Tuesday March 11, 2014
Debt can be overwhelming. The numbers are often so large being that debt-free seems like a longshot. How can you possibly pay off debts that are two or three times (or more) larger than your annual income?
The process isn't easy, but a lot of people pull it off. To make things easier, it helps to have a plan -- that'll help you make the first step, and you'll get started in the right direction. With that in mind, here are three great approaches to paying off debt. They all share some similarities, and that's because they're all full of good advice.
The nice thing about these approaches is that they leave some room for you to build a plan that fits. You can prioritize "bad" debts over "good" debts, and you can prioritize by interest rate or loan size (I prefer get rid of the highest interest rate first).
The hardest part about debt reduction is generally getting started. But once you're up and running, it gets easier to follow through. Having a plan (from start to finish) should help with that process.
Wednesday March 5, 2014
Student loans can help you fund an education, but we're hearing more and more about people who are dogged by student loan balances for life. Those loans can get out of hand, and they're difficult to get rid of in bankruptcy.
Student loans are especially tricky because a lot of students just get a large check - the money doesn't necessarily go directly to the school. Seeing that much money in your checking account creates temptation, and people have learned to use student loan money for daily living expenses (among other things).
Claire Murdough describes what people are doing (getting student loans without actually attending class), and why that strategy is dangerous. If you're using student loans, make sure to use them as an investment in your education. Living off of your loans puts you in an increasingly deep hole, and it makes it harder for you to qualify for loans you might really need in the future.
Monday March 3, 2014
An emergency fund helps you weather any storms that come your way. But how do you define an emergency?
If your car breaks down and you can't get to work, it's essential to get things running smoothly again (so you can continue earning income) without going into debt. Medical emergencies are, of course, real emergencies.
Some expenses might fall into a grey area. For example, it's tax season, and you might owe the IRS. When you find out about your tax liability it can certainly feel like an emergency, but it's probably not the best time to use your emergency fund. Sure, you might have to use it this year - but let's hope there's not another emergency until you replenish those funds.
For things like tax bills and special occasions, Stefanie (writing for See Debt Run) suggests making an important distinction: there are emergency expenses and there are irregular expenses. For emergencies, go ahead and use your emergency fund. But you'll be better off if you plan for irregular expenses. It doesn't matter how you do it -- you can let cash build up in your checking account or use an online banking subaccount -- just keep your emergency money available for real emergencies.
Friday February 28, 2014
Prepaid cards have become popular in recent years, and they continue to gain fans. Why? They are available to almost anybody, regardless of credit history, and you don't need a bank account (previously, the only way to pay with plastic was to use a credit card or your checking account's debit card).
Cards have evolved over the years. They used to be extremely expensive, and were only a good option for consumers who couldn't otherwise get a payment card. Now, it seems that these cards are no longer just a replacement for bank accounts -- they're being used in addition to bank accounts. A recent study from the Pew Charitable Trusts found that more than half of adults who use a prepaid card also have a checking account.
Why are consumers using prepaid cards when they could use a plain-old debit card? It's anybody's guess, although there are certainly good reasons for doing so. If you're considering using prepaid cards, keep in mind that although they're more consumer-friendly than they used to be, they're still loaded with fees. Research any card you're considering using and think carefully about how you'll use the card.