Is Going Into Debt Ever Worth It?

Is Going Into Debt Ever Worth It?

Debt has become such a dirty word these days, and in many cases, there is a good reason for that. Americans are saddled with unheard of amounts of debt and the problem is not just going to go away. In some cases, debt is absolutely necessary, while in others, it is beneficial. The key is knowing which kinds of debt to avoid, and which ones to focus on. Let’s take a look at some scenarios of taking on debt, and whether or not it would be worth it.

Scenario #1

“Stuff” You’ve just bought a new house or moved into a new apartment. It’s looking a little bare around the edges and you feel the need to start nesting and making the place look nice. You don’t have a lot of money to spend on new furniture, appliances or electronics, but you really want to have some new stuff. If you’re sitting on the floor, you may even need new stuff.

So, you head off to ye olde furniture mart and stock up on everything you’ve ever dreamt of owning for your home. You use the store’s “no interest for twelve months” plan and immediately stop worrying about how you’re going to pay that off. Soon, those payments start to stack up and at the end of those twelve months, you get slapped with a really high rate that puts you into debt even further.

This is a prime example of how going into debt like this is not worth it. While we all need furniture, we don’t necessarily need the best or the most expensive models. You can get an awesome couch by trolling through classifieds and spending less than $200. The same is true for appliances and electronics. Never fall prey to those “no interest” deals, they will only end up hurting you in the end.

Scenario #2

Investments. Now let’s look at a little different scenario. In this case, you have an opportunity to get a fantastic deal on a house that is used as a rental property. The tenant has signed a long term lease and maintenance costs are minimal. You don’t have enough in the bank to buy the house outright, so you consider getting a mortgage for the property.

Your mortgage will cost $550 per month, but the tenant is paying $850 a month in rent. That means that even though you are going into debt on that property, you’ll actually be making $300 extra a month as a result. This is a prime example of how going into debt can actually do you a favor. The key is understanding the basic concept of good versus bad debt. Good debt is an investment that will return you with an income, while bad debt is typically something that is going to depreciate and end up costing more money over the long term. Keep these principles in mind when you’re considering buying a property, or even new furniture. They’ll help keep everything in the proper perspective.

How to Work Less and Make More Money With Multiple Streams of Income

How to Work Less and Make More Money With Multiple Streams of Income

Most of us would like the chance to spend more time with our families, work a lot less and still bring in a sizeable income. If you’re only going to rely on your current income, the chances of that happening are pretty small, unless you’ve got an incredible job. However, there are ways that you can achieve this dream and they’re a lot easier than you might think. You’re about to learn how to work smarter and less and still make more money than you are right now.

The key to working less is having more than one stream of income coming into your pocket every month. This is a sound principle for many different reasons. First, you’re reducing your risks by not having to rely on your main source of income to pay your bills and keep living well. You can spread that risk around and if you do lose your job, you’ll have the resources on hand to keep paying your bills until you can find a new one.

Another benefit of having multiple streams of income is that you can eventually phase out your full-time job, if you’re making the right investments, and start working part-time. The old adage that two part-time jobs make one full-time job is certainly true here. By creating another stream of steady income that you can rely on, you can eventually scale back your current hours until you’re working only part-time. If you’ve got some really great streams of income coming in, you may even be able to quit that full-time job and focus on these streams instead.

Ok, so we understand how multiple streams of income can make your life easier, but how do you get started? You’ll need to take a small amount of risk here if you want to get to the point of being able to spend less time at work, but it is well worth it. It is best to try to reduce these risks when you’re first getting started so that you don’t jeopardize your finances, but with smart choices, it’s easy to pick a great income stream.

Some of the most common forms of creating multiple streams of income are actually the most simple. Let’s say that you have a knack for fixing cars. During the day, you’re a buttoned-down corporate worker, but on the weekends, you’re a car fixing fool. Start taking on outside work during those weekends and boom – you’ve got your first income stream coming in. As word of mouth travels, you’ll get more business and it will most likely pay better than your current job. Other streams of income include investing in P2P lending, other business opportunities, or even stocks and bonds that have a steady rate of return. The main goal of using multiple income streams to work less is to stop treading water at your job and start doing what you love while you’re getting paid for it. With the right amount of dedication, you should be able to go part-time or even quit your old job.

Don’t Close These Credit Cards

Don’t Close These Credit Cards

A lot of people tend to close out their credit card accounts if they get too far into debt with their creditors. Apparently they have some kind of notion that this will make the debt go away when this could not be further from the truth. Not only is this completely wrong, but the closing out of a credit card in delinquency hurts your credit badly.

Here is a look at five credit cards that you shouldn’t ever close.

  1. You should absolutely never close a credit card that still maintains a balance. When you close out any credit card that carried a balance, your total available amount of credit is going to drop down to $0, but carrying a balance on a credit card without a limit looks like you maxed out that credit card and that looks bad on your credit reports.
  2. You should absolutely never close the only credit card you have that has available credit on it. Closing out a card that has available credit on it is going to decrease your total amount of available credit, increasing your credit utilization numbers which is a situation that is simply not desirable in any way, shape or form.
  3. You should absolutely never close the only credit card that you have. Because a part of your credit score has to do with what different types of credit you are utilizing, you are going to want to have at least one credit card at all times. You do not want to be turned down for credit in the future simply because your creditor doesn’t think you have enough credit card experience, do you?
  4. You should absolutely never close the oldest credit card account on your credit report. Closing out an old credit card is going to significantly shorten your credit history. Tenders do not like borrowers that have shorter credit histories because they are perceived to be riskier in comparison to the borrowers that have much longer credit histories. When you close out an older credit card, your score may not be impacted immediately but in the future it certainly will.
  5. You should absolutely never close the credit card that has the best terms. Why should you let a good thing go away? If you have a credit card possessing a good interest rate, a lack of an annual fee or some other perks that make it worthwhile, you should absolutely keep it. If you have a credit card with really good terms that charges you less for making your purchases, then this is far better than opting for one that charges you more.
Consumers Need to Exercise Caution as Credit Card Rates Climb

Consumers Need to Exercise Caution as Credit Card Rates Climb

Many consumers are finding that even though they have had the same credit card for years, and have paid the balances off completely every month, their monthly statements are suddenly appearing with a surprise: An interest rate hike by as much as three percentage points.

Some consumers are not worried about these interest rate hikes because they pay their credit cards off completely every month, but because this experience is not unusual by any means, some consumers are beginning to worry. Right now it seems as if numerous banks are beginning to boost the credit rates for consumers of all types, not only consumers that have poor credit or late payments. Customers that have an excellent repayment history and excellent credit are experiencing the same boosts in their interest rates as customers with less than perfect credit. Lenders are blaming increases like these on the higher fund costs, and climbing numbers of defaults that are occurring. Consumer advocates are saying that banks are looking for any possible way to recoup their past losses, and before new rules limit the interest rates and fees that they can charge, they are trying to increase everyone’s interest rate at least a little.

Luckily, there are still options for credit customers that play by the rules. Interest rates may creep even without you realizing it, so the first step is simply going to be to keep an eye on your statements, making sure that nothing is out of the order. Credit card companies like to gradually increase your rate over time, but they may also hit you with a big interest rate hike if you are late in repaying your bill or keep your balance run up too high over time. Although this is an industry-wide trend, there is still something that you can do. While banks say that they have no choice but to raise their interest rates, most good credit customers can try to negotiate lower rates with their credit card companies.

Interest rates only really affect those who carry a credit card balance from month to month, so if you cannot negotiate a lower rate, what you can do is keep your credit card balances low to eliminate the worry associated with high interest rates. Unfortunately, many Americans do carry revolving debt, and almost all of this revolving debt is on credit cards. In America alone, there is more than $970 billion dollars in revolving debt, according to the Federal Reserve. More than 60 percent of all Americans have some form of credit card debt, and the average person has around $7,200 in debt according to a recent study conducted by the financial company Charles Schwab. Above all else, keep in mind that your credit card company needs to notify you if they intend to raise your interest rate, so you have some time to accept the change before it goes into effect in most circumstances.

Money Saving Tips for Financial Security: Reduced Spending, Investing and Fiscal Management in a Bad Economy

Money Saving Tips for Financial Security: Reduced Spending, Investing and Fiscal Management in a Bad Economy

It is possible to ensure financial stability, by following some simple money-saving, investing tips. Identifying and eliminating non-essential expenditure, redirecting unspent money to savings accounts, frugal living, staying within a budget, comparison shopping for essentials are some ways to make peace with one’s financial situation.

How to Cut Spending and Boost Savings

  • Recurring expenditures that seem non-essential, like a gym membership, an extra phone line, and high-end cable channels are the easiest places to begin to cut spending.
  • The use of coupons to shop for groceries and buying seasonal produce can reduce monthly expenditure.
  • Finding a carpool partner is one way to save on gas.
  • For those seeking an aggressive savings plan, having a portion of income sent automatically to a savings or investment account is a good option.
  • Have the remaining money that’s meant for spending sent to two checking accounts. One of the checking accounts is for paying bills. The other checking account is for day-to-day expenditure. Have a self-imposed limit to withdrawing money from day-to-day expenditure account to control spending.

The New Emergency Fund Rule- How to Have a Bigger Cash Cushion in case of Job Loss

The new rule to emergency funds in a bad economy is six months of expenditure, and as much as 12 months’ expenditure if kids are involved or if there is only one income. A bigger safety net is needed because, according to the Bureau of Labor Statistics, the average length of unemployment has risen from 4.5 months in 2016 to 6 months in 2017. The emergency fund can be kept in a high yield savings account and a short-term bond index fund.

If its hard to save money to throw into an emergency fund, consider temporarily redirecting 401(k) contributions that are made over the company’s match. If there is sufficient equity in the home, a home-equity line of credit could be a backup plan.

How to Streamline Finances for Easy Management

  • Consolidate bank accounts to one institution.
  • Rollover old 401(k)s into one IRA
  • Keep only two credit cards in the wallet
  • Choose to pay bills online
  • Sign up for banking alerts to signal that payments are due so penalties can be avoided.

Being smart about spending and saving can make the difference between enjoying financial freedom and experiencing a life-long debt situation. Simple, everyday choices of frugal living, informed investing and fiscal awareness could help lead a life of mental peace and material prosperity.