National Debt Relief - BBB Accredited Business - Get Relief From Unsecured Credit Card Debt, Medical Bills And Student Loans

8 Signs That You Need To Implement Financial Management

checklistFinancial management is a critical part of growing up. It dictates how well you are able to handle income and dispense the same for payments on your expenses and other loans. It restricts your purchases and tells you what is important and what can wait. It tells you as well what you can do to increase your income to meet financial targets. Financial management can also be a potent tool against debt.

This is important to share when there are about 20 million college students on an average at any given year according to Asa.org. That is a lot of college seniors entering the workforce where they will be earning on their own and experiencing life in full blast. The walls of their colleges and universities has now grown bigger to accommodate a lot more responsibilities. On top of these is developing financial management in running their money.

It starts with a desire to get their finances in order. There are still  a good number of Americans who are not able to balance a checkbook. The 410 (k) retirement fund, investments and emergency funds are alien to them. These are some of the foundations of financial management and college graduates and even some seasoned professionals needs to understand this to survive financially.

8 signs that you should start working on money management skills

As you go through life, there are pit stops where you need to make decisions and add some financial tools in your arsenal. Some of these can start as early as when you get your first job and for others, it could be as late as a few years before retirement. Whenever it happens, you should be able to discern these signs and know that it is time to work on your financial management skills.

When you start earning your own money

As soon as you leave university, the first order of business is not a vacation with your friends or a cruise with your partner. It should be to look for a job because your expenses and loan payments will not wait for your to finish a good time. If you have student loans, six months is a short time for a grace period and you need to start making payments after. Getting a place to stay, applying for utilities and others will require you to have a steady income.

When you get a job, income will not be too far behind. And when you start earning your own money, it is a clear sign that you need to implement proper financial management. This will put order in your finances and ensure that your monthly salary will not only last you until the next paycheck but will actually provide financial security for you in the long run.

When you already have a bank account

Forbes.com shared that there are about 7.7% of American households who still do not have their own bank account. That is approximately 1 in every 13 American families. There are mixed sentiments on how the banking system helps consumers but it cannot be denied that it is one of the safer ways to keep money and allow it to grow. When you open your own bank account, it is another step up  that needs proper management of your finances.

When you are saving for a goal (e.g. retirement, etc)

Having financial targets is another clear sign that it is high time for financial management skills. These can be in the form of emergency funds or retirement funds. In fact, there is only about 18% of Americans who are confident that they have enough funds for retirement according to Statisticbrain.com. Having financial goals is also a clear sign of financial maturity as you are already planning ahead and not just for the moment.

Here is a video explaining how saving for retirement might need to be done until 68 years old:

When you are responsible for paying monthly bills

Being able to pay for utilities such as water, electricity, phone, internet, and cable is another benchmark on the need to implement financial management. You need to be able to juggle your income with your expenses to avoid coming out short at the end of the month.

When you have started taking on credit

Taking on credit is another sign of financial maturity. Adding expenses on your card or taking out a payday loan to fix some part of the house needs proper management of finances. Without it, you might just end up in a store sale using up the loan you took out for another unnecessary expense.

When you start monitoring your credit

Monitoring your credit comes from the need to understand where you are putting your hard earned money. What items are you buying and where you can cut down on expenses. Financial management will help immensely at this point because it can provide a clear direction on how you can proceed after monitoring your credit.

When you  have started investing

Investment is a by-product of forward thinking and once you start delving into the world of investments, you will need financial management to guide you through your options. In fact, investing is one key to financial independence. It can help you plan for your future and hopefully retire at the time when you want to, not when you need to.

When you start paying your taxes

Making tax payments is a sign that you are already earning your own money. This calls for the need for financial management not only to monitor your income but to check as well if you are remitting the right amount for your taxes. Tax refund is a great surprise at the end of the year but it actually stems from wrong tax calculation. That would have been money you could have used for investment at the early part of the year. Instead of just giving the government an interest-free money, it could have earned a few dollars somewhere else.

4 important concepts of financial management

Financial management has four key pillars that consumers need to understand. It is beneficial to know these points in order to practice proper management of your finances.

  • Budgeting. Income has to be treated as the output of your hard work. You should put importance on how you use it and this is where budgeting comes in. Understand the important expenses and forego those that you can live without.
  • Saving. At this day and age, not a lot of people has an excuse not to save. Even technology has made saving easier. This is an important aspect of financial management because it allows the consumer to have funds for future use.
  • Smart spending. Similar to budgeting, spending smartly allows you to weed out your needs from your wants. It helps you identify and prioritize the important spending items in your budget.
  • Credit monitoring. It is important to be on top of your finances and monitoring your usage of credit can give you a great overview of your habits. Where you spend too much and where you can make improvements are just some of the advantages of checking your credit spending.

Financial management is an important tool in putting sense in your finances. Some people say that it is not how much you earn but how well you use what you have. This is where proper management of your finance kicks in. As long as you see the signs along the way, financial management can guide and steer you in the right direction.

10 Things Your Parents Didn’t Tell You About Personal Finances

Girl looking worriedIf you were fortunate your parents sat you down at some point and you had “the talk.” No, not the talk about sex. The talk about personal finances. Or maybe you were like me and your parents never discussed money with you. I guess mine thought I’d either figure it out on my own or just sort of pick it up by osmosis. In any event I finally did learn the important lessons about personal finances but in some cases it was definitely the hard way – like the time my wife and I decided to have a home custom built for us when we hardly knew what a mortgage was.
Even if your father or mother did have “the talk” with you, the odds are that there were some things they neglected to tell you that are important and here are 10 of them.

1. Being in debt is like indentured servitude

If you’re not familiar with the term indentured servitude the online encyclopedia Wikipedia defines it as, “a voluntary labor system whereby young people paid for their passage to the New World by working for an employer for a certain number of years”. The reason why debt is like this is because basically what you’re doing is sacrificing future earnings (working for a credit card company) in exchange for instant gratification (passage to the new world). How do you avoid going into debt? It’s pretty simple. If you have a credit card make sure you pay off your balance on time every month. Ditto store charge cards, and an auto loan – if you have one. I understand that it takes a certain amount of self-discipline to do this but it will pay off in the years ahead when you’re not sending 20% or 30% of your hard earned income off to a credit card company or companies.

2. If you need to ask your boss for a raise, you need a new employer

Assuming that you come to work every day on time and are good at your job you should earn a raise without having to ask for one. If you work for a corporation you probably get an annual review accompanied by a raise of some kind. If not, you’ll be at the mercy of your employer. But, again, if you’re doing a good job you should earn a raise without having to beg for one. And if you do have to beg for one, you might want to think about finding a new employer.

3. You can’t manage your money if you don’t track your income and outgo

The cornerstone of good money management is to know how much you earn and where your money’s going. Most of us do know how much we earn but if you’re not tracking your spending, it’s like playing baseball without keeping score. You may believe you’re ahead but you could actually be falling further and further in debt. There are a number of smart phone apps available today that make tracking spending drop-dead simple. Alternately, you could just use a pen and a notepad. But whichever method you choose it’s important to note all of your expenditures right down to the penny. Add them up at the end of the month and you’ll then know whether you’re winning or losing. If you find that you are losing – or spending more than you earn – you will need to find areas where you could cut costs.

If you would like more information about tracking spending here,  courtesy of National Debt Relief, is a video  that reveals three ways to do this.

4. Only suckers play the lottery

If you’re carrying a boatload of debt don’t think that playing the lottery is your way out. A very smart person once said, “Lotteries are for the mathematically challenged.” We have radio commercials for our state’s lottery that generally ends with words like, “chances of winning the Powerball lottery are one in 25.4 million”. You have a better chance of getting struck by lightning than winning a one of those lotteries.

5. Shun those credit card “convenience” checks

“Convenience” checks are those that you receive periodically from your credit card company or companies. They might seem like a convenient way to get cash but the interest rate on these things are often anything but convenient. Convenience checks usually come with a fee of 3% or 4% of the amount you’re borrowing, plus a very high interest rate. Most credit card companies charge the same interest rate on a convenience check as cash advances. This means the interest on a convenience check could be twice that of purchases.

6. A spreadsheet can help even the most disorganized

Even if you’re a very disorganized or scattered brained person a spreadsheet could help you successfully manage your personal finances. You could use one to track your spending, create and stick to a budget and help you pay off your debts. If you don’t have a spreadsheet program such as Excel, there are free ones available through OpenOffice.org, Google Docs, Kingsoft and a number of other sources. While it may take you 30 minutes or an hour to set up a spreadsheet once you’ve done this it probably won’t require more than a few minutes a week to keep your personal finances under control.

7. Patience is a huge virtue when it comes to saving money

You’ve undoubtedly heard the old story about the tortoise and the hare. When it comes to saving money, the tortoise is clearly the winner and by a wide margin. This is due to compounding interest. You could put as little as $50 a month in a savings account and end up with several hundreds of thousands of dollars. If you’re not familiar with compounding interest it’s basically where you earn interest on interest. For example, if you put that $50 into a savings account that pays 2% annually, you would have $612 at the end of the year and $1236 at the end of year two – or your $612 plus $600 plus 2%.

8. Money won’t buy happiness

A friend of mine used to say that while money won’t buy happiness it will rent a bunch of fun until happiness comes along. But that, of course, isn’t really true either. Real happiness doesn’t come from having enough money to buy a bunch of stuff. Nirvana comes from financial freedom. You might think that the guy that drives an almost new Lexus is better off then your friend who drives an old beater but this is often not the case. The guy in the Lexus may be up to his belly button in debt while the friend in the old beater has more than $100,000 in his 401(k). If you live prudently and save a good portion of your income the day will come when “no man will be your master” and you will be financially free, which is true happiness.

9. Not everyone needs a budget

We don’t know of a single financial guru that doesn’t preach the importance of having a budget. But the truth is that not everyone needs one. Some people just instinctually know how much they’re spending versus their income and how to keep the former from getting ahead of the latter. You may also not need a budget if your finances are relatively simple.

10. Frugality is not the be-all and end-all

You may have read some of the many articles regarding the importance of living frugally. Of course, living frugal is never a bad idea. However, frugality has its limits. You could cut your spending to the very bone and still not have enough money to create an emergency savings account or to invest. The best answer sometimes is finding ways to earn more money. For example, this might be harsh but you could get a second job. Our economy is mostly back to what it was before the Great Recession and there are many companies now hiring part-time employees. These jobs generally don’t pay much – usually nine dollars or $10 an hour – but 20 hours a week could go a long ways towards funding your savings account or making investments.

6 Common Causes of Credit Card Debt

Multiple credit cards in one handCharging purchases on a credit card has steadily been the most preferred payment  method of consumers lately. About 1.5 billion credit cards in the country are helping fuel this way of life. According to Statisticbrain.com, there are about 176.8 million consumers who has a credit card in their wallet where the average card ownership per person is 3.5. This goes to show the dependency of the US market in credit card purchases.

The expense item is still in the top four debt item in the country. It is in the league of mortgage loans, student loans, and auto loans. In a consumer driven economy, credit cards play a vital role not only in the private lives of its users but the whole economy as well. It increases the purchasing power of the consumer and extends credit for an otherwise impossible purchase.

But there are a few people that despise credit cards because of all the financial trouble they are in at the moment. Some of them were not aware of the impact of credit cards in the credit score, how late charges worked and other details that dragged them down in debt and interest payments. Though there are those that are able to live off a credit card but still manage to maintain their finances in check .

Common Credit Card Problems

It is important to note that any unfavorable details in your credit score might take approximately seven years to repair. This is in stark contrast with how a consumer can do damage on the credit score in a matter of days or weeks. What is easily put on the report will be a very hard and long battle to recover from.

In most cases, the problem lies with the user and not the card. The consumer gets in all sorts of predicament because the usage of the card was not properly observed. Here are some of the top reasons why a person could walk right into a debt trap using a credit card.

Credit card ready

Most consumers are not ready. This is one basic flaw in the system where as young as high school students get access to a credit card. When they get to college, they see credit cards as an endless source of cash. They then come home to mom and dad pleading poverty with a tidy amount of credit card bill.

It is not only students because there are also professionals who are not ready for the added financial responsibility but still get their hands on a shiny new plastic. One basic requirement of owning a credit card is a steady income to pay off the purchases. It is impossible to pay for the charged items without a good and steady source of funds. It could be coming  from an allowance, salary from employment or even returns from investment ventures. You would need to understand budgeting as well for this.

More than you can handle

Most of the consumers started with one credit card. But not all of them stop at just one. A lot of people are taking in a lot more and sometimes go way in over their head. Assigning a specific function to each credit card is a great idea but only if you can be financially mature to handle multiple cards. If not, it is better to stick to one card.

Some consumers assign a specific card for groceries, gas and other items. This is a budgeting tool that allows them to see how much each cost item is being used through the credit card bill. This is useful but requires a lot of restraint and discipline. Restraint from using the credit card just because you feel like it and discipline in using the card for specific purposes only.

Debt overcomes income

As you make purchase using a credit card, you do not see actual money exchange hands. This could be one of the reasons why overspending with the card is a common occurrence. Plus the fact that the money being used to pay for the purchase is borrowed and not actual money of the holder makes it all too easy to spend.

Consumers need to keep tabs on their expenses to know if their salary or any other sources of income is enough to meet the payments once the bill arrives. For some, it is the longest few weeks of their livers from the time the purchase was made up to the time the statement arrives. It is important to know how much you can spend in your card and keep a close eye on your credit limit as well.

Payment dispute

A late payment and non-payment are reported to the credit bureaus by the lender. But if there are any dispute on purchases on the card, it is best to talk to your lender at the soonest possible time. This is to get to the bottom of the issue and be able to investigate the incident. At this point, it is best to keep an open line of communication with your creditor and to not hold any payments due as a sign of retaliation for the error.

Major life change

Credit.com points out that major life changes affects the finances as well. Getting married, expecting a baby, moving houses and other big ticket item purchases can have an effect on the personal finance of the consumer even up to their credit cards. It is best to be able to anticipate and plan your budget around the new chapter in your life and make the credit card to your advantage rather than a liability.

Understanding the fine print

It is ideal that a consumer knows the basic details of his or her credit card. The credit limit, payment due date and interest rate are just some of the items that is needed to be remembered by the person. But there are more details about the credit card that a consumer must understand in order to enjoy the benefits to the fullest.

With a card, it is best to understand how the late fees and other finance charges work on your loan. Knowing this can alert you even before buying an off-budget item. It is a great idea to understand how the point system works and if there are any fees related to transfers of balances into or out of the current one.

Credit card use

Consumers are not asked to splurge on clothes shopping everyday or to totally stop purchases with a credit card. There should be a fine line between the two and the consumer must be able to strike the balance between too much and too little. Though there are fast credit score fixes, a consumer must not rely in this possibility to lose track of credit card spending.

Proper money management, keeping a steady income source and managing credit card expenses are some of the prerequisites for properly handling the plastic. It is a tough job but the rewards are great. Staying away from debt is one of the top reasons why people are trying to be more aware of credit card usage. Debt is already an all too common circumstance for most people but the better handling of various credit tools such as a credit card, then debt will be kept at bay.

10 Signs That Your Financial Management Skills Suck!

man looking frustratedDo you want to know how to improve your finances? Well you and a millions of Americans are after the same goal. We all had our finances suffer when the Great Recession hit and it was devastating to watch everything that we have worked so hard to acquire go down the drain.

We all blamed debt for most of our financial suffering. We thought that if we did not have debts, none of us would have gone through so much stress the way we did. While this way of thinking is sound, you need to realize that it is incorrect. Despite the obvious destructive effects of debt, the obvious culprit in our suffering is our own financial management skills. Or at least, the lack of the right skills.

According to a study done by CreditDonkey.com, the average income of Americans is $4,000 a month. Most of that goes to groceries, transportation, insurance, and housing expenses. Only 3% of the disposable income goes to savings and not even everyone can afford that. Low and mid income families usually cannot meet all the expenses so they are forced to pay for any deficit through their cards. The average is usually $58 a day. If you compute that, it amount to $1,740 a month – which is already 40% of the average income of Americans.

The way we spend our money, pay off deficit in our expenses and the little amount that we save is like a ticking time bomb. One glance and you know that there is something wrong with how we manage our money. It does not matter if you can earn more – if your financial management skill suck, then you will always be on the brink of a financial crisis.

10 reasons your money management skills will fail you

There are certain signs that will tell you if your money management skills is leading you to a disaster. You want to go through this list so you can be certain if you need to improve the way you manage your money.

Here are 10 reasons why your financial management skills put you in a compromising position.

  1. You do not have an emergency fund. Let us start with your financial security. One of the indications that you are financially secure is when you have enough money in your emergency fund. If not, then you know that you are in trouble. According to the latest Financial Security Index from Bankrate.com, 26% of the respondents in their survey said that they do not have any emergency fund. 24% has less than 3 months covers, 17% has 3-5 months and 23% has an emergency fund that is worth 6 months and more. If you are not part of the 40% who has an emergency fund worth 3 months or more in expenses, then you need to save more to secure your finances.
  2. You fail to keep track where your money is spent. Another sign that your financial management skills are not ideal is when you do not know where your money is going. Some people blindly pay their bills and daily expenses without really checking if they are able to pay off the priority. Even if you do not end up with a deficit each month, you need to track where your money is being spent. That is how you ensure that it is funding the expenses that matter to you.
  3. You have no idea how much you owe. As scary as this may sound, there are people who have no idea how much debt they have. This is dangerous because in most cases, they realize too late that their debts have grown into an amount that they cannot afford to pay back. Do not let it reach this point and just start monitoring all your credit accounts.
  4. You have a problem differentiating a want from a need. An important skill that you need to learn in financial management, that is admittedly quite tricky, is to distinguish the want from the need. The problem is, we try to justify the wants as a need. But here’s the thing. We want a big house but all we really need is a safe and comfortable home. We want designer jeans and dresses but all we really need are decent clothes. Learn how to prefer the essentials.
  5. You cannot say no. We’ve written an article that discusses how saying no can save you from a financial crisis. There is so much truth to this that  you need to really learn how to say no. That means saying to to your friends, family and even yourself. Helping is good but make sure you are not giving them the easy way out. They have to learn from their mistakes and instead of giving them the quick relief, guide them as they go through the painful process of saying no. In the end, you are not only helping them, you are also protecting your finances from being compromised.
  6. Your expenses are bigger than your income. If your expenses are bigger than your income, then you know that your financial management skills need improvement. Try to lower your expenses by cutting back on those that are not necessary. Live within your means because any purchase in excess of your income is done through credit.
  7. You always spend using your credit cards. Now that we have mentioned credit, let us discuss credit cards. It is not bad to use them but you have to learn how to use them properly so you do not end up in debt. Make sure that when you use it, you have the cash on hand to allow you to pay for it in full at the end of the month.
  8. You only pay the minimum requirement. In connection with the last, if your credit card payments are only based on the minimum requirement, you should know that it is also a sign of bad financial management skills. This payment method will keep you in debt for a very long time. So pay more than the minimum and if you cannot do that, then stop using your credit cards for the meantime until you have paid off your balance.
  9. You compare what you have with others. Another bad habit that could lead to your financial disaster is always comparing what you have with others. Their life is not the same as yours. It may be true that you have the same position and earn the same amount of money but you financial obligations might be different. You see them sporting new cars but that may be because they already have investments in place to help them afford it. Just focus on what you need and not what your neighbors have.
  10. You are not paying attention to your credit report. Lastly, not checking on your credit report is a big mistake for a lot of people. Some have gone through life with no debt or have made wise financial decisions but since they failed to check their credit report, they did not see that they were victims of identity theft. Unknowingly, someone got your details and borrowed huge sums of money under your name. If you fail to spot that in time, you could end up paying for all of that yourself.

5 steps to improve how you manage your finances

If you are guilty of any of these signs, then it is a must that you work on your financial management skills. In case there is a need to improve your habits, here are 5 things that you can do.

  • Improve your financial literacy. First of all, you have to be able to identify the mistakes before you make them. This can only be done if you are aware of what is right and wrong. Improve your financial literacy by reading about personal finances. You can start by visiting Consumer.gov – especially the part about managing your money.
  • Set up financial goals. Once you have educated yourself, set financial goals that will lead you towards a more prosperous financial standing. It can be as simple as growing your money up to $X amount or buying your own home.
  • Create a budget. When you have your goals, you can work on a budget that you will follow each month. This budget plan will not only help you practice financial management, it will also help you setup your finances so you can reach your financial goals.
  • Identify the habits that are sinking your finances. Obviously, you need to stop those bad spending habits in order for you to keep a tight lid on debt. Other habits that you may want to correct includes failing to check your credit report, not saving enough for retirement, etc.
  • Stop acquiring debt and pay off existing credit. Lastly, you want to make sure that any debt that you have will be paid off and you will also stop acquiring unnecessary debt. This will help maximize what limited resources you have each month.

Here is a video from HowCast that teaches how you can avoid credit card debt.

4 Good Financial Habits That Can Go Too Far

woman looking at her credit cardYour financial habits are hands down, the key to improve your financial situation. It does not matter how much income you earn. If you implement the wrong habits because of incorrect financial concepts, then you have no chance of getting out of a bad economic situation.

Some people have grappled with the idea of what habits should and should not be implemented in their personal financial condition. There are so many misconceptions out there that it can be quite confusing to know which should be followed or not.

Take for instance our belief that credit card debt is caused by irresponsible spending. While it is true that your spending can lead you to unmanageable credit card balances, that is not the whole reason why you have credit card debt. According to a study done by Demos.org, there are other factors affecting your credit card spending. Things like your education, insurance coverage and children are part of the reasons why you are currently suffering from credit card debt. You have to understand these things before you can truly and completely be free of your compulsion to spend using your cards.

Just like this misconception, there are also a lot of things that you should know about financial habits. It is not a simple good and bad habit. You have to go deeper than that concept to truly understand what is right and wrong for you. Sure it is easy to say that you should practice only good financial behavior. But you have to know that there are certain habits that although they have good motives, can turn out of be really bad for you.

4 good habits that can ruin your finances

In truth, anything in extreme is never good for you. It is true what they say – too much of a good thing can also be bad for you. That being said, let us discuss 4 financial habits that will not do you good if exaggerated.

Saving too much for the future.

A lot of people might disagree here. In fact, financial experts love to preach this: we need to always think ahead into the future because we owe it to ourselves to have a good retirement. They say that we need to pay ourselves first – meaning we have to make sure that our retired future self will be well provided for. There is some justification to this but remember that you should also let yourself enjoy the present. We need to save but not to the expense of our present life being too miserable. What need do you have for millions of dollars in your retirement if you will only spend it on expensive medical treatments because you exhausted your body trying to earn money to save? Saving can save your life but you need to set a limit. Plan what you need to save up for and cut your present self some slack once in a while.

Cutting back on your unnecessary expenses.

This is another of the financial habits that can really tear consumers apart. Some people believe that cutting back on that latte is imperative if you have a lot of debt to pay for. There are also people who will tell you not to treat yourself to a spa or a massage because that money could go to your savings. If you think about it, these make a lot of sense but here’s what you should consider. Some unnecessary expenses are needed for you to be motivated enough to pursue your financial goals. People may think that the morning latte is a waste of money but if it gets you going in the morning, then indulge yourself. If that is important to you, then buy that unnecessary item. Just make sure that when you do so, it will not make your expenses bigger than your income or it will not put you in debt. But if you have the extra cash to spare without making your savings contributions for the month zero – then give yourself the needed pampering. You do not have to completely let go of these things to find financial happiness. In fact, it might be just what you need to be motivated.

Comparing prices.

We all want to get the best value for our money. However, you do not want to spend forever trying to figure out and compute what product to use. While we do not want to waste our money, you do not want to waste your time either. Take for instance couponing. It is true that this can help you lower your expenses but it is just too tedious and time consuming to do. If you have the option to work longer hours to earn more, wouldn’t you want to spend it earning instead of clipping coupons? Are you really saving if you are too obsessed with saving pennies on each purchase you make?

Forgoing professional services.

DIY – this is another of the financial habits that we are being encouraged to pursue. There are things like debt relief or financial planning that we can do on our own but this is not always applicable for everyone. Again, time is a factor here. But even if you have the time to work on something on your own, make sure that you can do it properly. There are certain tasks that are best left in the hands of  professional because the cost of making a mistake will end up making you spend more that you should. While it is a great idea to do it yourself, make sure that you really have the capabilities to do it correctly.

Learning to balance your present needs with your future goals

We are not saying that these financial habits are bad. We are just saying that they should be done in moderation and with a deep regard for present circumstances. Being wise with your spending and saving more money are great habits to have. However, you have to learn how to balance your present needs with that of your future goals.

There is this article on Forbes.com that discussed how even spending on experiences instead of material things may not make you happy. The article mentioned that if you focus on life experiences, it does not necessarily mean you will be happy with your spending. You have to take into consideration what is valuable to you as a person.

For some people concentrating on buying for the sake of experience could work but for others, it may not. For instance, buying clothes is more of materialism than experientialism. However, if you are in an industry wherein you need to portray your professionalism through your outward appearance then buying clothes is something that you know you have to do.

What we are trying to point out is this. The financial habits that you should pursue may or may not be according to what the majority is doing. Sure saving for retirement is a good idea but if it is keeping you from enjoying your life today, then you need to rethink how you can save for retirement without depriving the present.

All it really takes is to know what is in moderation. Even the good financial habits, when done in extreme can do you more harm than good. Do not be too blinded by your need to succeed financially. First and foremost, understand yourself and your financial personality. Once you have that knowledge firmly in place, you will know what you truly deserve out of your money. After all, it is just a tool to help you thrive in this life. Everything else, the rules, the control, the plan and the implementations are all up to you.

5 Financial Lessons To Learn From Your Dog

smiling girlLearning financial lessons from a dog seems unlikely for some and improbable for most. But what we have lovingly referred to as “man’s best friend” has more to offer. Known for their fierce loyalty and positive disposition, dogs have been a constant companion of people for the longest time.  Dogs have taken many forms of odd jobs over the past few decades. From being a hunter’s companion to being a house pet. There are those that are assisting physically-disabled people to be mobile. Dogs are even known to be a great addition to the police force and even as a great companion for people in the hospital.

But there are more to a dog that just their companionship. They have been gifted with extraordinary characteristics that being able to learn some financial lessons just by mere observation is a constant reminder that they are more than just house pets that people call on every once in a while. They have more to offer than their kisses and cuddles. There are financial lessons that can be learned from TV programs so it is not that far fetched that there are financial lessons from dogs as well.

Financial lessons from a dog

It would be impossible to talk to any living person at this moment who hasn’t seen a dog. In fact, Statisticbrain.com reports that about 62% of American households ar pet owners. That means more than half of the population has a pet. From the same survey, it was found out that almost half of these pet owners has a dog for a pet.

By taking a close look on how these dogs behave, consumers can take away financial lessons that can be used in improving the financial standing.

Due diligence

As Creditdonkey.com shared, dogs use their nose to sniff out and investigate items that they cm ein contact with. It could be a new ball that you recently bought off the store rack or it could be that old rope you play tug-of-war with everyday. They will use their nose to identify what they are seeing and feeling because this is their strong point. Dogs has a keen sense of smell and they use this to their advantage like finding that cookie you hid in the cabinet. This is another trait with which we can learn financial lessons from.

As a consumer, there are times that we take on credit purchases and loan instruments without studying it carefully. This would often lead to serious problems in the future like inability to pay back and debt. Excitement got the best of us and we forgo due diligence. We do not observe around us and take a closer look on what additional monthly payment our purchases will do to out budget.

Learn to investigate first on the financial moves you are about to commit to before doing them. There are just so much that we can research on and our dogs are also telling us to sniff out and read between the lines.

Procrastination

They have none. Dogs are known to be up for anything anytime. They do not turn their back on any new adventure and seize the day with vigor and enthusiasm. See how their tails wiggle at the sight of a ball ready to be thrown in the air.  The will fly off the ground chasing that ball regardless how far or how high you throw it.

The same outlook can be applied with finances. The best time to straighten it out is today. Yesterday is already in the books and tomorrow is too far away. Now is the best time. If you are putting off the fact that you have to sit down and take a close hard look at your budget, the best time for it is now. The sooner you do it, the earlier you can map out all the financial moves you need to do.

Have you been planning to start saving for that emergency fund  you have always thought of? The perfect time is now. Just go ahead and send that amount over to your emergency fund and let it stay there. Continue doing the habit until you get used to it. Been wanting to ask your HR about 401(k) company matching. Again, the best time to do it is today. Putting it off for tomorrow may never end.

Here is a short video on how to start with emergency funds:

Dive in

Dogs dive head on. They jump right in without hesitation. If they know that you are at the other side of the door that is about to open, they will eagerly wait for an opening and jump off the gates just to get to you. This is how they are, once they are sure of what they want to do, they jump with both sets of feet in.

This financial lesson from our canine friend is telling us is to commit to our financial decisions. If we have carefully studied that investment option in the bank and feel good about it, seize the opportunity and dive right in.

Saving for a rainy day

By instinct, your dogs are save up bones by digging into the dirt and putting it in before covering it up again. They do this so they can chew on it again at some future point in time. This is a clear financial lesson for humans, save for the rainy day. it could be the emergency fund or the retirement fund. Whatever it is, be sure to have some funds ready to tide you through in the future

Attention

Just as there are financial lesson that can be learned from kid’s cartoon programs, our dogs can also teach us some valuable financial lessons where on of which is focus. Observe how your dogs are focused at whatever task at hand there is. If he is devouring a bone, his complete and undivided attention will be on that bone. If he sees that mailman coming, he will put all his energy in chasing him down until he gets to chew down the mail .

This observation is another financial lesson to be learned. There is nothing wrong with multi tasking at work or at home. We feel that we are able to get a lot of things done. But as our pet dogs do it, there is wisdom in focusing on one agenda until we achieve it. If we are listing down the monthly budget, we can finish it faster and more accurately if we do away with our smartphones for a while where we constantly check social networking sites.

This can also apply to long term goals. Saving for retirement should be the main focus of your 401(k). You must resist borrowing against it to be used for other non-retirement activities before you actually need it. Apart from the penalty in early withdrawal, you lose focus on the main objective of the fund.

More than a pet

Financial lessons can be found almost everywhere even with dogs. They have become an everyday companion for a lot of people for a multitude of reasons. Personal, service and even health reasons has endeared us to our canine pets. But seeing their characteristics, they offer so much more that companionship and friendship, their outlook in life is a great benchmark on how we can improve in our finances.

3 Tips That May Not Be The Best Financial Advice For You

couple with a financial expertWhile there is a financial advice for every generation, there is still a need for you to consider if these tips are really applicable to you. There is no one size fits all financial management. You need to understand which of them should be implemented in your life based on your specific financial situation.

There are a lot of gurus out there who are truthfully, sincere about helping you improve your financial standing. But before you apply their teachings in your life, make sure you understand what is at stake first. It is not enough that you keep on implementing what you hear. You need to filter out what will benefit you the most.

3 financial tips that are not always good for you

There are certain financial tips that when you first hear about them, you would want to implement them immediately. But before you do that, please make sure that it is an advice that you will really benefit from. If not, you can lose more money because of it.

Here are three financial advices that you need to consider carefully before you commit to them.

Financial advice 1: Automate your bills payments

There are financial advisers who tell consumers to automate their payments so it will never go to default. This makes a lot of sense if you think about it. You do not have to worry about making deadlines and keeping up with all the money that you have to send out every month. You do not have to juggle with due dates and all the details that come with making payments each month. Best of all, you do not have to worry about late payments.

But according to BankingMyWay.com, a pitfall of automating your payments is you will get lazy. The convenience that makes this mode of payment appealing can also be its downfall. You can easily lose track of all your payments. Since you are no longer thinking about them every month, you could think that your financial obligations are not as demanding as you thought it was. That could make opening new accounts more tempting.

You can also miss out on any machine related mistakes that could have caused you to pay more than what your should. Or it can cause you to pay less which will end up making you incur late penalty fees. Not only that, you can be in danger of overdrafting on your account. That is something that you do not want to happen.

Unless you are sure that you can control your spending and you can keep track of your payment, you may want to rethink following this financial advice.

Financial advice 2: Using credit cards for their rewards.

We have heard this advice before – if you will take a credit card, make sure you can benefit from the rewards. Some people are only interested in applying for the card because of the rewards and discounts they will get immediately. According to the data provided by CardHub.com, the initial rewards and bonuses of credit cards are 10% more in the first quarter of 2014 as compared to the same period in 2013. This can be very tempting to grab since the points and miles-based rewards are considered to be at an all time high when it comes to value.

But even if that is true, you need to exert caution. These cards will only be beneficial if it fits your spending lifestyle. If not, then do not avail of it. They will only be a temptation to increase your purchase.

Financial advice 3: Do not touch your emergency fund.

There is an interesting article from Investopedia.com that discussed why an emergency fund is a bad idea. According to the article, it is overly prudent to create an emergency fund. If you understand the risk and your other options, you will realize that there are better places to put your money than to let it sleep in your bank account.

At least, this is true if you are after financial wealth.

If you do the math, a person who lives on $30,000 a year will have to save up at least $22,500 to have enough emergency funds. But think about it. The average interest on your savings account is a mere $1-2%. That only translates to $225 to $450 growth. Even the ones with the highest yields of 3.5% will give you less than $790 of annual growth.

Now if you put that money on an investment that will earn you 15%, then it will earn you a whopping $3,375 per year. Don’t you think the need for an emergency fund is not too smart at this point? Just think about it.

You can probably set aside 3 months worth emergency funds and put the rest in an investment that you can liquidate easily should the need arises. That is how you setup your money to work for you.

How to filter the money advices you get

In truth, there is no such thing as a bad financial advice. Even putting yourself in debt is a good advice – but again, it has to depend on your unique situation. We were all told to eliminate debt but there are benefits to being in debt. Things like having the opportunity to raise your credit score is one. It can also help put money in your pocket – if you use it correctly.

The key is to know how you will filter out the advices that will have a good effect on your financial life and those that will not. Here are 5 tips that should help you decide what advice you can follow and what you need to forget about.

  • Have a clear idea of your financial goal. If you do not have one, then go think of a goal. It will not only give your financial habits direction, it will also help motivate you to improve your financial situation. If you have financial goals, you simply have to determine if the financial advice that you are getting will bring you closer to it. If not, then you can choose not to follow.
  • Know your financial behavior and situation. If you are also aware of your current financial standing, it will be easy for you to determine if an advice will be good for you or not. It is also vital for you to understand your own personal behavior to see if it will bring you closer to your goal or not.
  • Keep your financial education updated. Financial literacy is an important aspect of financial growth. It is also give you the foundation to choose the advices that you will follow. So make sure you are updated not just on the concepts, but the latest news about the financial situation around you. That way, you can know if a certain financial advice is still relevant based on the current economic conditions in the country. Someone might be telling you something that used to be effective in the past but not under the present economy.

In the end, having a clear picture of what you want, what you are capable of and what is realistic will help you make smart choices about your money. Keep in mind that a certain plan may work well with someone but it does not necessarily mean it will do the same for you. Think about that before you really choose to follow a financial advice.

How Credit Card Companies Calculate Your Interest Charges May Totally Surprise You

Hand holding batch of credit cards credit card debtIf you’re like us, you open your monthly credit card statements, note the minimum payments required and maybe the interest you’ve been charged and then file them away until a few days before your payments are due.

Credit cards can be great tools

Credit cards can be great tools when used sensibly, They can be very handy when you want to buy something but don’t have enough cash available to pay for it. If you’re typical your access to capital is limited and a credit card represents one way to get an instant line of credit that won’t have many strings attached. Of course, this doesn’t mean the money you can access with a credit card is free. If you’re not certain as to how credit card companies calculate your interest, you may be paying more money than is really necessary. It’s important that you do a good job of managing your credit card spending and that you know the terms of the agreements you have with your credit card providers.

If you’re average

What you may not be paying much attention to if you’re the average credit card user is how credit card interest actually works. Again, if you’re typical, you simply check out the interest you’ve been charged, maybe wince a bit and then move on. But to really understand your credit card bill you need to know how credit card interest really works.

Calculating your credit card interest

If you’ve ever tried to carefully read your agreement with a credit card company, you might come away with the idea that it was written to be almost impossible to understand. This can be especially true when it comes to how interest is calculated. If you don’t know how your interest is calculated, you could end up spending more than you had intended and with a huge interest penalty. Of course, you can prevent these problems simply by paying off your balances in full and on time every month. Unfortunately, many people cannot do this because they need that line of credit to make larger purchases they can’t pay for in just 30 days.

Most credit card issuers compound interest each day. Compounding your interest means that any interest charges you have that accumulate are added to your principal or the total amount you owe. To compound your interest, most credit card companies divide your annual interest rate by 365. The resulting daily interest is then multiplied by the balance of your loan to get the interest you’re charged daily. This is then added to your daily credit card balance.

It’s not compounded monthly

The mistake that most people make is to believe their interest charges are compounded monthly. But as you have read, this is not true for the majority of credit card issuers. This means that if you owe a large amount of money and don’t understand how interest works, this system of compounding can mean that your debt could spin out of control very quickly.

Here’s an example of what I mean. Let’s assume that you owe $1000 on a credit card with an APR or annual interest rate of 15%. If you divide 15% by 365 days, you’ll see your daily interest is 0.041%. This means if you carry that $1000 balance for just one day, your interest charge will be $.41. Then on day two you’ll be charged that 0.041% on $1000.41. While this may seem kind of insignificant it can become a huge issue if you owe a lot of money. This is the reason why it’s critical that you keep the average balances on your credit cards as low as you possibly can.

When you’re charged interest

A second important question is when will you be charged interest? Unfortunately, the answer to this may not be simple. Many credit cards have introductory offers that give you zero interest for some amount of time – ranging from six to 18 months. As you might guess, if you have a really good credit history you’ll get a longer introductory period. But, of course, nobody will get a 0% interest line of credit forever. After your introductory period expires you’ll be required to begin paying interest on any balance that you carry forward from one month to the next. In most cases, you can pay off your balance at the end of every month and won’t be required to pay any interest. But if you don’t pay off your balance in full, you will start seeing interest charges on your remaining balance.

How your credit card interest rate is determined?

You may understand that your credit card’s APR or interest rate has a big effect on how much you pay in interest each year. But what you might not be aware of is how credit card companies get to that APR. In fact, they use a number of different factors in assigning you an interest rate, including whatever is the prime rate, your credit score, your credit history and any credit card promotions the company is currently offering.

If you’re not familiar with the prime rate it’s based on economic variables tied to the interest rates paid by banks when they borrow from the Federal Reserve on a short-time basis. Generally speaking, the prime rate will be three percentage points higher than the federal rate. This means that when the prime rate goes up banks are required to pay more to borrow from the Federal Reserve and your card’s APR will also will increase – probably by the same amount
If you’re like us to open your monthly credit card statements note the minimum payment card or maybe supercharged file them away until a few days famous
The second factor, your credit score, affects how much you can borrow and your interest rate. As you might guess, if you have a high credit score you will get a lower interest rate. And the inverse is true. If you have a low credit score you will pay a higher interest rate.

How you have paid on credit cards and loans in the past also affects your interest rate. For example, if you were to make a late payment, this will directly affect your interest rate. Finally, a credit card company may be offering a promotion as a way to get new customers. Many of these promotions are introductory offers where, as reported above, you pay low or no interest for some period of time.

As a prudent consumer

If you want to be a sensible and prudent consumer, you need to keep abreast of how credit card interest is calculated and how your relationships with your credit card issuers affect your finances. Make sure to read the fine print in a credit card agreement before you sign up for one and understand all its details. That way you won’t have an unpleasant surprise sometime in the future when a credit card statement roles in and you find you’ve been charged an insanely high amount of interest.

Why a credit card can be better than a debit cardwoman with a laptop and holding a credit card

There are some very good reasons to have a debit card. For one thing, you can’t run up debt on a debit card. These cards are generally tied to your checking or savings account so that if you completely deplete that account, you can no longer use the debit card. However, there are also some reasons why a credit card can be better than a debit card.

The first of these is that you can build up your credit score with a credit card but not a debit card. When you use a credit card sensibly – especially if you pay off the balance on time every month – this will definitely have a positive affect on your credit score. In comparison, what you do with your debit card will have no affect on it.

Budgeting can also be easier with a credit card as all your transactions will show up on your statement at the end of every month. Good budgeting begins with tracking your spending so that you’ll know where your money’s gone. A credit card statement will help you understand this and see those areas where you might be able to reduce your spending.

Third, debit cards do not come with rewards as credit cards do. When you choose a credit card that comes with great rewards such as miles or cash back, this will help you get more bang out of every buck you spend.

Finally, credit cards give you more protection as a consumer than do debit cards. With most cards, your liability is capped at $50 if someone steals your identity or misappropriates your card. While debit cards do offer protection against fraud it could be as many as two months before you get back the money that was stolen.

5 Routines to Practice Financial Fitness

Consumer running while carrying a briefcaseFinancial fitness is an important aspect of our financial literacy. Similar to athletes participating in several sports, they prepare long and hard for each game. They live with discipline and dedication in order to achieve their goals. The more they practice and prepare for their game day, the better their performance is on game day. They are able to address the needs of the game and quickly adjust as needed.

The same principle goes for consumers in their daily battle with finances. It does not happen overnight. You do not wake up the next morning with all your debts paid off, all your bills paid for, your 401(k) at retirement level and emergency fund that can last you more years than you need. Even if you win the lottery today, it will be a short lived cash happiness without being financially fit and literate.

The Bleacherreport.com even shows that heading to off season, the NBA teams are just as concerned with their financial fitness as they are in keeping their players fit and healthy. The teams need money to pay the salaries of their players and they need the players to generate income for the team. Both area of the business and sport needs to put a premium on fitness to ensure that they can continue their purpose.

Practicing Financial Fitness

One of the world marathon majors, the New York city marathon is one of the biggest marathon events being organized in the world. Now carrying a different sponsor, it used to be ING New York CIty Marathon but is now branded TCS New York CIty Marathon. The event is slated on November 2, 2014 and is set against another challenging course.

The race begins in Staten Island in Fort Wadsworth near the Verrazano-Narrows Bridge. It then passes through Brooklyn and reach the Pulaski Bridge signifying the racers are halfway in the course. The road track proceeds to cover East River via the Queensboro Bridge entering Manhattan. Runners proceed to Willis Avenue Bridge and returns to Madison Avenue Bridge before entering Central Park through Harlem down Fifth Avenue. The race concludes by going back to Columbus Circle near Tavern on the Green.

That is a full marathon circuit and anyone taking that course on November 2 needs to be physically fit. Relating that to financial fitness, that course is similar to the challenges we have to take on in life. As the runners race to the finish line, we practice financial management to get to our goal. But we do not just get up and run the race just as we do not instantaneously get to our financial goals. Aside from the having a financial health checklist, we need to prepare for the actual financial challenge.

Set a goal

The first step is to financial fitness is setting a goal. Just as the marathon runners in New York city has one goal in mind, which is crossing the finish line at a good time, consumers need to also have a goal in mind. This serves as a target to aim for and can regularly remind of the ultimate pay off on all your financial decisions.

Having a goal helps you keep your focus. Say the goal is to pay off your student loan as fast as you can. That goal will help guide you in all your financial decision making. Just like the runners whose main goal is to finish the race, their preparations are all leading to that purpose. They train to get fit to achieve that goal. Your roadmap to your financial goal should be built around your main purpose. It has to lead to your achievement of your financial target.

Budget routine

There are people who are having a hard time grasping and understanding how budgeting works. This plays an important role in practicing financial fitness. Putting together a budget is your blueprint to achieve your goal. It is your step by step process in making sure you are on the right track and don’t go astray.

New York marathon runners train with a specific routine. They follow specific strength training workouts and check their food intake. They measure their performance to check if they are improving and staying on course. This holds true for consumer budgeting.

Your budget needs to keep you on track in achieving your goal. It is there to remind you how much you need every month to cover your expenses. It also lists down all your expenses every month so you can quickly do an audit n where your money is going. It can help you curb unnecessary expense items and save you extra dollars every month

Get debt down

Most runners have an ideal weight that they need to get down to in order to run more efficiently. In financial fitness, think of debt as excess weight that is pulling you down. Physically speaking, it is best to shed of excess weight until you are comfortable with your own body and you can move and go around as much as you want.

This is the same with your finances. Getting debt down can help you move freely with your finances. It opens more financial opportunities and just gives you more legroom to go around. Debt ties up your income to interest payments which is eating up on what could possibly be your emergency fund or retirement fund.

Avoid temptation

There will be temptations along the way as you reach for your goal. For New York Marathon runners, it could be skipping a training day or cheating on their diet. It could also be going around not being serious with the preparations for the run like sleeping late and partying all night long. These temptations steer them away from achieving their goal.

Same goes for financial fitness. Steering away from financial temptations can be a challenge. Just like getting that new mobile gadget or putting in your online cart that discounted European cruise. These are temptations when it will keep you away from your main goal. If the money that was supposed to be extra payment for student loans is used to buy a new guitar just for hobby, then that is a temptation. But if your bread and butter is producing music, then that guitar can be an investment.

Get professional help

New York marathon runners are mostly professional runners. And majority of them have had professional trainers guiding them to their peak health and condition to take on the gruelling marathon course. This is the same for consumers on the road to financial fitness.

There are professionals out there that can help you make better decisions with your finances. There are those as well that can help you manage your debts better. They offer professional pieces of advice that you can use to get out of debt.

Benefits of Financial Fitness

Practicing financial fitness can yield benefits for the consumer. Some of these are:

  • Less stress. People who are financially fit are able to manage their finances better and are in top of the situation. This gives the peace of mind knowing how they are financially performing. Taking a prevention-stance is better than problem-solving mindframe.
  • Better health. Taking on a financially fit goal ripples out to physical fitness. It gives you more sleep and takes away worry. It gives you a good appetite and you are able to eat healthy food rather than wolfing down on ice cream and cake because of too much worrying.
  • Improved focus. You are able to concentrate as well on the task at hand rather than thinking of how to pay for the bill coming in at the end of the week rather than paying attention on your current task.

Investopedia.com tells consumers that fitness is a step by step process. This is made up of small positive financial habits that we maintain over the course of time. As we do it over and over again, we build it into our own routine and helps us get to our goal faster.

In most cases, your financial health is connected with your physical health. So if you want to be physically fit, you also have to work on your personal finances. Here is a video from NBC15 about financial health.

Consumer Debt Indicates Confidence

happy woman with groceriesConsumer debt is a common experience for most Americans. It is evident in almost every aspect in their lives. It is a companion in almost all major decisions in a consumer’s life. Financing college dreams would most usually equate to taking out federal and private student loans. This would pay for the tuition and other fees to graduate with a degree.

For consumers buying a car, taking out a car loan is just around the corner. It helps them finance the car instead of buying the car in cash. It allows them as well to not tie up their funds in just one property. Buying a home would similarly have the same concept as getting a car. Mortgage loan is one of the most used consumer loan instrument.

From college education to buying a car and owning a house, consumer debt plays a vital role in those major life points. But even in our everyday lives, consumer debt is evident in our use of credit cards. From buying groceries, paying for the monthly bills to dining out with the family, credit card use has been playing a big role in a consumer’s life.

With all these consumer debt, people have been finding themselves deep in debt and putting together a financial routine to tame big debt. But experts are looking at debt in a different light. Oddly enough, some financial experts deem debt as a good indicator of consumer confidence.

Confidence in growing consumer debt

NYtimes.com recently shared an article on how consumer debt is indicating growth in consumer confidence. From the study, consumer debt for the first quarter of 2014 stands at $8.69 trillion. Covering the same quarter last year, this is a 2% increase in debt. And looking further down the timeline, this is the only increase in consumer debt since the 2008 recession.

The highest point for consumer debt was way back in the third quarter of 2008. Debt stood at $9.99 trillion. After this point, mortgage began a steady decline because of homes being given up due to default. Add to this the fact that few new home mortgages are being taken out for fear of the market and economy in general.

The increase in debt is being studied in comparison with a decline in delinquent payments as well. The study revealed that the delinquent payments for credit cards during the first quarter of 2014 was at 8.5%. This is the lowest percent of delinquent payments since 20013. This is a great indicator of consumer confidence in personal finance.

The study shows as well that there is an increasing number of young consumers aged 22 years old to about 25 years of age that are taking out auto loans. This holds true for those that has student loans and those that do not carry any student debt. There are a few reasons for an increase in auto loan takers such as:

  • Stable fuel prices. A steady performance of fuel prices has been generally a great contributor in the increase of auto loans. Thedetroitbureau.com even reported that because of stable prices of fuel, there are shifts in consumer preference in car brands.
  • Interest rates. The rates for car loan are relatively low and this encourages consumers more to buy that car that they need.
  • Credit availability. This is an example of an economic supply and demand ratio. As more people are looking for lenders for an auto loan, more banks are offering the loan instrument. Extending the service to cover the consumer market that are on the lookout for auto loans.

Talking more about consumer debt,  mortgage had quite a decrease in the 27 years old to 30 years of age market. The survey even pointed out that a lot of it has to do with people struggling with student loans.

Student loans are affecting mortgage loans

Carrying big debt can lead to terrible things to  your family. Debt is is both prohibitive and limiting in nature. This does not limit itself to just mortgage loans, credit card and auto loans. In fact, one of the bigger industries at the moment is student loans. The industry has seen phenomenal increase over the past few years.

Westernherald.com shows that in the past 10 years, there has been a 300 percent increase in student debt. The industry is now at $1.2 trillion and growing. In 20013, the student debt stood only at $253 billion and steadily climbed up. In fact, if grouped with other consumer debt such as mortgage loans, credit cards debt and auto loans – student debt kept at increasing in a steady pace.

This year, there are about .85 college students graduating with a bachelor’s degree. Simple straight computation would indicate that each one of them would have an average of about $26,500 a college graduate. Even with lower delinquent payments for student loans, there are still about 30% in default for federal loans. This indicates that there are quite a large number of borrowers struggling with payment.

This is in fact one of the things that experts are looking at as a cause of a decline in new mortgages for possible borrowers with student loans. Simple logic dictates that having a big student debt puts stress on a borrower to pay. The chances are they send in  late payments or worse, delinquent payments. This would reflect negatively on their credit score. And a subprime borrower would either be slapped with a high interest rate because of the risk or be denied outright. These two scenarios would lead the borrower to put off a mortgage loan until the student loan is paid or their credit score improves.

This is a dilemma knowing how a college education benefits the income. There is evidence to support that college graduates are able to land better paying jobs than high school graduate. Unemployment for college graduates are at 6 percent as compared to 13 percent for high school graduates or those who do not have a college degree.

The student loan debacle can boil down to one point, managing any consumer debt has to be done with financial literacy at the helm. From the time the loan is to be taken out until the repayment period all the way to paying it off. Having the basic wisdom if the loan is really something that is needed to the budgeting of monthly income to pay off the debt requires financial literacy.

It is one thing to qualify for a loan but it is another to make the payments to maintain a good credit score. Having a good paying job will not worth much if you delay on your payments and use the funds for unecessary expenses. Having a goal to aim for can greatly help in steering you over to the right direction. Having a  budget as well to guide you in your daily expenses will bring you closer to that goal.

The increase in consumer confidence because of an increase in debt and decrease in delinquent payments is a good sign that people are able to maintain debt and make the payments on time. They are more aware of the financial responsibilities and the effects of mismanaging the payments. It can also show the confidence people have in the economy because taking out loans are long term responsibilities.

 

Mobile Menu