Category Archives: Debt

How To Estimate Your Monthly Expenses

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When it comes to budgeting, most of us have a pretty solid grasp of our monthly income. It can be more complicated if you’re self-employed. There will be fluctuations as your sales go up and down, but they typically fall within somewhat predictable ranges at given times of the year. Estimating your expenses, on the other hand, can be a bit more challenging.

The Importance of Estimating Your Expenses

A budget is essential for sound money management. Having one keeps you from flailing from one financial emergency to another throughout your life. Financial mismanagement from not having and sticking to a budget typically ends with not having sufficient savings to fall back on when you’re retired.

Only by having an accurate grasp of your expenses can you hope to know how much money you’ll have left over at the end of each month or whether you’ll have more month left at the end of your money.

How to Accurately Estimate Your Monthly Expenses

You need to sit down and write out every expense you have each month. Also, if you have bills that are due quarterly, for example, don’t forget to write down a monthly portion for each of them.

The following is a list of expenses that most people will have.

  • Rent or Mortgage
  • Car Payment
  • Car Insurance
  • Car Gas and Maintenance
  • Electric Bill
  • Gas Bill
  • Water Bill
  • Cable and Internet
  • Groceries
  • Eating Out
  • Student Loans
  • Health Insurance
  • Credit Card Payments

For many, the above list will not be comprehensive. You may have a gym membership and a Netflix subscription, in which case, you’ll need to add those.

Do you have a pet? Their food purchases may already be covered under your grocery expense listing but anything else may have to be added to your expenses list.

Also, if you have a medical condition, be sure to add your out-of-pocket copay on any prescription medicines you buy and for any regular doctor visits.

One Critical Item to Remember When Estimating Expenses

Mike Tyson had a famous quote that “everyone has a plan until they get punched in the mouth.” Life can throw punches occasionally.

You’ll have car breakdowns, rushes to the emergency room with a sprained wrist or whatever, your home furnace may finally give up the ghost and who knows what else.

There will be unpredictable events that will exceed a given pay period’s income, so you’ll need savings to handle it.

One recommended formula for budgeting is known as the 50/30/20 rule.

This refers to:

  • 50 percent of your income for essentials such as rent, utility bills and food.
  • 30 percent for discretionary spending.
  • 20 percent put away in savings.

This is, of course, the ideal scenario. Even if you exceed your expenses in a given month, you should still make sure to put something away for a rainy day since it all adds up over time.

Let Your Phone Be Your Expense Tracker

The best way to estimate monthly expenses is by keeping track of current expenses. Many bills are fairly regular in their amounts and when they’re due.

So, if you know how much you paid this month, they won’t be much, if any, more next month. One of the best, most convenient ways to do this is through the use of expense tracking apps.

You can simply Google “best consumer expense tracking apps,” and you’ll be presented with a ton of options. Since they are on your phone, they’ll be with you wherever you are as you’re spending money.

They enable you to almost effortlessly plug in expenses as you incur them. Many also have the capability to link to your bank and other useful options. Thankfully, the days of having to save and add up a pocketful of wrinkled receipts to keep track of where your money’s going are long gone.

The Power of Information

One of the best things about tracking expenses and how it enables you to estimate future expenses is what it tells you about yourself. You may find you spend way more money in a particular area of your life than you ever realized before tracking it.

Perhaps you didn’t know how much all those lattes at the local coffeehouse were adding up to each month. This information can cause you to cut out certain expenditures when you realize that they’re keeping you from saving money toward other things in your life.

If you see you’re spending too much on credit card payments each month, this will help you to see the wisdom of cutting back and paying as you go with cash.

If you have a fair amount of credit card debt that is high interest, you may even want to prioritize paying this debt off above saving money.

Most savings or investment accounts will yield lower interest rates than what you’ll be paying on your credit card debt, so you’ll be losing money by putting it into savings before paying this off.

Most of us have a pretty good handle on our income, which makes tracking our expenses the major obstacle to sound financial budgeting and planning. Follow the tips above to find out where your money is going and have the power at your fingertips to change financial course in your life.

Money Mistakes You Should Never Make After Thirty

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The thirties is a turning point in a person’s life where they have to seriously look at conditions in their lives and what they are doing with themselves. It is the point between youth and older age. Unfortunately, there are a lot of financial mistakes that people make in this time of life and beyond. Here is a list of the financial mistakes that people make in their thirties.

Not Properly Investing

Once you hit 30, you should start to realize that your middle aged and elderly years are not too far away. This is why you have to properly invest your money for the future. There are a number of things that you can invest your money in—precious metals, stocks, money in the bank, etc. Make sure to set money and resources aside for both a rainy day and your golden years.

Getting Yourself Into Credit Card Debt

Some people get into a horrible habit where they run up credit cards and get into a spiral of debt. It’s shockingly easy to pay for things that you can’t really afford via a small piece of plastic. Do not let the easiness and convenience of credit cards trap you.

Not Building Up Your Credit

It is very important to build up your credit because credit is something that is relevant when purchasing and renting important things such as homes, apartments and cars. Of course, if used unwisely, the use of credit can result in massive amounts of debt. However, if you don’t have to make huge purchases to build credit; you can just make very small purchases and immediately pay them off. It is important to start building credit as soon as possible.

Spending Too Much On Vice

The costs of alcohol and other inebriating substances can add up. If you want to save more money, cut down on the vices. If you smoke a box of cigarettes each day, it may be time to kick the habit—for the sake of your wallet, in the very least. If you drink copious amount of alcohol on a regular basis, you should stop. The same goes for any other substance. It is unnecessary and unhealthy to consume massive amounts of drugs, cigarettes and/or alcohol, anyway. If you are giving money to adult entertainers, it is time to stop doing that, or to cut down on how much you give.

Not Brown Bagging It

If you are over 30, you should really be brown bagging your lunch if you want to save money. Sometimes, it can be hard to want to eat brown-bagged food when the smell of hot, freshly made food from local business is lingering in the air. For some people, brown bagging requires a certain level of self discipline and a certain mindset. You must grow into this mindset, if you have not already done so.

Living A Non-Frugal Life Of Luxury

Living a relatively non-frugal life of luxury is a good way to financially destroy yourself after the age of 30. It may seem unbelievable but, before you know it, some relatively inexpensive entertainment expenses can add up to large amounts. For example, let’s say that within the course of a month you spend $300 on restaurants, $200 on tickets for shows and hundreds of dollars on other activities. Before you know it, you may end up spending $1,000 or more on leisurely activities that you could most likely cut back on if you really wanted.

Doing Expensive Things With Friends

Once you hit the age of thirty, you should try to do less expensive activities with your friends. If you cannot convince your friends to do less costly activities, it may be time to find friends who appreciate a more frugal lifestyle. Instead of hanging out with the Great Gatsby, hang out with someone who has more frugal tastes.

Not Having Started A Solid Career

When you’re in your thirties, you are relatively close to your golden years. This is why you should start a solid career or already have one going. You are going to need a solid career that allows you to save money for retirement, as well as earn a pension. If you have not found your direction, you should in your thirties. This is a time when you should seriously evaluate and reevaluate your work life. Are you satisfied with various economic and personal aspects of your job?

Not Thinking About Retirement And Your Golden Years

Once you find yourself in your thirties, you should start thinking about retirement and what, exactly, you will do in your golden years. What are your financial goals for those years, and what kind of lifestyle do you want to live? If you do not consider these things now when you are your thirties, you may find yourself up a creek without a paddle when you are elderly.

Having Children Without Planning Finances Properly

Of course, people have the right to procreate, despite whatever circumstances loom over their lives. However, having children can drain you of finances—even if you raise your children in the most frugal manner. You will have to take into account things such as clothing, food, various bills and daycare. Also, down the road you may have to pay for the child’s schooling. You may have to put your child into private school if the local P-12 schools are sub par. Also, you are going to want to save for your child’s education.

Trying To Keep Up With Peers

A lot of people feel pressured to keep up with the materialism and expensive decisions of their peers. If you are still trying to keep up with the Jones’ in your 30s and beyond, you are in a rude financial awakening. Release yourself of this pressure, and you will find that your finances will become better endowed.

People make financial mistakes in their thirties. These mistakes include trying to keep up with peers, having children without doing financial planning, not thinking about what one will do in one’s elderly years, doing expensive things with friends, living a relatively luxurious life, not brown bagging meals, spending too much money on vices, not properly investing and getting into credit card debt.

How Credit Card Consolidation Can Help Your Financial Situation

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One of the most significant ways to get into debt is by applying for and owning many different credit cards. Often, this is because the stores and credit card companies make it so easy to obtain a credit card that you get carried away. Before you know it, you have accumulated a multitude of cards with very high interest rates that will take years to pay off. In many cases, stores offer discounts on purchases if you apply for, and receive, a credit card. Do not fall prey to this. Each time you acquire a store credit card, even if it is a soft credit check, it will still appear on your credit report and change the dynamics of your score.

Making minimum monthly payments is one way to dig the hole even deeper because you are basically paying the interest charges, and the principal continues to rise. Consolidating credit cards into one loan can be a way out. Search diligently for a loan, or a low interest credit card, on which you can combine all of your cards. Merging high interest debt into a single payment can be an enormous financial relief. The stress of trying to make minimum payments while the balance continues to increase can cause many sleepless nights.

When you have combined all credit card debt into one loan, you have an established amount to pay each month and a prearranged time period for repayment. This strategy will only be beneficial if you do not continue to use credit cards in the same manner you have been doing. Consolidating the cards and then continuing to use them, or procuring new cards, will begin the process all over again.

If you are struggling with debt and perhaps paying late, or not at all during some months, it may be difficult to find a consolidation loan with the lower interest rate you are seeking. Some of the areas for consideration are:

Current Credit Score

Check your score with the three reporting agencies – Experian, Equifax and TransUnion. If your credit is not good enough to qualify for a loan, do not apply. Your credit score may be negatively impacted by the application itself.

Applying for the Loan

Applying for a loan through traditional means generally requires a hard credit inquiry, and that may impact your credit standing. If poor credit is an issue, try less conventional ways of trying to acquire a loan, such as through private investors, borrowing from friends and family, or borrowing from your retirement account. Submitting applications for several different loans is a red flag because it suggests that you are not credit worthy.

Repaying the Loan

Once you have secured the funds to consolidate your credit cards, be extremely careful that you make payments on time; otherwise, your credit score will suffer. Paying on time can help repair damaged credit and put you on a better footing, which may signal better interest rates.

Transferring Balances

Once you have moved the balances from credit cards to the newly consolidated loan, destroy the old cards, but do not close the accounts. This creates another ding on your credit report, but keeping zero balances may help improve your score.

Is a Consolidation Loan the Right Choice

Regardless of how you got into this difficulty, a consolidation loan can be the answer to your problem. Budgeting is the key to acquiring and maintaining good credit. You become more deliberate about spending habits, and the by-product is improved credit. As you see your credit improve, you may be less likely to fall into this kind of credit conundrum again. If you do not create, and follow, a sensible budget, you will end up in the same situation again.

Impulsive buying is a major culprit. In addition, many people fail to make adjustments to their budget when their situations change. When there is more outgo than income, it should be a clue that you are overspending. Using credit cards to maintain a certain lifestyle is dangerous.

If credit card debt is the only kind of debt you have, a consolidation loan may help diversify the types of credit you have and may improve your score slightly. You especially want to avoid multiple inquiries into your credit if you plan to make a significant purchase, such as a house or car.

Think carefully about a debt consolidation loan and the period of time it will take to repay it. Even though you may find a good loan with low interest rates, which makes monthly payments more manageable, that is still a lot of outstanding debt for a long period of time. This may also affect your ability to make large purchases. Paying off the loan over a shorter time can help you prepare for a major purchase.

Consider a balance transfer credit card if you can pay off the debt in the prescribed period of time. Otherwise, you are right back where you started. That introductory rate period may ruin your carefully laid plans to get out of debt. If you have not paid the loan in its entirety when the introductory rate is over, you will be charged a much higher interest rate.

If you do not want to make your finances worse, be astute enough to carefully read the fine print in any balance transfer or other debt consolidation loan. The best way to get out of debt is to change your spending habits and to gradually, with patience, work your way out of a bad financial situation. If you can maintain a budget and pay your bills on time, your financial difficulty will improve over time. It probably took a shorter period of time to accumulate the debt associated with your credit cards than it will take to pay it off. Paying down the debt and starting on a path to good consumerism will ultimately give you the peace and comfort of knowing that you have control over your spending and, perhaps, other areas of your life.

Is Trump and DeVos at Fault with the Failure of the Federal Student Loan Forgiveness Plan?

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Revised Student Loan Forgiveness Plan Fails Graduates Again

For millions of students and graduates across the United States, a student-loan forgiveness plan could alleviate the sky-high costs of higher education. FedLoan Servicing has advertised its recent loan forgiveness benefit for the better part of the past two years, but the company kickstarted its new program by denying nearly all candidates who applied. At this point, government officials from across the political spectrum are concerned about FedLoan’s ties with the Education Department. Is there reason to suspect a growing coalition between third-party loan agencies and the Federal Government?

What is a Student-Loan Forgiveness Plan, and Whom Does it Apply to?

It’s important to take a closer look at what a federal student-loan forgiveness plan is designed to accomplish. Rather than diminish costs equally for anyone with student loan debt, a forgiveness plan is designed specifically to benefit those who meet certain loan and employment criteria. The two most important factors are the size of an individual’s loan and the type of work he or she engages in after graduation. For example, professions such as teaching and social work have a reputation for strong loan relief options.

Teachers, social workers, firefighters and other service professionals make up the group that felt most betrayed after the initial wave of application denials in 2017. In 2007, these professionals were provided a clear option to lighten their debt under the Public Service Loan Forgiveness Program. However, as the program’s first wave of eligible candidates stepped up to the plate in 2017, the vast majority were sent away without further explanation.

Temporary Expanded Public Service Loan Forgiveness Program

This brings us to today’s dilemma where the government has opened its doors on an expanded loan forgiveness program that has once again dismissed applicants en masse. Critics from around the industry have begun pointing fingers at Betsy DeVos with demands for answers. It has been easy to place blame on the Education Department because their recent mantra has seemingly been to increase the requirements of qualifying for loan forgiveness.

Interestingly, the requirements for the most recent wave of loan forgiveness include that an applicant must have already applied and been rejected for the original Public Service Loan Forgiveness Program. This caveat has flown well under the radar and is a suspected reason that tens of thousands of recent applicants were turned away this year.

The Failure of Student Loan Forgiveness Programs and the Education Department

The fact that so much misinformation is floating around on this subject is at the heart of why Donald Trump and the Education Department have found themselves under the eye of scrutiny. Many critics believe the Federal Government is employing black-hat tactics to withhold the majority of the $700 million budgeted for loan forgiveness. At this time, only $27 million has been put to use.

There is no doubt that misinformation and confusion – whether intentional or otherwise – has caused a great percentage of FedLoan’s overall application denials. Worse, after a candidate is declined, it becomes a lengthy appeal process to have the decision revisited. This throws off the timing for loan forgiveness, and it forces recipients to pay more on their loan than what they had planned for through up to ten years of timely payment.

Still, greater concern exists over whether the Education Department is building a coalition of lobbyists in the industry of third-party student debt consolidation. President Trump has ties with officials in the FedLoan agency. Having connections with the company responsible for handling the forgiveness plan gives President Trump a layer of security in the wake of growing concern over his Education Department’s competency. With Trump’s inside edge, it could be difficult for future democrats and other politicians to employ the sweeping forgiveness plans that have gained popularity among all groups of learners who currently owe on student loans.

Despite the obvious reasons for the popularity of sweeping forgiveness plans, the feasibility of such programs is something the Education Department discredits. With total student debt totaling over $1.5 trillion, the meager budget of $700 million would require a major overhaul. Funding and executing a sweeping forgiveness plan is a general mainstay in democratic campaign strategy for the 2020 election.

When thinking about all the pieces that went wrong with the loan forgiveness plan, its easy to place blame on the Education Department, the Federal Government at large and, of course, FedLoan Services. At the end of the day, however, misinformation and confusion are the leading causes of frustration for those graduates in need of financial help. It is impossible at this time to determine the extent that any of that confusion occurred to deny as many applications as possible. Many cases can be made about the President’s involvement with officials at the FedLoan organization, but no evidence has yet pushed the case beyond the point of speculation.

Bernie Sanders & Student Loans: Can America Afford a Debt Jubilee?

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Student loans are sources of stress for numerous American families. In fact, statistics show that student debts are worth nearly $1.5 trillion as of the end of 2018, and approximately three million individuals over the age of 60 are still carrying student debt. Thinking about student loan debt is difficult for young adults who are in the thick of college studies and who are only thinking about their futures and careers in the rosiest possible terms. However, once these students graduate and start making loan payments, they quickly realize what an impossible situation they are in particularly once they get married and begin seeing additional family costs.

Everything You Need to Know About Student Loan Debt Forgiveness and the Debt Jubilee

While student debt forgiveness once seemed to be an impossible idea, today, it is seeming much more possible thanks to the current economic climate in America and the ideas espoused by presidential candidate hopefuls. Soon, millions of Americans at all socioeconomic levels may be able to celebrate a welcome jubilee and relief from the overwhelming burden of long-lasting debt.

What Is a Jubilee?

The term jubilee goes back to Bible times when God told the Israelites to hold a jubilee every 50 years. According to the biblical book of Deuteronomy, the Israelites were to forgive numerous debts against their fellow countrymen in the fiftieth year and to return to their ancestral homes as parcels of land were given back to the original owners. While this jubilee ensured that the Israelites were able to retain some hope even if they were currently working as servants for others or had been forced to sell their ancestral lands to pay off debts, the jubilee did not refer to complete debt forgiveness as the term now means.

Could a Jubilee Be Coming?

While there is no law in the United States currently to proclaim a jubilee every certain number of years, there have been certain periods in U.S. history when incredible levels of debt relief were granted and people’s lives dramatically improved. One such example would be the time of the New Deal in the 1950s, which provided much-needed relief for families who had been burdened by the Great Depression and World War II. Could another jubilee be swiftly coming?

Four specific facts point to the strong possibility of sweeping debt forgiveness and a coming time of jubilee.

1. Debts of all types continue to rise in the United States. The government is in an incredible amount of debt, and consumer debts are sky-high as well.

2. Most Americans lack good financial health. Many are making the same wages that they were years ago, making it difficult for them to build savings or pay off debts. This is also leading to a stagnant economy.

3. Popular opinion especially among lower-income individuals in the U.S. shows that many are looking for huge changes in the American government.

4. The economy is in a weakened state, creating a strong possibility of a coming recession.

What About the Debt from Student Loans?

Intricately connected to this discussion of a possible debt jubilee is the current discussion of the Democratic presidential candidates. Numerous candidates have recently been proposing a variety of student loan forgiveness policies that they promise to adopt if they are elected. Here is a brief look at the candidates making these proposals and what their possible policies could include.

  • Bernie Sanders, who has probably been the most vehemently for debt forgiveness, has promised to cancel all student debt regardless of the income level of the individual. He has also promised to provide more Pell grants and other monetary offers to help lower-income individuals attend college.
  • Elizabeth Warren has promised to cancel a great deal of student debt, but her forgiveness policy would be based on the income level of the individual.
  • Julian Castro has also called for a partial forgiveness policy, stating that individuals with student debt should not have to make payments until they are making at least 250 percent above the federal poverty mark.

The candidates who support partial student debt forgiveness rather than full forgiveness do so because so many Americans with this debt are actually making very high incomes or have graduate degrees that set them up with the ability to make high incomes.

Can America Afford to Forgive Student Loans?

While all of this talk about student debt forgiveness can sound incredibly positive, Americans must keep in mind that promises from presidential candidates do not automatically equal positive results. Any person who has studied politics in the last several decades will know that most promises made on the campaign trail end up to be nothing more than smoke with no real substance to them. Therefore, can Americans start crossing their fingers and hoping for the best when it comes to student debt, or should they get rid of any hope they might still be holding onto for their bank accounts?

Although there are many positives in student debt forgiveness, there are also a few distinct problems with the proposed policies.

1. Nobody knows exactly how much student debt exists. While some estimate 2019 figures around the $1.6 trillion mark, the U.S. Department of Education does not actually disseminate full data.

2. Many colleges and universities also hold many student loans, which could add significantly more to the above figure.

3. Sanders proposes to fund this debt forgiveness with an additional tax on traded funds, which could cost the average American plenty over his lifetime.

4. Student debt forgiveness could make colleges and universities significantly raise their tuition rates, leading to even more debt in the coming years.

Because of the many unknowns, it is difficult for many Americans to form opinions on this subject, and it is hard for them to argue the position that they may already hold. Therefore, Americans may just have to wait and see what further information the presidential candidates give before making up their minds as to whether or not they support student debt forgiveness.

4 Types of Debt That Can Actually Be Good For You

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Most people do not like hearing the dreaded D-word. The term “debt” can inspire a lot of stress and anxiety in many people. Whether it is owing money to your friends or the government, no one likes being reminded that you are indebted to another entity. However, what if there were actually kinds of debt that actually be good for you? Of course, debt is still debt. You have to pay it back eventually, but if you invest in a worthy cause, it can be of some benefit to you. Here are some kinds of debt that can be good for you.

1. Student Loans

As of 2018, the United States has over 1.5 trillion dollars worth of outstanding student loan debt. The bottom line is that college has become incredibly expensive, and there are many students who graduate with a large debt bill attached to their name. However, investing all of that money into a proper education can make the debt worth it. This means that if you are looking for an education that will provide you employment with a suitable income, it will give you the ability to pay it back rather quickly. Popular careers such as those in health care delivery, engineering, and other high paying jobs will give you the ease of mind of not having to pay the debt off over an extended period of time.

This is where adequate research plays an important role. Depending on what you are studying, you have to at least predict how much you will be able to make with your degree. If you take out a lot of money for a job that does not pay more than others, then you will be looking at a longer period of repayments or income-based monthly payments. If you graduate with a larger sum of debt, you will also have to adjust your lifestyle a bit, meaning that you should only spend for yourself what is absolutely essential, so that you can pay the debt off as quickly as you can.

Numerous studies suggest that those with a college education will be more likely to find employment than those who do not. Over the long-term, you will be better off if you have a college degree, because it provides valuable credentials to your name. But be forewarned at the kind of loans that you take out and what your needs are. The repayment options from federal and private loans differ, and interest rates will vary. Do your due diligence, and be wise with your money, but a college degree can be worth it f you are wise.

2. Mortgage

Owning a house is a huge accomplishment, but it is a very expensive investment. That being said, owning a home is something that can help you build your net worth and equity. Getting a loan on property can be used to your advantage because debt can be used to purchase other properties that can generate a steady inflow of cash through renters. The best part? Your equity can grow with each monthly through someone else’s money.

You should start very small when it comes to investing in property. Ensuring that you can handle payments comfortably and making sure the market is good would behoove you before you take on that debt. There are also three common reasons why a mortgage is commonly referred to as good debt.

First, very few Americans are able to put down the necessary amount of cash without getting a loan to cover the cost. Second, unlike utilizing a credit card for personal leisures and delights, you will be spending more time in your house than anywhere else. Finally, home prices have a historical trend of going up. This means it will be a profitable investment. That being said, once again, those reasons do not matter if you cannot meet the monthly payment requirements.

3. Auto Loans

There are any that seem to be against the idea of borrowing a car and labeling it as good debt. But it does, sometimes, make sense to invest in a vehicle. Remember that investment can be good debt.

However, you should not fall into the trap of getting any car that may be expensive or what may set you back. Look for the cheapest car that is available which can get you to work. You will most certainly have to invest in a car if you live in areas where public transportation is unavailable.

It is very good to think strategically when it comes to auto loans. Keep your total auto costs, involving your car loan payment within 20% of your pay. Also, shoot for loan terms to be within four years, with a down payment of around 20%. You also need to take action and consider refinancing or trading in a car you cannot afford to help you manage other expenses.

4. Business Debt

Similar to student loans, investing in a business can be a potentially fruitful venture that will land you long-term wealth and income for an extended period of time. Each business have unique needs. One of the most important things that a business needs to get off the ground is capital so that they can cover expenses that is required to maintain the business. This is why you will have to be very careful with this kind of debt.

Much like anything else you will need, you have to be extremely realistic about what you require to get started and do not borrow anything more than is necessary. As you start to bring in more and more revenue, you can use that money to expand your business even further. In time, once you start to gain more income, you can pay down all of your debt and shift your focus to something everyone should want to do. That would be to build wealth.