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Friday November 24th 2017

Put a Leash on It! Top Five Tips for Controlling Your Debt

Americans are facing an unprecedented level of debt. From credit cards to second mortgages, the majority of the country is in over its head. Here are five ways to get a handle on your debt and keep it under control.

Understand Good Debt vs. Bad Debt

There is such a thing as good debt. Investing in a mortgage or purchasing a car are ways that you can increase your credit rating and purchase expensive items that you need. Make sure you research the best rate options before you sign on for a large loan. Bad debt that should be avoided is usually in the form of high interest rates from credit cards. Try to pay for daily items with cash, and never buy anything with a credit card that you won’t be able to pay for by the end of the month.

Organize Spending Habits

Have a plan for your money. All of those small items that you pick up during the week are inexpensive one at a time, but they add up quickly. Make a realistic budget that includes all of the things you expect to purchase on a regular basis – including that danish with your coffee on Friday mornings.

Always Pay More than the Minimum

If you are carrying a revolving balance on your credit cards, always pay more than the minimum every month. Usually the minimum will only cover your interest payment on the balance. In order to make some headway into the principle balance, you will need to pay more than the minimum requirement.

Be Ready for Emergencies

It is important to be prepared for unexpected emergencies. Most financial planners recommend that you keep a savings account that is large enough to cover your expenses for three months. This safety net will provide you with the money you need in an emergency without having to resort to credit cards or other financial pitfalls.

Pay Debt Down in the Proper Order

How you pay your debt off is important. Begin by paying off the loans or credit cards that have the highest interest rate. Your debt will drop much faster as you reduce the balances on those loans because the interest that you are paying will be reduced right away. A good strategy is to make larger payments on one high interest loan and at least the minimum on your other loans. As you pay one off, you can start on the next one in the list.


Should You Pay Off Your Student Loans Early?

Should you pay off your student loans early? Absolutely! Paying off your student loans as soon as you possibly can is the best thing you can possibly do with your money. Tons of people graduate from college with thousands of dollars worth of student loans and completely forget or neglect to pay the money back once they are out college. This is one of the worst mistakes you can make. There are a number of reasons to pay your loans off as soon as possible.

Better Credit

First of all, paying your student loan as soon as you can will lower your debt to income ratio. This will allow you to have more money when you start to make important financial decisions later on down the road. Having a good debt to income ratio will allow you to afford a nicer house, car, and other objects you may desire. You may even be able to take the extra money afforded to you and invest it in order to start making even more money. Bottom line, the financial position you will be in later will be well worth the money you pay now.

Interest Savings

The longer you wait to pay your loans the more your loans will cost. Each month you don’t pay is more interest being added to the previous interest your loans have accumulated. The longer you wait to pay the more interest you will have to pay. The sooner you pay your loans the less you will pay altogether which could potentially save yourself thousands of dollars.

You’ve Got to Do it Sooner or Later Anyway

You cannot escape your student loans. You still have to pay your student loans even if you declare bankruptcy. Should your finances tank you will still have to climb back up with your student loans weighing you down. Paying your student loans early will allow you to deal with a financial crisis easier.

Most people start out with student loans as their only source of debt. Why not start your debt free life sooner than later by paying off your only source of debt as quickly as possible? You have nothing to lose and everything to gain from paying your loans right away.

Even if you can only pay off a portion of your loans you will still benefit more than not. Getting your finances in order as quickly as possible should always be your number one priority.


Step-by-Step Guide to Lower Credit Card Interest Rates

Credit card companies compete with each other using their individual interest rates. The following is a method in which you can use a credit card company’s competitive mindset to lower your credit card interest rates.

Getting the Best Rate

Credit card companies are in the business of making money. If they could charge you a hundred percent interest rate they would. However, credit card companies are constantly competing with each other for customers on a daily basis. No one would use a credit card that charged a hundred percent interest, thus a credit card company with a hundred percent interest rate would become bankrupt in a matter of days. Just how much you do pay can depend on how far you’re willing to go to get the best rate.

Gather Your Information and Start Calling

First off you need to get your credit card statements together and call the customer service number that is list on your credit card statement. This will call will take a while and probably try your patience but it could save your hundreds of dollars in the future so stick with it. Go through the recording and push the necessary numbers until you get a hold of one of your credit card company’s representatives.

Negotiating a Better Rate

Now that you have an actual person on the phone you can start step two. Simply ask the representative to lower your credit card’s interest rate. Make sure you point out that you constantly pay your bill on time. If you make a lot of late payments you may be unable to lower your interest rate at all.

Be Nice

It is absolutely essential that you keep a polite tone. You are trying to get the credit card company to do you a favor; people do not do favors for people that show hostility towards them. Stay polite and the customer service representative will be more willing to help you out however he or she can.

Be Persistent

If your credit card company can’t lower your rate then request detailed information on why they aren’t willing to lower your interest rate and how you can qualify for a lower rate in the future. You may need to simply wait a few months before calling again. It is actually a good idea to call every few months whether they approve a lower interest rate or not. You want to get as close to zero percent as possible.

Lastly, pay your bill in full each month. If you pay your bill in full you make sure your credit card company doesn’t have a reason to increase your interest rate. The longer you pay your bill in full each month without any troubles the more of a reason your credit card company will have to lower your interest rate next time you call.

Politeness and manners are the keys to lowering your credit card interest rates. Those who ask nicely and frequently are more likely to receive lower credit card interest rates than those who demand and never ask. One phone call could save you hundreds of dollars each year


Dividend Investing versus High-Yield Savings

Dividend investing is one of the easiest ways to build long-term wealth. When companies pay out dividends, they are essentially sharing the profits they have earned with shareholders. Investors, especially those who are interested in income investing, tend to favor companies that pay high dividends. But stocks can be risky and some prefer to put their money into High-Yield Savings. Which is right for you?

What is Dividend Investing?

Dividend investing is the process of taking the dividend payments received from the company you own shares of and using them to buy more shares of the company’s stock. One way of automating this process is to enroll in a Dividend Reinvestment Plan (DRIP). A Dividend Reinvestment Plan is a plan in which shareholders have cash dividends automatically reinvested into additional shares of the firm’s common stock.

What is High-Yield Savings?

As the economy struggles through a recession, more people are looking to place their money in savings accounts. A high-yield savings account is an account opened at a bank or credit union that yields a higher than average rate of interest.

As the name suggest, these accounts have a higher Annual Percentage Yield (APY) than regular savings accounts. The advantages of having a high-yield savings account is that your money is highly liquid, it is FDIC insured, and you can get started with a low minimum balance in most cases. Depending on the bank, some accounts may come with other perks.

Rates of Return

The rate of return on dividend investing varies depending on the stock. It is common for dividend investors to only invest in a company’s stock that has a dividend yield of at least 4%. The yield of 4% gives investors the assurance that they will earn more than the average rate of inflation. Investors want to make sure they maintain purchasing power.

The Federal Reserve is keeping target interest rates low, which means that the yield on savings accounts are relatively low as well. Currently, there are some community banks that are offering interest rates as high as 5%. Investors that earn rates this high will be able to accumulate great wealth over the long-term. This yield is not very common. Most banks are offering interest rates of 1.5% to 3% on high-yield savings accounts.

Risks

There are also unique risks associated with dividend investing. A dividend stock still has some of the same risk as non-dividend stocks. Companies can experience periods where they are not earning profits, and therefore are not paying dividends.

High-yield savings accounts are FDIC insured, which means that they have zero principle risk. However, there is an inflation risk that is associated with high-yield savings accounts. When the inflation rate, which is usually around 3%, is higher than the yield you are receiving from the savings account, you lose purchasing power. Dividend investing also has inflation risk. The dividend return can be less than the inflation rate as well.

Tax Implications

There are specific tax implications related to dividend investing. Dividend payments are taxed as capital gains and not ordinary income. The current capital gain tax rate is 15% for those in the 25% of higher tax bracket. It is 0% for individuals who are in a lower tax bracket than 25%.

When considering taxes, dividend investing has an advantage over high-yield savings accounts. The interest earned from high-yield savings accounts are treated as ordinary income and taxed at your ordinary federal income tax rate.

Dividend investing and high-yield savings accounts both have their advantages and disadvantages. As with all investments, it is important to research them thoroughly. Investors typically choose investments that offer them the highest possible returns for their risk preferences


Mortgage Basics: Terms You Should Understand

When you apply for your first mortgage, you’ll hear many new terms that can be confusing. Don’t assume you understand what mortgage terms mean. Take the time to educate yourself so you know what  you’re getting into. Before you ever see the mortgage contract, you’ll be discussing certain terms with the lender.

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