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.
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.
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.
Freezing your credit is one way to guard against identity theft. When you set up a credit freeze, information in your credit reports is unavailable (for the most part), so it's extremely difficult for a thief to open new accounts in your name: credit card companies won't open an account for a new customer if there's no way to check that customer's credit.
A credit freeze makes it difficult for identity thieves, but how does it affect you? Len Penzo describes some of the problems he's run into after freezing his credit. There is a small cost involved, the the main issue is that sometimes you want the information in your credit reports to be available -- even if you're not applying for a loan. Credit information is increasingly used in non-borrowing-related situations (signing up to view your Social Security Statements online, for example), so you'll need to unlock your credit reports from time to time, and that takes time and money.
America Saves Week runs from February 24th through March 1st, 2014. It's a great opportunity to focus your attention on your savings habits, and any improvements you make will put you in a more secure financial position.
What can you do to take advantage of America Saves Week? Take a close look at your finances. Any week is a good week for that, but most people find that distractions and obligations pull them in other directions. Here's an excuse to spend a little bit of time today so that things can be better tomorrow.
If you'd benefit from a bit of structure (who wouldn't?), head over to the America Saves Week website and get started. You can take a pledge and hold yourself accountable. You can also learn a lot about saving and help yourself stay motivated to save - and that will certainly help you reach your goals.
The program officially starts next week, but you'll be doing yourself a favor if you get a head start.
Saving money is great. If you can shave a few bucks (or more) off of your monthly expenses, it feels good and leaves more money for the important things in life. But what happens to that money after you save it?
You probably hear plenty of tips on saving cash, but you don't hear as much about what to do after you've saved that money. Unfortunately, your efforts at saving may be wasted if you simply spend elsewhere.
Donna Freedman, writing for MoneyTalksNews.com, explains how you can keep everything you save. There are several approaches, including sub-accounts and online bank accounts -- so read what she has to say and decide which method works best for you. By setting up a system, you'll make major progress towards your goals, whatever they are (you might need to start a savings account, or you might be building up funds for a new business venture).
If you stopped shopping at Target and Neiman Marcus as a result of recent data breaches, you might think you're less likely to fall victim to a data breach. Supporting small businesses might feel better to you, and you might assume that they're not worth hackers' time.
Unfortunately for small business owners and customers, data breaches at large retailers might mean the stakes are higher. Target, for example, probably takes data security especially seriously now (and they've got some money to throw at the problem - not that that always fixes things). And no department store wants to be "the next Target."
Adam Levin, writing at the Huffington Post, explains that thieves might be motivated to look at smaller targets:
"Hackers will always go after the weakest link. If they determine that the big guys have toughened up, they're just going to go after easier targets, like small businesses."
This isn't meant to give you a sense of hopelessness. It's just important to know that data breaches can happen anywhere, so you still have to watch your credit cards - even if you don't shop at Target. For small businesses, Levin provides helpful tips that can help you stay out of the headlines and on your customers' good side.
By now all of your tax forms are rolling in, and mid-April is coming quickly. If you owe money, you may be wondering how you're going to pay.
Hopefully you've budgeted for taxes throughout the year and you've got cash on hand. If not, you'll need to find a solution, and some of the alternatives can hurt your credit scores. Ideally, you'll want to pay in a way that keeps your credit in good shape.
Lucy Lazarony, writing for Credit.com, gives an overview of your options and describes how they'll affect your credit. Your taxes and credit are indirectly linked, but if you fail to pay the link becomes more direct: the IRS can get a judgement against you (which will lower your credit scores) and has a number of tools available to collect from you.
Managing your bills can feel like a chore. You need to keep track of who you owe, make sure you've got funds available, and get payments out the door on time. If you mess up, it can cost you: you might have to pay late fees, services might be cancelled (which can cause other issues), and your credit might even get dinged up if you let things go for too long.
How can you make things easier? A little organization never hurt. My Dollar Plan shares some great ideas on how to set yourself up for success when it comes to getting your bills paid easily. By working through Kristen's checklist (which shouldn't take long), you'll save a lot of time every month going forward.
One of my favorite ideas is to create an email account for all of your bills. As email accounts age, they tend to get cluttered. Creating a brand new account and using it only for "Payment Due" alerts will help you stay on top of your bills (and you can continue to skim through all the junk in your other accounts and delete freely).
[via Rockstar Finance]
You can buy stamps and send mail at the post office. You can even buy money orders. Someday, the US Postal Service might look a lot more like a bank and offer additional banking services.
Last week the Office of the Inspector General (OIG) of the U.S. Postal Service published a white paper describing how the USPS might get into banking services. The idea is to provide services to underserved consumers, who typically spend more (as a portion of their income) on financial transactions than consumers who are more financially secure. The USPS would not become a bank, but would partner with existing financial institutions.
Elizabeth Warren evaluated the idea today on LinkedIn. In her view, the program would be win-win: undeserved consumers would get access to affordable bank services, and USPS could increase revenues. The USPS would not replace banks and credit unions; only basic services like checking accounts and small loans would be available.
I don't know whether this is a good idea or not. There is an argument to be made for taking advantage of USPS locations just about everywhere, but the USPS will need to convince consumers and taxpayers that the strategy won't fail.