Personal Finance

There is a lack of financial and investment education in our schools, among the many things not taught. If you are a high school graduate that doesn’t know much about finance, except how to write a check and balance your check book, investing or saving for retirement is probably something you haven?t given much thought to. So here is some advice:

Eliminate Debt

To best eliminate debt, calculate and make a list what you are spending on each debt payment and who you have it with. Make a commit to that amount by permanently adding it to your budget. This part of your budget, I like to call debt payoff money, cannot change until you pay off all of your debt for this method to work best.

If you have any money left over, get a raise or are rewarded a bonus, add it to this budget item. Do not go out and blow it. The most important factor to eliminating debt is to not add to it making purchases you really do not need. That’s how you got yourself in debt. If you can’t pay for it cash, you don’t need it.

Take a look at and put each debt into one of the following categories, listed in order of priority: high interest debt, non-tax deductible debt, tax write-off debt, and mortgage.

High interest debts are your credit cards or high interest loans. These should be paid off first. Consider of changing to a rewards card like the chase flexible rewards card. Once this debt is eliminated, take the money you were paying on your cards and loan and add it to payments next on the list to be eliminated.

Non-tax deductible debts are lines of credit, bank or car loans. Because you are adding the money you used to pay on your cards to these payments, you will pay this debt off much earlier.

Again, after you pay off your loans, take the money used on your cards and loans and put towards your student loan or other tax deductible debt and erase this debt.

You are almost debt free. Your mortgage is the last debt you want to apply your debt pay-off money to. You are going to be making extra payments with all the money you have freed up by eliminating your other debt. You are not simply paying interest on your mortgage; any extra money you pay on your mortgage goes directly towards the principal. Let’s say you have a $100,000, 30 year mortgage with a 7.5% annual interest rate.

You have been making your regular payments for 5 years. Now you decide to send in your extra $250 each month. You have reduced your mortgage by approximately 12 years. That is 12 years earlier you will own your home, not the bank. To find out when you will pay off your mortgage, use a mortgage pay-off calculator found on-line. The excitement over how many years you will be debt free will give you the motivation to stick to this plan.

10% Rule

Do not start investing before you eliminate your debt. First and foremost is the importance of becoming debt free. This is an exception, one of the oldest investment rules, is to put aside 10% of each paycheck and investing it. This isn’t going to really mess up your monthly budget and something anyone can start easily. By investing a percentage of your income, instead of a random amount, will motivate you to be consistent. If your pay fluctuates, so will the 10% amount you are putting away. So, go ahead and start build retirement fund.

Be Realistic

Common sense tells us packing a lunch instead of eating out is going to save you money. Going to the movies with your family every Friday night is obviously going to cost you. Going to the Expensive O’Latte Cafe every morning instead of brewing your coffee at home is a sure budget leak. The question is why do we do these things? We have become comfortable. Everything is automatic or drive-thru or my favorite, “I just had to.” Did someone come up to you and put a gun to your head and say, “You have to buy a newer car that thing you’ve been driving around for two years is a piece of junk.” I highly doubt that happened.

Any car purchase, whether it is new or used is not an asset or an investment. The minute you drive off the lot in your new car its value automatically depreciates. Newer cars carry higher insurance rates. Buying new is just not a wise decision. Used cars depreciate too but the huge loss felt with a new one is not there. The rate of depreciate is much lower. Take car of your car, get regular oil and filter changes, get a tune up and run it into the ground. After that, buy another used car and do the same thing.

Bonuses and Raises

This is so frustrating to watch. People who get a raise or a bonus and spend it on something, that at best could be described as dumb, drive me crazy. Invest your 2% raise by adding the amount to your 10% you are already investing. Take your bonus and put it in an emergency fund savings account. You lived with before your raise or bonus, why do you long to spend it now? Don’t be stupid.

Now what?

Keep doing what you are doing and better if you can. The temptation to buy what you cannot afford will never go away. Over time you will also refine your ability to distinguish a want from a need, which will help you financially and prevent new debts. Keep up with new investment strategies, study up on how they work and what their returns are, and don’t be foolish.

Tags: personal finance investing, credit, personal finance news

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It is very common for people to search for a personal loan these days. In fact, you will have a lot of choices when you are doing that. Yet you will still want to get better repayment terms when you are searching for the loans.

One thing you have to know is that you may need to spend a lot of time when you are searching for the loan. This is because there are a lot of lenders and they will have different offers to you. You have to compare these offers before you get the loan. To this end you would like to find some ways to save your time. You will need to search for your loan online if you would like to save some time.

It is very true that you may be able to get better offers online. One of the reasons for this is that financially it is a lot easier for a lender to run the business online. They do not need to spend the money to rent an office in some expensive areas and this will save them a lot of money. They will in turn provide better terms and services in order to attract more customers.

Besides low interest rate, you may even get some more offers. For example, some online lenders may offer cash rebates if your loan is approved. There are even some lenders which may offer zero interest plan if you can pay off the loan within a certain short period. Of course you will still be subject to some service charge in this case.

The special offers provided by the lenders can be very attractive. However, you do not make your decision based on these offers. You should mainly focus on the interest rate. The other offers should only be treated as bonus. Otherwise you will only pay more than the amount you should pay.

In the past, it may need to take you a few days in order to get the loan approved. You may have spent two to three days in order to approach different lenders or credit unions. However, the situation will be totally different if you are trying to apply for the loan online. You can get the loan approved within minutes!

Although it is easier to get a loan online, the lender will still consider your credit ratings before they decide to lend you the money. You will expect a longer time if you have a relatively poor credit score.

You have to remember that it is only one of your options to apply for your loan online. You can of course go back to the idea of searching for the loan from a traditional lender. In fact, you should compare the terms and interest rates before you make the final decision!

Tags: personal finance news, loans, personal finance software

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