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11 Financial Things To Do Before Turning 30

young woman thinkingTurning 30 is a kind of watershed moment in most people’s lives. It sort of marks the end of young adulthood and the real coming into your own as a person. You will likely have new responsibilities including maybe even marriage and children but regardless of this the number one thing on your list should be your finances. This is especially important if you’re married, as conflict over money is the number two reason why couples end up divorcing.

What do you need to achieve financially by the time you turn 30? Here are 11 financial things you should have done or be working on. As you might imagine these goals are not for everyone and all eleven may not be feasible for you. But it’s important to keep them in mind at least as general guidelines.

Be prepared for large expenditures

Big expenditures will be coming your way and you should be saving up, anticipating and preparing for them. As an example of this, you may soon be buying a house, having children and other comparable major expenses. If necessary you will need to alter your lifestyle to be prepared for these expenses so that you will be able to pay for them without having to go into debt.

Have an emergency fund

In the event you don’t now have an emergency fund you need to start building one so you will have money available to pay for unanticipated expenses such as a serious illness, an auto accident or if you were to lose your job. Experts generally say you should have the equivalent of six months worth of living expenses banked and, of course, a year would be even better. If six months seems out of reach try for the equivalent of at least three months of your living expenses.

Live within your means

By the time you hit 30 you should know how to live within your means but be able to also enjoy life. You should know your priorities or what it’s worth spending money on and how to save in other areas to pay for those guilty little pleasures like your morning latte. It’s acceptable to splurge on yourself periodically so long as you’re cutting costs aggressively on other items. And understand that what other people are skipping on may not be anything you would want to give up.

Automate your finances

By now, you should know about automating your finances. For example, you should be sending a part of your paycheck automatically to your savings account every month so that you’re paying yourself first. If you’ve already built up a fairly nice emergency fund, you might send the money to your broker for investing. The simple fact is that most people don’t miss the money when it’s taken out of their paycheck before they ever see it. This just makes saving money a lot easier.

Max out your 401(k)

You should now be maxing out or at least meeting your employer’s match for your 401(k). When your employer matches your contribution to your 401(k) this is like free money and many financial experts say it’s the average person’s best friend. The money you put into a 401(k) is pretax meaning that it doesn’t count against your income. If times get tough you could borrow against your 401(k) and when you pay back the money, you’re basically paying interest to yourself. Be aware that if you do borrow from your 401(k) you need to start paying back the money within six months or it will be treated as ordinary income and taxed accordingly. And of course, you will have to pay taxes when you begin withdrawing the money at age 70 ½. In the event your employer does not offer a 401(k) you should be putting money into a conventional IRA

Have a Roth IRA

The money you put into a conventional IRA is also pretax like a 401(k). But it’s good to also have a Roth IRA. The reason for this is that the money you put into it is treated as taxable income but it’s tax free when you begin withdrawing it.

Make a will

I understand that its tough to think about your death when you’re only 30 years old but accidents and illnesses do happen. Even if you’re single you need to have a will so that you will have control over what happens to your money and physical possessions. Of course, this is even more critical if you’re married and have children.

Prioritize and pay off your high-interest debt

If you still have high-interest debt you need to get to work paying it off. Most experts say that the best way to pay off high-interest credit card debt is by using a technique called snowballing. It’s where you prioritize your debts from the one with the lowest balance down to the one with the highest. You then focus on paying off the one with the lowest balance. When you get it paid off you will have “new” money available to begin paying off the card with the second lowest balance and so on. This is called snowballing your debt because as you get each one paid off, you should pick up momentum to pay off the next one just as a snowball picks up momentum as it rolls downhill. If you think this technique might help you, watch this video from Dave Ramsey for more information.

If you have federal student loan debt you can’t snowball it but you could change repayment programs so that you would have better terms and lower monthly payments.

You were probably put in 10-Year Standard Repayment after you graduated from school. This means you have a fixed term of 10 years and fixed monthly payments. Another program such as Graduated Repayment or Pay As You Earn Repayment could be a better option. If you would like to know more about these options go to the website https://studentaid.ed.gov/repay-loans/understand/plans.

Improve your credit score

Like it or not, that little three-digit credit score is what rules your credit life. It was invented by a company that was then known as Fair Isaac Corporation but is now simply FICO. If you don’t know your FICO score you can get it on the website www.myfico.com. You can also get it from any of the three credit reporting bureaus – Experian, Equifax and TransUnion or from an independent source such as CreditKarma.com. If you find that you have a low credit score of, say, less than 600 you need to get to work to improve it. One of the components that make up your score is your debt-to-credit ratio. This is calculated by dividing your debt by the total amount of credit you have available. For example, if you have total credit card limits of $10,000 and have charged $2000, your debt-to-credit ratio would be 20%, which would be very good. If you find your ratio is above 40%, you will need to either pay down some of your debts or get your credit limits increased. Do this and your credit score should improve at least somewhat. Beyond this, you need to check your credit reports to see what’s dragging down your score. If you have missed payments, skipped payments or defaulted on payments, you will need to get to work to correct these issues.

Know something about negotiating

It’s important to be able to negotiate successfully over things such as salary and with service providers. By now you should at least understand the elements of how to negotiate successfully.

Have read a few books

Finally, by the time you reach age 30 you should have read a couple of books about personal finance. Two of the best of these are Your Money Or Your Life and Dave Ramsey’s Total Money Makeover.

20 Financial Terms You Should Definitely Understand

Two smiling girls have coffee timeWhen you hear or read terms such as AIM, net worth or AGI does it make you go “huh”? If so, you’re certainly not alone. There are a lot of financial terms kicking around out there that many people don’t understand. Financial gurus are especially fond of tossing around terms such as asset allocation or amortization without providing any sort of explanation – with the assumption that you’ll just know what they’re talking about. Here to make matters a bit simpler are explanations of 20 terms associated with money that you definitely should understand.

FICO score

Your FICA score is a three-digit representation of your credit history. Banks and other lenders use your score to measure how creditworthy you are. If you’re wondering what FICO means it’s an acronym for the company that used to be Fair Isaac Corporation and that developed the methodology for calculating credit scores. FICO scores go from a low of 300 to a high of 850 and, of course, the higher your score the better the terms you’ll get on your next credit card or loan.

Compound interest

This is the interest that you earn on whatever amount you deposit when you’re investing or saving plus any interest you’ve accumulated over time. On the other hand, if you’re borrowing money it’s the interest that’s charged on the original amount you borrowed as well as any interest charges that are added to your outstanding balance over time. As you might guess, it’s much better to earn compound interest on your savings then to pay it on the money you borrow.

Net worth

This is the difference between your liabilities and your assets. The way you calculate yours is by adding up all of the money or investments you have such as the current market value of your house and car as well as any balances you have in checking, savings, retirement or other investment accounts and then subtract your debts. This will need to include your credit card balances, mortgage balance and any other obligations or loans. The net worth number you get will help you understand how financially healthy you are.

Asset allocation

This is the process you use to choose what percentage of your portfolio that you’d like to invest in various asset classes. It’s based on your personal risk tolerances, time horizon and your goals. Bonds, stocks and cash or the equivalent of cash (think CDs) are the three major types of asset classes.

Bonds

These are essentially investments in debt. In other words, when you purchase a bond you are lending money to a government or corporation for a specific amount of time at a fixed interest rate. When you do this you receive interest payments periodically over time. When the bond matures, you get the loan amount back.

Rebalancing

When you buy or sell securities over time in order to maintain your desired allocation of assets it is called rebalancing. As an example of this if you’re allocating 60% stocks, 20% cash and 20% bonds and the stock market has done well over the past year, you might rebalance your allocation to 70% stocks, 20% cash and 10% bonds.

Capital gains

Capital gains is the amount that an asset or investment increases in value over its original purchase price. However, this gain is just a paper gain until you actually sell the asset. In contrast, a capital loss is when your asset or investment decreases in value. When you sell an investment, you pay taxes on both short-term capital gains and long-term capital gains. On the other hand, if you suffer a capital loss this could help reduce your taxes.

Amortization

This is when you pay off your debt in fixed payments over a specific amount of time. As an example of this your mortgage is amortized with monthly payments that are computed based on the amount of money you borrowed, plus the interest you will be required to pay over the life of the loan.

ARM

This is short for adjustable rate mortgage. It’s the kind of mortgage where the interest you pay increases or decreases based on a particular benchmark. These mortgages generally start out with a fixed rate for three to five years and the interest rate then resets every year thereafter based on some benchmark, plus an additional amount. As an example of this, if you have a five-year ARM your interest rate will be set for the first five years after which it will increase or decrease based on your mortgage’s terms.

Escrow

This is an account that is kept by an independent third party on behalf of two other parties to a transaction. For example, if you are buying a house, you will deposit money into an escrow account that the seller can’t withdraw until the contract’s terms have been fulfilled and the sale completed.

Defined-benefit plan

This is a retirement plan sponsored by an employer such as a pension where you get a specific retirement benefit based on some formula. This formula may include your earnings history, age and length of employment. You as the employee may or may not be obligated to contribute anything to the plan. Many companies no longer offer these plans due to their high costs.

Defined-contribution plan

Many companies now offer these retirement plans as a benefit to their workers. This is where the employee or maybe both the employee and employer make contributions on a regular basis. The most common example of this type of plan are 401(k)s and 403(b)s. One of the biggest advantage of these plans is that you don’t pay taxes on the amount you put in every year.

Stock options

This is an employee benefit where the owners of the option have the right to buy their employer’s stock at a preset price and within a specific period or on a specified date. These are often used by companies as management incentives. For example, if an executive helps boost the company’s stock value above the price of his or her option, the manager could then buy the stock at the lower price and pocket the gain when she or he sells it.

Permanent life insurance

Permanent life insurance is a kind of policy that provides coverage over the insured’s lifetime and also has an investment component called cash value. After a certain period of time, the policyholder will be able to borrow or withdraw against the cash value of the policy. As a rule, the premiums paid for a permanent life insurance policy will be more expensive than for term life.

Term life insurance

Term life is a policy that covers you over a set period which can be anywhere from five to 30 years. If you die during that set period of time, your beneficiaries get a payout. If you don’t, the policy will expire with no value. Of course, you can always decide to renew coverage after your term is over. Plus you can cancel at any time without penalty

Private mortgage insurance

If you want to buy a house and have a down payment of less than 20%, the mortgage lender will require you to get this type of insurance. It is also often call PMI. Its purpose is to protect lenders against a loss if you default on your payments. If you are required to get private mortgage insurance this will increase the premiums that you will pay every month.

Umbrella insurance

Umbrella insurance is a type of policy that offers extra liability coverage beyond what is provided by yoVideo thumbnail for youtube video 10 Signs That Your Financial Management Skills Suck!ur home, boat or auto insurance. If you feel you’re at risk for being sued for other people’s injuries or property damage you might consider buying this type of insurance.

AGI

AGI is an acronym for adjusted gross income. It is calculated as your gross income minus certain IRS-specified deductions. When you file your taxes you fill out your AGI at the bottom of page 1 of Form 1040. It is used to determine your taxable income minus any IRS-qualified deductions.

Itemized deductions

These are expenses that the IRS lets you subtract from your adjusted gross income, which reduces your taxable income even further. This can include mortgage interest you paid, dental and medical costs or gifts to charity.

Standard deduction

If you decide not to itemize your deductions this is a standard amount you can use to reduce your taxable income. It will be based on your tax-filing status and it’s the federal government’s way of ensuring that at least some part of your income is not taxed.

4 Ways You Can Stop Living Paycheck To Paycheck

walking paycheck to paycheckDo you want to quit living paycheck to paycheck? Of course you do! Who wants to live a life wherein your income just passes through your hands? This is the life of a person who lives from paycheck to paycheck. These are the people who always have to stretch their salaries to the last penny. They have budgeted their money so that everything goes to a particular expense.

While this seems organized, it is highly stressful. People who just get by on their salaries are those who do not have the extra money to contribute towards their savings. The most scary fact is, these are the households that are usually one emergency away from a financial crisis.

An article published on CNN.com revealed that 25 million household belonging to the middle-class are living paycheck to paycheck. These are the families that are not unemployed. They have stable jobs, own their homes and drive a car. But why are they living this way?

The article mentioned that one-third of American households spend all of their salaries at the end of the month. 66% of these come from the middle-class. These are the families that have $41,000 as their median income. The data came from a study conducted by Brookings Institution.

This is a scary data to look into and it further shows how the middle class is really losing ground in our society. While they may appear to be more affluent, their financial situation is not much different compared to poor households – those with an annual income of $21,000 (and no assets). This means that having a higher income does not really guarantee that you can move on to a better financial position.

4 tips that can help you stretch your limited resources

So what can you do to stretch your limited resources and get out of a life of living paycheck to paycheck? Here are 4 tips that we have for you. Most of these moves should give you the extra money in your budget to help you save or invest – two of the most proactive ways you can improve your financial situation.

  1. Opt for a cheaper home. One of the biggest expense in a household is spent on their home. Regardless if you own your home or you are renting, this is the biggest percentage that eats into your income. Sometimes, owning your own home makes it even more stressful. Some homeowner regrets emerged once their home loan payments start getting compromised. And the housing expenses does not end with the monthly mortgage or the rental cost. It also includes the utilities, home repairs and even the occasional purchases for broken furniture, appliances and equipments. One of the ways that you can effectively get out of living paycheck to paycheck is to lower this biggest expense in your budget. Rent in a smaller home if you have to. Sell your home and buy a smaller one. This will lower your monthly payments on the home. Not only that, you will have lower utility bills too. After all, maintaining, heating and cooling a smaller unit is cheaper.
  2. Seek out financial aid. Analyze your financial situation and see if you can qualify for any government aid. It may be food stamps, a health care coverage, or even a straight out cash assistance. You can also explore the benefits that your employer is offering. You might be eligible to receive some benefit from them. You can even look into your tax refund. Maybe you are allowed to get a higher refund on your taxes. These will help you get extra money.
  3. Lower your grocery expenses. While this is not your biggest expense each month, this is the biggest discretionary expense that you can cut back on. It may be a bit tough considering the fact that food prices are going up nowadays. USAToday.com reported some statistics from the Bureau of Labor Statistics that revealed a 0.4% increase in food prices in February this year. Although you are battling with the rising commodity prices, you can find ways to still cut back on your grocery expenses. If your weekly budget is $50, try to slash it down to $30. Use coupons, utilize leftovers, grow your own herbs, make your own cleaning products, shop in bulk – there are so many things that you can do. It will take a bit of getting used to but this is possible if you really want to stop living paycheck to paycheck.
  4. Increase your cashflow. Lastly, you want to think about how you can increase your monthly income. If that means getting another job or putting up a freelancing side gig, it all depends on what you think you can accommodate in your busy schedule. It will involve sacrifices – both on your physical body and your time for yourself and your family. But you do not have to do this for a long time. You can give yourself a few months or even just a year – just enough time for you to build up your savings. We suggest that you look for a passive income business that will not eat up most of your time and yet can provide you with continuous income.

These four tips should be able to help you move away from living paycheck to paycheck.

Reason why your income is never more than enough

Apart from increasing your extra money so you can build up your savings and invest your money, you might want to identify why you are using up your salary the way you do.

Well we have one solid guess: you base your spending on your income.

We have this habit of upgrading our lifestyle whenever we get an increase. When you get a promotion, you buy a house. When another promotion comes in, you scout for a second home. When yet another promotion is lined up, you buy a luxury car. While this may seem normal, how we buy these things lead to our destruction. Instead of saving the money from the salary increase that comes with the promotion, we dedicate it to pay off mortgages and car loans.

It is apparent that there is something wrong with how we spend our money. According to an article published on BusinessInsider.com, 20% of Americans admitted to spending more on their cellphones than their groceries. While having a cellphone is convenient, it is not a necessity – at least the expensive ones are not.

Basing your spending on your income is what keep you living paycheck to paycheck. It is true that it can help us be sure we will not be spending more than we should.  But you should keep yourself from basing your expenses from it.

That simply means if you earn $40,000 a year, you will also set up a lifestyle that requires that much money to support. So what should you do instead?

You have to learn how to base your spending on a comfortable lifestyle – not necessarily your dream lifestyle. At least, not yet. Most of our dream lifestyles involve really extravagant spending. Given that you want to get out of living paycheck to paycheck, you may want to establish a lifestyle budget that is just right. That means you are provided with everything that you need to survive comfortably. It is not affluent or extravagant – but just right.

Once you have done this, you can live debt free on a $30,000 a year income – easy! If you have decided on living at $30,000 a year (that is $2,500 a month), you can earn $40,000 and put aside any extra into your savings. You can also invest that money so it can earn you money even while you are doing nothing.

That is how you really stop living paycheck to paycheck.

Surprising Fact – Secured Credit Cards Are Not Just For Those With Bad Credit

If you’re interested in personal finance you’ve probably read several if not a dozen different articles promoting secured credit cards for people with tarnished credit reports or poor credit scores and are unable to get conventional credit cards. While this is true it’s not the whole truth. The “nothing but the truth” is that secured credit cards can be great for young people that are trying to establish a credit history or for foreign citizens that are living in the US and have no American credit history let alone a credit score.

If you have poor credit

Have you checked your credit score recently? You can get it free from any of the three credit reporting bureaus or from sites such as CreditKarma.com or CreditSesame.com. This will not be your true FICO® score as the only place you can get it is on the site www.myfico.com. You will have to sign up for its Score Watch program that costs $4.95 for the first month and then $14.95 a month thereafter. But you will get two FICO Credit Scores, two Equifax Credit Reports™, FICO® Score monitoring and alerts
The reason why it’s best to get your true FICO score is because that’s the one that 90% of all lenders use in deciding whether or not to grant you credit. FICO scores range from a low of 300 to a high of 850. When you check your score if you find it’s below 580 potential lenders will see you as having a “poor” credit score. If this is the case getting a secured credit card could be a good way to build up your credit so that you will have a higher credit score. And you want to have a higher credit score because there is an inverse relationship at work here. The higher your credit score, the lower the interest rates you will be charged. Conversely, the lower your credit score, the higher will be your interest rates.

How secured credit cards work

To get a secured credit card requires that you make a refundable security deposit that then works as cash collateral in the event you default on your payments. Your credit limit will be based, of course, on how much money you deposit. While it’s possible to get a credit limit of more than 100% of your security deposit it’s more often 50% to 100%. What this means is that if you make a $300 deposit on the card that’s its credit limit. However, if your lender offers only 50% of your deposit then your credit limit would be $150. Clearly this is not as good a deal. It would be much better to find a card where your credit limit is equal to your deposit.

If you’re trying to build credit

No matter what your circumstances might be, it’s a good idea to get a secured card if you are trying to build or rebuild your credit. You are basically guaranteed to get approved because you’re the one that’s taking the financial risk through your security deposit and not your bank or lender.

No one will know

One really good thing about a secured credit card is that no one but you will know it’s a secured card. They are not emblazoned with the word “secured” on them. If you pull out the card on a date or to pay for a business lunch no one around you will know that you have no or bad credit and had to get a secured card.

Choosing the right one

Virtually all banks, major lenders and even credit unions offer secured cards. Before you choose one be sure to read the fine print carefully. This is where you’ll find the card’s fees and APR as well as other important information. But there is one thing to check out that’s more important than any other. Make sure that how you use the card will be reported to all three credit bureaus – Experian, Equifax and TransUnion. You need to make sure your use of the card will be reported to all of these bureaus because not all lenders pull information from all three. You want to create a positive history with a secured card and then make sure it’s relayed to a potential lender regardless of which credit bureau it uses.

What else to look for

Maybe this goes without saying but you should look for the secured card that has the lowest possible fee structure and APR (annual percentage rate). Unfortunately, many secured cards have transaction fees for each purchase, application fees, monthly fees to maintain the card, higher interest rates. no grace period when you make purchases and other fees that unsecured cards just don’t have.

The interest rate

Unfortunately the interest rate on a secured card or its annual percentage rate can be as low as 9.90% or as high as 22.99% or even higher. When the secured card has low or no upfront fees, it often has a higher interest rate. Conversely if the card has high upfront fees or annual fees, it could have a lower interest rate. In addition, there are often many other fees that are determined by the lender and so differ from card to card.

A secured card is not a prepaid card

It’s also important to understand that a secured card is not a prepaid card. When you make a deposit to “secure” a card and make a purchase, your balance is not reduced. Of course, you will still be required to pay for whatever you charge on a secured card each month just as is the case with a conventional credit card. However, the secured deposit balance will remain the same until you close your account – unless the card’s terms state otherwise. In comparison, with a prepaid card your balance decreases every time you make a purchase until you reach a zero balance. At that time you will need to either add money to the card or throw it away.

Note: If you’d like to know more about prepaid credit cards and what they’re good for, watch this video courtesy of National Debt Relief.

 

They aren’t negotiable

If you search carefully you may be able to find a secured card that has few or no fees. However, some cards can have a lot of fees and they can be very high. With secured cards these fees are rarely negotiable and some have fees of more than $14.95 a month in addition to application fees, late fees, over-the-limit fees, cash advance fees, annual fees and more.

You won’t get any rewards

Another downside of secured cards is that they don’t come with any rewards. You won’t get those nice little extras that many regular cards provide such as airline miles or cash back. But remember the reason that you would get one of these cards is not for its rewards. It’s to help you build or rebuild your credit, which could serve you well in the years ahead.

The net/net

The bottom line of a secured card is that it could help you build or rebuild your credit but it can be a slow process. For people that just had a bankruptcy or just completed debt settlement and don’t have good credit, it can be a good to get a secured card to help rebuild their credit scores. But if you don’t have a lot of negative information on your credit report such as late or missed payments or debts that have gone to collection then adding a secured credit card won’t turn things around for you as if my magic. The fact is that a secured card just won’t be an instant fix.

Want To Make A Smart Debt Move? Ask These Two Questions First

choosing between good and bad creditMaking smart debt choices is the best way for us to learn our lessons after the last recession. While some think that the ideal solution is to completely eliminate debt from our lives, this is not always the best scenario for everyone. For most Americans, we still need the financial boost that debt can provide in order for us to propel our wealth to greater heights. We have mentioned it again and again – the concept of credit is not really the problem. It is our inability to implement proper credit management that put us through financial hell in the past few years.

According to Bloomberg.com, consumer debt in the last quarter declined for the first time in the past 12 months. This is caused by the decrease in new mortgage loans that is at its lowest since 2000. The data coming from the Federal Reserve Bank of New York mentioned that the household debt of Americans dipped by 0.2%. This is equivalent to $18 billion. That means from January to March, consumers were able to put the total consumer debt to $11.63 trillion. It is still a big amount but at least it is going down. The only loans that are increasing at this moment are the student loans and auto loans.

These data does not really show if we are making smart debt choices already. While the American debt crisis is improving, it is definitely far from over. We need to continue pursuing better financial and credit management habits, lest we fall into the same debt pit – or more accurately, dig ourselves deeper into the one we are currently in.

2 questions to ask before making a debt decision

Since debt elimination is not the solution to improve our financial situation, it is obvious that we need to make sure that we can making smart debt moves instead. A lot of people are still skeptical as to whether there is such a thing as good debt. Believe it or not, there is. It might be tough to consider debt as a good one because we have gone through so much trouble because of it. But like what we said, debt itself is not the problem. It is the consumer habits behind that debt that led to our financial crisis.

If you believe that there is such a thing as a good debt, how can you ensure that you are choosing the right one? How does one determine if they are getting a smart debt choice or not?

There are two important questions that you need to answer.

Is the need for debt temporary or is it a permanent requirement for your lifestyle?

This is the first question that you need to ask yourself. What is this debt being used for? When your debt is only a temporary need that will help you improve your lifestyle, then that can be considered as a good credit investment. But if this particular credit is something that you will need to make every now and then to support a lifestyle upgrade, then this is clearly a bad debt. Going through with this loan is not a smart debt decision.

For instance, if you are getting the loan to finance a home that you want to buy, that can be considered as a good debt – as long as you are borrowing an amount that you can afford to pay off. But if you are borrowing money to finance a luxury car and you need to keep on using your credit card to finance the gas and maintenance costs, then that is not a good debt.

It is just like making a business loan. This type of debt can go both ways. If your business loan is a one time loan that will help you make profit, then that is a good debt. But if you are forced to keep on borrowing money to pay for the overhead expenses of the company, then this is already a bad debt. You need to reconsider your business before you take on more debt for it.

Make sure that the debt that you will borrow has a timeline. If you can see an end to your debt payments, then that is credit that you can take. But if there is no definite end to the debt payment, then you may want to rethink the need for that loan.

Will reason for the debt be worth the time and amount it will take to pay it back?

Debt, when you let it grow is powerful enough to control what your future will be like. You do not want it to have this power over your life. So before you take on that mortgage or that student loan, ask yourself first: will homeownership be worth being in debt for the next 30 years? Can you live with the thought that for 3 decades, your lender will be getting a portion of your income? For that luxury car, do you think driving in a flashy vehicle is worth making your creditors rich? After all, the interest rate you will be adding to the amount you borrowed is making banks and lenders rich.

According to an article published on TIME.com, 5 years after the Great Recession, banks are reaping in record profits. The report coming from Wall Street Journal revealed that banks earned $40.24 billion from April to June of 2014. The data also revealed that the profits of these banks are not coming from trading – but more on the interest of the loans they are distributing to the consumers. Both commercial and consumer lending rose by 13% and 6% respectively.

If you want to pass on your hard earned income to the bank via the interest of your loan, then go ahead with the debt. But if not, then you may want to find more reason to make your debt more worthwhile.

Answer these two questions and you should be able to identify if you are making a smart debt choice.

How making smart credit choices can affect your future

Debt will always be one of the major financial decisions that you have to make – regardless of the amount. Do not belittle the small credit purchases you make through your credit card because that will accumulate over time.

To help you make the right decision, here are some tips that you can follow.

  • Know your current finances first. It is important for you to understand just how strong your financial situation is. Make sure that your money can sustain the additional burden that this new loan will bring to your budget.
  • Strike a balance between your current and future finances. More accurately, you want to balance your financial situation today against a conservative expectation of your future earnings. It is not right that you only consider your present income. What if your future income decreases? How can you afford to pay it off? According to the Report on the Economic Well-Beaing of US Households released by the FederalReserve.gov in the, 16% of the participants expected their income to decline. If this is the same as your sentiment, make sure you will not maximize the amount of money that you will borrow if it is based on your current income.
  • Create a payment plan. The only way for you to determine if you can afford to pay off your debt is by creating a payment plan. Before you proceed with the loan, check if the payment plan is something that you can live with.
  • Make sure you are getting a good debt. The last tip that we have for you to make a smart debt move is to answer the two questions mentioned above. If the debt is only temporary and you think it is worth it, then what you are about to borrow is a good debt.

How To Turn That Old Junk Into Hundreds of Dollars

Money coming out of computer like ATMIf you’re like us you have a lot of junk sitting around in your basement, garage or even a storage shed. It could be things like that painting you inherited from your Aunt Frances, toys from when your children were young, an old computer or books you read once and then packed away. You think it’s all worthless but hold on. You might be able to sell some of it and for more money than you might imagine. And even if you can’t sell it for much you’ll at least have freed up some space for more, well, stuff.

Where to sell your junk

Just as there are good and bad places to buy stuff, there are good and bad places to sell it. For example, the best places to sell valuable old furniture are auction houses followed by consignment stores. Auction houses and consignment stores are also often the best places to sell valuable artwork while sports and exercise gear generally get the best prices online and or in a yard sale.

Here are some other categories of stuff and the two best places to sell them. B: This assumes the stuff is all ”valuable” and in excellent condition.

Item                              Best place                                     Second best place to sell

Clothing                                         Auction house                                    Consignment store

Musical instruments                 Auction house                                        Consignment store

Collectibles                                  Online                                                 Consignment store

Jewelry                                          Auction house                                  Consignment store

Electronics and appliances         Consignment store                          Online

Housewares                               Auction house                              Consignment store

Get an appraisal

If you think you have something worth, say, $1,000 or more, you may want to get a professional appraisal in writing. This will tell you how much the item is worth and how much insurance you will need to cover it. However, a professional appraisal can be expensive. Most experts charge from $100 to $300 an hour to look over your items, do some research and then write a detailed valuation. Alternately, you could ask an appraiser to do a “ballpark estimate” or give you a rough idea of what your items are worth, which he or she could likely do in an hour.

When using an auction house

If you have items valuable enough to warrant taking to an auction house, make sure you document them with detailed descriptions that you can share with possible auctioneers. For example, if you have an antique table include the maker’s name and the date and the amount you paid for it. You might also attend a few sales in advance to see how auctions work and what different houses specialize in. When you go to one of those sales ask the auctioneer how he or she promotes them –in newspapers, online or via email is best – and if they simulcast online. Generally speaking you‘ll pay a sales commission equal to 20% to 50% of the sales price. Again as a general rule, you will pay smaller commissions on more expensive items. Make sure your items are insured and find out when you will get paid, as some auction houses will wait until the buyers’ payments clear before they pay you.

Consignment shops

When it comes to furniture, consignment shop owners usually want only top quality stuff and some will take only antiques. Clothing, household goods, and jewelry must be in great shape. To maximize your return, visit a few shops to make sure they sell items similar to yours. Many owners of consignment shops will see sellers by appointment only. Call first. Show them your items or photos of them. Most will suggest a selling price. However, be aware that the store’s cut is usually 50%. Ask if the price of your item will be reduced if it doesn’t sell within some specified amount of time. If it doesn’t sell within 90 days it will probably be returned or donated to a charity.

Selling online

When you put items on Amazon or eBay you will get the eyeballs of literally millions of potential buyers. However, it takes some marketing smarts to make sure that your items stand out. You will want to sell what’s in demand, which are usually one-of-a-kind items that are gently used such as clothing, electronics, sporting goods and popular collectibles. If the items are easy to ship, put them on a like Amazon or eBay. If the item is heavy or bulky, try putting it on Craigslist or some other free listing service. Most experts say it’s best to keep your description short. What you mostly need to provide is condition information such as pristine, stained or chipped.

If you’ve never posted on Amazon, Craigslist or eBay, all three have helpful tutorials that explain how to sell successfully on their sites. Reviewing these tutorials would be a good investment of your time.

See what other comparable items have sold for on whichever site you choose. If you use eBay, check the prices that similar items actually sold for under “completed listings.”

Finally, check to see what fees you will be charged. As a general rule you can put up to 50 items per month for auction on eBay free. But you will then pay a fee depending on the item and what it sold for, plus a shipping charge. Amazon charges $.99 to list an, plus a fee based on what you sold the item for, as well as shipping and a referral fee.

flohmarktstand (9)Have a yard sale

It can take a lot of time and effort to do a yard sale but the good news is that it doesn’t require you to pay anybody a commission on whatever money you earn. However, it’s a good idea to call your city’s office as might need to get a permit to hold a sale. In the event that you do, it will probably only cost a few dollars.

Another good thing about a yard sale is that almost anything that’s not valuable enough to put into a consignment shop, an auction house or online is fair game. Even broken items can be sold at yard sales. Malfunctioning electronics can be particularly good because people often buy them for parts.

Believe it or not, the best strategy is to not price anything. The most stressful and time-consuming part of a yard sale is determining how to charge for things. A better solution is to ask buyers for their best offers. In many cases they‘ll name a price that’s better than what you would have suggested. If you run into people who seem to shy to negotiate then you will have to name a price. You can get a fairly good valuation of the stuff you will be selling on the website Statricks.com. It compiles pricing data from online auction sites such as eBay and from classified ads on Craigslist and offers aggregate pricing on literally hundreds of thousands of used products such as bicycles, computers, small appliances, photo and video equipment and musical instruments.

To get the word out regarding your yard sale, you might put a free ad on eBay classifieds, Craigslist, YardSaleSearch and GarageSaleHunter. You should also put information about your sale on social media sites such as Instagram, Twitter, and Facebook. Be sure to make enough directional signs to get people to your house from major streets. One expert says you should use signs no larger than 15 x 15″ and that simply says “Sale” and includes an arrow pointing the way to your house.

The best time to start a garage sale is Thursday or Friday and start early – like 6 AM or 7 AM. That way you’ll get people driving the kids to school or going to work. If you have items left, you can always continue the sale during the week.

Be friendly. If you’re reading a book or talking on the phone people are less likely to buy from you. However, if you greet them warmly and are available to answer their questions and to negotiate, you’ll do much better.

Finally, keep your house locked during your yard sale and keep your money and your phone with you all the time. Also, turn down payments in big bills, as they could be counterfeit.

7 Ways You Can Make Budgeting Fun

woman carrying groceriesThere are several good reasons why you use a budget in your household finances. Budgeting is the first step towards financial independence. Not only that it can help you strategize how you can reach all of your financial goals.

Best of all, a budget can help you avoid debt. An article from USNews.com revealed that the unexpected costs are not really unexpected. We know that they will happen. The problem is, we do not budget for them. We sometimes fail to prepare for expenses like birthdays, weddings, and even car repairs just because did not put them in our budget plans. If you think about it, these are expenses that know will happen. Weddings are once in a lifetime events that couples will reveal months before the actual date. Birthdays happen every year. Car repairs – each car part has a specific lifespan that you should be aware of. These are all expenses that you should be prepared for because you know that they will happen. Even the real emergencies like accidents and illnesses can be prepared for in advance. You just need budgeting to prepare for all of them.

The truth is, we all know how important having a budget is. However, not everyone is successful at it. The reason for that is a wrong perception and implementation of a budget plan. Some people find a budget plan to be restrictive and complicated. But an effective budget is actually not complicated nor is it restrictive. In fact, a budgeting can be fun if you know how to implement it correctly.

How can you make budget implementation fun

Some people start organizing their finances but end up giving up on it because they are having trouble sticking to a budget. If you want some motivation to make a budget plan a regular part of your life, you may want to follow these 7 suggestions to make budgeting fun and in effect, easier.

  • Use a budgeting application. There are so many budget apps that are available in the market. You can start your search by going to review sites or news websites like NYTimes.com for a list of the best apps that you can use. These apps can help you organize your finances easily. It can also help you automate the tracking of your finances. The app can make budgeting less tedious and that should encourage you to continue using it so you can monitor where your money is going.
  • Anticipate your goals. All budgets should be aligned to your financial goals. Your goals can be to pay off your debt, grow your savings or put aside money for investments. These are all great financial goals that a budget plan can help you achieve. To make your budget more fun, you might want to keep your eyes focused on your prize. If you have to create a visual representation of your goal, then do that. Put it in your ref or your workstation. If your goal is buying your dream house, print a small photo of that and tape it to your credit card. That should make you think twice before you use your card for unnecessary purchases. Your goal should keep you motivated to stick to your budget plan.
  • Set up milestones. If you have long term goals, it helps to set up milestones so you can be encouraged to implement your budget to reach them. These milestones will help you concentrate and take note of the progress that you are making. Every time you reach a milestone, you will find the motivation to reach the next milestone. Having these little goals will give you something to look forward to as you deal with the sacrifices involved in changing your financial habits for the better.
  • Give yourself small rewards. If the milestones are not enough to motivate you, give yourself small rewards after reaching a milestone. Or, you can reward yourself if you stick to your budget every month. For instance, if you succeeded in paying all your bills on time, allow yourself to give in to small indulges – as long as it is still within your budget.
  • Make budgeting a group activity. Involving other people in your attempt at budgeting will help make it more fun. Let your friends in on your budget plan efforts and encourage them to do the same. Compare notes and you can even turn it into a game. You can also include your family – especially when it comes to saving. Let your kids compete at who will have the most savings each week. These should make the sacrifices needed in implementing a budget more acceptable.
  • Join a community. If you cannot find friends who will be with you in your budgeting efforts, you can find companions online. Find an online community and share your experience with them. You might find some advice on how to stick to your budget plan. It helps to know that you are not alone in your struggle. And talking to real people who have successfully passed the difficulties that you are going through should make things easier for you and will keep you from feeling discouraged.
  • Learn something new. If your budget plan requires you to lower your spending, you might want to learn something new so you can meet that budget goal. For instance, learn how to bake so you can lower your food costs. You can also learn how to make your own household products to save on groceries. Not only will you be successful in sticking to your budget, you can also improve your skills.

A budget plan will help you spend on the important things in your life

One of the benefits of a budget plan is it will allow you to spend on the things that are important in your life. Contrary to what others perceive about budgeting, it will not restrict or deprive you of what you want to spend on. The goal of a budget is to help you find the means to pay for what you love to indulge on without putting you in debt.

According to Gallup.com, less than half of consumers spend more this year compared to the last. Only 18% said that they are spending less. When these expenses are detailed, it is revealed that the increase in spending is mostly on household necessities like groceries, utilities and gas. This could mean that consumers are wising up when it comes to spending – which is a good thing. But that also means that a budget plan should still be implemented because of the following reasons:

  • It can help you organize your money. One of the benefits of budgeting is in helping you organize your finances. You can identify how much money you are earning each month and where each penny will go. You can control that and make sure that it only goes where you want it to.
  • It can help you make financial decisions. Having an idea of your overall financial situation is one of the best benefits to a budget plan. If you are tempted to buy something, you can simply consult your budget to see if you can afford it or not. If not, then you can choose the expenses that you can cut back on to afford it. If there is none, then you know that the answer to your expense is a no.
  • It can help you grow your savings. A budget plan will give you more chances of meeting your saving goals. You can decide to put aside $500 a month and identify the expenses that you will cut back on to meet that goal. Without a budget plan, you might save only what is left after your expenses are met – which is usually one of the best ways to fail at saving. You have to admit that saving last usually ends up with you having nothing left to save.

It can help you stay out of debt. Since budgeting helps you save, it is one of the best ways for you to stay out of debt. That is because any unexpected expense will not have to be borrowed. You have your savings for that. Not only that, any expense that you will make on your credit card can be included in your budget. That way, you can pay it off at the end of the month and you know your monthly credit limit.

Understanding The 6 Reactions To A Financial Disaster

man swimming in debtAre you currently facing a big problem with family finances? Nobody wants to be in a financial disaster. If you even find yourself in one, you want to get out of it and you want to do it quickly.

While this is a natural reaction, you might want to change your perception about this. Because having a negative attitude about what is already a disaster will not help you change anything. If, like millions of Americans, you are still struggling to recover after the Great Recession, you might want to take a look at how you are reacting to the whole crisis.

The truth about your financial crisis

Here’s the thing: everyone goes through a financial disaster at some point in their life. Now your reaction to that crisis will have a big effect on how your life will turn out. If you react to it in the wrong way, you might end up in an even bigger disaster. If you react to it positively, then you might learn something new from your situation.

Looking at the current statistics in our country will not really help you in being hopeful about financial recovery. An article published in About.com regarding the US Economy revealed that the total debt in the country continues to rise. The credit card debt in May 2014 is at $872 billion – a rise from $870 billion in April. The loans are $2.32 trillion in May which increased from $2.30 trillion in April. This increase continues to disable a lot of American families because the increase in debt, specifically involving credit cards, is believed to be caused by late payments, lack of emergency funds and savings.

When it comes to financial problems, we usually think that earning more will get you out of it. While that may help you with the debt or payments that you need to make, it will not alleviate your situation in the way that it should.

6 common reactions to a financial problem

It is important to know that in any financial disaster, you have to react to it the right way in order for you to turn it into something beneficial in your life. As difficult as that may be in your current “crappy” situation, it is not impossible.

According to an article published on PsychologyToday.com, you can turn any crisis into an emotional threat or a challenge – depending how you choose to react to it. This will highly depend on how you control your emotions. The article revealed that your emotions are the heart of your response to any financial disaster. It can either be an obstacle or your source of strength to overcome your situation.

Understanding the different emotions that you will feel will help you in recovering from a financial disaster. That is because you will learn how to deal with each and every one of them. While we usually react to situations differently, we usually go through the same 6 reactions after a crisis. How we deal with each of them will determine how fast we can move forward.

Here are the 6 reactions that you need to go through as you personally deal with your financial problem.

  • State of Shock and Denial. The first reaction is usually shock and closely followed by denial. When you confront a problem for the first time, it is only natural that you show disbelief. Sometimes, even if we know the situation, being faced with the actual problem can be disconcerting. We never really know how big the problem have become unless we lay it all out. These reactions will usually delay the inevitable pain of knowing that you did something wrong in your life.
  • Point of Depression. Once you get over the feeling of shock, next come that sinking sense of depression. When it dawns on you that the financial disaster is real, it can really pull you under. Knowing that you made a mistake that led to this bleak situation is one thing. Trying to wrap your head in the reality is something else entirely. Admitting defeat is never easy and if you do not prepare for this reaction, you will lose it. Try not to stay here too long because the longer you feel depressed, the more you will be unable to act on the problem.
  • Phase of Acceptance. You should ideally breeze through the first two and go to this phase immediately. This is the first step to being proactive about your financial disaster. Once your depression is over and you have accepted the reality of the situation, this is when you can finally start to move forward. Unless you have accepted the mistakes and the problem, you can never really start the recovery process. You can find it easier to accept your situation if you try to see the good in the bad situation. Here is an interesting and light-hearted video about what you should do when things around you are falling apart. Marie Forleo discusses how you should react to a disaster in your life – which is actually applicable in any type of crisis – financial or not.

  • Stage of Analysis. Once you have accepted the financial disaster, you can now concentrate on moving forward from the problem. But before you can do that, you have to analyze what led you to this particular scenario first. Be honest about what really happened. Find out how you can got into this financial crisis. Then, identify what you did wrong and what you should have done differently. Some people skip this part over but it is an important step in your road towards recovery. If you fail to identify the mistake, then you might see yourself in this same situation again in the future.
  • Time for Rebuilding. Once you have identified the root of the problem, you can start to plan out how you will improve your finances. Will you require a debt relief program or should you just start earning more? Should your plan involve a change in your lifestyle and spending habits? These are all part of rebuilding what you have lost during the financial disaster.
  • Process of Fortification. Finally, you need to undergo the process of fortification. With what you have gained in the number 4 step, you can use that knowledge to fortify your finances to make sure that you will never be put in another compromising financial position again. Do not end with rebuilding. You need to make sure you that this is the last rebuilding that you will ever make.

How to rise from a financial slump quickly

Although rising from a financial crisis is difficult, it is something that you can do. It just takes a lot of discipline, self-control and even a bit of reflection about how you had been living your life. Do not think that it is the end of the world. You will always have hope to recover from a financial disaster as long as you are willing.

Once you have gone through the 6 reactions, you need to focus on maintaining certain habits so you can keep yourself from the mistakes of the past. In truth, going through a financial problem is not so bad – at least if you look at the lessons that you have learned because of it.

According to the Economist.com, Americans are spending less on unnecessary expenses after the Great Recession. They learned their lesson and they have identified that certain expenses have contributed to their financial fall.The average spending per family, from 2007 to 2010, fell by 3.1%. Since the average prices have risen by 5.2%, the article believes that the drop in spending is actually 8%. That is not so bad for a nation who has a reputation for overspending.

There are techniques that you can do to stay away from financial ruin and here are three suggestions from us.

  • Build up your emergency fund. This reserve money will help you get out of unexpected situations without borrowing money.
  • Investing your extra money. This is the proactive way that you can grow your money. Any extra money that you have that is outside your emergency fund should be invested. This is your way of setting up your money so it can earn you some extra income.
  • Spend your money wisely. In the end, it is not about how much money you are earning. Staying away from a financial disaster is best done by using your money wisely. Do not let your overspending lead you to another crisis.

Patience Can Teach You Two Things About Personal Finance

woman thinkingThere are many virtues that you need to implement to say that you have mastered personal finance. When we say mastered, we mean you know that you are on top of your financial situation and you are in complete control of where your money goes.

Of all the virtues that is applicable in your financial life, none of them is as important as patience. If you think about it, this particular virtue will lead to a lot of financial habits that will allow you to improve your personal finances.

The role of patience in our financial behavior

Among the things that you will be encouraged to do is planning for major financial decisions. If you think about it, every decision, big or small should be part of a greater plan in your life. This is the only way that you can align all your decisions and make sure that everything that goes on in your life is leading you to a future that you want to have. But when it comes to planning, that means you have to exercise some patience. You need to think about every little detail of what you want to happen in your life so you can plan them realistically.

If you are impatient, you will exhibit impulsiveness that is fueled by your need for instant gratification. That is never a good thing when it comes to personal finance. Nobody excels in their finances with these traits. You need to take make the necessary plans that will take you to your goals and implement it one step at a time. That is how you can achieve what you set out to do.

According to a survey done and published on Gallup.com, American consumers are noted to be more careful in their spending but there is still a huge percentage that leaves a lot of room for improvement.

The survey revealed that 38% of the participants still make impulse purchases and 27% admitted to spending a week’s worth of pay for a major expense. Not only that 16% of the respondents said that they agree to the notion that when they get money, they should spend it immediately. Almost 3 out of 10 also believed that their lifestyle convenience is more important than saving.

While we deserve to spend our money for our convenience, it should not be done at the expense of our future self. If we fail to be patient enough to save for tomorrow, what will happen to us if the economy collapses again?

Our impatience is the one trait that puts our future in danger. that is because it is impatience that leads us to think that using credit to finance our purchases is always okay. This is not always the case and it is one aspect of personal finance that we need to tread carefully.

2 lessons about finances that you will learn from being patient

When you are patient, that are two important lessons that you will learn. These will prove to be very useful in your attempt to improve your personal finances.

It is not possible to have it all immediately.

We all want the American Dream and we want it immediately. There is no such thing as a quick get rich scheme that lasted long. Think about the lottery winners. Most of them splurged their money and ended up poorer than when they started. Being handed everything a once will make you irresponsible. But if you are patient enough to accept that you can only take one step at a time, then that is something that will make you more cautious of whatever personal finance achievement you will make.

One of the best illustrations that we are suckers for that quick acquisition of wealth is our gambling statistics. According to data found on an article published on Mint.com, Americans spent $60 billion on lottery tickets back in 2010. Casinos in the country had revenues of over $125 billion. Although some of these gamblers won, you can bet that they quickly went through these winnings and lost them all again in gambling.

You have to accept that being financially successful requires hard work and most of all, patience. You want to be aggressive, that is true. But it has to be done under the right context and with the right plans in place.

Building up your savings will take time.

The other lesson that you will get from being patience is that savings will take time to grow. We cannot save a big amount at once because our limited income is bound by a lot of financial obligations. We are lucky to have anything to save at all. We need to keep ourselves from feeling frustrated when our savings seem to be slow going. Remember that a dollar a day will eventually grow. Just be consistent about it and it will grow. It will just take time so you need to be patient.

According to statistics from Mintel.com, only 10% of Americans save their extra money. The rest will spend it and will not think twice about saving. This percentage is for 2014 – it used to be double in 2013.

To say that we need to improve is not enough. There is a need to improve and that need has to be acted on immediately. We cannot wait any longer because opportunities that we are getting right now might not last.

Results of applying patience in your financial life

If you are unsure about how you can start, then begin by practicing the virtue of patience. You can start with another aspect of your life until you reach the personal finance side.

Do not be blinded into thinking that what you need to focus on right now is increasing your income. This will never be the right solution. You have to understand that you can be debt free on a $30,000 a year income. It is not the amount that comes in but your behavior when it comes to using that money. When it comes to behavior, you should know that patience is among the top virtues that you need to work on.

Here are three results that will emerge from your financial patience.

  • You will have no debt. This is a dream for a lot of us – having no debt that can compromise our limited financial resources. When you are patient, you will not feel the need to use credit for purchases that you want to make. You can find it in you to wait so you can save up for certain expenses that can be availed in the future.
  • You will always have well planned purchases. Since you are taking your time, you will have well planned purchases. You do not have to rush through your spending. You will feel at ease in finding the time to plan when you can afford to make payments for what you want to buy. That way, you can set up your personal finances so that you are working for future expenses, and not slaving away to pay for past expenses. If you did not know, that is the scenario when you are in debt.
  • You can achieve your financial goals faster. Managing financial goals is no easy feat. But if you are patient enough to manage your finances wisely to avoid debt and to make smart purchases, then you will have more extra money to invest and grow your wealth.

Patience may seem like a farfetched virtue to be effective in improving your personal finance. But it will help you develop a lot of habits that will be beneficial to your pursuit of wealth.

4 Tips If You Need To Pay For College Yourself

young woman looking frustratedAre you prepared for the school year 2014-2015 college costs? Or are you floundering around because you do not know where you will get the money to pay for college yourself?

It may seem like a lack of parental responsibility but the law does not stop some parents from refusing to pay for their kid’s higher education. Heartless? It goes both ways. If you think about it, you cannot really blame them. There are horror stories of parents having to withdraw all of their retirement money because they co-signed their children’s college loans. When it turned out that their kids were not responsible and even dropped out of school, they were left with the burden of paying the debts that they have not benefited from in any way.

Even if you both shoulder 50% of the college expenses (you and your parents), they have more to lose because retirement is nearer for them. They only have a much shorter time to prepare for it and it does not seem fair to make them shoulder your education. But then again, they are the ones with the income or the credit history to borrow money. You would think it should be them who should shoulder your studies.

Apparently, the majority of parents are still willing to help pay for college. According to a study done and published on DiscoverFinancial.com, 77% of parents still plan on helping their children shoulder their college expenses. But here’s the thing: times are tough and the 77% used to be 81% in 2013. While the majority want to help, the numbers are falling. More and more students are forced to fend off for themselves and put themselves through college.

4 options to finance your college education

If you are part of the group that was left to pay for college themselves, then do not feel so bad. That does not mean your parents do not love. It may just be that they are in more of a financial problem than you thought. After all, if they lose their retirement money to help you pay for your schooling, can you promise them that you will financially be responsible for them when they retire? Probably not.

Instead of feeling wounded, look at this as a challenge. You will be learning a lot by relying on your own resources to go through college compared to those who has mom and dad’s wallet to support them. And to make you feel a lot better, there are ways for you to pay for college on your own.

You also have to know that getting a college loan is not your only option. It is the most common financial path for students but it is not the only one out there. Here are 4 tips for you to get through college without the help of you parents.

Apply for scholarships and grants

There are so many scholarships and grants being offered by organizations, the government, schools and even private companies. You just have to search them out to find where you can qualify. These scholarship programs are usually merit-based so you should have very good grades. Even if you are an athlete, you still need to have good grades. This is one of the best ways to go through college at a very low cost. In some cases, the school might even waive the whole tuition fee and give you some allowance for your living expenses.

Of course, there are also scholarship programs that will depend on your family’s income and even where you came from. Since it will help you go to college at a low cost and you do not have to pay back anything, you can expect that the competition to qualify will be very fierce. So before you submit your application, make sure you fit the qualifications and you can meet the requirements of the program.

Go to a low cost college

Not everyone will go to community colleges enthusiastically but if the Ivy League schools are beyond your financial reach, then do not force it. You will be better off to go to a community college and be debt free than to go to an Ivy League university and be under hundreds of thousands of debt when you graduate. What some student do is to go to a community college for the first two years and save as much money as they can. Then, they shift institutions in their third year. This saves them a huge amount in the first two years and helps them lower any possibility of debt for the remaining years in college.

Work while in college

Your third option to pay for college on your own is to work while you are studying. The amount of time that you will spend  in a classroom is only between 15-20 hours a week. Even if you spend the same amount of time to do homeworks and study, you still have a lot of time in your hands. A person has 168 hours a week (including weekends). If you get 8 hours of sleep a day, 3 hours a day doing personal stuff and errands, and 2 hours a day relaxing or going out with friends, that will still leave you with around 37 hours of free time. What can you do with that? Add it to your entertainment time? That may be tempting but you should know that more time for entertainment means you will be spending more. So the best way to spend all those free time is to go to work. It will help you pay for college and give you some work experience that can help you in the long run.

Get a student loan

This is still part of your options but you are encouraged to put this option last. If none of the other three will work for you, then go ahead and get a student loan. The American Student Assistance published some statistics on ASA.org that revealed how 60% of college students borrow money to cover the costs of going to college. If this is the option that you will pursue, make sure that you will only borrow what you need. And work while you are in college so you can limit the amount that you have to borrow for the next term.

Know your college expenses

If you will pay for college on your own, you also need to understand the different costs that you will encounter in college. According to the CollegeBoard.org, your school expenses will be summed into five categories.

  • Tuition fees. These include the actual amount that you have to pay the school for credit hours. These are for your classes. Take note that the number of credit hours and the course you are taking will affect how much you will pay in tuition and fees.
  • Room and board. Some universities and college separate the board and lodging while others group them together. If it is separate, you need to consider the inclusions in the room and board. Will it include your meals?
  • Books and supplies. This will have to be considered as a separate expense since it varies every term and course. But according to the site, the average estimate for this is $1,200 – for a four year course.
  • Personal expenses. These are everything that you need to spend on to live comfortably. Your phone, laundry and meal expenses fall under this category. Include here your clothing and entertainment expenses too.
  • Transportation. This is an expense category for both car owners or those who use the public transportation. Factor in these costs before you go to college.

All of these should be considered if you are going to pay for college. Do not concentrate too much on the tuition fees. Your college expenses will be a lot more than that. At this point, creating a frugal budget will be really helpful to maximize your limited resources and lower your debt amount.

Parents and kids should join forces to go through college without debt

In the end, while parents are not obliged to pay for their kid’s college tuition, it is important for both the parents and the student to work together. That way, the latter will not have to be buried in debt and at the same time, the parents does not have to compromise their retirement money.

Here is a video about a young man named Brandon and how he is trying to go through college without any debt.

There are two important factors that allowed Brandon to attend college without having to rely on student loans.

  • His parents saved for college shortly after he and his siblings were born. The saving started really early so the parents did not have to shell out any money by the time Brandon had to go to college.
  • Brandon worked part time jobs and during school breaks to make more money. This young man worked hard so he can finance his own needs without relying on his parents. Not only that, he also knows that the experience he will get while working through college will help him when he goes out to the corporate world after graduation.

This is a formula that can really work well for any type of family.

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