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Do Not Let Your Debt Problems Keep You From Buying A New Home

house and calculator on a mortgage applicationWe all know how debt problems can keep you from improving your finances. It can keep you from investing your money so you can grow your personal net worth. Well this particular fact can be proven by the recent statistics from Credit.com.

According to an article published on the site, 52% of Millennials admitted that their debts are keeping them from buying their first house. This data came from a survey conducted by TD Bank. Their debt obligations are keeping them from saving up for a down payment – or at least, 70% of them are saying this. It makes a lot of sense because there are several news reports that say how Millennials are so deep in student loan debt.

But despite this obvious difficulty, 5 out of 10 Millennials think that they can buy their own house in 5 years. In fact, majority of them believe they can buy a home in the next 2 years.

Although your debt problems will make it difficult to buy a new home, it is not impossible to do it. If all the Americans treat their debts as a hindrance to buy a home, then nobody will become a homeowner. The consumer debt problem in the country seems like something that will never be solved – or at least, eliminated. We will always have some form of debt to our name. The key is to learn how to manage your debt situation so it can never keep you from reaching financial goals like buying your own house.

How to buy a home despite your debt situation

Truth be told, majority of homeowners were probably in debt before they bought a house. Some of them probably had student loans like the MIllennials. Others have credit card debts. There are homebuyers who have existing personal loans before they applied for a mortgage.

This is a certainty because mortgage lenders look at the credit score of buyers before granting approval for the home loan. A credit score is a number that indicates how creditworthy a person is. This is computed based on their credit report – which is a record of their credit behavior. If you do not use credit before buying a home, it will be very difficult for you to get approval for a home loan. After all, this is a huge amount to borrow. Lenders will not easily trust a person with a low credit score because they are considered to be high risk borrowers. That being said, being in debt before buying a new home is the best way for you to do it.

Of course, there are certain rules that you need to follow because debt problems can be a tricky financial situation to be in. Too much debt amount will get you disapproved of your home loan too – thus keeping you from buying a house. So what should you do in order to keep your debt situation from ruining your chances of living in your dream house? Here are a few tips that you can use.

  • Fix your credit score first. If you consider your credit situation as a problem, it means you have more debts than you can handle. It may be because you are having a hard time paying it off. In case this is true and you have already missed a couple of payments, that would mean your credit score is quite low. According to the statistics provided through CreditCards.com, Millennials have the lowest Vantage Score average at 628. If this is your score, you need to take your time before you buy a house. Get your credit score up first so you can be approved of a low interest rate home loan. That should help make your debt payments easier to commit to.
  • Save as much as you can for a down payment. While you are fixing your credit score, you can also work on saving for your down payment. The higher you can pay upfront, the less amount you need to borrow. This strategy will save you a lot of money in the long run. So be patient and set aside an amount each month so you can pay at least 20% of the sale price as your down payment.
  • Know how much you can afford. It is also very important that you be honest with how much you can afford to buy. If your finances can only afford to buy a 2 bedroom apartment, do not try to buy a bigger 3 bedroom home if it will cost more. You can forego having that extra room if it will give you bigger debt problems in the long run. Do not try to buy a home in posh neighborhoods if you cannot afford it. As long as the community is safe and secure, you can go for the cheaper properties.
  • Choose the right home to buy. There are a lot of questions that you need to ask yourself before buying a house. One of them is about what you are looking for in a home. Do not force a 4 bedroom house if you only have one child and you do not have plans of having another. The more bedrooms there are, the higher you have to pay for it. Find a house that will also compliment the lifestyle that you wish to lead.
  • Time when you will buy your home. It is very important to time when you intend to buy your house. Look at the housing market to get tips from there. Most experts would say that you should buy a house when the market is down so you can purchase the property at a lower amount. However, there is one real estate investor who claims that you can buy a home anytime you wish – as long as you have the plan and strategy in place to make it worth your while. Here is a video that explains how you can know when it is the best time to buy a property. In the video is Kris Krohn, a real estate investor with hundreds of real estate property investments in the country.

Two ways you can own a home without making debt a burden

The truth is, there are two ways that you can be a homeowner without adding to your debt problems.

Own a tiny house

Tiny homes started to gain momentum when the housing market crashed during the Great Recession. A lot of consumers lost their homes to foreclosure when they failed to pay off their mortgage because of job loss. Some of them could not profit from their homes because of the lower value at that time. But that did not erase the dream of Americans to live in their own homes. The answer to that was building tiny homes. These houses are literally small – a cross between a cottage and an RV. It is actually like a small cottage on wheels and the designs are quite attractive. If you are living solo or as a couple, you can live in these for a couple of years. There are even designs that small families can live in. These tiny homes are inexpensive (some as low as $22,000) and you can build one on your own. A news article even featured a high school student building his own tiny house to void the problem of mortgages. If you want your own place but you do not have at least a hundred thousand dollars (and you cannot qualify for a home loan), then tiny homes should be good enough for you. At least, for the meantime.

Buy a home that you can rent out.

Another option to keep homeownership from adding to your debt problems is to buy a home with a garage or basement that you can rent out. In REInvestorTV.com, real estate investor Kris Krohn mentions how he started building his empire of properties all over the country. He said that his mentor taught him to do a couple of things: have at least 2 years of work experience, build up his credit score and save up for his down payment. He waited for 14 months to save $3,000 – something that he will use as the down payment for the first house he will buy. During that waiting period, he established a good credit reputation and together with his work history, he was able to get a loan to finance a $110,000 house in the market. Now this house was then worth $150,000 – which gave him an immediate $40,000 equity. So how did this strategy keep him from debt problems? This first house had a basement that he could rent out. So he lived in the main house and found a tenant that paid him enough to cover his monthly amortizations. If you think about it, he owned the house that he lived in and he only spent $3,000 in cash.

These two strategies can help you own your house without putting additional strain in your debt problems. Think about your options and analyze how you can benefit from it.

Six Important Things To Do Before Buying A House

A young couple with money at homeSo the time has come. You feel that you’re ready to become a homeowner. Buying a house can be one of the most exciting events in your life. Just imagine. No more listening to that leaky faucet because your landlord won’t fix it. No more worrying about where you’ll live next. You’ll be in one place for maybe the rest of your life. In short, you’ll soon be enjoying that American dream of owning your own house.

But not so fast there.

There are some things that you need to do before you begin house shopping to make sure that the experience will be as easy and as positive as possible.

Gather up all your financial stuff

It would be a mistake to start shopping without first getting your financial ducks in a line. This means that you need to get your credit report from the three credit bureaus – Equifax, Experian and TransUnion – and go through them with a fine tooth comb. The Federal Trade Commission released a report last year that nearly 20% of us have errors in our credit reports and yours could be one of them. Look carefully for mistakes that could be dragging down your credit score. Did you really miss that payment? Do you not remember having done business with that particular lender? If you spot things you don’t believe should be on your credit report you need to dispute them. You do this by writing a letter to the credit bureau along with whatever documentation you have to back up your claim. If you can get an error off your credit report it could help your credit score significantly.

Next, gather up the financial information you’ll need to apply for a mortgage. This typically includes your previous years’ tax returns, pay stubs and bank statements. The goal here is to be able to show a loan officer that you have the ability to make the requisite payments on your mortgage.

Be a mortgage detective

Now that you have your financials in hand it’s time to go online and start researching options for your mortgage. There are a number of online aids available that allow you to comparison shop a number of different lenders in all 50 states. These range from small, local or regional providers to bigger, better known brands such as Bank of America and Citi. Two of the most popular of these tools can be found at Banknote.com and TimeValue.com. Quicken Loans and Lending Tree also offers mortgage comparison tools. Be sure to to see if you would qualify for a special loan such as a Veterans Affairs (VA) loan or any other special financing options through a state or federal program.

Once you’ve chosen your mortgage lender be sure to get a preapproval letter as this will make you a more competitive buyer.

Check out neighborhoods

Here comes the fun part, which is choosing your neighborhood. You will want to investigate everything from schools to commute times and criminal activity. The website Trulia.com has maps that will show you the incidence of crimes by neighborhood, the location of schools, commute times and even neighborhoods’ affordability. If it turns out you can’t find anything you can afford in the neighborhood of your choice, check out those that border it for more options.

Make a checklist

couple discussing finances

Couple calculating their budget

The more house shopping you do the tougher it will be to keep your priorities straight and to remember what you’ve seen. In fact, as you see more homes you can actually lose track of what matters.

For example, you might remember that one house had a wonderful kitchen but you can’t remember exactly which one. Or you do remember a house you loved but you think it was listed at $50,000 more than you can afford.

This is where you really need to have a checklist. Probably the easiest way to do this is with a spreadsheet. Use the left-hand column to list the things that you really must have. This could include number of bedrooms, number of bathrooms, type of garage, a well-lit kitchen, proximity to schools, ample storage space and so forth. Following this you could have a list of your “dream” features like granite countertops, upgraded appliances, a patio, a water feature, a three car and so on.

Use the right-hand columns of your spreadsheet for the addresses of houses as you visit them. When you go through each one check off your “must haves” and your “dream” features. This will not only help you keep straight as to the houses you saw but will also help your real estate agent navigate through the home buying process faster and with less confusion. But don’t let your checklist straitjacket you. There’s an old saying in the real estate business that “buyers are liars.” What this means, as any real estate agent will tell you, is that many buyers often tell them one thing but then buy something entirely different. You could end up falling in love with a house that has few of your “must haves” but is outstanding in some other ways. You’ll be living in that house for many, many years so it’s important that you love it – even if it doesn’t have a well-lit kitchen.

Find the right real estate agent

There are real estate agents that are true stars in the business and can work miracles. Unfortunately, there are also some that are less than stellar. All it takes to get a real estate license in most states is pass a background check, take a course in real estate and then pass a written exam. Unfortunately, the sad truth is the skills that are required to pass a written test don’t necessarily correlate to what it takes to be a great real estate agent. Look for an online directory of real estate agents in your area with profiles, ratings and reviews. This should give you a better sense of the agent’s specialties and qualifications. You could also ask friends and family members for recommendations. And be sure to ask any prospective real estate agent for her or his references.

As the following video emphasizes, you need to choose an agent that specializes in the type of home that you want to buy and the neighborhood you’ve chosen. And watch this video for more tips on how to choose the right real estate agent.

Want To Save On Household Expenses? Stop Eating Out

calculator on top of a plateDo you want to save on household expenses? Of course you do. There are so many expenses that you need to make at home. You have all your utility bills to pay off. That includes your electricity, gas and water bills. You also have your subscriptions like your cable and Internet connections. Part of your monthly expenses also includes your debt payments like your mortgages, car loan and credit cards. Add to this your food budget and you have a lot of expenses to finance on a monthly basis.

An article published on CheatSheet.com revealed that a family of four would need an estimate of $58,000 each year to live comfortably. That is around $4,833 each month. The sad thing is, the median income in the country is $52,000. That means the majority of American households are a couple of thousand dollars short. Those under the poverty level earn $24,000 a year and that puts them at a huge disadvantage when it comes to their household budget.

The good news is, there are many ways that you can save on your household expenses. You just have to know what you are willing to sacrifice in order to stay within your budget.

One of the areas that you can save on is your food budget. In fact, there is a study that reveals how you can save a lot of money each month on food – and it does not involve what you spend while grocery shopping.

Stop dining out so you can lower your monthly expenses at home

One article from Yahoo.com revealed how the prices of food served at home and those in US restaurants have increased since 2014. Based on the data from the Bureau of Labor Statistics, the cost of serving food at home increased by 0.6% in May – compared to 12 months before. That is a relatively small increase if you compare it to the 3% increase of eating out.

According to the article, if you really want to save on your household expenses, you need to start using your kitchen more often. You need to start eating at home – and not take out. You need to start cooking your meals from scratch and eat them at home because that will save you more money in your budget.

Based on the details provided in the USDA.gov, in May of 2015, the total food expenses that were served at home reached $60.1 billion. In comparison, the food served in restaurants reached $62.5 billion. We are spending a lot more by eating out. Since the increase in food served at home is lower than those served away from home, you will realize just how big the saving will be if you keep on eating in your house.

Here are some benefits that you will get if you start eating at home – at least, benefits that go beyond what you will save on your household expenses.

  • You can sharpen your cooking skills. What better way to be an expert in cooking than by practicing it at home? Cooking is something that everyone can do – as long as you have the patience and the determination to learn, you can cook meals for your family. Of course, your first attempts might leave a lot to be desired but you will get better in time. That is for certain.
  • You can choose what your family will eat. Another benefit is you get to choose what you will feed your family. When you eat out, everyone can choose from the menu. You can argue so they will choose healthier meals but why go through all that? When you feed them at home, they are forced to eat what you put on the table.
  • You can eat healthy meals. Speaking of healthy meals, you can guarantee that everything that you put in your plate is healthy. From the cooking oil to the seasoning and all the ingredients – all of these will be something that you have chosen. If your spouse needs to lower their cholesterol, you can control what they eat by choosing carefully what you will use in every meal.

There are other financial benefits that you will get when you start eating at home. You can save on gas because you do not have to drive to the restaurant just to eat. You do not have to leave a tip. You can do other things while you are cooking too. It saves you money and time.

If that is not enough reason to eat at home, then what is?

Tips to save on your food expenses at home

Among all your household expenses, what you spend on food is something that you can fully control. It is very easy to cut down on food costs compared to your other expenses. You do not have to take drastic measures in order to save. You can keep your family full and healthy and still save a lot on your expenses. Unlike subscriptions, you do not have to fully terminate their services in order to lower your spending. You just have to implement the right tips that will allow you to maximize what you can save on your food costs. Here are some things that you can do.

  • Consolidate your shopping schedules. There is much to gain when you consolidate your shopping schedule. You get to save your time. You also get to save on gas. It just takes a bit more planning in order to pull this off but that is more beneficial for you than you know. When you are forced to plan, you get to take more time before you make purchases. You get to think about what you will buy and it makes you think more of how much you are willing to spend. It is easier to budget your household expenses if you have less shopping schedules.
  • Buy in bulk. Since you will be having less shopping schedules, you will be forced to buy in bulk. This is a good thing because you generally pay less per piece if you buy them in huge quantities. Companies usually price bulk items cheaper because they want you to buy more of their products. So if you want to save money on your food expenses, you need to start thinking about buying in bulk. Just be careful to buy only what you know you can consume before the expiration date. If you are buying a month’s worth of bananas, for instance, not all of them should be ripe. That way, the other bananas will have more time before they are overripe. Remember this when buying your produce.
  • Plan your meals. Since you have a shopping schedule and you will be buying in bulk, it is very important to plan your meals. If you will buy in bulk, you can plan to have chicken meals for one whole week. Research recipes so you will know what ingredients you can buy in bulk. It will not only help you save on household expenses, it will also allow you to save time – since you already know what you will buy in the store. It will also help you stick to your budget. If it is not on the list, then do not buy it – or at least, think twice before you proceed with that purchase.
  • Use cash when making purchases. If you want to stick to your budget, it is very helpful to use cash during your shopping errands. Put your money in an envelope and bring that with you. It is your choice if you want to bring your credit card in case of emergencies. If you decide to bring it, make sure that you can control yourself to keep from using it for unnecessary expenses.

These tips will really help you with your household budget. If you want more tips, here is a video from the Inside Edition about a frugal mom. She gives us tips on how you can save money on your usual expenses.

Common Money Mistakes Made By Young Adults

couple discussing financesThere’s no question about the fact that if you’re in your 20s or early 30s you’re still learning things about life. Unfortunately, life does not come with any guarantees. As you may have already learned having a college degree does not guarantee that you’ll be able to land a job related to your major field of study. And the fact that you have a checking account and a couple of credit cards doesn’t guarantee that you’ll be a smart money manager. If you were lucky your parents sat you down and had “that talk” with you and we don’t mean the one about where babies come from. We mean the one about money management and how to avoid piling up too much debt.

Good money management and an easy life aren’t guaranteed, either. There are some money mistakes made by young adults and here are the common ones you should do your best to avoid.

Not building a credit history

If you already haven’t had to borrow money the odds are overwhelming that you eventually will need to. This could be a car loan, a mortgage or a credit card because, yes, credit cards are a form of borrowing money. If you don’t yet have much of a credit history, you need to get to work building one. You probably already have at least one credit card and it’s important that you pay off your balance at the end of every month. If you have more than one credit card, you might want to put several of them away and then try to forget where you put them. If you can’t completely pay off the balance on a credit card, pay as much on it as you can and then try to get the debt cleared the following month. The important thing is to keep current, as this will help you build a good credit history.

Not understanding the reality of your student loans

Last year’s college graduate left school owing an average of more than $30,000. Whether this is true of you or you owe less than $5000 the important thing is to understand that you must repay that loan or loans. You will be considered late on a payment the first day after its due date. This won’t be reported to the credit bureaus until you are more than 30 days late. But if you don’t get caught up on that late payment your account will eventually be turned over to a collection agency and trust us, that’s one of the last things you want to happen. Once your account goes to a collection agency you could see your wages garnished, your tax refunds offset and the amount you owe increased dramatically by fines, penalties and attorneys’ fees.

Not getting started

When you’re fresh out of school you may find yourself falling into the “what came first the chicken or the egg” syndrome. This is how do you get on-the-job experience if no one will hire you to get it? If you find yourself faced by this challenge the answer is in two words – patience and persistence. You will need to keep submitting resumes and knocking on doors until you find something. And don’t be afraid to take a job that isn’t related to your field of study. We know of one young woman whose college major was environmental sciences but who took a job working at a Starbucks as a sort of stopgap measure. She is now running her own store. While that might not be in the area of environmental sciences it is helping her develop managerial skills she will be able to take with her into any other career. The moral of the story? The important thing is to get started even if the job isn’t necessarily related to your college major

Taking the wrong job

While you may be young this doesn’t mean that you don’t deserve a decent job. You may have to begin with a low-paying job, as did the young woman we just described. However, this doesn’t mean you should take a dead-end job where there’s no possibility of promotions or raises. This is an area where you need to learn to advocate for yourself. If you’ve been in a job some period of time but haven’t seen a raise you need to speak up. Never assume that what you’re currently earning is the best you can do.

Not learning to be savvy financially

The earlier you began creating good financial habits the easier your life will be. Many young adults make the mistake of spending the majority of their paychecks on non-essentials such as “living the good life.” What this results in is wasting precious years where they could be paying down student loans and investing. If you already haven’t done this you need to make a budget that tracks your monthly income and spending. You need to know how much you owe and when your payments are due. It’s also important to have an emergency fund equivalent to at least three months of living expenses. You’re bound to run into a financial emergency. When you do but don’t have the money put away to handle it you’ll just create more debt.

Refusing to ask for help

If you’re finances are currently in a mess, don’t be afraid to go to someone in your life for financial advice. There’s no shame in asking for help. Trying to manage your finances all by yourself can be scary. There might be someone in your family you can go to that’s very good in managing her or his finances. If not, you could go to a consumer credit counseling agency for help. There may be one of these agencies near where you live. If there isn’t, there are any number available online. Just make sure you choose one that’s a nonprofit and charges little or nothing for its services. In either case, you’ll be assigned a credit counselor who will review your financial situation and help you get things under control.

Trying to keep up with your peers

If you’re not careful it’s easy to fall under the spell of peer pressure. Just because your friends go clubbing every weekend, eat out regularly and always dress in the latest fashions doesn’t mean you need to. For all you know, they may be living this lifestyle on credit cards, which ultimately will leave them in a world of financial hurt. Live only the lifestyle you can afford based on your budget and not on what your peers are doing.

Finally, here is, believe it or not, a rap song video with some fun money management tips.

The Biggest Dos and Don’ts of A 401(k)

golden egg with moneyFor most people who are trying to save for their retirements an employer-sponsored 401(k) can be an incredibly great deal. The premise of a 401(k) is reasonably easy to understand. You take pretax dollars out of your paycheck, invest them over a number of years and ultimately wind up with a really nice nest egg come retirement. On the downside, 401(k)s have some rules that can be difficult to understand. So the important thing is to know the dos and don’ts of a 401(k) so you’ll know how to get the most out of yours.

Do begin saving early even if you don’t earn much

One of the most powerful forces in the known universe is compound interest. If you save just a little cash and give it a lot of time to grow this will be better than saving a lot of cash but for a short period of time.

Don’t be afraid of growth

If you start early you have a fair amount of time to offset any losses. Stop worrying about things and keep that 401(k) in growth mode. This means investing in US and international stocks. These will carry more risk in the short term but over many years they will be a much better wealth creation tool. You should even consider investing in stocks if you’re in your 40s or 50s because you could easily live to 80 or 90.

Do take advantage of your employer’s match

If your employer matches your contribution to some percentage take full advantage of it. This is basically free money. Your employer puts it in your 401(k) account as a reward for saving, which is something you should be doing anyway.

Don’t treat your 401(k) as if it were a checking account

You can borrow from your 401(k) but you need to be careful because it can be very costly. You’ll not only pay a penalty for any withdrawals you make before age 59 ½ you’ll also be short of that cash when it comes time to retire or in an emergency. The bottom line is that you should exhaust every other option for borrowing money before you dip into your retirement funds.

Do contribute from your bonuses

When you get a bonus it can be very tempting to use it for a beach vacation and there is nothing wrong with using part of it for that or for a pair of special shoes. But put the rest into your 401(k) account to help feed your long-term savings.

man balancing a checkbookDon’t forget catch-up contributions

If you’re getting close to retirement, are behind on your saving and are 50 or older remember that you’re allowed by the IRS if to contribute an additional $6000 for the tax year 2015 and that’s above the normal $18,000 limit. That makes a total of $24,000 you could invest in your 401(k). This can be a powerful catch-up tool.

Do increase your contributions when you get raises

There are a huge number of studies showing that when you make your saving automatic you don’t notice that missing money as much. Make arrangements with your HR department to adjust your 401(k) contributions each year when your salary increases. You’ll never miss the money and you’ll be glad you did this come retirement time.

Don’t ignore those taxes

The sad fact is that you don’t really have as much money in your 401(k) as you think. The reason for this is that it’s a tax-deferred account meaning that when you begin withdrawing funds the money will be taxed as ordinary income. If you don’t think this can hurt think about this. If you have $1 million in your 401(k) and withdraw the full amount you would pay the top tax rate, which as of this writing is 39.6% meaning it would cost you $396,000. Ouch!

Do learn if there’s a vesting schedule

While you may be getting a nice matching contribution from your employer do understand that it may have put strings on it through what’s called a vesting schedule. What this translates into is whatever money you contribute into your 401(k) will always be yours. However, some employers can and do reserve the right to get back its matching funds if you quit before you become vested. While federal law limits vesting schedules the terms can still be nasty. As an example of this, your employer might require you to work a minimum of three years or lose every single penny of what it matched. Check out your vesting schedule and make sure you understand its terms. This could actually help you decided when to – or not to – get a new job.

Don’t forget about your RMDs

RMDs are those required minimum distributions the government makes you take out of your 401(k) when you reach age 70 1/2 if you’re no longer working. How much you’ll be required to take out of your 401(k) involves a lot of math based on your account balances, age and marital status. This means that once you reach that 70 ½ and are required to start taking money out of your 401(k) you should consult with a tax professional or check out the RMD worksheets available on IRS.gov. This is important because if you don’t take out the required amount you can expect the government to penalize you so it will get its share regardless.

Do think long-term and diversify

The retirement giant Fidelity Investments made the astounding discovery that it’s best-performing accounts were those of people that didn’t even realize they had accounts. This is proof positive of the power of sticking with investments and not being influenced by day-to-day changes. What you need to do is diversify across asset classes including bonds and stocks and think both domestically and internationally.

Don’t be afraid to ask for assistance

When you reach that golden age where you’ve paid off your mortgage and paid for your kids’ college educations you need to think about the kind of retirement you want and the type of legacy you want to leave your heirs. And most importantly you need to think about when and how do you start moving money around to get there. These are critical questions and there’s nothing wrong with looking for help. An accredited financial advisor could help you navigate the various tax laws and figure out a long-term plan that would help keep those golden years golden. You don’t want to make an expensive mistake late in life and paying a smart person to help you could be an excellent investment.

If you’d like to know more about 401K)s, here’s a video courtesy of National Debt Relief with details.

 

5 Frugal Tips To Enjoy This Summer

happy familySummer is here and if you want to enjoy it without breaking your budget, then you need to pay attention to the frugal tips that will be discussed in this article.

Following a successful frugal lifestyle does not mean you will be depriving yourself of a fun-filled activity this summer season. Frugality should never feel restrictive. If that is how you feel as you practice frugal habits, then you are probably doing something wrong.

A lot of people who are practicing frugality actually feel quite liberated. Being frugal allows people to be free from materialism. They know that being happy goes beyond your possessions and how much you spend each month. It does not matter how much you can afford to spend as long as your priority expenses are met. When you are freed from this way of thinking, the pressure to work long hours in order to earn more will no longer be there.

If you haven’t thought about becoming frugal, then you may want to start practicing it this summer. According to a report from the American Express Spending and Saving Tracker, Americans are known to live for summer travel. They think of it as a reward that they deserve to enjoy after all their hard work and the cold winter months they had to endure.

This is probably one of the reasons why the summer season is one of the most expensive when it comes to entertainment costs. On top of the summer travel, parents have to deal with the additional expense of having all the children at home. They need to spend more to keep the house cool – which means higher energy costs. They have to spend on summer activities that will keep their kids entertained for the next two month. These are only some of the added expenses that they have to think about when the summer season comes in.

The report published on AmericanExpress.com revealed that 91% of their respondents have implemented saving strategies that will allow them to reduce costs this summer. Whether you have done the same or you lacked any plans for this season, you need to find some frugal tips that will allow you to keep your costs low.

5 ways you can have some frugal fun this summer

There are many ways you can have fun with a frugal lifestyle. All it takes is a clear understanding of what you believe will make your family happy. Add to that your creativity and you should be able to have a lot of fun this summer without spending a lot of money.

Here are 5 frugal tips that you can use to help get things started this summer.

Use your kitchen.

There are so many things you can do in the kitchen. Let your children have fun with you in this room. Create cold drinks that will help keep everyone cool when it gets too hot. You can also teach your kids how to cook or bake goodies. Make it as fun as possible by coming up with some food art. If your kids are not interested in cooking or baking, you can have them watch you as you work in the kitchen. Bake your own bread, mix your own drinks and cook meals from scratch. Whatever comes out of the kitchen can be consumed and that can help you save on take out or deliveries. You can even earn from the things that you can cook or bake. Sell cupcakes, cookies and other treats. The kids can help with the packaging. It can be a fun summer project for the family.

Staycation is the key.

AAA.com reports that 37.2 million Americans jumpstart their summer vacation with a holiday weekend – this year, it is Memorial Day. But travelling far will cost you money and that is what we are trying to avoid this summer. You deserve a change in scenery and some relaxation – that is true. However, you do not have to travel far to get that reward. What you need is some staycation options. Staycation is simply enjoying what you have in your neighborhood – or at least what is near your home. Instead of booking a hotel in a far place, why not book a hotel nearby with the amenities that will make you feel like you are in another state? Explore what you have in the community because there may be hidden gems that you have yet to explore. Go to the museum or enjoy a bike ride in the park, etc.

Explore the park.

One of the places that you can go to is the local park. Have a picnic there with your kids. Make it a spontaneous excursion. Instead of having snacks in the kitchen, put it in a picnic basket and drive to the nearest park with your kids. Bring with you a blanket, some books and outdoor game materials like some a ball, frisbee, etc. Your kids have a wide imagination. They will come up with something to do while out in the park. You will all benefit from the bonding and the exposure to nature.

Look for free activities.

Talking about frugal tips will always include something that is free. For sure, your local community has events and activities that you can enjoy without paying anything. From festivals, concerts in the park, open theatre to trade fairs, these are all possible activities that you can go to with your family. Look at the community board to see what you can do with your free time. If it is sponsored by the community, it is most likely offered for free or at a very low cost. You can also look at the amenities in your area. You may be able to have your kids join the summer sports league or something similar.

Spring cleaning – in the summer.

If you failed to do some spring cleaning, you may want to do that this summer. Go through all your stuff, and see what you can sell off. Have a yard sale so you can profit from the things that you no longer use around the house. Sometimes, what you consider as trash is something valuable to others. You can remove the clutter from your home and at the same time, earn some cash that may be able to fund some of your summer activities.

Follow these frugal tips to allow you to enjoy the summer without breaking the bank.

How to save on air conditioner costs this summer

One of the expenses that will also increase during the summer time is your air conditioner cost. Since the season is quite hot, you need to spend more to keep your home cooler. Your kids will be spending more of their time at home. You want to make sure they will be comfortable. That means you need to keep the air conditioner running more than the usual. You need to prepare for this increase in your household budget.

Fortunately, there are ways to keep your energy costs low despite the need to keep the house cooler. According to the tips found on ConsumerEnergyCenter.org, you can save energy for up to 3% per degree that is more than 72 degrees.

Of course, the challenge here is how to accomplish that higher degree so you can save on energy costs. Here are some frugal tips aimed at your energy consumption this summer.

  • Open the doors and windows. Make sure the house is well ventilated by opening the doors and windows. Let the air go through the house to keep it cooler.
  • Use a ceiling fan. A ceiling fan is a great way to get the air circulating in every room. Even if it is not enough to keep the whole house cool, it will help lower the need to make you’re A/C unit working too hard.
  • Go to cooler places. The best way to lower your use of the air conditioner is to just leave your house and go somewhere cooler. You can go to the park as long as the sun is not too striking. Or, you can go to the mall where the air conditioner is free. Other places you can go to include the library, museum, etc.
  • Make sure your A/C unit is in good condition. A broken A/C will consume more energy than the usual. Ensure that the necessary repairs and maintenance checks are done before the summer season comes in.
  • Keep yourself hydrated. Another way that you can stay cool without putting too much strain on your air conditioner is by drinking a lot of liquids. Use your kitchen to concoct drinks that can be enjoyed by your family.

To get more energy saving tips for the summer, watch this video.

Financial Lessons For Kids That They Can Use As An Adult

group of kids around saving conceptDid you know that teaching financial lessons to your kids will help set them up to a financially successful life in the future? You need to consider how important it is to learn financial management at an early age. There are many benefits to knowing how to manage your money properly. For one, you can use financial management as a debt solution. It can also keep you from debt in the first place. This is one lesson that you want your child to have as they enter into adulthood. One bad financial decision, like student loans, may result in decades of suffering.

According to an article published on DailyFinance.com, it is revealed that the percentage of students who display responsible financial behaviour declined – at least when you look at the statistics from 2012 to 2014. These behaviours include tasks like reviewing bills, paying bills on time, following budgets, paying off credit cards and controlling their spending. The survey involved 42,000 first year college students from both four-year and two-year colleges and universities. The topics in the survey covered savings, banking, school loans and credit cards. The report is titled “Money Matters on Campus” – an initiative from Higher One and EverFi, a financial company and education technology company respectively.

The report indicated that college students are stressed financially – regardless of where they come from in life. According to the report, the thing that gives them the stress the most is their level of student loans.

It is very important that you equip your kids with the right lessons that they can use even as they get older. Truth is, this is not very hard to do. A lot of financial lessons that we got as kids can easily be applied even as we get older.

Money lessons we got as kids that can be applied when we’re older

According to Bankrate.com, there are a lot of parents who fail at teaching their kids the right financial lessons. In an article about teaching kids money lessons, it is revealed that 20% of parents have never talked to their kids about basic money concepts. This data came from a survey done by True Credit of TransUnion.

You need to do better than these parents so you can prepare your kids for a future filled with the right financial decisions. Here are 4 simple financial lessons that you can start with.

Money does not grow on trees.

Some parents think that this is a difficult concept for kids to grasp. But when you think about it, they need to learn it because it teaches them the value of money. They have to realize that you are working hard to earn the money that you are spending at home. You can discuss with them the concept of an income and how you need to spend hours in the office or your business to earn money. To illustrate this lesson, you can ask them to do extra difficult chores at home – something that they will be paid for. Choose these chores wisely. Try not to reward them for simple chores because that might make them refuse to help around the house if they will not be paid for it. If they are older, you can encourage them to find part time jobs – especially during the summer when school is over.

Just because you want it, doesn’t mean you should get it.

The next lesson that you can teach your kids is about smart spending. As a parent, it is quite difficult to say no to our children. But you know that it is never a good idea to give them everything they ask for. You need to help them get used to the idea that wanting something does not necessarily mean they should have it – especially if it is not a necessity. This lesson can serve as the foundation for smart spending habits. They can learn that even if they can afford to buy something in cash, it does not mean they should buy it.

Wait to save before you buy.

In connection with the precious lesson, you need to stress the importance of saving to your kids. Saving can help them purchase a lot of things in the future. If you have to say no to one of their requests, you can encourage them to save for it instead. If there is a toy that they want to buy, you can tell them that they can save up for it using their allowance. For younger kids, you can encourage them to help beyond their usual chores so they can earn extra money from you. They can use that to save up for the purchase that they want to make.

Spending money is fun.

While you need to encourage them to save, it is also important for you to teach your kids to enjoy spending the money that they have. This is especially true if they worked hard for that money. Have them commit to save a portion of it and then let them enjoy spending that money. They deserve whatever it is that they will spend it on. Try not to teach them to feel guilty if they do not save everything they earned. That is a mistake because they deserve to know that they can spend their money anyway they wish – as long as it is done in a smart way that will not jeopardize their financial standing.

Teaching kids smart money management skills is easy if you practice what you preach. Living by example is a lot better than hours of talking to your children about money management. Even if you spend hours teaching your kids, if they see that you are practicing something else, they are more inclined to follow what you are doing.

Money quotes from famous cartoons

If you feel like teaching your kids financial lessons seems daunting, you should know that there are a lot of tools that you can use to help you get the message across. For instance, Time for Kids and the financial editor of the “Today” show came up with a magazine that is intended to teach children money lessons. An article published on NYTimes.com explained that this magazine will target fourth, fifth and sixth graders. The publication will be distributed to schools nationwide.

There are also story books that you can use to teach your children about money. There are even cartoon shows that can teach financial lessons – if you know how to use them properly.

You should know that some famous cartoon characters have some pretty impressive quotes that you can use while teaching your kids money lessons. Here are some of them.

The past can hurt. But you can either run from it or learn from it. – Rafiki, The Lion King. This simply means it is okay to make mistakes when it comes to your money. As long as you know the lesson that you need to learn from it and you will avoid committing the same mistakes again.

Venture outside your comfort zone. The rewards are worth it. – Rapunzel, Tangled. This is a great quote that you can relate to investing. The simple rule in investing is this: the higher the risk, the higher potential there is to earn more.

The future is worth it. All the pain. All the tears. The future is worth the fight. – Martian Manhunter, DC Universe. The lesson you can connect here is about saving – specifically retirement savings. Although your kids will have to sacrifice and let go of some expenses, it will all be worth it if they end up saving a lot for their retirement.

You control your destiny – you don’t need magic to do it. And there are no magical shortcuts to solving your problems. – Merida, Brave. Merida here is telling us that when it comes to your financial problems, the shortcut is not the best way to solve them. For instance, when it comes to debt, bankruptcy may be the fastest way to solve it, but it is not always the best way for you to get out of debt. If a solution seems too easy and too good to be true, then it probably is.

Fairy tales can come true. You gotta make them happen, it all depends on you. – Tiana, Princess and the Frog. This means if you want to be rich, you need to work hard for it. Those get-rich-quick schemes are rarely true. You need to work hard to become rich. It all depends on how much you want to improve your finances – if you want it bad enough, you will do your best to reach your goal.

Do not be fooled by its commonplace appearance. Like so many things, it is not what’s outside, but what is inside that counts. – Aladdin, Aladdin. This young thief can be quoted when you are trying to teach your child about financial decisions. Just because a lot of people are doing something, buying a product or something similar, it does not mean they should follow suit. Teach your child to trust their judgement and stay true to what they want out of their finances.

There are other quotes that you can use to help teach your kids important financial lessons. You know your child best so you are in the best position to figure out the best way to teach them these important concepts.

Consolidate Debt, Pay For A Wedding Or Buy An RV — Without Ever Seeing A Banker

College student catching money in the airSo you need a loan. You might need the money to consolidate debts, buy a boat or an RV, pay for a wedding or pay taxes. You could go to your bank but, well, you just hate the idea of facing that personal banker and groveling for money. The problem with getting a loan from a bank or even a credit union is that you need to have pretty good credit. If you don’t, you might be facing the embarrassment of being turned down. And who wants to be turned down by that young snip of a personal banker who stares at you as if you were a dead fish.

 

If you have less than stellar credit or just don’t want to have to go to a bank for a loan there’s a new way to get one called marketplace lending. Until a few months ago it was called peer-to-peer lending but then some of the big guys of finance like hedge funds got involved so if you are able to get one of these loans it probably won’t come from one of your peers.

Why a marketplace loan can be better

The prime reason why a marketplace loan can be better is because it’s likely to cost you less than if you were to go to a bank or even a credit union. There are currently marketplace lenders offering loans for as little as 4% interest. And these are fixed and not variable-rate loans. Their terms are generally three or five years depending on the amount you want to borrow and your credit worthiness.

A second reason why a market place loan can be better is that you may be able to get one even if you have poor credit. Bankers hate risk. If you have poor credit that’s a red flag – that you represent a risk. In comparison, marketplace lenders are often willing to take more of a risk on you. Of course, your loan will come with a higher interest rate – to offset that risk. Finally, marketplace loans are unsecured so that if you are able to get one you won’t be required to provide any collateral.

How marketplace loans work

There are now numerous marketplace lenders but the way things work is generally the same. You fill out a short application where you provide information such as your name, address, social security number, the amount of money you need and how you will use it. If your application is approved your loan request will be posted on the website’s platform for potential investors to review. In most cases it will stay there for 14 days. If your loan is totally funded before the 14 days, the money will be direct deposited to your checking account. If it is only partially funded before the end of the 14 days you may have the option of taking the lesser amount. If it’s not funded at all or for less than some required minimum such as 70%, then you’ll be out of luck. In this case, you may allowed to repost your request.

How much you could borrow

Again, all the marketplace lenders tend to provide loans ranging from $1000 to $32,000 – depending on the individual lender. The terms of these loans are almost always three years or five years. Your interest rate will depend on your credit worthiness. In most cases after you fill out an application you will be assigned a letter grade and your term and interest rate will depend on it. If you have good credit you’ll likely get an A, which means you’ll get the best interest rate offered by that lender and probably a three-year term. On the other hand, if your letter grade is a C or D your interest rate could be as high as 20% or even 30%.

How you repay marketplace loans

Every marketplace lender we’ve analyzed all require their loans to be repaid through automatic withdrawals. Some will allow payments to be made by check but generally charge an extra $15 per payment for this. There are also almost always late payment fees and in some cases origination fees that can vary from 1% to 5% of the amount of the loan. These origination fees are usually added onto the loan amount so that if you were to borrow $5000 with a 1% origination fee, your loan would actually be for $5050.

Man counting moneyThere are lots of options

Marketplace lending sort of exploded over the course of the past year Initially there were essentially three options –Lending Club, Prosper and Funding Circle. However, new marketplace lenders have been cropping up recently like crabgrass. In addition to the three noted above, there are Peerform, Upstart Lending, SoFi, CircleBack Lending, Pave, Borrowers First and probably others we simply don’t know about.

Lending Club, Prosper and some of the other marketplace lenders operate kind of like banks in that they will loan money to almost anyone for practically any purpose. Some of the other lenders tend to be more specialized. For example, SoFi provides loans only to graduates of Title IV universities that have reasonably good credit ratings. All of the loans made by Borrowers First come not from individual lenders but from just one bank so it says that it’s able to qualify people and grant loans much quicker than some of the comparable marketplace lenders. And Funding Circle provides only business loans up to $500,000.

The downside

While there are many advantages to marketplace lending versus traditional lending it’s important to understand that it’s relatively new and totally unregulated. Banks provide safety in the fact that most belong to the FDIC and provide the same consumer protection regulations as Truth in Lending. In comparison, marketplace lenders offer no consumer protection. None have failed to date but this doesn’t mean there couldn’t be a failure. And if one does occur nobody knows what will happen to either its lenders or borrowers.

5 Things You Need To Know About Medicare Before You Need Medicare

Happy old couple looking at a cameraMedicare has been a Godsend for many Americans. There are now roughly 52.3 million Americans on Medicare; 43.5 million due to age and another 8.8 million because of disability. Medicare beneficiaries averaged $11,901 in total benefits this past year of which $5045 was Part A, $5092 Part B and $1773 Part D (more about Parts A, B and D later).

If you don’t think Medicare can be incredibly helpful, consider this. Both my parents died after long hospital stays and it cost them (or us) practically nothing. I have a friend who had emergency surgery last year. The total bill for his surgery and hospital stay was north of $120,000. What did it cost him? A little over $1200.

If you haven’t noticed, the cost of medical care has skyrocketed over the past 10 years. Consumer Reports recently reported, “Person for person, health care in the U.S. costs about twice as much as it does in the rest of the developed world. In fact, if our $3 trillion health care sector were its own country, it would be the world’s fifth-largest economy. “

If you haven’t yet reached the age where you’re eligible for Medicare we don’t have to tell you how expensive health insurance can be. But even if you’re a number of years away from 65 there are some things you need to know about Medicare before you need it.

There are four parts

There are four parts to Medicare. Part A includes hospital insurance. Part B includes medical insurance. Part C is known as Medicare Advantage. It includes all the benefits and services of Parts A and B along with some additional benefits and is operated by Medicare-approved private insurance companies. Part D, which was introduced under President George W. Bush, added prescription drug coverage.

The eligibility requirements

To be eligible for the original Medicare (Parts A and B) you must be either a U.S. citizen or legal resident and age 65. You would also qualify if you have been entitled to Social Security disability for at least two years, have end-state renal disease, require transplant or dialysis and are currently insured.

When to enroll

If you receive Social Security, U.S. Civil Service or Railroad Retirement benefits you will be automatically enrolled in Medicare Part A. If not there is an important seven-month enrollment period that overlaps your 65th birthday. The way it works is that if you want immediate coverage you must apply three months before you turn 65. If you wait and apply during the four months following your 65th birthday, you won’t have coverage for one to three months after you enroll.

If you fail to enroll during the seven-month period you will be penalized unless you or your spouse has health insurance where you work. The way this penalty works is for every year you fail to sign up, your Part B premium will go up 10% … and that’s forever.

There is a special enrollment period if you or your spouse is over 65 and covered by health insurance at your workplace. If this is the case you could delay signing up. If you do enroll then Medicare becomes the second payer. And if you enroll in Part B you will receive practically no benefits. You may also lose your Medicap enrollment guarantee.

What it costs

Generally speaking there is no cost for Medicare Part A. If there is some reason why you don’t qualify you can buy Part A coverage for a premium.

If you are eligible for Part A you’re also eligible for Part B. However, it ‘s optional. Premiums for Part B coverage start at $104.90 and are based on your adjusted gross income. If you sign up for Part B it will be automatically deducted from your Social Security monthly payments. Part B covers physician and outpatient care, home health, medical supplies and preventive services. It requires a co-pay of 20% of the covered benefit.Medicare doesn’t pay for everything

As great as Medicare can be, Parts A and B won’t pay all your medical expenses because of their deductibles and co-pays. In the case of Part A (hospital) coverage, there is a cost or deductible of $1216 for the first 60 days. It then jumps to an additional $321.50 a day for days 61 through 90 and then $630 a day for hospital stays beyond that.

These deductibles and co-pays are reasons for the afore mentioned Medigap or Medicare Supplement Insurance, which is designed to fill the “gap” between what Medicare covers and its deductibles and co-pays. There are 10 standardized Medigap policies to choose from. As you might guess, the more these plans cover the more they cost. As an example of this, Medicare Supplement Insurance Plan “A” includes 100% of Parts A and B but not the Part B deductibles. Plan C covers 100% of Parts A and B and includes 100% of Part B deductibles. Plan G is sort of the Cadillac of these plans as it provides 100% coverage of all deductibles, co-pays, excess charges; hospice care and skilled nursing facility care coinsurance.

The paperwork

The one downside of Medicare coverage is the bills and it’s important to review them carefully. We know that when you see your charges there will be a lot of medical mumbo-jumbo thrown at you so you may have to get out your dictionary or call your healthcare provider for some explanations. As an example of this the term “transdermal Clonidine procedure” means you had a Clonidine patch for some period of time. If you don’t remember having a patch or if you don’t have hypertension (which is what Clonidine is meant to treat) you need to call and dispute this.

medical debtBe sure to pay you bills

As painful as it might be you need to pay your medical bills as quickly as you can. If you don’t, your healthcare provider(s) could turn them over to a bill collector and this is something you definitely don’t want to happen. If you can’t pay your bills you should contact your healthcare provider and ask about arranging a payment plan. Depending on your circumstances you might also be able to negotiate a reduction in you bills. Barring that you could put the charges on a credit card or cards or get a debt consolidation loan. While these alternatives might not seem very appealing they are definitely better than letting your medical bills go to a collection agency as this would not only have a bad effect on your life but would also severely damage your credit score.

7 Things Your Employer Won’t Tell You About Your 401(k) Plan

You have a job, you’re getting a steady paycheck and your company just gave you a form to sign up for something called a 401(k) plan. You give it a casual glance, see that you’d have to fund the account with money out of your paycheck, turn the form over and go on with your work.Video thumbnail for youtube video 6 Tips For Simplifying Your Financial Life

Bad mistake.

1. Sign up regardless

Some companies will match the money you put into your 401(k) account up to a certain percentage. Others won’t. If you work for a company that doesn’t provide matching dollars you should still sign up for a 401(k) account because it’s an almost painless way to get started on your retirement saving. And yes, the money will be taken out of your paycheck every pay period but you’re less likely to miss the money because you never actually see it. Even if you start out by saving just $15 or $25 out of every paycheck this will eventually add up to a fairly serious amount.

If your employer does match your contribution you absolutely must sign up for a 401(k)account or you’re basically throwing away free money. As an example of this let’s suppose you contribute $142 a month. If your employer matches to the maximum it will have added another $1704 by the end of a year.

2. Establish automatic increases

Experts at this sort of thing say that your 401(k) contribution plus whatever your company matches should add up to at least 15% of your annual income. If you don’t feel comfortable starting out at that level set up annual automatic increases. For example, you might increase your contribution by 1% a year. If you change your mind for some reason, you can always remove that automatic increase and there won’t be any penalty.

3. Take time to understand the alternatives

Most 401(k) plans limit your alternatives or how you can invest your money. For example, you might be limited to certain mutual funds, stocks and bonds. You may also be allowed to invest only a certain percentage of your contributions in stocks. Take some time to review your alternatives and to do some research. Make sure you understand the differences between stocks, mutual funds and bonds. Mutual funds can be a good choice because they spread the risk as you’re essentially investing in a number of companies. As a general these funds neither increase nor decrease in value as rapidly as do stocks. Bonds pay guaranteed annual dividends. This makes them a very stable investment. If you’ve ever heard the financial expression “coupon clippers” this refers to bonds because in some cases you literally clip a coupon each year and exchange it for cash.

4. Don’t be scared of stocks

You should put some of your money into stocks and some into mutual funds or bonds. If you’re in your 20s or early 30s you might want to heavy up on stocks. Yes, they will go up and down but you probably have close to 40 years before you retire and blue ribbon stocks always increase in value over the long term. Since you have a long-term before you retire don’t be afraid to take a risk at this time. But again do your homework. Choose stocks that are not likely to be terribly volatile. It might be okay to buy stock in some of the high-flying tech companies such as Google or Apple but you might want to balance that off by investing in companies like UPS, Honda and General Mills. These companies might not have the flashy track record of an Apple or a Facebook but they are good value stocks that are almost sure to steadily increase in value over the years to come.

5. Learn what it’s costing you

We don’t know of a single 401(k) plan where there is not an annual administrative fee charged. You should be able to see this on your account statement. However, there may also be fees based on the funds in which you invest. You probably won’t see this on your statement because it’s subtracted from your investment. You may have to call your plan administrator to learn what this fee or fees are. For example, you might find you’re being charged $3.17 for every $1000 you invest in a particular fund. That would be okay because it’s below the average 401(k) fund, which is $5.80 for every $1000 invested. If you find you’re paying more than the $5.80 you might want to take a hard look at the funds in which you’re investing.

6. Think before you leave

Most companies have what’s called a “vesting” date”. If you leave before this date you may lose your employer’s matching contribution. If you consider your current job to be just a steppingstone on your career path make sure to learn if there is a vesting date and when it is before you decide to leave. While this might not keep you cemented to your job it’s something valuable to know. After all, you might learn that if you were to stay just another month you’d get the full amount of your employer’s matching contribution.

7. You can take it with youstack of cash

There’s the old saying about money that “you can’t take it with you” when you die. However, in the case of a 401(k) you can take the money with you. However, don’t use it for a great island vacation or a new car. If you spend it before age 59 1/2 you will pay a tax penalty of 10%, plus you’ll have to pay regular income tax on the full amount. If your new employer offers a 401(k) plan your best option would be to roll over the money into it. If not, put it in an IRA. Alternately, you could leave the money where it is with your current employer where it will continue to grow although you can’t, of course, add any more money to it. Just make sure you keep some kind of a reminder so that 10 years from now you won’t have completely forgotten about that money. And yes, many people actually do this.

If you’d like to know more about 401(k) plans here’s a video courtesy of National Debt Relief with details about them and how employer matching works …

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