consolidation seems to be the answer but is debt consolidation the best answer?

What is Debt Consolidation?

Debt consolidation is essentially taking out one loan to pay off all (or a good chunk) of your debt.  It is generally used for people who have a large amount of consumer, or credit card, debt. This makes it so that you’ll have one easy payment each month going towards your debt-payoff efforts. For some, this has been the answer to their struggle with debt.

The Problem With Debt Consolidation

The biggest issue with debt consolidation isn’t taking out a loan to pay everything off. The issue lies with the individual’s personal finance approach. Normally, people who consolidate their debt have no plan to spend cash and not run their credit cards for everything. This makes it so that some people who have taken the debt consolidation route may wind up back in tremendous debt. There is also a good chance that they don’t have an emergency savings fund either, which means if an emergency arises it will likely go on their credit card.

And, even if you’ve established a solid plan for saving and reforming your spending habits, debt consolidation may wind up costing you more in the long run. For the most part, people choose debt consolidation to make their lives a little easier and, in some cases, decrease their monthly debt payment. However, debt consolidation loans can come with a higher interest rate and will last much longer than most of your current debt repayment plans. This means you could potentially wind up paying more when all is said and done.

Should You Consider Debt Consolidation?

If you’re thinking about debt consolidation, you’re not alone. There are plenty of people who have consolidated and paid off their debt successfully. And, while there are plenty of things to consider before doing so, it is a viable option for some. If you’re considering debt consolidation, remember the bottom line: Will it cost you more to consolidate? If the answer is yes, don’t.

Also, be sure that you have a solid financial plan for once your debt is consolidated so you don’t go back to the same spending habits. Oftentimes “moving” the debt, like you do when you consolidate, makes people forget about the debt they were in, to begin with.

Other Ways to Get Out of Debt Without Debt Consolidation

Debt consolidation is far from the only way to pay off a large amount of debt though. Here are just a few ways to get out of debt without consolidating:

  • Get a Look at Your Finances – Take a minute and really sit down with your finances. Get an idea of what is possible and what is out of reach in terms of paying off your debt and your budget. If you need to, reach out to a financial advisor.
  • Write Down Your Budget – Once you’ve got a sense of what your finances are like, start tracking your spending and create a budget. Make sure you write it down and hold yourself to sticking to it!
  • Get a Second Job – If you’re having trouble paying off your debt, consider getting a second job or side hustle. Bringing in more money will always positively affect your finances.
  • Live on Less Than You Make – This is a budgeting basic but something you need to keep in mind. If you truly want to be debt free you CANNOT spend more than you make.
  • Don’t Take on New Debt – If you’re just getting out of debt or trying to get out of debt, don’t take on any new credit cards or loans. Though credit card offers can be tempting, just say no.

Getting out of debt is no easy feat. While debt consolidation may seem like the answer to your problems, be sure you consider taking some simpler avenues (like living on less than you make and earning more) before taking on a consolidation loan. Remember, it’s not really getting rid of your debt, it is simply moving it!

Have you consolidated or paid off debt successfully? We’d love to hear your story!

Photo: CafeCredit.com

You may also enjoy reading:

Finding Debt Counseling the Right Way

| Leave a Comment

<p>There are times when we must admit that we can’t do it all ourselves, especially when it comes to money. Sometimes you’ll need the help of a financial advisor or trusted friend to set up your finances and get you on the right track. However, if debt is your issue, you may want to look into debt counseling services.</p>::Pexels

There are times when we must admit that we can’t do it all ourselves, especially when it comes to money. Sometimes you’ll need the help of a financial advisor or trusted friend to set up your finances and get you on the right track. However, if debt is your issue, you may want to look into debt counseling services.

But how do you know what debt counseling service is right for you?

About Debt Counseling

If you’ve come to the point that you think you may need debt counseling, don’t worry. There are plenty of great organizations out there to help. For the most part, these are agencies with a number of counselors available to help you.

What a debt counseling agency does for an individual in debt is, instead of paying your regular debt collectors each month, you pay one bill to the debt management company. The company will also negotiate lower interest rates if possible. This can be a great way to consolidate your debt without taking out a loan.

There are some debt counseling agencies that have been exposed as scams though so you’ll want to be sure you’re picking the right one.

Why It’s Important to Pick the Right Agency

Of course, no one wants to be scammed but it is extremely important you pick the right debt counseling agency. If you are set up with a poorly run agency (or even a scam) you could run the risk of hurting your credit even more.

While signing up with the agency themselves won’t do any harm, the management of your debt repayment by the agency can impact your credit. Some scam agencies (or agencies that are poorly run) may turn your payment in late to the debt collector. This could cause your credit score to decrease because of late payment.

 

Finding a Debt Counselor

As with most things finance, you’ll want to interview the agency that will be helping you and do plenty of research. A simple Google search of “debt counseling” in your area won’t be enough. Each organization will want to chat with you. You will also want to make sure they are a nonprofit organization (no debt counseling agency you want to do business with is for-profit).

Generally, upon meeting your debt counselor, you will establish a debt repayment plan. Your counselor will be in charge of contacting debt collectors and haggling the interest rates down or removing fees. Once the negotiations are over, you can begin work repaying your debt.

As mentioned above, you don’t want to do business with a for-profit debt counseling agency. After all, what good is paying off all your debt if you have to shell out thousands to do it? You will be looking at $50 or less to sign up for debt counseling services and another $25 to $25 per month on counseling through the debt repayment plan. Some organizations, depending on your financial status, will offer the services completely free.

You may also be able to approach an organization if your financial situation allows. Individuals there will help you get back on your feet and establish a financial plan that works (but your income will need to be within their limits).

No debt counseling agency is the same so, chances are, if you are in need there is an agency out there that can help you. If you are looking for help managing or paying off your debt, go to the National Foundation for Credit Counseling website for more information about debt counseling services.

READ MORE:

 

If You Must Get a Debt Consolidation Loan, Here is How

| Leave a Comment

<p>If You Must Get a Debt Consolidation Loan, Here is How</p>::Pexels

 

Consolidate Your Debt in Three Steps

Debt consolidation is an option many people turn to when they feel they are drowning in debt. There is no doubt that, for some, it is a great option to consolidate and pay off your debts. So, if you have to pull out a debt consolidation loan, how do you do it?

Of course, consolidating your debt isn’t an overnight process. It will take some work and planning on your part. However, it doesn’t have to be complicated. In fact, it is as easy as 1-2-3:

Step One: List Your Debt

Before thinking about taking out a debt consolidation loan, consider whether you have enough debt to consolidate or not. Take some time to write down all of your debt. Include any loans and credit cards you have that need to be paid off. Generally, if this amount is $10,000 or more you can pull out a debt consolidation loan to ease your payments.

Be sure to list each of your debts along with the interest rate. Lower interest rates on payments may be worth simply paying off instead of consolidating. You may also want to consider seeking debt counseling before settling on consolidating your debt.

Step Two: Research Debt Consolidation Loans

Once you’ve established your need for a debt consolidation loan and have identified the debts you want to target, research the different types of consolidation loans available to you. Generally, there are three debt consolidation loans to choose from:

  • Unsecured Loans – Unsecured debt consolidation loans require good credit, which is a difficulty for many people looking to consolidate their debt. These types of loans will allow you to pull out a loan, based on your credit, and consolidate your debts as you see fit, into one monthly payment.
  • Secured Loans – Secured loans for paying off debt don’t always make sense. However, if you’ll save money on the interest they can be helpful. Secured loans allow you to borrow against money you have in savings or elsewhere to pay off your debt with one monthly payment. If the consolidation loan’s interest rate is less than your credit card interest rates or loan interest rates, a secured loan is a great way to go!
  • Private Student Loans – For many people, student loans make up the majority of their debt. If you want to consolidate these, you will have to pull out a private student loan. Many banks offer private student loans and can provide you with a lower-interest loan to pay your education off.

Step Three: Create an Easy Payment Plan

After deciding what debt consolidation loan is best for your repayment needs, determine the terms of your loan. If you can only afford $200 per month towards debt repayment, adjust the length of your loan accordingly. You should also be sure to put your payment date on a date that is always convenient for you. To ensure the loan payment is always made, set up an automatic payment. Making the payments in full and on time will help your credit score significantly.

If you find yourself gravitating towards a debt consolidation loan, you’re not alone. Just be sure you go through the steps above and define the best course of action for you and your finances.

Readers, have you taken out a debt consolidation loan? What was your experience?