How to Understand Personal Finance Basics

How to Understand Personal Finance Basics.

Understanding your personal finances can be very overwhelming, particularly if you’re just starting out. It is tough to know how best to handle your money, how to go about paying off debt, and where and when to invest. By following some basic steps for doing these things, as well as saving for emergencies and retirement and insuring the assets you’ve worked hard to obtain, you can begin to understand your personal finances and become more confident in your ability to make good decisions regarding them.





Learning How to Create a Budget.



Gather your financial statements and information. Creating a budget is one of the most important aspects of personal finance. A solid budget allows you to plan for how you’ll spend the money you bring in each month and illustrates your spending patterns. To begin, gather all the financial information you can, including bank statements, pay stubs, credit card bills, utility bills, investment account statements, and any other information you can think of.

Most people make monthly budgets so your goal is to figure out how much you make in a month and what your monthly expenses are. The more detail you can provide, the better your budget will be.



Record your monthly income. After gathering all of your financial data, separate out your sources of income. Record the amount of income you bring home in a month. Be sure to include any side jobs you have.

If your income varies from month to month, it may be helpful to figure out your average monthly income for the last six months or so.



List your fixed monthly expenses. Next, look over your financial documents and record any fixed expenses you have, or those that are essential and do not change much from month to month.

Fixed expenses can include things like mortgage payments or rent, credit card payments, car payments, and essential utilities like electric, water, and sewage.



List your variable monthly expenses. You also need to record your variable monthly expenses, which are items for which the amount of money you spend each month varies. These expenses are not necessarily essential and are likely where you will make adjustments to your spending in your budget.

Variable expenses can include things like groceries, gasoline, gym memberships, and eating out.



Total your monthly income and expenses. Once you have recorded all of your income and expenses, both fixed and variable, total each category. Ultimately, you want your income to be larger than your expenses. If it is, you can then decide where it is best for you to spend your excess income. If your expenses are more than your income, you will need to make adjustments to your budget to cut your spending or increase your income.



Adjust your variable expenses to hit your goal. If your budget shows you are spending more than you are earning in income, look at your variable expenses to find places you can cut back on spending, since these items are usually non-essential.

For example, if you are eating out four nights a week, you may have to cut this back to two nights a week. This will free up money you can put toward essential expenses like college loans or credit card debt.

In addition, you may be paying unnecessary monthly fees, like overdraft or late fees. If you are spending money on these types of fees, work on making your payments on time and keeping a bit of a cushion in your bank account.

Alternatively, you can work on earning more instead of spending less. Evaluate whether or not you can pick up a few extra hours of work a week, work overtime, or work any side jobs to increase the amount of money you’re bringing in each month.



Review your budget every month. At the end of each month, take some time and review your spending over the past month. Did you stick to your budget? If not, where did you veer off course? Pinpointing where you are exceeding your budget will help you figure out what kind of spending you need to pay attention to most. Reviewing your budget can also be encouraging if you find you are sticking to it. You may find that it’s extremely motivating seeing the amount of money you saved by cutting back the number of days you eat out a week, for example.













Strategizing to Pay Down Debt..



Pay more than the minimum amount due each month. Even following a strict budget doesn’t mean you can totally avoid debt. Large purchases, like cars, school, and houses often require you to take out a significant loan. In addition, it can be easy to rack up credit card debt quickly. One of the personal finance basics you must understand is how to take care of this debt as quickly as possible. The first step to doing this is to pay more than the minimum payment as often as you can.

For example, say the minimum payment on your car loan is $50 a month. Paying even $60 a month toward this loan can help you pay it off sooner and cut down on the amount you pay in finance charges over time. The more you can pay above the minimum, the better.



Transfer credit card balances with high annual percentage rates. If you have a credit card for which you are paying a high annual percentage rate (APR), it might be a good idea to look into transferring this balance to a credit card that offers a lower APR or no APR for a certain amount of time. This way, your entire payment will be applied to your balance, not interest.

Read the fine print before transferring a balance. Most cards charge a transfer fee (3% of the balance, for example) and only offer 0% APR for a limited amount of time (12 or 18 months, for example). Make sure you understand the terms of your new agreement and shop around for the best option before transferring your balance.



Calculate the amount of debt on each credit card. If you have multiple credit cards, compare the amount of debt you have on each one. You can use this information in two different ways:

Some people believe paying off the credit card with the smallest balance first is best. The idea here is that getting the smaller amount of debt paid off will motivate you and allow you to focus on your remaining debt.

Alternatively, some people believe you should focus on paying off the largest balance because you will be paying the most in interest on this balance. To do this, you would try to make more than the minimum payment on this balance, while paying only the minimum on your smaller balance.

If possible, the best solution is to pay more than the minimum simultaneously on each balance.



Dedicate excess funds toward paying off debt. Once you are able to follow your monthly budget, dedicate any extra funds you have at the end of the month toward paying down your debt. It can be tempting to use this money to treat yourself to a fancy dinner or a new TV, but remember your long-term goals before doing this. In the long run, paying down debt will serve you better than treating yourself to something unnecessary.



Consolidate your debt. If you have multiple credit card accounts, student loans, a mortgage, a car loan, or any combination of these debts, consolidating them into one payment may help you manage them more easily. Typically, when you consolidate debt, you’ll get a debt consolidation loan. These loans usually have a lower interest rate and require lower monthly payments.

While consolidating your debt can make it easier to manage, it may also increase the amount you’ll pay in the long run because it extends your payments over a longer period of time.

If your credit score is not good, you may need a co-signer to be able to get a debt consolidation loan.

You can also consolidate your credit card debt by transferring all of your balances to a 0% APR credit card. If you think you can pay off your debt within 12 to 18 months, this might be a good option. However, if you think it will take you significantly longer to pay it off, this might not be a good option because the 0% APR is usually only good for 12 to 18 months.



Refinance your loans. Refinancing is generally a good option if your financial situation has improved since taking out your loan. Similar to consolidating your debt, refinancing your loans also consolidates your debts and may allow you to make lower monthly payments on your loans. Refinancing might also allow you to shorten the term of your loan to pay off your debts more quickly. In addition, depending on your financial situation, you may also be eligible for a lower interest rate.





Choose a student loan repayment plan. If you can afford it, the standard repayment plan is your best option for repaying federal loans. A standard plan requires you to pay the same amount every month over a ten year period. If you can’t afford the payments on a standard plan, however, the government offers two alternative categories of plans—income-driven and basic.

Income-driven repayment plans extend the terms of your loan to 20 or 25 years and require you to pay a certain percentage of your income toward your loan each month, rather than a fixed monthly payment. In addition, any amount still owed at the end of your loan term is forgiven.

Basic plans include standard, graduated, and extended repayment options. Standard is the best option if you can afford it, but graduated or extended plans may be right in some situations. Graduated plans start you off with low payments and gradually increase them over time. This plan can be good if you expect to make more money over the years. Extended plans extend the terms of your loan to 25 years, allowing you to make smaller payments each month, but pay more in interest over time.











Saving for Emergencies and Retirement.



Set up automatic deposits. It can be tough to commit to putting money into your savings account every month, but it is important to do so to ensure you have enough money for emergencies and for your future. If possible, make automatic payments into a saving account each month.

For example, set your bank account so it automatically transfers $50 from your checking account to savings account at least once a month.

Or, if your paycheck gets deposited directly into your account, you can usually set it up so that a certain portion (either a dollar amount or a percentage) is deposited straight into your savings account. Most professionals recommend putting 10 to 20 percent of your income towards savings each month.



Contribute to a retirement savings plan. You should start saving for retirement as soon as possible to ensure you’ll have enough money to live comfortably when you are done working. The amount you need to contribute to this savings account monthly depends on a number of different factors, like when you start saving, how much you are starting with, and whether or not you’re going to receive any kind of employer contribution.

Many employers offer a 401k, or a retirement savings plan, of some kind to their employees. A lot of companies will also match a percentage of the employee’s contributions into this account over time. If your employer offers a plan of this sort, start contributing to it as soon as you can, even if it is just a small amount.

If you are self-employed or your employer does not offer any kind of retirement savings plan, you can set up your own plan through investment websites or many banks.

Consult a financial advisor to figure out how much you should be putting away for retirement to reach your goals.[19]



Build an emergency fund. In addition to saving for retirement, you also need to save for emergencies, like losing a job, costly car repairs, or unexpected medical expenses. You can use your bank’s savings account for this emergency fund.

Financial professionals recommend you have enough in your savings account to cover a month and a half of living expenses for each person you claim as a dependent. For example, if you are married with one child, you should have enough to cover four and a half months of living expenses.











Investing for Beginners.



Invest in a Target Date Fund (TDF). Figuring out where to invest your money is one of the hardest parts of personal finance basics. Essentially, you want to invest in a variety of stocks, bonds, and treasuries—but which ones? Target Date Funds make this a little easier for you. A TDF is basically a hands-off retirement account. You enter the age you want to retire and the TDF will automatically spread the money you put into this account across a wide variety of stocks, bonds, and treasuries.

Some of the recommended companies through which to do this are Vanguard, Fidelity, and T. Rowe Price.



Diversify your investments. If you choose a more hands-on approach to investing, it is important to diversify your portfolio to reduce risk. Diversifying means that you choose a variety of stocks, bonds, and treasuries in which to invest. You should make sure your investments are spread over a number of different companies and industries. This way, if one company or industry suffers a financial downturn, you will only lose a portion of your investment, not the whole thing.



Invest in your 401k. As mentioned above, investing in a 401k provided by your company is a good idea. There are a couple really good things about this option. First of all, most of the time, the money you put into a 401k is deferred on your taxes until you take it out of the account. Some 401ks are taxed before investing, however, so check with your employer to find out which one you have. Second, your employer will often match the amount of money in your 401k (up to a certain amount) so you are, essentially, getting free money just for investing.

You should invest in a company match 401k even if you are in debt. The return you receive on this type of investing is often more than what your debt is.

The amount of money your company will match often depends how much you invest in your 401k. Usually, you have to hit certain investment thresholds, which will then determine the percentage your company will match.



Invest in a Roth IRA. Another investment opportunity offered by many employers is a Roth IRA. In a Roth IRA, you pay taxes up front on your investment. Investing in a Roth IRA is an especially good idea for young people with low incomes, considering the tax rate will likely increase in their lifetime. This type of investment can be very helpful because it will provide you with a pot of money for your retirement that won’t shrink due to taxes.]















Understanding Why to Insure Your Investments.



Get property insurance. You should invest in property insurance to protect your home, which is often one of your biggest assets. Property insurance is actually required if you have a mortgage. This type of insurance will protect you from having to pay out-of-pocket for any major unforeseen home repairs.

If you rent, it is just as important to invest in renter’s insurance. Your belongings can add up to a significant investment and getting renter’s insurance will help protect you in the event of a burglary, fire, flood, or other disaster.



Buy life insurance. Getting life insurance is especially important if you have a family or are married. Life insurance makes sure your income (or at least part of it) is supplemented in the event that you pass away. This is important because your family could face very tough financial situations if they are unable to make up for the portion of income you brought to the table.



Get health insurance. Health insurance premiums can be a small price to pay if you find yourself sick or seriously injured. Medical bills alone can put you in serious debt if you don’t have some sort of insurance policy. In addition, you’ll likely miss a significant amount of work if you are seriously injured, leaving you no way to pay these bills.

Many employers offer health insurance to their employees at a discounted rate. Usually only full-time employees are eligible to receive health insurance through the company, but some companies may offer it to part-time employees as well.

Buying health insurance independently, without the help of an employer, can be expensive. However, it is worth investing in to make sure you are not crippled by debt in the event you become sick or injured.[28]



Buy automobile insurance. Finally, you should invest in automobile insurance. In fact, it is required of anyone who owns a car in the United States. Auto insurance helps cover the cost to repair your car after an accident and medical bills for you and others involved. A major car accident can put you in debt from car repairs and time off work if you’re injured. It is also possible your assets can be seized to help pay for the other driver’s medical bills if the accident is your fault. Having automobile insurance can help diffuse some of these costs and help keep you out of debt.















Working with a Financial Planner.



Start now. One of the most important things you can do for your personal finances is to start thinking about them and working on them early. It may seem like you have plenty of time to save for retirement, but you can actually lose a lot of money in interest if you wait too long. Make financial planning a regular part of your life—like going to the doctor—and get started as soon as possible.

Get your significant other involved. If you are planning a future together, make sure to include your significant other in your planning. Talking to your partner and including them in the process will ensure you are both on the same page with your spending and saving habits and allow you to develop a plan that meets both of your needs.



Be proactive. Some people assume that everything will work out in the long-run and ignore negative cues about their finances. If you do this, however, you could set yourself up for a major loss. Instead, think about how negative financial situations, like severe drops in the stock market, might affect your financial security and plan alternative options.



Plan out the details. Many people see saving for retirement as a race to reach a certain amount of savings before the date they retire. This approach can be misleading, however. Instead, think about the things you’ll need to pay for, like housing, healthcare, eldercare, hobbies, transportation, and so on. Do your best to figure out how much these products and services will cost you and how you’ll finance them.





Tips.

Figuring out how to handle your personal finances can be very confusing whether you’re a beginner or not. It is a good idea to consult a financial planner to help you decide how to best handle your money.

November 13, 2019

how to understand personal finance basics

How to Understand Personal Finance Basics.

Understanding your personal finances can be very overwhelming, particularly if you’re just starting out. It is tough to know how best to handle your money, how to go about paying off debt, and where and when to invest. By following some basic steps for doing these things, as well as saving for emergencies and retirement and insuring the assets you’ve worked hard to obtain, you can begin to understand your personal finances and become more confident in your ability to make good decisions regarding them.





Learning How to Create a Budget.



Gather your financial statements and information. Creating a budget is one of the most important aspects of personal finance. A solid budget allows you to plan for how you’ll spend the money you bring in each month and illustrates your spending patterns. To begin, gather all the financial information you can, including bank statements, pay stubs, credit card bills, utility bills, investment account statements, and any other information you can think of.

Most people make monthly budgets so your goal is to figure out how much you make in a month and what your monthly expenses are. The more detail you can provide, the better your budget will be.



Record your monthly income. After gathering all of your financial data, separate out your sources of income. Record the amount of income you bring home in a month. Be sure to include any side jobs you have.

If your income varies from month to month, it may be helpful to figure out your average monthly income for the last six months or so.



List your fixed monthly expenses. Next, look over your financial documents and record any fixed expenses you have, or those that are essential and do not change much from month to month.

Fixed expenses can include things like mortgage payments or rent, credit card payments, car payments, and essential utilities like electric, water, and sewage.



List your variable monthly expenses. You also need to record your variable monthly expenses, which are items for which the amount of money you spend each month varies. These expenses are not necessarily essential and are likely where you will make adjustments to your spending in your budget.

Variable expenses can include things like groceries, gasoline, gym memberships, and eating out.



Total your monthly income and expenses. Once you have recorded all of your income and expenses, both fixed and variable, total each category. Ultimately, you want your income to be larger than your expenses. If it is, you can then decide where it is best for you to spend your excess income. If your expenses are more than your income, you will need to make adjustments to your budget to cut your spending or increase your income.



Adjust your variable expenses to hit your goal. If your budget shows you are spending more than you are earning in income, look at your variable expenses to find places you can cut back on spending, since these items are usually non-essential.

For example, if you are eating out four nights a week, you may have to cut this back to two nights a week. This will free up money you can put toward essential expenses like college loans or credit card debt.

In addition, you may be paying unnecessary monthly fees, like overdraft or late fees. If you are spending money on these types of fees, work on making your payments on time and keeping a bit of a cushion in your bank account.

Alternatively, you can work on earning more instead of spending less. Evaluate whether or not you can pick up a few extra hours of work a week, work overtime, or work any side jobs to increase the amount of money you’re bringing in each month.



Review your budget every month. At the end of each month, take some time and review your spending over the past month. Did you stick to your budget? If not, where did you veer off course? Pinpointing where you are exceeding your budget will help you figure out what kind of spending you need to pay attention to most. Reviewing your budget can also be encouraging if you find you are sticking to it. You may find that it’s extremely motivating seeing the amount of money you saved by cutting back the number of days you eat out a week, for example.













Strategizing to Pay Down Debt..



Pay more than the minimum amount due each month. Even following a strict budget doesn’t mean you can totally avoid debt. Large purchases, like cars, school, and houses often require you to take out a significant loan. In addition, it can be easy to rack up credit card debt quickly. One of the personal finance basics you must understand is how to take care of this debt as quickly as possible. The first step to doing this is to pay more than the minimum payment as often as you can.

For example, say the minimum payment on your car loan is $50 a month. Paying even $60 a month toward this loan can help you pay it off sooner and cut down on the amount you pay in finance charges over time. The more you can pay above the minimum, the better.



Transfer credit card balances with high annual percentage rates. If you have a credit card for which you are paying a high annual percentage rate (APR), it might be a good idea to look into transferring this balance to a credit card that offers a lower APR or no APR for a certain amount of time. This way, your entire payment will be applied to your balance, not interest.

Read the fine print before transferring a balance. Most cards charge a transfer fee (3% of the balance, for example) and only offer 0% APR for a limited amount of time (12 or 18 months, for example). Make sure you understand the terms of your new agreement and shop around for the best option before transferring your balance.



Calculate the amount of debt on each credit card. If you have multiple credit cards, compare the amount of debt you have on each one. You can use this information in two different ways:

Some people believe paying off the credit card with the smallest balance first is best. The idea here is that getting the smaller amount of debt paid off will motivate you and allow you to focus on your remaining debt.

Alternatively, some people believe you should focus on paying off the largest balance because you will be paying the most in interest on this balance. To do this, you would try to make more than the minimum payment on this balance, while paying only the minimum on your smaller balance.

If possible, the best solution is to pay more than the minimum simultaneously on each balance.



Dedicate excess funds toward paying off debt. Once you are able to follow your monthly budget, dedicate any extra funds you have at the end of the month toward paying down your debt. It can be tempting to use this money to treat yourself to a fancy dinner or a new TV, but remember your long-term goals before doing this. In the long run, paying down debt will serve you better than treating yourself to something unnecessary.



Consolidate your debt. If you have multiple credit card accounts, student loans, a mortgage, a car loan, or any combination of these debts, consolidating them into one payment may help you manage them more easily. Typically, when you consolidate debt, you’ll get a debt consolidation loan. These loans usually have a lower interest rate and require lower monthly payments.

While consolidating your debt can make it easier to manage, it may also increase the amount you’ll pay in the long run because it extends your payments over a longer period of time.

If your credit score is not good, you may need a co-signer to be able to get a debt consolidation loan.

You can also consolidate your credit card debt by transferring all of your balances to a 0% APR credit card. If you think you can pay off your debt within 12 to 18 months, this might be a good option. However, if you think it will take you significantly longer to pay it off, this might not be a good option because the 0% APR is usually only good for 12 to 18 months.



Refinance your loans. Refinancing is generally a good option if your financial situation has improved since taking out your loan. Similar to consolidating your debt, refinancing your loans also consolidates your debts and may allow you to make lower monthly payments on your loans. Refinancing might also allow you to shorten the term of your loan to pay off your debts more quickly. In addition, depending on your financial situation, you may also be eligible for a lower interest rate.





Choose a student loan repayment plan. If you can afford it, the standard repayment plan is your best option for repaying federal loans. A standard plan requires you to pay the same amount every month over a ten year period. If you can’t afford the payments on a standard plan, however, the government offers two alternative categories of plans—income-driven and basic.

Income-driven repayment plans extend the terms of your loan to 20 or 25 years and require you to pay a certain percentage of your income toward your loan each month, rather than a fixed monthly payment. In addition, any amount still owed at the end of your loan term is forgiven.

Basic plans include standard, graduated, and extended repayment options. Standard is the best option if you can afford it, but graduated or extended plans may be right in some situations. Graduated plans start you off with low payments and gradually increase them over time. This plan can be good if you expect to make more money over the years. Extended plans extend the terms of your loan to 25 years, allowing you to make smaller payments each month, but pay more in interest over time.











Saving for Emergencies and Retirement.



Set up automatic deposits. It can be tough to commit to putting money into your savings account every month, but it is important to do so to ensure you have enough money for emergencies and for your future. If possible, make automatic payments into a saving account each month.

For example, set your bank account so it automatically transfers $50 from your checking account to savings account at least once a month.

Or, if your paycheck gets deposited directly into your account, you can usually set it up so that a certain portion (either a dollar amount or a percentage) is deposited straight into your savings account. Most professionals recommend putting 10 to 20 percent of your income towards savings each month.



Contribute to a retirement savings plan. You should start saving for retirement as soon as possible to ensure you’ll have enough money to live comfortably when you are done working. The amount you need to contribute to this savings account monthly depends on a number of different factors, like when you start saving, how much you are starting with, and whether or not you’re going to receive any kind of employer contribution.

Many employers offer a 401k, or a retirement savings plan, of some kind to their employees. A lot of companies will also match a percentage of the employee’s contributions into this account over time. If your employer offers a plan of this sort, start contributing to it as soon as you can, even if it is just a small amount.

If you are self-employed or your employer does not offer any kind of retirement savings plan, you can set up your own plan through investment websites or many banks.

Consult a financial advisor to figure out how much you should be putting away for retirement to reach your goals.[19]



Build an emergency fund. In addition to saving for retirement, you also need to save for emergencies, like losing a job, costly car repairs, or unexpected medical expenses. You can use your bank’s savings account for this emergency fund.

Financial professionals recommend you have enough in your savings account to cover a month and a half of living expenses for each person you claim as a dependent. For example, if you are married with one child, you should have enough to cover four and a half months of living expenses.











Investing for Beginners.



Invest in a Target Date Fund (TDF). Figuring out where to invest your money is one of the hardest parts of personal finance basics. Essentially, you want to invest in a variety of stocks, bonds, and treasuries—but which ones? Target Date Funds make this a little easier for you. A TDF is basically a hands-off retirement account. You enter the age you want to retire and the TDF will automatically spread the money you put into this account across a wide variety of stocks, bonds, and treasuries.

Some of the recommended companies through which to do this are Vanguard, Fidelity, and T. Rowe Price.



Diversify your investments. If you choose a more hands-on approach to investing, it is important to diversify your portfolio to reduce risk. Diversifying means that you choose a variety of stocks, bonds, and treasuries in which to invest. You should make sure your investments are spread over a number of different companies and industries. This way, if one company or industry suffers a financial downturn, you will only lose a portion of your investment, not the whole thing.



Invest in your 401k. As mentioned above, investing in a 401k provided by your company is a good idea. There are a couple really good things about this option. First of all, most of the time, the money you put into a 401k is deferred on your taxes until you take it out of the account. Some 401ks are taxed before investing, however, so check with your employer to find out which one you have. Second, your employer will often match the amount of money in your 401k (up to a certain amount) so you are, essentially, getting free money just for investing.

You should invest in a company match 401k even if you are in debt. The return you receive on this type of investing is often more than what your debt is.

The amount of money your company will match often depends how much you invest in your 401k. Usually, you have to hit certain investment thresholds, which will then determine the percentage your company will match.



Invest in a Roth IRA. Another investment opportunity offered by many employers is a Roth IRA. In a Roth IRA, you pay taxes up front on your investment. Investing in a Roth IRA is an especially good idea for young people with low incomes, considering the tax rate will likely increase in their lifetime. This type of investment can be very helpful because it will provide you with a pot of money for your retirement that won’t shrink due to taxes.]















Understanding Why to Insure Your Investments.



Get property insurance. You should invest in property insurance to protect your home, which is often one of your biggest assets. Property insurance is actually required if you have a mortgage. This type of insurance will protect you from having to pay out-of-pocket for any major unforeseen home repairs.

If you rent, it is just as important to invest in renter’s insurance. Your belongings can add up to a significant investment and getting renter’s insurance will help protect you in the event of a burglary, fire, flood, or other disaster.



Buy life insurance. Getting life insurance is especially important if you have a family or are married. Life insurance makes sure your income (or at least part of it) is supplemented in the event that you pass away. This is important because your family could face very tough financial situations if they are unable to make up for the portion of income you brought to the table.



Get health insurance. Health insurance premiums can be a small price to pay if you find yourself sick or seriously injured. Medical bills alone can put you in serious debt if you don’t have some sort of insurance policy. In addition, you’ll likely miss a significant amount of work if you are seriously injured, leaving you no way to pay these bills.

Many employers offer health insurance to their employees at a discounted rate. Usually only full-time employees are eligible to receive health insurance through the company, but some companies may offer it to part-time employees as well.

Buying health insurance independently, without the help of an employer, can be expensive. However, it is worth investing in to make sure you are not crippled by debt in the event you become sick or injured.[28]



Buy automobile insurance. Finally, you should invest in automobile insurance. In fact, it is required of anyone who owns a car in the United States. Auto insurance helps cover the cost to repair your car after an accident and medical bills for you and others involved. A major car accident can put you in debt from car repairs and time off work if you’re injured. It is also possible your assets can be seized to help pay for the other driver’s medical bills if the accident is your fault. Having automobile insurance can help diffuse some of these costs and help keep you out of debt.















Working with a Financial Planner.



Start now. One of the most important things you can do for your personal finances is to start thinking about them and working on them early. It may seem like you have plenty of time to save for retirement, but you can actually lose a lot of money in interest if you wait too long. Make financial planning a regular part of your life—like going to the doctor—and get started as soon as possible.

Get your significant other involved. If you are planning a future together, make sure to include your significant other in your planning. Talking to your partner and including them in the process will ensure you are both on the same page with your spending and saving habits and allow you to develop a plan that meets both of your needs.



Be proactive. Some people assume that everything will work out in the long-run and ignore negative cues about their finances. If you do this, however, you could set yourself up for a major loss. Instead, think about how negative financial situations, like severe drops in the stock market, might affect your financial security and plan alternative options.



Plan out the details. Many people see saving for retirement as a race to reach a certain amount of savings before the date they retire. This approach can be misleading, however. Instead, think about the things you’ll need to pay for, like housing, healthcare, eldercare, hobbies, transportation, and so on. Do your best to figure out how much these products and services will cost you and how you’ll finance them.





Tips.

Figuring out how to handle your personal finances can be very confusing whether you’re a beginner or not. It is a good idea to consult a financial planner to help you decide how to best handle your money.

November 10, 2019

How to Avoid Finance Charges on Credit Cards

How to Avoid Finance Charges on Credit Cards.

If you are late paying off the balance of your credit card, you will likely incur further finance charges on the balance until it is paid. The best way to avoid these charges is to pay off the balance on time. You will often get a grace period of around 21 days after receiving the bill in which to do this. If you just pay off the minimum you will be incurring more and more interest and it will take you a long time to pay off the debt.

Method 1 Clearing Your Card Balance.

1. Pay off your balance at the end of every billing cycle. The most straight-forward way to avoid charges on the balance of your credit card is to pay it off in full at the end of each billing cycle. Paying off the whole balance by the due date on your bill will mean that you do not incur any additional finance charges on the balance.

Paying the balance of on time will also help your credit rating improve over time.

2. Determine if you have a grace period. Once you receive your bill, you will often have a grace period in which you can pay it off without incurring charges. These vary depending on what credit card deal you have, so you will have to check the details of your specific account. The typical grace period tends to be around 25 days.

If your card does have a grace period, your card provider must give you at least 21 days after your bill is mailed for you to pay it off.

3. Pay off the balance within your grace period. If your card has a grace period, you must pay off the balance in full before the end of this period to avoid any finance charges. If the grace period is 21 days, make sure you pay off the balance in advance of the due date. You can make the payment up to 5pm on the last day without incurring charges.

Make your payments in plenty of time so that you don’t accidentally miss the deadline.

If you mail your payment, allow 7 to 10 days for the payment to be applied to your account.

For online banking, check with your bank. It can be the same day, or it can take three working days. It’s best to be safe, so pay it off early if possible.

4. Consider transferring the balance to another card. If you are unable to pay off the balance within your grace period, there is an alternative way to clear the balance. You may be able to transfer the balance to another credit card, with a lower APR. For example, some cards will give you 0% APR for a limited time. In this specified period you will not have to pay any finance charges, so you will be able to pay the balance off more cheaply.

If you are considering this, it is important that you are careful and conscientious with your finances.

After the 0% APR period expires you may have to pay a higher rate of interest, so you should be completely sure of the terms and conditions.

If you transfer the balance from one card to another, remember that you have not paid off the debt. Don’t do this just to free up the card to take on more debt.

Method 2 Finding the Best Credit Card Deal.

1. Choose credit cards that do not charge annual service charges. There are numerous charges and fees connected to credit cards that you cannot avoid by paying off the balance on time. These include annual fees that are incurred regardless of how much you use the card. By shopping around you can find a card that doesn’t have these unavoidable service charges.

You can search through a database of hundreds of credit card agreements that are available from a variety of companies online.

The database is available on the website of the Consumer Financial Protection Bureau here: http://www.consumerfinance.gov/credit-cards/agreements/

2. Read the fine print. It’s important that you spend some time reading up on the all small print before you sign up for a credit card. Read it again before you activate a card, and call the company if you don't understand something. Be sure you know the interest rate and how finance charges are determined. Find out if there are ways for the lender to raise the interest rate, and if anything seems questionable, avoid working with that company.

Check to see what fees there are for balance transfers.

When you use the "checks" that arrive with your bill, these are considered balance transfers and are often subjected to additional fees.

3. Determine whether there is a universal default clause. When you are looking at different credit card agreements you should note whether or not they have a universal default clause. This type of clause gives the credit card company the right to raise the interest rate on your card if you are late paying your credit card bill or any other creditor. The credit card provider can monitor your credit report and alter your rates during the contract.

This clause can also be activated for a high debt-to-income ratio.

Remember that a higher interest rate or APR on your card results in high finance charges.

If you have a card with this clause, pay all your bills on time.

Question : I have never missed minimum due date, but still there is a finance charge. Is it because of the outstanding balance, or is the bank cheating me?
Answer : In all likelihood, the bank is not cheating you. If you fail to pay the full balance due before the due date, you will pay finance charges, which usually consist of interest on the unpaid balance.

Question : If the bank is closed on the first 3 days of month, can they charge the full month's interest when you were not able to contact them previous 3 days?
Answe : Yes. Some purchases compound interest monthly, and once the month has started, you could owe interest for the next 30 days. It's just like when you mail a check: it is credited on the day it is received, which would not be on a weekend or holiday.

Question : If my account has been closed but I still have a balance, can I avoid paying the finance charge?
Answer : You can try to negotiate with the credit card company for a payment plan that doesn't involve finance charges or a lump sum payoff but typically you will continue to pay interest as long as you have a balance.

Question : Do I get a personal loan on the basis of my credit card score?
Answer : A lender will consider your credit score as well as your credit history, work history and current income.

Question : If I pay total unbilled amount before due date, can I use my credit limit the next day?
Answer : You should wait until the card issuer has acknowledged receipt of your payment.

Question : If I paid all the outstanding balance, is there any finance charges?
Answer : It's possible there are finance charges left over from before you paid off the balance. If you pay off the full balance on time, there will be no further finance charges placed on your account after that point. If you keep paying the balance down to zero on time every month, you will not see any more finance charges.

Tips.

Check your credit report annually and correct any erroneous information. Some creditors use information obtained in credit reports to increase the finance charge percentage charged.

January 18, 2020

how to avoid finance charges on credit cards

How to Avoid Finance Charges on Credit Cards.

If you are late paying off the balance of your credit card, you will likely incur further finance charges on the balance until it is paid. The best way to avoid these charges is to pay off the balance on time. You will often get a grace period of around 21 days after receiving the bill in which to do this. If you just pay off the minimum you will be incurring more and more interest and it will take you a long time to pay off the debt.

Method 1 Clearing Your Card Balance.

1. Pay off your balance at the end of every billing cycle. The most straight-forward way to avoid charges on the balance of your credit card is to pay it off in full at the end of each billing cycle. Paying off the whole balance by the due date on your bill will mean that you do not incur any additional finance charges on the balance.

Paying the balance of on time will also help your credit rating improve over time.

2. Determine if you have a grace period. Once you receive your bill, you will often have a grace period in which you can pay it off without incurring charges. These vary depending on what credit card deal you have, so you will have to check the details of your specific account. The typical grace period tends to be around 25 days.

If your card does have a grace period, your card provider must give you at least 21 days after your bill is mailed for you to pay it off.

3. Pay off the balance within your grace period. If your card has a grace period, you must pay off the balance in full before the end of this period to avoid any finance charges. If the grace period is 21 days, make sure you pay off the balance in advance of the due date. You can make the payment up to 5pm on the last day without incurring charges.

Make your payments in plenty of time so that you don’t accidentally miss the deadline.

If you mail your payment, allow 7 to 10 days for the payment to be applied to your account.

For online banking, check with your bank. It can be the same day, or it can take three working days. It’s best to be safe, so pay it off early if possible.

4. Consider transferring the balance to another card. If you are unable to pay off the balance within your grace period, there is an alternative way to clear the balance. You may be able to transfer the balance to another credit card, with a lower APR. For example, some cards will give you 0% APR for a limited time. In this specified period you will not have to pay any finance charges, so you will be able to pay the balance off more cheaply.

If you are considering this, it is important that you are careful and conscientious with your finances.

After the 0% APR period expires you may have to pay a higher rate of interest, so you should be completely sure of the terms and conditions.

If you transfer the balance from one card to another, remember that you have not paid off the debt. Don’t do this just to free up the card to take on more debt.

Method 2 Finding the Best Credit Card Deal.

1. Choose credit cards that do not charge annual service charges. There are numerous charges and fees connected to credit cards that you cannot avoid by paying off the balance on time. These include annual fees that are incurred regardless of how much you use the card. By shopping around you can find a card that doesn’t have these unavoidable service charges.

You can search through a database of hundreds of credit card agreements that are available from a variety of companies online.

The database is available on the website of the Consumer Financial Protection Bureau here: http://www.consumerfinance.gov/credit-cards/agreements/

2. Read the fine print. It’s important that you spend some time reading up on the all small print before you sign up for a credit card. Read it again before you activate a card, and call the company if you don't understand something. Be sure you know the interest rate and how finance charges are determined. Find out if there are ways for the lender to raise the interest rate, and if anything seems questionable, avoid working with that company.

Check to see what fees there are for balance transfers.

When you use the "checks" that arrive with your bill, these are considered balance transfers and are often subjected to additional fees.

3. Determine whether there is a universal default clause. When you are looking at different credit card agreements you should note whether or not they have a universal default clause. This type of clause gives the credit card company the right to raise the interest rate on your card if you are late paying your credit card bill or any other creditor. The credit card provider can monitor your credit report and alter your rates during the contract.

This clause can also be activated for a high debt-to-income ratio.

Remember that a higher interest rate or APR on your card results in high finance charges.

If you have a card with this clause, pay all your bills on time.

Question : I have never missed minimum due date, but still there is a finance charge. Is it because of the outstanding balance, or is the bank cheating me?
Answer : In all likelihood, the bank is not cheating you. If you fail to pay the full balance due before the due date, you will pay finance charges, which usually consist of interest on the unpaid balance.

Question : If the bank is closed on the first 3 days of month, can they charge the full month's interest when you were not able to contact them previous 3 days?
Answe : Yes. Some purchases compound interest monthly, and once the month has started, you could owe interest for the next 30 days. It's just like when you mail a check: it is credited on the day it is received, which would not be on a weekend or holiday.

Question : If my account has been closed but I still have a balance, can I avoid paying the finance charge?
Answer : You can try to negotiate with the credit card company for a payment plan that doesn't involve finance charges or a lump sum payoff but typically you will continue to pay interest as long as you have a balance.

Question : Do I get a personal loan on the basis of my credit card score?
Answer : A lender will consider your credit score as well as your credit history, work history and current income.

Question : If I pay total unbilled amount before due date, can I use my credit limit the next day?
Answer : You should wait until the card issuer has acknowledged receipt of your payment.

Question : If I paid all the outstanding balance, is there any finance charges?
Answer : It's possible there are finance charges left over from before you paid off the balance. If you pay off the full balance on time, there will be no further finance charges placed on your account after that point. If you keep paying the balance down to zero on time every month, you will not see any more finance charges.

Tips.

Check your credit report annually and correct any erroneous information. Some creditors use information obtained in credit reports to increase the finance charge percentage charged.

January 18, 2020

Personal finance: How to manage money during the pandemic | Managing Your Finances During a Pandemic

Personal finance: How to manage money during the pandemic | Managing Your Finances During a Pandemic.

Times of crisis can bring uncertainty for many reasons, and the current coronavirus pandemic is no exception.

Whether you have experienced a change in your financial situation because of layoffs, reduced hours or wages or through increased medical expenses, it is important to take stock of where you are and make a plan to ensure financial success now and in the future.

Many organizations are offering support to those impacted by the coronavirus. Knowing where to go for help, what to ask, and how to document your situation is key to successfully managing your finances and recovering once the crisis is over.

Steps to help you manage your money during and after a pandemic.

1. Analyze Available Resources.

If there is one upside to the current situation, it’s that many programs are being offered to help consumers stay healthy, both physically and financially. Identify all available resources and take advantage of those that fit your needs. Beyond any savings you may have put aside for emergencies, community resources, like the ones below, could help you bridge a temporary income gap:

Military relief societies are offering grants or zero-interest loans for service members affected by coronavirus. Contact Army Emergency Relief, Air Force Aid Society, Navy-Marine Corps Relief Society, or Coast Guard Mutual Assistance for more information.
Depending on your situation, you may qualify for unemployment benefits. Check with the Department of Labor in your state for eligibility criteria.
Many banks and financial institutions are offering to help consumers impacted by the coronavirus. Contact your individual lenders to find out what is available to you.
Many school districts are providing free meals for children at school pick-up locations or bus stops. Contact your local school to find out whether this is an option where you live.
National and local service providers have a variety of assistance options, from payment plans to free services. Visit 211 from United Way and scroll down for available resources.

2. Create a Priority-Based Spending Plan.

Once you’ve identified resources you qualify for, evaluate your budget and create a priority-based spending plan. Consider all sources of available income and make a realistic list of your expected monthly expenses, prioritizing the "must-haves."

These are things like rent or mortgage, food, utilities, insurance, transportation and medication. Then, do the math. If your adjusted income adds up to less than your total monthly expenses, anything that is not a priority item will need to be deferred as much as possible until the crisis is over and your financial situation changes.

3. Contact Your Creditors.

If you cannot meet all of your financial obligations, contact your creditors to ask for assistance. Some programs are already in place to help stop evictions and foreclosures, so whether you are a renter or homeowner, contact your landlord or mortgage servicer right away to ask for help.

The same goes for providers of automobile, student and personal loans, including credit cards. Creditors might offer reduced payments and fees, deferred payments through forbearance, or other hardship plans.

When you talk with your creditors, be sure to take notes. Write down.

The date and time of your call.
The name of the representative you spoke with.
What you were offered.
How information will be reported to the credit bureaus.
The plan you ultimately agreed on.

Once you agree on a plan, put together a letter summarizing your discussion and mail it to the creditor. Then, monitor your monthly statements to be sure you are receiving the assistance you discussed.

4. Recover Strong.

Although it is difficult to think about future emergencies when you are in the middle of a crisis, consider making a financial recovery plan for once things get back to normal so that you are prepared to handle the next emergency that may arise.

Once you are back on your feet, revisit your monthly budget and commit to regular savings to build or rebuild your emergency fund. Start gradually and set a goal to save $1,000, then keep saving until you have three months of your living expenses put away to handle future emergencies.

If you have debt, consider implementing a rapid repayment plan to pay it down or consider talking with a credit counselor to see if a debt management plan is right for you.

And please remember, these are unprecedented times, and although you may feel alone, everyone is affected by the current pandemic. Take steps to safeguard your physical, emotional, and financial health, and reach out if you need assistance.



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July 16, 2020

how to reduce finance charges on a car loan

How to Reduce Finance Charges on a Car Loan.

Finance charges applied to a car loan are the actual charges for the cost of borrowing the money needed to purchase your car. The finance charge that is associated with your car loan is directly contingent upon three variables: loan amount, interest rate, and loan term. Modifying any or all of these variables will change the amount of finance charges you will pay for the loan. There are a number of ways to reduce finance charges on a loan, and the method you choose will be contingent upon whether you already have a loan or are taking out a new loan. Knowing your options can help you save money and pay off your vehicle faster.

Method 1 Reducing Finance Charges for a New Loan.

1. Learn your credit score. Automobile loans are largely determined by the borrower's credit score; the better the borrower's credit score is, the lower his interest rate will likely be. Knowing your credit score before you apply for an automobile loan can help ensure that you get the best possible loan terms. You can obtain a free copy of your credit report (one free copy is guaranteed every 12 months) by visiting AnnualCreditReport.com or by calling 1-877-322-8228.

Your credit report won't explicitly contain your credit score, but it will contain information that determines your credit score. Because of this, it's tremendously important to review all of the information contained in your credit report and understand what determines your credit score to ensure that there are no errors.

If your credit score is low, you may need to improve your credit score. Improving your credit score will likely get you much better terms on your loan. If you can hold off on purchasing your vehicle until you've repaired your credit, it may be worth waiting.

Consider contacting a credit counseling organization to help you rebuild your credit. A credit counselor can work with you to build and stick to a budget, and can even help you manage your income and your debts. You can find a credit counseling organization near you by searching online - just be clear on the terms and fees of the services offered before signing up with a credit counselor.

2. Shop around for your loan. Most dealerships offer automobile loans at the dealership, which can make it convenient for buyers. However, the dealership may not be offering the best available loan. Many automobile dealers arrange loans by acting as a "middle man" between you and a bank, which means that the dealership may charge you extra to compensate for its services. Even if the dealership's fees aren't unreasonable, it's likely that the dealer will then sell your contract to a bank, credit union, or finance company, and you may end up making payments to that third party. Even if you end up going with the dealer's financing option, it's worth shopping around for a better loan from a local bank or credit union.

3. Don't take out a small loan. Every loan term is different, depending on factors like your credit score and the amount you're requesting to borrow. Smaller loans typically have very high monthly finance charges, because the bank makes money off of these charges and they know that a smaller loan will be paid off more quickly. If you intend to take out an auto loan for only a few thousand dollars, it may be worth saving up until you have the whole amount that you'll need to purchase an automobile, or purchasing an automobile that fits in your available price range.

4. Get a pre-approved loan before you buy a car. Pre-approved loans are arranged in advance with a bank or financial institution. This may be helpful, as many people feel pressured to go with the loan options that a dealer offers at the car lot, and end up getting a loan with high finance charges. If you get a pre-approved loan beforehand, you'll know exactly how much you can afford to spend on an automobile, which will also help you stay within your budget.

5. Consider leasing instead of buying. Leasing a vehicle allows you to use your vehicle for an arranged duration of time and a predetermined number of miles. You won't own your car, but lease payments are typically lower than what the monthly payments on a loan would be for the exact same vehicle. Some lease terms also give you the option of purchasing your vehicle at the end of the leasing period. Before you decide to lease, it may be helpful to consider.

the lease costs at the beginning, middle, and end of the leasing period.

what leasing offers and terms are available to you.

how long you want to keep the automobile.

Method 2 Refinancing an Existing Loan.

1. Contact your lender. You can apply to refinance your automobile loan with the lender from the original loan, or you can switch to a new lender. Lenders who allow refinancing will replace your existing loan with a new loan, typically offering lower monthly finance charges. Not every lender will allow borrowers to refinance a loan, so it may be worth comparing your options to determine which lender to go with, or whether you're eligible to refinance at all.

2. Gather the necessary information. As part of the refinancing application process, you'll need some basic information to provide the lender. Before you apply to refinance your loan, you'll need to have ready:

your current interest rate.

how much money is still owed on the existing loan.

how many months remain in the existing loan's terms.

the make, model, and current odometer reading of your vehicle.

the current value of your vehicle.

your current income and employment history.

your current credit score.

3. Compare refinance loan options. If you are eligible for an automobile loan refinance with your existing lender, you may be eligible for a better loan through a different lending institution. It's worth comparing your refinance loan options to get the best available loan terms. When you search around and compare refinance options, it's worth considering:

the loan rate.

the duration of the loan.

whether there are pre-payment penalties or late payment penalties.

any fees or finance charges.

what (if any) the conditions for automobile repossession are with a given lender.

Method 3 Pre-paying an Existing Loan.

1. Learn whether you're able to pre-pay your loan. If refinancing isn't an option, you may be eligible for pre-paying your loan. Pre-payment, also called early loan payoff, simply means that you pay off your debt before the agreed-upon end date of an existing loan.[29] The benefit of pre-paying your loan is that you're not subjected to the monthly finance charges you would otherwise be paying on your loan, but for that reason many lenders charge a pre-payment penalty or fee.[30] The terms of your existing loan should specify whether there is any pre-payment or early loan payoff penalty, but if you're unsure you can always consult with your lender.

2. Learn the pre-payment process for your lender. If your lender permits you to make pre-payments on your loan, there may be a special process for making those payments. These payments are sometimes referred to as principal-only payments, and it's important to specify to your lender that you intend for that payment to be applied to the principal loan, not the finance charges for upcoming months. Each lender's process may be different, so it's best to call or email the lender's customer service department and ask what you need to do to make a principal-only payment towards your loan.

3. Calculate your early loan payoff amount. There are many early loan payoff "calculators" available online, but all of them factor in the same basic information to determine how much you will need to pay in order to payoff your loan early:

the total number of months in your existing loan term.

the number of months remaining on your existing loan.

the amount your existing loan was for.

the monthly payments remaining on your loan.

the current annual interest rate (APR) on your existing loan.

Tips.

Reducing the finance charges by reducing the term of the loan will lower the finance charges overall but it will also increase your monthly payment, because you take less time to repay the loan.

Consider working with a credit counseling organization if you're having trouble sticking with your budget or paying off your loans.

November 26, 2019

How to Reduce Finance Charges on a Car Loan

How to Reduce Finance Charges on a Car Loan.

Finance charges applied to a car loan are the actual charges for the cost of borrowing the money needed to purchase your car. The finance charge that is associated with your car loan is directly contingent upon three variables: loan amount, interest rate, and loan term. Modifying any or all of these variables will change the amount of finance charges you will pay for the loan. There are a number of ways to reduce finance charges on a loan, and the method you choose will be contingent upon whether you already have a loan or are taking out a new loan. Knowing your options can help you save money and pay off your vehicle faster.

Method 1 Reducing Finance Charges for a New Loan.

1. Learn your credit score. Automobile loans are largely determined by the borrower's credit score; the better the borrower's credit score is, the lower his interest rate will likely be. Knowing your credit score before you apply for an automobile loan can help ensure that you get the best possible loan terms. You can obtain a free copy of your credit report (one free copy is guaranteed every 12 months) by visiting AnnualCreditReport.com or by calling 1-877-322-8228.

Your credit report won't explicitly contain your credit score, but it will contain information that determines your credit score. Because of this, it's tremendously important to review all of the information contained in your credit report and understand what determines your credit score to ensure that there are no errors.

If your credit score is low, you may need to improve your credit score. Improving your credit score will likely get you much better terms on your loan. If you can hold off on purchasing your vehicle until you've repaired your credit, it may be worth waiting.

Consider contacting a credit counseling organization to help you rebuild your credit. A credit counselor can work with you to build and stick to a budget, and can even help you manage your income and your debts. You can find a credit counseling organization near you by searching online - just be clear on the terms and fees of the services offered before signing up with a credit counselor.

2. Shop around for your loan. Most dealerships offer automobile loans at the dealership, which can make it convenient for buyers. However, the dealership may not be offering the best available loan. Many automobile dealers arrange loans by acting as a "middle man" between you and a bank, which means that the dealership may charge you extra to compensate for its services. Even if the dealership's fees aren't unreasonable, it's likely that the dealer will then sell your contract to a bank, credit union, or finance company, and you may end up making payments to that third party. Even if you end up going with the dealer's financing option, it's worth shopping around for a better loan from a local bank or credit union.

3. Don't take out a small loan. Every loan term is different, depending on factors like your credit score and the amount you're requesting to borrow. Smaller loans typically have very high monthly finance charges, because the bank makes money off of these charges and they know that a smaller loan will be paid off more quickly. If you intend to take out an auto loan for only a few thousand dollars, it may be worth saving up until you have the whole amount that you'll need to purchase an automobile, or purchasing an automobile that fits in your available price range.

4. Get a pre-approved loan before you buy a car. Pre-approved loans are arranged in advance with a bank or financial institution. This may be helpful, as many people feel pressured to go with the loan options that a dealer offers at the car lot, and end up getting a loan with high finance charges. If you get a pre-approved loan beforehand, you'll know exactly how much you can afford to spend on an automobile, which will also help you stay within your budget.

5. Consider leasing instead of buying. Leasing a vehicle allows you to use your vehicle for an arranged duration of time and a predetermined number of miles. You won't own your car, but lease payments are typically lower than what the monthly payments on a loan would be for the exact same vehicle. Some lease terms also give you the option of purchasing your vehicle at the end of the leasing period. Before you decide to lease, it may be helpful to consider.

the lease costs at the beginning, middle, and end of the leasing period.

what leasing offers and terms are available to you.

how long you want to keep the automobile.

Method 2 Refinancing an Existing Loan.

1. Contact your lender. You can apply to refinance your automobile loan with the lender from the original loan, or you can switch to a new lender. Lenders who allow refinancing will replace your existing loan with a new loan, typically offering lower monthly finance charges. Not every lender will allow borrowers to refinance a loan, so it may be worth comparing your options to determine which lender to go with, or whether you're eligible to refinance at all.

2. Gather the necessary information. As part of the refinancing application process, you'll need some basic information to provide the lender. Before you apply to refinance your loan, you'll need to have ready:

your current interest rate.

how much money is still owed on the existing loan.

how many months remain in the existing loan's terms.

the make, model, and current odometer reading of your vehicle.

the current value of your vehicle.

your current income and employment history.

your current credit score.

3. Compare refinance loan options. If you are eligible for an automobile loan refinance with your existing lender, you may be eligible for a better loan through a different lending institution. It's worth comparing your refinance loan options to get the best available loan terms. When you search around and compare refinance options, it's worth considering:

the loan rate.

the duration of the loan.

whether there are pre-payment penalties or late payment penalties.

any fees or finance charges.

what (if any) the conditions for automobile repossession are with a given lender.

Method 3 Pre-paying an Existing Loan.

1. Learn whether you're able to pre-pay your loan. If refinancing isn't an option, you may be eligible for pre-paying your loan. Pre-payment, also called early loan payoff, simply means that you pay off your debt before the agreed-upon end date of an existing loan.[29] The benefit of pre-paying your loan is that you're not subjected to the monthly finance charges you would otherwise be paying on your loan, but for that reason many lenders charge a pre-payment penalty or fee.[30] The terms of your existing loan should specify whether there is any pre-payment or early loan payoff penalty, but if you're unsure you can always consult with your lender.

2. Learn the pre-payment process for your lender. If your lender permits you to make pre-payments on your loan, there may be a special process for making those payments. These payments are sometimes referred to as principal-only payments, and it's important to specify to your lender that you intend for that payment to be applied to the principal loan, not the finance charges for upcoming months. Each lender's process may be different, so it's best to call or email the lender's customer service department and ask what you need to do to make a principal-only payment towards your loan.

3. Calculate your early loan payoff amount. There are many early loan payoff "calculators" available online, but all of them factor in the same basic information to determine how much you will need to pay in order to payoff your loan early:

the total number of months in your existing loan term.

the number of months remaining on your existing loan.

the amount your existing loan was for.

the monthly payments remaining on your loan.

the current annual interest rate (APR) on your existing loan.

Tips.

Reducing the finance charges by reducing the term of the loan will lower the finance charges overall but it will also increase your monthly payment, because you take less time to repay the loan.

Consider working with a credit counseling organization if you're having trouble sticking with your budget or paying off your loans.

November 28, 2019

how to finance real estate

How to Finance Real Estate.

Real estate can be a very good investment. Depending upon your resources, you may need to know how to finance the real estate. When financing, there are a number of considerations and options for you to consider.

Steps,

1. Review your financial background. Prior to considering a loan you should be aware of several factors which may affect your loan approval.

Check your credit score. A low credit score may affect the interest rate that you will pay or may prevent you from getting the loan.

Make sure you save enough money to cover a down payment. Although no money down loans have existed, it is likely you will pay an upfront payment of anywhere from 3.5% to upwards of 20% of the cost of your new real estate. A second loan may help defray that cost.

You may need to establish that you have a stable level of income, and a lender may consider the ratio of your debt to income. A high percentage of debt to income could disqualify you for a loan.

2. Assess the maximum amount of mortgage you can afford. You will need to take a look at your income and expenses, including your debt. That debt should include any installment debt, mortgage debt on a second property, loans, credit card debt, child support and additional debt which will be acquired with the new property. That additional debt should include the new projected insurance, taxes and home owners fees. You should add that debt to any other monthly expenses, such as food, clothing, health care, and transportation costs to determine the amount of your overall obligations should you complete your purchase. Of course certain expenses such as your current rent payments would be excluded. Subtract the obligations from your income to determine the maximum mortgage payment you could make and decide the mortgage amount you would be comfortable making.

3. Secure pre-approval or pre-qualification for a loan with a lender. A lender will review your finances and give you an idea how much you can borrow. The pre-approval process goes through a more in depth analysis of your finances and more accurately reflects an amount that you can borrow. Neither review is binding on the lender.

4. Determine the type of loan you want or need. The first option most people consider is the conventional loan. There are several types of conventional loans.

The fixed loan locks in the interest rate and the payment amount for the duration of the loan.

In the adjustable rate mortgage, the interest rate is subject to change over the course of the loan.

A jumbo mortgage comes into play when a loan is higher then a certain amount which then results in a higher interest rate.

A loan may also have a balloon payment which usually allows for a lower interest rate for a period of years and then finishes with a final lump sum payment.

5. Pursue alternative financing if a conventional loan is unavailable or not your best interests. One option is to see if the lender will consider taking on other collateral you own to secure the loan. Also, the seller may agree to either finance part of the loan, or agree to lease the property to you with the intent to sell it to you. One other option is to secure a private money loan from private investors looking to make money on their investment.

Tips.

The process of pre-approval or pre-qualification not only gives you an estimate of your maximum mortgage, it tells a potential seller that you are a serious buyer which can give you an advantage over offers from other buyers.

Warnings.

Even though you are pre-approved for a mortgage at a certain amount, it does not guarantee that you will be able to afford that mortgage. Remember to review your current financial situation and try to anticipate any future expenses before taking on a mortgage that ends up too large to handle.

December 17, 2019

How to Finance Real Estate

How to Finance Real Estate.

Real estate can be a very good investment. Depending upon your resources, you may need to know how to finance the real estate. When financing, there are a number of considerations and options for you to consider.

Steps,

1. Review your financial background. Prior to considering a loan you should be aware of several factors which may affect your loan approval.

Check your credit score. A low credit score may affect the interest rate that you will pay or may prevent you from getting the loan.

Make sure you save enough money to cover a down payment. Although no money down loans have existed, it is likely you will pay an upfront payment of anywhere from 3.5% to upwards of 20% of the cost of your new real estate. A second loan may help defray that cost.

You may need to establish that you have a stable level of income, and a lender may consider the ratio of your debt to income. A high percentage of debt to income could disqualify you for a loan.

2. Assess the maximum amount of mortgage you can afford. You will need to take a look at your income and expenses, including your debt. That debt should include any installment debt, mortgage debt on a second property, loans, credit card debt, child support and additional debt which will be acquired with the new property. That additional debt should include the new projected insurance, taxes and home owners fees. You should add that debt to any other monthly expenses, such as food, clothing, health care, and transportation costs to determine the amount of your overall obligations should you complete your purchase. Of course certain expenses such as your current rent payments would be excluded. Subtract the obligations from your income to determine the maximum mortgage payment you could make and decide the mortgage amount you would be comfortable making.

3. Secure pre-approval or pre-qualification for a loan with a lender. A lender will review your finances and give you an idea how much you can borrow. The pre-approval process goes through a more in depth analysis of your finances and more accurately reflects an amount that you can borrow. Neither review is binding on the lender.

4. Determine the type of loan you want or need. The first option most people consider is the conventional loan. There are several types of conventional loans.

The fixed loan locks in the interest rate and the payment amount for the duration of the loan.

In the adjustable rate mortgage, the interest rate is subject to change over the course of the loan.

A jumbo mortgage comes into play when a loan is higher then a certain amount which then results in a higher interest rate.

A loan may also have a balloon payment which usually allows for a lower interest rate for a period of years and then finishes with a final lump sum payment.

5. Pursue alternative financing if a conventional loan is unavailable or not your best interests. One option is to see if the lender will consider taking on other collateral you own to secure the loan. Also, the seller may agree to either finance part of the loan, or agree to lease the property to you with the intent to sell it to you. One other option is to secure a private money loan from private investors looking to make money on their investment.

Tips.

The process of pre-approval or pre-qualification not only gives you an estimate of your maximum mortgage, it tells a potential seller that you are a serious buyer which can give you an advantage over offers from other buyers.

Warnings.

Even though you are pre-approved for a mortgage at a certain amount, it does not guarantee that you will be able to afford that mortgage. Remember to review your current financial situation and try to anticipate any future expenses before taking on a mortgage that ends up too large to handle.

December 17, 2019

How to Stop Being Broke

How to Stop Being Broke.

If you're sick of being broke, it's time to take control of your finances! Whether you need to work on your spending habits, learn how to save, or find ways to earn more money, you can find a way to stop being broke. Follow these steps to start working towards financial freedom and better peace of mind.

Part 1 Getting into the Right Mindset.
1. Set goals. If you want to change your financial situation, you need to get specific about want you want to accomplish. Think about exactly what you want your finances to look like and what you can do to achieve those goals.
Setting short-term goals in addition to long-term goals can help keep you motivated by providing you with a sense of accomplishment.
Create a budget for non-essential items and hold yourself accountable for it each month. If you go over-budget one month, tell yourself that your budget for the next month is reduced as a result.
2. Stop comparing yourself to others. If you're spending beyond your means because you feel that you need to keep up with your friends or show others that you can afford a certain lifestyle, you're not doing yourself any favors. Stop worrying about what others can afford and think about how you can live within your means.
Stop equating your self-worth with your ability to buy things. This kind of thinking will make you extremely unhappy in the long run and will probably get you stuck in debt forever.
3. Track your expenses. To understand exactly where all your money is going, keep careful track of every dollar you spend. You can do this with a pen and paper or electronically if you use a card for everything, but make sure to account for everything. This simple habit will help you spend more wisely.
Try categorizing your expenses and adding them up on a monthly basis. For example, you could create categories for food, housing, transportation, utilities, insurance, entertainment, and clothing. Then calculate what percentage of your income you are spending on each category. You might realize that your expenses in some of these categories are way too high.
To understand how much you can afford to spend each day, subtract your fixed expenses from your monthly income and divide the remaining amount by 31.
4. Make a plan for getting out of debt. If you are broke because you have credit card debt, a car payment, or student loans, think about what you can do to pay off these debts faster.
Making even a few extra payments each year can help you pay off your debts much faster.
5. Start saving. This may seem impossible if you are always broke, but planning for the future will help you get out of this cycle. Start small by just putting $50 in an emergency fund each month.
Don't forget to save for retirement! Take advantage of the 401k offerings at your company or open an IRA account.

Part 2 Avoiding Money Traps.
1. Avoid lending to others. While you may want to help out your loved ones who are in need, you really shouldn't be lending money if you can't afford to pay your own bills.
2. Avoid payday loans. While they may seem like a good solution if you're strapped for cash, the interest rates are ridiculously high, so they will only get you further into debt.
3. Understand how much it will really cost. Before you take out any kind of loan or finance any purchase, be sure to calculate what your monthly payments will be, how long it will take you to repay the debt, and how much you will be paying in interest.
In some cases, paying interest may be worth it. For example, most people cannot afford to purchase a house without taking out a mortgage, but depending on the price of the house and the average cost of rent in your area, you might still be saving a significant amount of money by choosing to buy with a mortgage instead of renting.
Be especially wary of high interest rates for depreciating assets like vehicles. If you decide to sell your vehicle after you have owned it for several years, it may be worth less than what you owe on it. This can also happen with real estate when the market conditions are poor.
4. Avoid impulse buys. If you always have a plan for what you will buy, you will have a much easier time managing your finances.
If you have a hard time controlling your purchases when you go to the mall, try to avoid going to the mall at all.
Write out a list when you go shopping so you will always know exactly what you need to buy.
5. Use credit cards wisely. If you have a harder time keeping track of your expenses and sticking to your budget when you use a credit card, stop using it.
Paying with cash instead of a credit card will allow you to visualize how much of your available funds you are spending on a given purchase.
If you are able to stick to your budget when using a credit card, look for one that has no annual fee and will reward you with cash back or other incentives. Just make sure you always pay your bill on time or these incentives will not be worth the price you are paying in interest.

Part 3 Spending Less.
1. Assess your daily or weekly spending habits. Once you have a solid grasp on what you are spending your money on, you can start cutting out expensive habits.
2. Buy used items. You can save on everything from your next car to furnishings for your home by buying gently used items.
You can sometimes find really great clothes that have barely been worn at thrift shops for a fraction of the price.
3. Look for monthly expenses that can be cut. If you pay for monthly memberships or subscriptions, carefully assess how much they cost, how much you use them, and whether you could give them up.
Make sure you're not paying for services that you never use. For example, if you have premium cable channels that you never watch, you can cancel them without feeling like you are making any sacrifices. The same goes for your cell phone bill if you are paying for more data than you ever use.
4. Compare items or brands when shopping. If you're on a tight budget, you want to make sure you're always getting the best deal on absolutely everything. Take some time to compare prices for items you purchase regularly and for large purchases.
If you've had the same auto insurance carrier or cable company for a long time, there might be better deals out there, so be sure to comparison shop regularly.
Shopping for necessities online can be cheaper in some instances, but make sure you take shipping charges into account.
Use coupons to save some extra cash. Keep in mind that many retailers accept competitors' coupons.
5. Ask for a better deal. You can always ask your service providers for better deals, especially if you've been a loyal customer. The worst they can say is no.
Try this with your cable and internet providers, insurance companies, and cell phone carriers.
6. Spend less on entertainment or at restaurants. Whether it's dining out or going to amusement parks, entertainment can eat up a big chunk of your budget. Look for less expensive ways to have fun.
Learn to cook at home and keep the fridge well stocked with ingredients for things that you know you can cook from scratch when you come home late and don't have much time to whip up a grand meal.
Instead of going out to eat with friends, invite them over for a potluck.
7. Do more yourself. It may be convenient to use a laundry service or to have someone else shovel your driveway, but if you're physically capable of doing these things yourself. Think about the money you can save.
If you're not very handy, try to teach yourself to do more around the house. If you need a simple repair done, you may be able to watch a video online or take a class at a local home improvement store to learn how to do it yourself.
8. Save money on energy. Go green around the house to save money on your utility bills each month.
Sealing up air gaps can reduce your heating and cooling bills. If you own your home, investing in a properly insulated attic can make a huge difference.
Turning your heat down just a few degrees in the winter can make a big difference in your energy bills as well. A programmable thermostat will let you automate the temperature of your house so you won't spend money on heating the place to a comfortable level when you're not at home.
9. Avoid bank and credit card fees. Choose your bank and credit card providers wisely in order to avoid unnecessary fees.
Make sure to only use the ATM at your bank if you will get charged for using outside ATMs.
10. Aim to have a few no-spend days a month. After a while, it becomes a game: "How can I run my life today without writing anything down in my little blue book?" "How ingenious can I be to make do with the things, food, and resources I already have at my disposal?" See how often you can turn this into a habit.

Part 4 Earning More.
1. Get a better job. If spending less is just not enough, it may be time to get a better job that will allow you to make more money. Start by updating your resume, searching for listings online, and networking with other professionals in your field.
Don't forget to look for advancement opportunities within your company.
2. Do something else on the side. Using your skills to provide freelance or consulting services is a great way to earn additional income. If this won't work with your profession, get a part-time job or find creative ways to make some extra cash on the side.
You can make some extra money by performing jobs like mowing lawns, cleaning houses, or even walking dogs for people in your neighborhood.
3. Sell stuff you don't need. You probably have at least a few possessions that you no longer need or want, and you can turn those items into extra cash by selling them to people who do want them.
If you have lots of unwanted items, try having a yard sale.

Community Q&A.

Question : My family barely has any money. My dad has his own company, but it hasn't gotten any business in a long time. I have some money saved up, and I was think of leaving a little in my dad's wallet. What do you think?
Answer : Definitely do. Work as much as you can and give and much as you can. Also putting your family's money in a good, interest-bearing account can help a lot.

Tips.

To always have money in the bank to pay regular bills, add them up for the past year and divide by 52. Round up to the next 25, 50, or 100 dollars. Remember to add in quarterly or annual bills, too.
Buy clothes that can be used for several different occasions instead of only one-time events.
Use coupons on items whenever you can.
Start a Christmas Club account, but put in more than you expect to spend on gifts. The excess is great for a mini-vacation or special purchase.
Get a jar to collect your spare change. When it's full, take it to the bank. (Don't take it to one of those coin counters, as they charge for counting your change.)
Take it a day at a time. Start small, set goals, reward yourself (not with any type of shopping, of course) and enjoy playing the game.

July 02, 2020

How to Finance Nursing Home Care

How to Finance Nursing Home Care.

As more and more Americans require nursing home care, their families are struggling to find ways to pay for, or at least reduce, the immense cost of care. In 2012, the average cost of a private room was over $90,000 a year and a semi-private room cost $81,000 a year. For most people, paying for a loved one’s nursing home care presents an almost insurmountable financial obstacle. However, there are ways to finance and reduce the cost of a nursing home so that a loved one can get the type of long-term care that they require.

Method 1 Reducing Costs and Using Personal Assets.

1. Consider in-home care. Long-term nursing home care costs between $6,000 and 9,000 a month and many people cannot afford this option. To save money, you may want to consider in-home care, which costs approximately $21 an hour for a care assistant. This option is not only less expensive but it allows your elderly or disabled family member to reside in his or her home for as long as possible.

2. Negotiate long-term care costs. If you are paying out-of-pocket for long-term nursing care, you should negotiate the overall cost with the nursing home. While some nursing homes may refuse to negotiate, others would prefer to take a lower private care rate because it still pays more than state-sponsored Medicaid programs.

3. Relocate your loved one. The cost of nursing home care varies greatly from state to state and even from locality to locality. If your loved one has family members who live in different states, you should determine which state has the lowest cost for nursing home care. Nursing home care in Texas, Utah and Alabama can cost less than half of nursing home care in states in the Northeast.

4. Qualify for a Reverse Mortgage. A reverse mortgage is a loan that a homeowner gets from a bank against the value of their home. The loan converts the home's equity into cash and the homeowner receives either a cash sum, regular payments, or a line of credit equal to the equity in the home. After the owner's death, the bank may foreclose on the home (get ownership without further liability to the home owner) or members of the estate may sell the home and pay off the loan.

In order to qualify for a reverse mortgage, each homeowner must be at least 62 years old and live in the home where the reverse mortgage was taken.

A reverse mortgage may be a good solution if you are in good health. You can use the proceeds from the reverse mortgage to pay for long-term care insurance or to make your home more accessible so that you can remain in the house as long as possible.

If you are in need of care but do not require nursing home care yet, you can use a reverse mortgage to pay for in-home caregiver services. This provides seniors with the ability to stay in their home for a fraction of the cost of a nursing home.

If you are a married couple and one of you need nursing home care, a reverse mortgage can pay for nursing home care and allow the healthy spouse to remain in the family home. If the spouse needing care dies, the surviving spouse can stay in the home so long as they can continue to pay for property taxes and insurance.

Method 2 Qualifying for Medicaid.

1. Determine whether you qualify for Medicaid. Medicaid is a state and federal government program that assists low-income individuals with a variety of medical care, including nursing home care. You can only qualify for Medicaid if you fall below the monthly income and asset limits set by your state.

You can determine whether you meet the eligibility requirements for your state at: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/

If you qualify for Medicaid, you can apply online at https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/ or check the website for the address of your state Medicaid office and apply in person.

2. Qualify for Medicaid. If your assets are currently too high to qualify for Medicaid and you want to protect your personal assets from nursing home expenses, you can consider legally reducing your assets in order to qualify for Medicaid.

Before attempting to reduce or transfer your assets, you should speak with an elder law attorney. Medicaid has very strict rules about what assets can be transferred and what purchases are allowable to reduce your income. If you improperly reduce your assets, Medicaid can penalize you for months to years and prohibit your qualification for the program.

The National Association of Elder Law Attorneys has information about elder law specialists on its website at: https://www.naela.org. The American Bar Association also provides attorney referral information at: http://apps.americanbar.org/legalservices/findlegalhelp/home.cfm.

3. Reduce your assets. In order to qualify for Medicaid, you can reduce your assets by.

Paying off debt, such as a mortgage, student loans or credit cards.

Paying for in-home medical care, Paying for necessary home repairs, such as a new roof or furnace.

Transfer funds to your spouse for his or her benefit, Transfer funds or set up a trust for your blind or disabled child or for a disabled person under the age of 65.

4. Set up a Medicaid Asset Trust. With a Medicaid Asset Trust, you transfer all of your assets into a trust and give up control over those assets. Any funds placed in the trust do not count towards the Medicaid asset limits. However, if you transfer funds into the trust within 5 years of applying for Medicaid, you may be subject to Medicaid’s “lookback provision.” Under this provision, Medicaid may penalize any person that it determines conducted a non-exempt transfer under the Medicaid regulations. If you are penalized, you may not be able to qualify for Medicaid for months or even years.

Method 3 Using Insurance Options.

1. Purchase long-term health insurance. Unlike regular health insurance, long-term health insurance is designed to pay for long-term care, which may include nursing home care, in-home care or medical equipment. When evaluating long-term health insurance polices, you should carefully select a policy that covers nursing home care if you reasonably believe that you will not have someone to care for you at home should you fall ill and become unable to care for yourself.

It is best to acquire long-term health insurance when you are younger and in good health. As you get older, long-term health insurance becomes much more expensive and many seniors are either unable to afford or qualify for a policy.

2. Cash in your life insurance. Another way to pay for nursing home care is to cash in your whole life insurance policy. Certain policies allow policyholders to cash in their insurance policy for 50 to 75 percent of the face value of the policy.

Keep in mind that this is only an option for whole life policies, not term life policies where there is no cash value.

Depending on your individual life insurance policy, there are two ways that you can cash in your policy: accelerated benefit or life settlement.

If you qualify for an accelerated benefit, the insurance company will pay between 60 and 80 percent of the face value of the policy. Under certain policies, you may have to be suffering from a terminal illness in order to qualify for an accelerated benefit.

A life settlement is a policy payout that you negotiate with an outside company not the insurance company that issued the policy. These settlement companies look at the value of your policy, your age, and your health and pay you between 40 and 75 percent of the face value of the policy. Depending on the health and age of an individual, it may be possible to sell some term policies.

Before negotiating a life settlement, you should speak with an elder law attorney as there may be tax and Medicaid implications from receiving the proceeds of the policy through a settlement company.

3. Check Medicare benefits. While Medicare does not pay the cost of long-term nursing home care, you may qualify for a certain portion of the stay if you were transferred to a nursing home within several days of a hospital stay and you require skilled nursing or rehabilitative care. If you go to a Medicare-approved facility, your stay may be covered for up to 100 days.

Medicare will also pay for in-home care for a certain period as well. This coverage may help if you are trying to reduce assets or do not physically require full nursing-home care.

Tips.

Do not try to transfer or reduce assets before speaking with an experienced elder law attorney.

Be wary of advisers who are not attorneys. Throughout the country, there are people and companies who exploit the elderly and their caregivers by inducements of Medicaid qualification.

December 15, 2019