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Archive for August, 2008

Why ‘Save to Spend’ Is Still The Best Strategy

Written by Toi Williams on Aug 29th, 2008 | Filed under: mindset, saving

In recent years, the easy access to credit severely reduced the amount of people across the nation that saved up their money to purchase the things that they desired.  Instead of budgeting their money and putting a little of it away each paycheck to save up for the expensive items and vacations that they wanted, people began to place these massive purchases on their credit cards with the realization that they could pay off the balance of the credit card over time.  In effect, the common trend was reversed with people buying first and paying later instead of saving first and buying later.

What Makes Debt A Bad Idea?

What many people forget to remember is that there was a reason that our parents and our grandparents tried to stay away from debt as much as possible.  In most cases, debt is not a good thing and it can get you into a lot of trouble fairly quickly.  As people get into debt, they find that their financial options are limited, they are less able to handle emergencies, and they can lose every thing that they have worked for in order for their debt to be paid off.

Let’s take a look at how debt works.  When you are incurring debt, you are paying someone to lend you money for a short period of time and the person that is lending you the money gets all of their money back plus some of yours for having the money for you to borrow.  When you are buying items on credit, you are paying more for the item than you would have if you had paid in cash and sometimes it can be significantly more depending on the interest rate on the credit card that you used to pay for the purchase.  For example, if you purchased a table that costs $200 on a credit card that had a 15% interest rate and took six months to pay off the purchase, you could end up spending around $450 to buy the table – $250 more than you would have paid if you would have purchased the table with cash.

Why Is ‘Save To Spend’ A Good Idea?

When you use the save to spend method, you determine what item you would like to purchase and place a certain amount of money aside each month to be able to pay for the purchase in cash when the time comes.  For example, a person who would like to go on a vacation that will cost $1,000 may decide to save $200 per month for 5 months in order to have the money that they need to take their vacation.  This makes obtaining the money more manageable and ensures that you will not be working off the costs of the vacation for months to come.

Items purchased using the save to spend method cost less than purchasing items with a credit card and if the person is really savvy with their money, they will be more inclined to seek out deals on the things that they want in order to maximize what they are getting for their money.  People seem to be more aware of money leaving their bank account than they are of charges racking up on their credit card and tend to be more cautious about the prices of items when they are paying for the purchases out of their pocket or out of their bank account.  They will also avoid having interest charges placed on the cost of the items that they will have to pay off eventually which can greatly increase the cost of owning the items.

How Are You Going To Pay For Your Child’s College Education?

Written by Toi Williams on Aug 28th, 2008 | Filed under: Uncategorized

Many people are struggling to make ends meet today and are worried about being able to save for their children’s college education.  Being able to go to college and earn a degree is becoming more and more important in today’s job market and it stands to reason that a college education will be even more important for obtaining a job when your children are old enough to enter the job market.  As a parent, you want your children to have the best in life and have all the tools that they need to succeed in the world on their own.  Being able to save for your child’s college education can go a long way towards giving your child an advantage in life.

Different Ways To Save

There are a number of different ways that can be used for saving for a child’s college education.  One of the most popular ways to save for college is to put your money into a 529 college savings plan.  Once the child is ready to go to college, the money that has been placed into the savings plan can be used to pay for the tuition to the college.  The rules of the 529 college savings plan will dictate exactly how the money may be used for college expenses and these limitations will be disclosed before the person decides to place any money into the plan.

Other people choose to open interest bearing savings accounts for the money that they are trying to save for their children’s college education.  These savings accounts may have a low rate of return, but the money that is saved in these accounts can be accessed at any time and can be used to pay for whatever it is needed for, including food, books, or dormitory furnishings.  The parents can also dictate how much money will be placed into the account at any given time, contributing more when there is additional money coming into the household.

Even people that do not make a lot of money can save for their children’s college education.  By placing $25 per month into a savings account for each child, a parent will be giving them a head start on their future that will be greatly appreciated.  When it is time to apply for college, applying for scholarships may take care of a portion of the tuition costs, meaning that the student will be paying less for each semester of college and may even be able to offset the costs even more by working part-time. Having these savings in reserve for the amount that is not covered by other methods will ensure that the student has enough financial backing to pay for their education until they receive their degree.

Buying A House? Here’s Some Rules Of Thumb To Follow

Written by Toi Williams on Aug 26th, 2008 | Filed under: Uncategorized

By now, everyone has heard of someone or has read about someone that has been affected by the mortgage crisis.  There is enough blame to go around for many different players in the mortgage bubble that collapsed, taking many people’s home equity away with it, but the truth is that many of the foreclosures that have been seen were because the person took out an exotic mortgage loan to finance a house that they could not afford. 

In the buying frenzy of the moment, many of these people opted for adjustable, teaser rate loans with the belief that they would always be able to find a buyer to purchase the home for more than they had paid for it and they could get out from under the mortgage loan before the interest rate reset to a higher rate.  When the mortgage bubble collapsed, many of these people found themselves stuck in a home that they could not sell and owing much more on the mortgage than they could possibly afford.  The result was that a wave of foreclosures swept across the nation, leaving the banks owning many of the homes that they had signed loans for just three or four years earlier.

If you are in the market to purchase a house today, there are some rules of thumb that you should follow to make sure that you do not find yourself in the same trap:

1.  The 30 Year Fixed Rule
Many of the people that are in trouble with their mortgages today chose adjustable rate loans so that they could purchase a larger house with less money down and lower initial monthly payments.  Honestly, if you would be unable to afford the mortgage payments at the 30 year fixed rate for the loan, then you should not be buying the home because the price of the home will place an economic hardship for you.  Because the 30 year fixed rate loan is considered one of the most reasonable loan products available for mortgage loans, this is the type of loan you should be pursuing when looking for a mortgage loan.

2.  Do Not Purchase A Short Term Home
Although owning your home would seem to be an attractive solution in any case, purchasing a home to live in it for a short period of time can be a tremendous waste of money.  If you are not planning on being in the home for at least 7 years, then the fees that you have paid for the purchase of the home and the fees that you will pay for selling the home and for paying off the mortgage loan early will erase any monetary gains that you have made while staying in the home.  Add in the cost of repainting and repairing everything that is needed to get the home ready for sale and you may be losing a great deal of money by moving out of the home within a short period of time.

3.  Be Aware Of The Fees That You Are Paying And Why
As many of these foreclosures and personal bankruptcies work their way through the court system, many people are finding that the fees that they were charged for their mortgage loan were well beyond and above what they should have been paying in fees.  Some of the brokers originating the loans were adding additional fees into the loans as vague entries in the hopes that the person signing for the loan would not notice.  Make sure that you know about each of the fees that are being charged on your mortgage loan and what they are for.  If you do not know what a fee is for or why it is the amount that it is, do not sign the documents until all of your questions have been satisfied.

Avoiding Unnecessary Debt With 3 Easy Actions

Written by Toi Williams on Aug 25th, 2008 | Filed under: Uncategorized

One of the biggest problems that is facing the nation today is the amount of unnecessary debt that many people have accumulated over the last decade.  Many people have wasted a great deal of their money on things that do not retain any value, such as the latest electronic devices, expensive fad fashions, and luxury vacations.  Some of these people believed that they had a personal ATM in the equity in their home while other people believed that they could keep charging things to their credit cards, forgetting that all of those purchases will have to be paid for eventually.  Now that credit limits are being reduced and home equity loans are more difficult to obtain, people are finding that they are having a hard time coming up with the amount of money they need to maintain their current lifestyle.

By avoiding many of the traps that trick you into obtaining debt that is unnecessary, you will be able to save quite a bit of money each month to put towards paying off credit card balances or other living expenses.  It is easy to identify the tricks once you know what they are and you will be able to see them used in various ways depending on where you are at and what you are doing at the time.  Many retailers use a number of different tricks to get you to purchase more than you intend to and other businesses have their ways of extracting more money from you as well.

1. Avoid Paying Extra For Convenience
One of the traps that many people pay for is the convenience of doing things just a little bit faster or making it a little bit easier for the person to do.  A perfect example of this is paying ATM fees for withdrawals from your bank account because you went to another bank’s ATM.  For most people, there are enough bank branches near their home or place of employment that if they planned their purchases carefully, then they would never have to use the ATM of another branch resulting in fees paid to both banks.

2.  See If There Are Items You Can Eliminate From Your Daily Life
Many people have items that they pay for every day that they do not even calculate as a drain on their finances because the day to day cost of the item is so small.  For example, a person that purchases coffee at the neighborhood coffee shop for $2.50 each day could save themselves $625 per year by brewing your own coffee at home and bringing it with you to work in a reusable travel mug.  Bringing your lunch to work each day instead of purchasing lunch at a fast food place or casual restaurant could help you save more than $1,200 over the course of a year.

3.  Make A Shopping List Every Time
Retail stores are experts when it comes to convincing people to purchase more than they really need or came in to get.  In order to help you resist the temptation to purchase more items than you wanted to buy, you should make a shopping list of the things you want to get prior to going into the store and stick to the list while you are in the store.  By only purchasing the things that are on your list, you will save money by avoiding impulse purchases and will not have additional things in your home that you do not use or use infrequently.

debt help might be the right solution to your financial problems if you’re struggling with serious debt. Debt management, debt consolidation and bankruptcy are other options worth considering. Seek professional debt advice now and make yourself debt free.

Student Loans: How Much Should I Borrow?

Written by Toi Williams on Aug 24th, 2008 | Filed under: Uncategorized

As the economic downturn continues, many recent college graduates are having a difficult time finding jobs that pay well enough to allow them to live comfortably and begin to pay off their student loans.  Depending on the school that the student was attending and how long they had been in school, many of these students find themselves owing tens of thousands of dollars to the student loan companies after they have graduated.  In order to minimize their losses, many student loan companies have become aggressive in their tactics to recoup the money that they are owed on student loans before their borrowers start to default on their student loans.

As the price of secondary education has become more and more expensive over the years, more and more people have turned to student loans in order to finance their college degrees.  Because a college education is such an important part of getting hired for the best positions today, many people see obtaining a student loan to pay for college as their only option for getting ahead in the world.  Thousands of recent high school graduates and people interested in furthering their education sign up for student loans each year.

So How Do You Avoid Getting In Over Your Head?

A good rule of thumb to remember is never apply for more in student loans than you would make as a salary in the first year of a job in your field.  If the beginning salary for a typical position in the field you are earning a degree in is $35,000 per year, then you should try to restrict your borrowing to less than $35,000.  Many people accomplish this by using money from other sources, such as a job or a gift from their family members, to pay the rest of the balance that is due to the university.

By holding the amount that you are borrowing from the student loan company to the amount that you should be making in your first year of employment, you will be ensuring that the loan payment for the student loan will not be an unmanageable percentage of your income.  This will increase your success at building your life after you graduate from the university because you will be able to focus on other areas of your life, such as housing and transportation, rather than spending all of your money paying back student loans. 

The money that is obtained from student loans should go towards your education and little else.  Many student loan companies would be happy to loan you more money than you truly need for your tuition so that you can pay for your books, your food, and your lodging as well, but you must remember that every dollar that is obtained from a student loan will be charged interest and will need to be repaid in the future.  You do not want to sacrifice your future comfort so that you can live well on campus today by applying for more money in student loans than you actually need.

Increasing Your Credit Limit Can Improve Your Financial Future

Written by Toi Williams on Aug 22nd, 2008 | Filed under: credit cards

If you have had a good relationship with your credit card company over the last several years, then chances are that the credit card company will be interested in raising your credit limit.  Having your credit limit raised can provide a wide variety of different benefits but can also get you into a lot of trouble if you use this additional credit irresponsibly.  By controlling the amount that you are spending and following the basic s of credit, you will find that having an increased credit limit can make your financial stability more secure and improve your credit profile for future purchases.

What Kind Of Improvements?

There are a number of different ways that an increased credit limit can improve your financial future if used correctly.  One of the easiest benefits to recognize is the increased spending power that you will have on your credit card.  This will allow you to hold more money in reserve to be used for unexpected financial emergencies, such as medical bills or urgent repairs to your home or car.

An increased credit limit can also improve your credit score, providing that you do not charge a lot of additional items to the credit card as soon as the credit increase is approved.  A large part of your credit score is determined by the ratio between how much credit you have been issued and how much of your available credit you are using.  If you are able to keep the amount of credit that you are using to less than 40% of the credit you have been issued, the credit rating agencies determine that you are not a credit risk and you know how to use your credit responsibly.

Having a higher credit score can lead to many other benefits for people that use their credit responsibly.  If the person has a higher credit score, they will be eligible for lower interest rates on all of the credit products and loans, including mortgage loans and car loans.  They are also more likely to be approved for different types of credit products and will not have to put up as much collateral or as much money for a down payment as people that have lower credit scores.

Getting an increase in your credit limit can give you many different benefits that could have long term effects on your financial health.  If the additional credit is used correctly, it can improve many different areas of your life and give you the purchasing power that you need to handle any type of emergency that may come along.

Is The Time Right For Refinancing Your Home?

Written by Toi Williams on Aug 19th, 2008 | Filed under: Uncategorized

It can be difficult for a person to know whether the time is right for refinancing their home and refinancing at the wrong time can cost the person a great deal of money in the long run.  Deciding whether the time is right for refinancing your home will depend on your financial situation at the time, the financial climate of the country, and the reason for the refinance.  By taking all of these things into consideration, you will be able to determine whether refinancing your home is the right solution at the appropriate time.

Your Financial Situation

Many people choose to refinance their homes because they are in a dire financial situation and they need to extract themselves from the situation as quickly as possible.  Although this may not be the best reason for refinancing your home, it is an option for obtaining a large amount of money fairly quickly to handle emergency issues that you would not be able to take care of any other way.  If you are not facing a financial crisis and you do not really need the money for anything important, it is best to leave the equity in your home where you will not be paying interest on it to a financial institution.

The Financial Climate

Some people choose to refinance their home because the financial climate of the country has changed and they are able to get a better interest rate on the new loan than they have on their current loan.  Refinancing into a lower interest, fixed rate mortgage loan can save the homeowners thousands of dollars over the life of the mortgage loan, but only if it is done in the correct way.  The difference between the interest rates will need to be more than just a few percentage points apart, there should still be a significant amount of time left on the life of the original loan, and the fees associated with obtaining the refinancing should not be so much that it negates the financial gain of obtaining the loan at the lower rate.

The Reason For The Refinance

Some reasons for refinancing your home are better than others.  If you are refinancing to obtain money to remodel your home, that is great because you are reinvesting in your home by using the money to improve your residence which will increase the value of the home.  Refinancing the home to take an expensive vacation is a bad idea because you will have nothing to show for the money that you have spent except memories and you will be paying off the money that you obtained for a much longer period of time than if you had used a credit card.  It is important to make sure that you use the money for a purpose that makes the interest rate for the money and the length of time that it will take you to pay off your house worth the result.

5 Ways A Good Credit Report Can Enhance Your Quality Of Life

Written by Toi Williams on Aug 18th, 2008 | Filed under: credit score

Many people do not understand how important a good credit report can be to your future happiness.  A credit report is one of the first things that many lenders and creditors look at when trying to determine whether or not to give you whatever items you have requested and has the ability to affect many different areas of your life.  Keeping your credit report positive and ensuring that there are no negative entries on your credit report can go a long way towards helping you get the things that you want in life.

1. Credit Approval
Having a good credit report means that you have a good chance of being approved for additional credit or loan products in the future.  Whether you are looking for a new credit card, to purchase a new car, or interested in getting a mortgage loan, a good credit report will increase your chances of getting approval from the lender or the credit card company that you are interested in doing business with.

2. Higher Credit Limits
If your credit report does not have anything negative reported on it and the length of your credit history is significant, then many lenders will approve you for a higher credit limit than they would have if you had a shaky credit history.  For example, a person with an average credit report may be approved for a credit line of $5,000 where a person with an excellent credit report could be approved for a credit line of $10,000 or more.  This gives the person increased purchasing power for the things that they want and allows them to have enough credit in reserve for any financial emergencies that may arise.

3. Lower Interest Rates
People that have a good credit report will typically qualify for a lower interest rate on their loans and credit cards than a person that has a lot of negative information on their credit report.  This is because a good credit report means that you will not be a credit risk for the company that approves your request for a credit card or a loan and they can give you a lower interest rate because there is a very good chance that they will be receiving their money back in a timely manner.  Having a lower interest rate on your credit cards and your loans can save you hundreds of dollars in interest payments each year.

4. Employment Approval
Many employment positions where the person would be operating in a position of trust have started to review the credit reports of applicants for the position to determine whether they would be trustworthy in the position.  The reasoning is that people that are good about paying their bills and their loans on time would be less likely to steal from the company or abuse the trust of the customers that give them access to their financial information.

5. Rental Approval
If you are looking to rent an apartment, a condominium, or a home, the landlord will typically request your permission to review your credit report before approving your application for renting the property.  Because it can be very costly to evict a tenant for the non-payment of their rent, many landlords want to know that you do not have a history of not paying your bills before they agree to allow you to occupy their property.

Your credit report has the ability to affect many different areas of your life and a bad credit report can have you denied for many things that you probably would never think of.  Because it is much easier to maintain your credit report than to repair it, it is very important that you do all that you can to prevent negative information from going onto your credit report.

Supersize Your Savings Account Using These Simple Steps

Written by Toi Williams on Aug 16th, 2008 | Filed under: saving

Saving enough money to be able to handle most of the issues that occur in life can be very difficult for many people.  They may believe that they do not make enough money to be able to save any significant amount in their savings account or they may be constantly taking the money out of their savings account to pay for other items that they believe that they need.  Saving money can be accomplished by anyone at any income level, as long as they are dedicated to creating a system for saving and sticking to it until they have reached their financial goals.

1 – Trim The Fat From Your Everyday Expenses
Most people have many things that they spend money on each day that they could trim from their budget and possibly never even miss.  Instead of purchasing lunch at a casual or fast food restaurant each workday, try taking your lunch with you to work and pocketing that $5 or more that you are spending each work day.  At the end of the year, you will have saved over $1,000 simply by changing your eating habits and taking your lunch to work each day.

2 – Find Alternate Forms Of Entertainment
Cable television is one of the biggest expenses in a household and many people do not watch the television enough to justify all of the channels that they are purchased with their cable package.  Many movies and DVD box sets of television shows can be purchased at a reasonable price and there are a number of stores that specialize in reselling used DVDs at an inexpensive price.  If you are only watching a few hours of television today, consider getting rid of that expensive cable package and investing in a collection of DVD’s of the shows and movies that you really enjoy watching.

3 – Reduce Your Energy Consumption
Energy bills for the home can take a large bite out of your available finances each month.  By using some simple energy saving methods, such as replacing old weather stripping that may be letting heat out of the home, turning down the thermostat a few degrees, or turning off the lights and the television set when you leave the room, you could be saving hundreds of dollars on your energy bills each year.

4 – Reduce Your Gasoline Consumption
Over the last five years, the price of gasoline has skyrocketed to levels that have never been seen before.  By carefully planning your day, you may be able to reduce the amount of miles that you drive and the amount of gasoline that you consume each day.  Plan to run errands on the way home from work so that you are not making a separate trip or plan to carpool to work with a coworker on certain days of the week in order to save a significant amount of gasoline each month.

5 – Reduce The Number Of Brand Names That You Purchase
Many people purchase brand name items, not because they are better, but because that is what they have been programmed by commercials to do.  Many store brands and items that have no brands are just as good as the name brand items, but cost a lot less because you are not paying for the name and the advertising associated with the product.

Solve Common Credit Card Problems With 4 Simple Solutions

Written by Toi Williams on Aug 13th, 2008 | Filed under: credit cards

Many people are finding out that having a credit card is not quite as beneficial as they once believed.  With interest rates skyrocketing, credit limits being reduced, and people having trouble paying off their balances, many people are discovering that they got in over their heads with their credit cards and do not know how to extract themselves from the situation that they are in.  Here are some common problems facing people that own credit cards and some solutions that may help them solve their credit card related problems.

Problem 1 – Too Many Credit Cards
Open up the wallet of the average consumer and you will find multiple credit cards from different credit card companies.  Having multiple credit cards increases the risk of missing a payment date, which can result in a penalty fee of as much as $39 and increase the interest rates on all of your credit accounts to the maximum charged by the credit card companies.  If you have many different credit cards, including ones obtained by different retail stores, it is best to pay off each one and only keep the ones with the longest credit history and highest credit limits that can be used anywhere.

Problem 2 – High Balances On Multiple Credit Cards
If you have high balances on multiple credit cards, it can be difficult to pay the minimum balances of each one and keep track of how you are paying each one down.  If possible, you should transfer the balances of the credit cards to a single credit account so that you only have a single payment to keep track of each month and you can easily see the progress that is being made for paying off the balance.  Many credit card companies are still offering a 0% or very low interest rate on balance transfers, so transferring the balances to a single card may save you money in interest payments as well.

Problem 3 – Reduction In Credit Limit
Because of the credit crunch, many credit card companies are reducing the limits on some of their high credit limit cards.  This often occurs without much warning to the consumer and can have a negative effect on many areas of the person’s life, including decreased purchasing power and lower credit scores as credit rating agencies notice that you are using a higher percentage of your available credit.  The only solution to this problem is to attempt to pay down the credit card to less than 50% of the amount of credit available so that your credit score will return to its higher level and the interest rates on any other loan products that you own will not rise due to a lower credit score.

Problem 4 – High Interest Rate On Credit Card Balance
If you have a credit card that has a high interest rate, you may want to consider transferring the balance of that credit card to a credit card with a lower interest rate.  Another credit card that you currently own may be offering a deal on the interest rates for balance transfers or you may choose to get a new credit card, as many credit card companies are still offering attractive interest rates for new balance transfers.  If you are able to lower the interest rate that you are paying on your high balances by 5% or more, you will be saving hundreds of dollars on the interest payments of the balance.