Manage Your Personal Consumer Debt
Labels:
debt,
personal debt
Almost everyone has or will have some form of personal consumer debt to manage. Borrowing money can be a good thing. For example, it could allow you to purchase items like a new home when you don’t have the cash in hand. It can also be bad, like when you borrow more than you can afford to pay back. But if you follow the simple rules outlined below, you can manage your debt wisely, leaving you money to save and invest for the future.
- Establish a good credit history. Pay your bills in full and on time. A good payment history could lead to easier access to credit when you really need it and could also make you eligible for more attractive interest rates.
- Borrow wisely. Don’t take on more debt that you can afford and beware of shady lenders and aggressive salespeople. If a deal sounds too good to be true, it probably is.
- Work with your creditors If you get behind. Call the people you owe money to and try to work out a reasonable repayment plan within your means. Since collecting on unpaid debts can be costly and time consuming, many creditors are willing to work with you. Get help if you need it. Credit counseling services can help get your bills under control.
- Pay higher interest debt first. Try to pay down the debt that is costing you the most. Tackle the higher interest debt first and then move on to the one with the next highest interest rate.
- Check your credit on a regular basis. Mistakes happen. Identities are stolen. One way to protect yourself from these pitfalls is to check your credit report regularly to make sure it’s accurate. Free credit reports are available on an annual basis from the main credit reporting agencies. It’s easy and could alert you to problems before they get out of hand.
Manage your personal consumer debt. Don't let it manage you!
Create a Finance Budget Plan for your Household
Creating a finance plan for your household budget is the first step to getting your financial house in order. Gathering information and assessing your goals and needs is very important if you want to develop an effective personal budget plan for yourself. Following are steps to take in order to create a plan for your household budget that allows you to prioritize your spending and begin planning for future wants and needs.
Gather your financial information - The first step is to gather all of your financial documents, helping you get the clearest possible picture of your current financial situation. These can include bank statements, investment account statements, monthly bills, mortgage payments, pay stubs, and so on.
Inventory your income - Next, take stock of your monthly income. In addition to income from your regular paycheck, don’t forget to include other sources of income that you may have, such as investment accounts, trust accounts, rental property income, and part time work.
List your expenses - Now list your monthly expenses as Mandatory or Miscellaneous. Mandatory expenses can include groceries, clothing, mortgage/rent payments, utilities and insurance payments such as life, health, auto and homeowners. Miscellaneous expenses could include travel, entertainment, hobbies, gifts, and dining out.
Don’t forget about other expenses - Expenses should also include money that you need for your next car, your child’s education, and your retirement savings. Factoring in what you should set aside for these items is an important part of the budgeting process that is often overlooked.
Adjust your spending habits - If you’re spending more than you’re taking in each month, you should first take a look at trimming your miscellaneous spending. Try eating out less each month, selling the motorcycle, or scaling back the plans for the family vacation.
After you’ve gone through the time and effort to create and put your finance budget plan for your household into action, don’t forget to review it regularly to make sure you’re still on track.
The Benefits of a 401k Plan
In spite of efforts to educate people on the benefits of a 401K plan, there are many who do not understand the advantages to contributing to an employer sponsored retirement plan. The 401K plan was designed to encourage working class people save for their retirement years. Below are some key advantages to participating in your company's retirement plan.
Lowering your current taxable income: Contributions to your plan account are before tax. That means they are made before taxes are taken out of your paycheck. The advantage here is when you contribute before tax dollars to your 401K plan, you lower your taxable income. Plus you won't pay taxes on your savings until you take it out. The sooner you take advantage of this tax break, the more money you could save in the long run.
Accelerated saving: If you are age 50 or older, The IRS has a provision allowing you to contribute to your 401k above and beyond the typical dollar limits set for your 401k plan. Catch up contribution provisions offer an opportunity to accelerate saving by allowing you to contribute even more to the plan. These contributions are also pre tax meaning you could see an even bigger tax break than if you are contributing the maximum amount.
Free money: If your employer offers matching contributions, you’ll enjoy watching your account grow even faster. The standard is a 50% match on every dollar up to 6% of your gross income. This essentially equates to a 50% return right away. I guarantee there aren't too many investments that will generate that kind of return.
To make the most of the tax advantages and the other benefits of your 401K retirement plan, start saving early and save the maximum amount allowed by your plan. Or save as much as you can afford to right now and increase your contribution when possible.
Estimate the Costs of Home Ownership
Labels:
home ownership,
insurance,
taxes
Millions of first time home buyers often do not estimate the costs of home ownership prior to taking on a mortgage payment. The purchase price of the home along with a low interest rate and a choice area is all a lot of people need to convince themselves they are making the right decision. However, there are some very important factors you should consider prior to making a commitment to buy a home.
Property Taxes - Local governments and schools often depend on property taxes as their primary source of income. These taxes are based on a homes assessed value which occur every three to five years. It's important how much value your locality has placed on a home before making a purchase. The average is around 1% of the value of your home but it does vary depending on your state of residence.
Home Owners Insurance - This insurance provides coverage in the event of a disaster that causes damage to your property. It also covers any accidents that may happen at the home which you or members of your family are liable for. If you financed the purchase of your home with a mortgage, the lender will require you to obtain a homeowners insurance policy. Check with a local insurance agent about rates specific to your area.
Private Mortgage Insurance - If your down payment on a home is less than 20% of the selling price, you are required to obtain private mortgage insurance or PMI for short. The amount will vary depending on the amount of your down payment and loan itself. You may be eligible to have this requirement waived if you agree to a higher interest rate although that is typically not advisable. It's best to be in a position to put at least 20% down in order to avoid PMI all together. The average amount is usually around .05% of the purchase price of your home.
Home Maintenance - This is usually one of those forgotten costs that surface as soon as you have to make some sort of repair to your home. It's surprising that people and especially those who are used to renting don't account for the fact that repairs made to a home are funded by money out of their own back pockets. A general rule of thumb is to estimate 1% of the value of your home for annual repairs. Of course, if you buy an older home the repair costs can be substantial and you will have to adjust as necessary.
There are many advantages to owning your own home but there are also many things to consider prior to becoming a home owner. It's important to know and understand the costs involved to avoid getting in over your head with a mortgage payment you can't handle. If you don't estimate the costs of home ownership before hand, you may find yourself on an uphill climb for a very long time.
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