7 Ways to Get Your FICO Credit Score for Free

Man checking his credit score
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A good credit score is the key that unlocks the door to better loan terms, an improved chance of getting a rental apartment and even the odds of landing a job.

So, this three-digit number packs a punch. Knowing the score reveals whether you need to work to improve your credit score.

In the past, you’d have to pay to see your credit score. But that has changed. Today, you can get a free score from any of the following sources.

1. Discover

Anyone can access their credit score for free through the Discover Free Credit Scorecard program.

You don’t have to be a Discover customer to sign up for the service. It not only provides your credit score, but also will notify you of new accounts on your Experian credit report and send an alert if your Social Security number is found on the dark web.

2. Credit cards

Through the FICO Score Open Access program, FICO works with more than 200 financial institutions to provide their partners’ customers with free access to credit scores. The following credit card issuers are among those participating in the program:

  • Citi
  • Barclaycard
  • HSBC

3. Lenders

If you have student loans, an auto loan or a mortgage, you may also be able to get a free FICO score through your lender. Here are a few of the loan companies that have partnered with the FICO Score Open Access program:

  • Sallie Mae
  • Payoff
  • Vanderbilt Mortgage and Finance

4. Banks and credit unions

Dozens of banks and credit unions across the country also offer access to free FICO scores through FICO Open Access. These include both large and small institutions. Here are a few examples:

  • SunTrust
  • Bank of America
  • Affinity Federal Credit Union

Depending on the institution, free scores may only be available to customers enrolled in certain products, and the program may change.

5. Credit counselors

If you’re using the services of a credit-counseling program to improve your finances, you may be eligible for a free FICO score through that organization via the FICO Score Open Access program.

Partner organizations (see them listed below participating banks and credit cards) include companies with national or regional clients.

These are a few of the credit counseling organizations offering free FICO scores:

  • DebtHelper.com
  • Operation Hope
  • Consumer Credit Counseling Service of Savannah

6. Experian

The credit reporting company Experian offers free access to FICO credit scores through its website FreeCreditScore.com.

You won’t have to enter any credit card information to create a free account and see your FICO score. The company says it does not sell your information to third parties. It updates scores every 30 days.

7. Credit applications

A sometimes overlooked option for getting a free credit score is simply to ask to see it when applying for a loan.

If your credit is being pulled by a dealership, mortgage lender or bank, see if they will be willing to share your score with you. While this won’t work for an automated credit application, such as for a credit card, it is an option anytime you have contact with a company representative.

Keep in mind, though, that a major reason for checking your score is to provide you time to repair or boost your credit score before applying for a loan. If possible, try one of the options above first.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

5 Things You Think Could Hurt Your Credit Score — but Don’t

Surprised senior woman holding credit card
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There are plenty of things that people don’t realize can damage their credit score, from reserving a rental car to canceling a credit card.

At the same time, there are some things that people commonly believe can hurt their credit score — but that actually have no impact on scores.

Following are a few examples of the more persistent myths about what can affect your credit score.

1. Checking your credit report

As we noted in “7 Credit Score Myths: Fact vs. Fiction,” checking your own credit report doesn’t hurt your credit score. It’s actually a good idea to look at your report regularly, to monitor for errors and signs of identity theft.

Under federal law, you are entitled to one free report from each of the three major nationwide credit reporting companies — Equifax, Experian and TransUnion — every 12 months.

Order them through the official website AnnualCreditReport.com. Or, for detailed directions, see “How to Get Your Free Credit Report in 6 Easy Steps.”

2. Unpaid library fines

In the past, it might have been possible for unpaid library fines to hurt your credit score. But credit reporting companies no longer collect information reported through municipalities or municipal court records, according to Consumer Reports.

This is true even if the library sends your unpaid fine to a collection agency. Rod Griffin, director of public education at Experian, explains to Consumer Reports:

“A library may work with a collection agency, but municipalities have relationships with collection agencies that prohibit them by contract from reporting. To my knowledge there are no exceptions. We’ve removed all of that information.”

3. Unpaid parking tickets

Like unpaid library fines, unpaid parking tickets are part of municipal records — and, again, credit-reporting companies no longer collect this information.

4. Civil judgments

A civil judgment is effectively a court-ordered debt resulting from a civil lawsuit.

In the past, civil judgments could have appeared in credit reports and thus negatively affected credit scores. But in July 2017, the three major credit-reporting companies changed their standards for the collection of certain court-related records in such a way that civil judgments are generally excluded from credit reports.

5. Recent medical debts

Back in 2016, the three major credit-reporting companies announced that medical debts would not appear on credit reports until after a 180-day “waiting period” had passed.

So, if your insurance company hasn’t dealt with all the claims related to last month’s surgery, don’t worry: Those unpaid bills won’t show up just yet.

Obviously, it’s important to take care of medical debts as promptly as possible. If you’re having trouble paying, see “Successfully Negotiate Your Medical Bills in 7 Simple Steps.”

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

10 Things That Lower Your Social Security Check

Senior couple on a computer
SUPERMAO / Shutterstock.com

You’ve worked hard for Social Security retirement benefits, and you probably want every dollar you’re entitled to receive.

Unfortunately, the sad reality is that there are reasons why your Social Security payments could decrease. Many are in your control, but some are not.

Keep reading to find out how your monthly check could get dinged for everything from poor timing on your part to poor planning on the government’s end.

1. Failing to catch incorrect wage information

A young black man gets angry at his laptop computer while working at his office desk
Roman Samborskyi / Shutterstock.com

Social Security benefits are based on your lifetime earnings record. If the government doesn’t have the correct wage information for you, the result could be a smaller Social Security check.

To make sure the government has the right info on your wages, sign up for your own account at the Social Security Administration (SSA) website. Among other things, you can use the account to review your earnings history.

For more on Social Security accounts and earnings histories, check out “9 Social Security Terms Everyone Should Know.”

2. Receiving some types of pensions

Worried senior couple
wavebreakmedia / Shutterstock.com

Some workers may not be eligible for Social Security as a result of the nature of their employment. As we report in “6 Types of People Who Can’t Count on Social Security“:

“Not every worker pays into the Social Security system. In certain states, public employees are not covered by Social Security due to receiving a pension. They can include employees of state and local government agencies, including school systems, colleges and universities. In some states, they may also include police officers and firefighters.”

3. Missing the Medicare application window

K.D.P. / Shutterstock.com

While the full retirement age for Social Security has been slowly changing, the age for Medicare eligibility has remained the same. That means that even if you aren’t applying for Social Security until age 66 or later, you need to apply for Medicare at age 65.

Failure to do so could result in late enrollment penalties. For instance, Medicare Part B premiums are 10% higher for every 12-month period a person fails to sign up for Medicare coverage when they are eligible. Because Medicare payments generally are taken from your Social Security benefit, this could lower your Social Security benefit each month.

4. Rising Medicare premiums

Rayjunk / Shutterstock.com

Even if you apply for Medicare on time, you could find that your Social Security payments take a hit from rising Medicare premiums. That’s because Medicare premiums generally are deducted from Social Security payments.

In 2012, people paid $99.90 per month for Medicare Part B, which covers outpatient services. For 2020, that premium is $144.60 for most people, with high earners paying more — between $202.40 and $491.60, depending on their income.

5. Claiming retirement benefits early

Ekaterina Pokrovsky / Shutterstock.com

Claiming your Social Security benefits earlier than your full retirement age (an age set by the SSA) will result in a smaller check going forward. While the government is happy to start sending you monthly checks at age 62, it is going to reduce your monthly payment — possibly by up to one-third or more.

The reduction is permanent, so don’t expect to see a big bump in benefits once you reach your full retirement age.

6. Getting your full retirement age wrong

senior man
Roman Samborskyi / Shutterstock.com

You may think you’re doing everything right by filing for Social Security benefits at age 65, but filing at that age will reduce your payments as well. Although 65 was long considered the full retirement age, the government has been slowly moving the goalposts.

If you were born between 1943 and 1954, your full retirement age is 66. The number increases by two months each year (for example, 66 and 6 months for those born in 1957) until reaching a full retirement age of 67 for those born in or after 1960.

7. Earning too much income as an early retiree

sirtravelalot / Shutterstock.com

If you decide to go the early retirement route, you should think twice about continuing to work while receiving Social Security benefits. In 2021, if you are younger than your full retirement age but old enough to have started taking Social Security, you can only earn up to $18,960 before a portion of your benefits is withheld. In that situation, the government reduces monthly benefits by $1 for every $2 earned above that amount.

If you’ll hit your full retirement age this year, you can earn up to $50,520 in the months leading up to your birthday. Exceeding that amount means the Social Security Administration will take $1 for every $3 you earn over the limit.

Fortunately, these aren’t permanent reductions in your benefits. And, starting with the month you reach full retirement age, there is no limit on how much you can earn. In addition, any benefits withheld because of your earnings will be added back to your benefits each month starting at your full retirement age.

8. Owing taxes or child support

Worried stressed businessman
fizkes / Shutterstock.com

The government can also take money from Social Security to pay for back taxes or child support.

Garnishment for taxes is limited to 15% of your monthly benefits. However, if you owe child support, get ready for the government to take as much as 65% of your benefits to pay for that obligation.

9. Defaulting on federal student loans

Student loans
PHOTOBUAY / Shutterstock.com

Thanks to a U.S. Treasury rule, debt collectors for credit cards and other consumer accounts can’t garnish your Social Security benefits. However, that protection doesn’t extend to debts owed to the federal government. If you have defaulted on federal student loans for yourself or loans you took out for a child, some of your Social Security benefits can be withheld to pay off the debt.

10. Outliving the Social Security trust fund

A senior man opens an empty wallet
perfectlab / Shutterstock.com

Your Social Security benefits might take a hit if you outlive the program’s trust fund. According to the 2020 Trustees Report, the Old-Age and Survivors Insurance Trust Fund — which pays out Social Security retirement benefits — will run out of cash in 2034.

The retirement of the largest generation in U.S. history, the baby boom generation, is challenging the system as the cost of those workers’ benefits grows faster than the working-age population paying into the system.

After 2034, the program will only have enough income from employed workers to pay 76% of Social Security benefits, the report notes.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

7 Credit Card Debt Mistakes to Avoid

There’s really only one way to get out of credit card debt: by paying off the balance. But there are plenty of pitfalls along the way to make the payoff more costly than it needs to be.

If you’re among the consumers who paid off $108 billion in credit card debt in 2020, good on you! However, that still leaves $820 billion left to go, so it’s in your best interest to do everything you can to put a dent in debt that costs you in double-digit interest rates every month.

Picking a method for paying down the balance should be your first step — there are plenty of options, including avalanche, snowball and lasso — but there are mistakes you should avoid to ensure you get the maximum value out of whatever method you choose.

We’re here to help you avoid the most common — and costly — errors people make when getting out of debt. Let it help you make the best money decisions during your climb.

7 Credit Card Debt Mistakes to Avoid

You’re ready to pay off that credit card. That’s great! But just randomly paying back money without a strategy could end up costing you more money.

1. Forgoing a Budget

You know how if you don’t make plans for a day off, you end up wasting it on a Netflix binge instead of doing something productive?

Well, the same goes for paying off debt. If you’re simply going about it without a plan, there’s a good chance all your good intentions — and extra payments — will end up getting spent elsewhere.

How do you prevent the money from disappearing? By creating a budget.

Stop whining — it’s no different than planning a vacation itinerary. Instead of blowing your money on new shoes, you’ll create an attack plan and pay off debt faster with a clear direction.

Pro Tip

Never miss a bill — and incur late fees — by automating payments. Many service providers and banks provide automatic withdrawals for bills on specified dates each month.

By reviewing a monthly budget, you can see where you might be overspending in certain areas (I spent how much on takeout?!?) and commit to applying that money to your credit card debt instead.

Even if you’ve never lived with one before, we can help you create a budget that fits your lifestyle and your money goals.

2. Never Applying for a Personal Loan With a Lower Interest Rate

Don’t make the mistake of assuming that replacing credit card debt with a personal loan is just trading one debt for another. Interest rates can make a big difference.

How much of a difference? Let’s say you have $5,000 in credit card debt and you commit to paying $400 every month.

If your credit card interest rate is 17%, it will take you 14 months to pay off the debt, and you’ll pay $542 in interest. Alternatively, if you take out a low-interest loan at 4%, it will take you one less month to pay off the loan, and you’ll pay $116 in interest — a savings of $426.

3. Ignoring Balance Transfer Offers

If you’re paying off credit cards and you know you’re within striking distance of wiping them out, you could be throwing away money on interest by not researching short-term options.

By opening a balance transfer credit card, you could save yourself a bundle on interest. Balance transfer credit cards generally come with lower introductory interest rates for a set amount of time (plus any transfer fees). The rates then rise to a higher annual percentage rate after the promotional period ends.

If you’re prepared to pay off your credit cards within the promotional period, it would be a big financial faux pas not to put in the extra effort to research balance transfer offers.

And consolidating your credit card balances could not only save you money with a lower interest rate but also keep you on a more livable payment schedule, thus avoiding those pesky late payment fees.

4. Focusing Only on Saving Instead of Making Money

If you’ve reduced your expenses, but you’re still coming up short on extra credit card payments, remember the other half of the financial equation: money coming in.

Getting a side hustle to bank extra money for payments can accelerate your payoff schedule in a meaningful way. Consider this: If you make $50 extra each week, you could pay an extra $600 toward the credit card balance after just three months.

Pro Tip

An exit plan that defines clear financial goals can stave off a reliance on money from gig work to cover basic necessities and stop you from getting stuck in an endless hustle.

One of the keys to making the side gig work for you is to create a specific goal for the money you want to earn or the time you want to spend working. By developing an exit plan for your side gig, you won’t end up burning out and spending all the extra cash on ways to make up for being overworked.

A woman sits on the floor of her home while cradling her head on her lap to show being stressed.
Getty Images

5. Refusing to Ask for Help

If you feel like you’ve tried everything — or nothing, because you’re too overwhelmed — it’s time to swallow your pride and ask a professional for help.

A credit counselor can review your financial situation and make recommendations to improve it. Depending on your situation, they might help you organize your credit accounts, obtain a credit report, develop a budget or even help you set up a plan to pay off your debt.

If your credit card debt is more temporary but urgent — think: you got laid off and your water heater just died — you can also ask your credit card issuer for a break via a credit card hardship program.

The little-advertised assistance option could suspend your minimum payments or reduce your interest rate temporarily. But you won’t get the help unless you ask for it.

6. Forgetting the Residual Interest

Let’s say you’ve been paying down your credit card balance for a few months (or years). You get the statement in the mail that says your current balance is $1,000 and you’re ready to pay it off.

You go online to make the payment in full, but you schedule it for 10 days later because you’re waiting for pay day.

When you get next month’s statement, you’ll see that you were charged interest on that $1,000 for the 10 days between the account closing date and your payment (and probably a couple extra days for the time it took for the statement to arrive in the mail). That’s called residual interest (or trailing interest).

It might only be a few dollars, but if you don’t pay the residual interest — which could easily happen if you think that the balance is paid in full so you ignore the next statement — that amount will continue to accrue interest.

And not paying it will result in late fees and a hit to your credit score.

Instead, call your credit card company for the full payoff amount as of the date the issuer will receive the payment, then monitor your credit card statement for at least a couple months after to make sure the residual interest has been paid off, too.

7. Losing Sight of Your Future

Paying off your credit card bill is important. But so is your future.

If you’re putting every last dime toward credit card payments, you could be setting yourself up for a big financial hardship down the road.

In the short term, that could be due to an unexpected expense and no emergency fund to cover the cost.

In the long term, you could be losing out on retirement savings by not investing early and letting compound interest do its thing to grow your nest egg.

And once you make that last payment — oh, joy! — you’ll understandably want to celebrate.

But you’ll also want to think about life after debt, including sticking with the good strategies you used to get out of debt rather than falling back into bad habits that got you into debt in the first place.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

Source: thepennyhoarder.com

17 Ways to Dig Yourself Out of a Financial Hole

 At age 47 I was jobless, emotionally broken after an abusive marriage, and running through savings to keep a divorce attorney in my corner. Grieving my mother’s death and terrified that my disabled adult daughter and I would end up homeless, I couldn’t see any kind of future for myself.

Within five years I had earned a university degree on scholarship, found a new career as a personal finance writer, paid off divorce-related debt, and started rebuilding my cash reserves. In the next four years, I would open a Roth IRA and a SEP-IRA. I never was homeless, and I’ve never carried any debt since then.

Dig out of a financial hole

It’s possible to dig yourself out of a financial hole if you’re willing to do the work. But you can’t stop there. It’s absolutely crucial to establish smart money habits in order to build your financial future — and to keep from winding up back in the hole.

Maybe you’ve stalled financially because you never learned how to manage money. Or maybe you’re mired in debt due to circumstances beyond your control, such as job loss or serious illness.

It doesn’t matter how you got there. What matters is that you get yourself out. Use these basic tactics to get a handle on your finances.

The best time to have started getting your finances together was 20 years ago. The second-best time is right now.

If you’re in debt, quit adding to it. Easier said than done, I know: My divorce attorney charged by the minute, for heaven’s sake, yet I couldn’t do without representation.

What could I do without? Almost everything else. I’d always been fairly thrifty, so it wasn’t as hard for me as it might be for others. However, I hadn’t done such a deep dive into frugality since my single-mom days, when I did all the laundry (including diapers) on a scrub-board in the sink. Not everyone can (or wants to) go to the lengths I did, such as living mostly on dry beans and homemade soups, using coupon/rebate deals to stretch my budget, buying almost no new clothing for years, recycling cans picked up on walks around the neighborhood, looking for any possible side gig (babysitting, participating in medical studies, shoveling snow) to add a few dollars to debt payoff.

If you find it tough sledding at first, welcome to the club of being human. Then think about your spending in this way: Adding more debt doesn’t just mean paying extra interest, but also something called “opportunity cost.” Every dollar you spend is a dollar that can’t work for you any other way.

While you’re still in the hole, this means dollars that can’t help you dig your way back out. And once you’re debt-free? It means dollars that can’t help you meet new financial goals: retirement savings, paying off your mortgage, a trip to your family reunion, or whatever will make your life better.

To be clear: Your tolerance for frugal hacks is as unique as you are. I can’t force you to wash out Ziploc bags or to shovel snow for that matter. What I can do is urge you to adopt the main attitude that helped get me through those five years — something I call the Frugal Filter:

  • Do I really need this whatever-it-is?
  • Is there something I already have that might work?
  • If I absolutely must get this item, is there a way to do so for free (borrowing it from a friend, using Freecycle)? And if not, how can I make it as affordable as possible? (Some examples: thrift store, yard sale, cashing in rewards points for gift cards to pay for it.)

Start by adding up all your income sources. Next, list all your obligations, including but not limited to mortgage, minimum credit card payments, utilities, insurance car note, and legally mandated payments (e.g. alimony or child support).

Subtract the second number from the first. If your monthly expenses are lower than your current income, that’s a good sign. But keep in mind that these are your anticipated expenses. You’ll also need money for irregular expenses such as home repair or a replacement vehicle, as well as for vacations, gift-giving, and other things that make our lives richer.

Tracking spending means you’ll know where you stand. The next thing to do is look for the best ways to use your money.

A lot of people swear by the 50/30/20 plan: Spend no more than half your after-tax income on needs, 30% on things you want, and 20% on savings and debt repayment.

Arrange your current spending into those categories. If you’re spending more than you should in any given department, find ways to bring costs down. For example, you might be able to refinance the mortgage and cut grocery costs (more on that in a minute) to get your “needs” spending under 50% of your take-home pay.

The categories can be flexible, though. For example, if debt repayment is more important to you right now than going out to eat, you could use some of your “wants” dollars toward paying down your credit cards.

Speaking of which, you also need to…

Earlier you added up your basic monthly expenses. But what’s the total amount owed? A lot of people honestly don’t know, because they never added it up. Full disclosure: I still don’t know how much my divorce cost, because I don’t want to know. (Hint: It was a lot.)

Don’t be like me. Add up your credit card balances while seated, because the total might make you feel a little faint (especially when you consider how much interest you’re paying). Let that Big Number inspire you to get real about paying it off.

First: If you’re making extra payments on your current mortgage, stop for now and put that money against your credit card balance. Talk with a mortgage specialist about the possibility of refinancing; your loan would be longer, but the money you’d save each month can be used against higher-interest debt.

Next, call your credit card issuers and ask for lower interest rates. There’s no guarantee you’ll get them, but it can’t hurt to ask.

Some people swear by the “debt snowball.” You pay minimum payments on all your credit cards except for the one with the lowest balance (but not necessarily the lowest interest rate); for that one, make the biggest payment you can. Once it’s paid off, you attack the card with the next-lowest balance, and so on.

The theory is that paying one card off quickly encourages you to keep going. Then again, you’re paying more interest on the other cards. That’s why some suggest it’s better to pay off the cards with the highest interest rates first.

Do what works best for you. If you need that encouragement, go with the debt snowball.

Another option is a 0% balance transfer credit card: moving all your debt onto a new card that offers 0% interest for 12 to 18 months. You’ll pay a balance transfer fee, typically about 3% of the total debt. However, if you pay the card in full during the introductory period, you won’t owe any interest.

This could save you a ton of money. (Wish I’d known about it back when I was paying off my divorce debt.) However, you shouldn’t get a 0% balance transfer card unless you have an ironclad plan to pay it off. Otherwise, you’ll wind up paying a ton of interest anyway, in addition to the transfer fee.

Another credit card debt tactic is a personal loan, that is if you can get a decent rate. You’d need an ironclad payoff plan for this option, too. And no matter how you pay off your debt, you absolutely need a plan to keep you from running up the credit cards all over again.

Our consumerist culture tells us that if we want something, then we should have it. This is why some people shop for fun, I guess, even if they don’t technically need anything.

“Need” is the operative word. Food, shelter, basic clothing, and utilities are needs. Everything else is a parade of wants.

There’s nothing wrong with wanting things. But there’s a whole lot that’s wrong with buying things we can’t actually afford. So if you shop for fun, stop doing that. Stop it right now. Un-bookmark your favorite shopping sites. Avoid brick-and-mortar stores.

Delete your stored credit cards, and remember that “one-click” shopping is of the devil.

Sound harsh? Reframe that thought right now: This is prudence, not punishment. It’s part of your plan to meet financial goals, including getting out of debt.

Since we get a nice dopamine rush whenever we find that Really Good Deal, our brain will try to trick you into “just looking.” Look for other ways to feel good, whether that’s The New York Times crossword puzzle or bingeing your favorite shows on an affordable streaming service.

Find a friend who’s also trying to get out of the financial hole, and the two of you can support each other. (“I just saw the most amazing price on cheese straighteners and I really want to get one! Talk me out of it!”)

Here’s what worked for me: Thinking about what I did have, rather than obsessing about what I didn’t. Sounds corny, but hear me out. While living on about $1,000 a month (and still helping my daughter), I made an actual list of my advantages: decent health, a university scholarship, a library card, a part-time job, a 99-cent radio from the St. Vincent de Paul thrift shop, and the absolute conviction that I would one day be back in the black.

The only person who can help me is me,” I said out loud, more than once, developing a stoic pride in — once more! — making do on nothing. I was dirt-poor but I was not dirt. I had a plan. (I also still had the scrub-board, and even used it sometimes.)

Sure, sometimes I still wanted stuff I couldn’t afford. Most of the time, my attitude of gratitude helped me power through. After all, I had things that were important to me and I knew if I just kept working at it, my debt would be gone. It wasn’t easy. But as my dad used to say, “That’s why they call it ‘work.’ If it were fun, they’d call it ‘fun.’”

Be an adult. Own your mistakes or your misfortunes. And do the work.

Part of the reason I went broke was the financial support I gave to my daughter, whose disability benefit was minuscule. Ultimately she got married, found a job she could do from home, became self-sufficient, and moved to a different city. I kept giving, though: treating them to multiple meals out when I visited, sending numerous “just because” gift cards throughout the year, forgiving them a decent-sized loan (as a wedding gift).

Maybe you do this sort of thing, too. Keeping your grown kids on the family phone plan. Paying for their health insurance. Covering some (or all) of their rent. A financial planner told me some clients routinely buy extra stuff at Costco to bribe their children to drop by.

Perhaps your own kids don’t have to drop by because they’re already there: boomerang offspring who came back due to job issues, or who live with you so they can save up for their own homes. Or maybe your kids never launched in the first place — and why should they? Mom and Dad have a comfy home, a well-stocked fridge, and all the streaming platforms.

It’s natural to want to give our children the best. But here’s the thing: You cannot finance retirement. Your kids have many decades to build their financial lives. You, on the other hand, have a finite number of years to make the right money choices.

If you are in debt and/or have an underfunded retirement, do not set yourself on fire to keep someone else warm. Doing so could leave you out in the cold, financially speaking.

To be clear: I would have helped my daughter forever if necessary, but I’m very glad it wasn’t. Those dollars wound up going to retirement savings, my emergency fund (more on that below), and some cash reserves. I refuse to put my daughter in the position of having to support me if I run out of money in retirement. Don’t put that burden on your kids, either.

This may sound counterintuitive. Why save for retirement while I still have balances on 18% credit cards?

Because you can’t finance retirement, remember?

Retirement isn’t a question of simple-interest savings. It’s about growth, and growth takes time. The years you spend not contributing will be felt keenly when you retire — especially if you, like me, got something of a late start.

As noted, the 20% part of the 50/30/20 budget includes saving for the future. Ideally, you’ve already got some retirement savings from your current (or recent) job, and it will continue to grow as you figure things out. Resist the temptation to raid it early; the longer it stays there, the better your chances for its lasting throughout your retirement.

For some people, a 10% (or higher) contribution to their house of worship is absolute. If that’s you, know that it still may be possible to keep tithing at that level — but the money has to come from somewhere else in your budget. As noted above, you can find other ways to cut in order to keep the tithes coming.

If need be, talk to your religious leader about temporarily cutting back or even pausing your contribution. You could always promise to restart and to make up for the lost time.

Even when things were pretty dire for me I gave $20 a month to my church. Sure, that money could have gone toward my credit card debt. But giving to others got me out of my own head. That $240 a year reminded me that not only were my basics covered, I could even afford a little help for others who needed it. Never underestimate the satisfaction and peace this knowledge can bring.

I kept a certain amount of liquid cash while paying off the divorce-related debt. It was tempting to throw every dime I had toward the balance. But I also wanted cash on hand so I could pay for utilities, car insurance, and food in case my job went away.

Some money experts suggest having a year’s worth of expenses banked. Others say that amount discourages people from even trying to save. Instead, they suggest one to three months’ worth as an initial goal, with additional contributions when possible.

I’m in the latter camp. Rather than pressuring yourself to come up with tens of thousands of dollars, aim for a single month’s worth. Go back to that household budget and look for places to cut. Canceling a subscription box you’ve stopped being thrilled by, skipping that automobile detailing you normally get every couple of months, dropping the gym membership that you haven’t been using anyway — these and other budget trims can help plump up the EF faster than you would have thought possible.

Food is the budget category with the most flexibility. You probably can’t negotiate your car payment or your son’s college tuition, but you can cut down on meals outside the home and be choosier about shopping.

Accustomed to stores like Whole Foods and Sprouts? You might be surprised by the organic options available at regular grocers and even discount markets. Take an hour a week to browse different stores, and plan future shopping accordingly.

If you eat most of your meals away from home, gradually change your ways. Buy good-quality coffee and breakfast ingredients so you aren’t tempted to grab takeout every morning. Batch-cook and freeze breakfast sandwiches on weekends, or buy premade ones from a warehouse club (still more affordable than breakfast out).

Carrying your lunch just one day a week could likely save you $10 to $20, or $520 to $1,040 a year. Over time, work your way up to brown-bagging it at least three times a week, and put the thousands of dollars you save toward some other financial goal. In the four years it took to get my degree, I never once bought a single meal at school. An occasional snack or drink, maybe, but I carried all my meals. Again, I’m hardcore and looked at lunch as the fuel I needed to get through the day. Your mileage may vary. Just make sure it’s something you actually like to eat — and again, start slowly so that you don’t set yourself up to fail.

Dinners can be tough since most people arrive home as tired as they are hungry. A little weekend planning or some monthly batch cooking — especially with an Instant Pot — can change the way you eat, and will certainly change how much you spend.

Don’t know how to cook much, or at all? Do an online search for “easy affordable recipes with [your favorite ingredients].” Remember, you didn’t know how to use a smartphone until you made it your business to learn. The same is true of cooking.

It is worth it to shop around for something like car insurance.

Ask me how I know. When I arrived in Seattle, fresh out of my horrible marriage, I used the insurance agent a relative recommended. And wound up paying about $700 more a year than I needed to, for five years. Still shake my head sometimes about that $3,500 worth of opportunity cost, but I didn’t know what I didn’t know.

Look for better deals on Internet, phone, and cable service, too. This can save you some serious bucks, especially if you bundle services.

Note: Many people have ditched cable entirely in favor of streaming services. If you haven’t investigated these lately, you’ll be surprised by the options — and the potential savings.

All of it. You won’t get out of the financial hole overnight, so it’s essential to note individual steps along the way. For some, a spreadsheet makes things easier.

Or use my daughter’s method, which is to list debts on a whiteboard. Each time you make a payment, you get to amend the total to reflect the change — and oh, my, how satisfying it is to literally wipe the debt off the board.

Once you’re back in the black, keep those savvy money moves in place. Spend less than you earn. Contribute to retirement regularly. Build an emergency fund to guard against the unexpected.

Source: newretirement.com

Study: Credit Cards Hijack Your Brain, Leading to More Spending

Excited woman with credit card
Photo by Roman Samborskyi / Shutterstock.com

Credit cards get you to spend by creating a “purchase craving” in your brain, according to a new study out of the MIT Sloan School of Management.

Researchers say the study is the first to show evidence that a consumer’s choice of payment method can trigger different types of brain activation.

In the words of two of the study authors — Drazen Prelec of MIT and Sachin Banker of the University of Utah — when you use a credit card instead of cash, it serves to “step on the gas,” driving more spending “by putting costs out-of-mind regardless of the price of the product.”

In a press announcement from the MIT Sloan School of Management, Prelec says:

“Prior studies have shown that credit cards have a different effect on consumers than cash and are often blamed for overspending and household debt. But it is unclear from standard research tools whether credit cards ‘release the brakes’ by removing the pain of payment or ‘step on the gas’ by creating a craving to spend.”

The study found that paying with a credit card sensitizes reward networks in the brain. The process involves the striatum, a dopaminergic reward center that drugs like cocaine and amphetamines exploit.

Once these reward networks are sensitized, credit card use drives an increase in purchases.

As Prelec says:

“The reward networks in the brain that are activated by all kinds of rewards are activated by a credit card purchase. The act of putting that plastic credit card in your hand is associated with enjoyable purchases.”

The study also found that different types of cards — and the way they are used — elicit different types of spending. So, a card used at a restaurant or during a vacation spurs a different appetite for spending than a card used to fill up your gas tank, for example.

Looking for a new credit card — hopefully one that will not make you spend more? Stop by Money Talks News’ Solutions Center and search for the perfect credit card for you.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

13 Ways to Get Out of Debt

Stressed businessman looking at laptop
GaudiLab / Shutterstock.com

This story originally appeared on NewRetirement.

In 2020, Fidelity reported that the majority of people who were making financial resolutions for the new year wanted to achieve a debt-free life. While fortunes have shifted during the coronavirus pandemic, it is still a very worthy goal.

Not sure how to get out of debt? You have options.

Don’t play tug of war with your money. Get out of debt and align your finances on your side!

Based on my experience, there are quite a few methods for getting out of debt. Some require brute force, others discipline and there are even methods that are fairly passive and pain-free.

Find the right way for you to get out of debt.

1. The Debt Snowball

Studio Peace / Shutterstock.com

Endorsed by Dave Ramsey and many other personal finance gurus, this works.

What is it? It is a debt snowball!

Start with your smallest debt and pay it off as quickly as possible, all while making the minimum payments on all the other debts.

When your first debt is gone, apply that usual payment amount to the payments you make on your next-largest debt. Follow this pattern until you’ve officially slain the dragon and all debts are paid.

Why is this my favorite? Because people stick with it.

When you pay off a debt and strike it off your list, something inside you just goes berserk with enthusiasm. You want to do it again! “What’s the next debt? Let’s kill that one too!” And you just go absolutely nuts until all the debts are completely gone.

2. The Debt Avalanche

Man with sledgehammer hitting "Debt" ball
BsWei / Shutterstock.com

What does the debt avalanche do that the debt snowball doesn’t?

It considers the interest on your loans.

The debt avalanche applies a different methodology for how to get out of debt.

Instead of ordering your smallest debts to your largest, you pay them off from the largest interest rate to the smallest. Maggie McGrath did some great analysis on Forbes if you’re interested in the math and want to get your nerd on, but apples to apples, the avalanche does pay off debts faster than the debt snowball.

However, fewer people make it through this plan because you don’t get to see immediate wins to keep you motivated.

If your highest interest loan is your $20,000 maxed-out credit card, it might take you a full year to pay it off. By that point, most people have lost motivation and moved onto the next shiny object of life.

If you’re super nerdy and determined to get rid of your debt, however, the avalanche will probably work for you. If you need the small wins to pep you up and put that spring in your step, use the debt snowball.

3. Loan Consolidation

Couple meeting with loan officer
megaflopp / Shutterstock.com

If you have a few debts that have a high interest rate, and if you’re more passive about getting rid of them, then setting up a simple loan consolidation might be your best bet.

Set up the term length, negotiate the new, lower interest rate, and you’ll get rid of your debts at a pre-determined time — hopefully long before your retirement date. It’s not the most effective way to pay off your debts, but it is better than ignoring your debts entirely.

4. Transfer Balance to a Low- or Zero-Interest Credit Card

couple earning cash back while shopping online
Prostock-studio / Shutterstock.com

Depending on your credit score and debt burden, you may be able to transfer your debts onto a zero-interest credit card and really focus on paying down the balance as quickly as possible — preferably before that introductory interest rate resets to a higher one.

This is great if you are committed to truly getting rid of the debt.

5. Talk to Your Creditors About a Lower Interest Rate

A woman with a smartphone and credit card is taken by surprise
garetsworkshop / Shutterstock.com

Particularly with credit card debt, you may be able to talk with your creditors and ask them for an interest rate deduction.

The worst they can say is no. And, it doesn’t hurt to ask.

6. Try Negotiating a Settlement

Two pair of clasped hands on a conference table.
vchal / Shutterstock.com

Your creditors want you to succeed. They make money when you are able to pay back the loan.

If they think that you won’t be able to pay back the money you owe them or if they think they can get their money back faster, then they may be willing to make it easier for you.

Before negotiating, make sure you know exactly how much you can pay back and in what time frame. Be prepared to demonstrate to the creditor how exactly you are going to be successful. Prepare a compelling argument for why they should reduce the total amount of what you owe.

7. Refinance Your Mortgage

buying a home
ShutterOK / Shutterstock.com

Interest rates are near an all-time low right now.

If you have a mortgage, it may be incredibly profitable for you to refinance into a lower interest rate.

Just be sure to consider closing costs.

8. Refinance Your Home and Consolidate Other Loans Into Your Mortgage

Coins and Monopoly hotels and houses
igorstevanovic / Shutterstock.com

If you have a mortgage and additional debts, you can really take advantage of low interest rates by refinancing your mortgage and securing a home equity line of credit (HELOC) at the same time.

The refinancing can lower the interest rate on your mortgage. Assuming the HELOC is at a lower rate than your other debt, you can your HELOC funds to pay off other higher interest loans.

9. Ramp Up Your Earnings

Winking woman with money
Alliance Images / Shutterstock.com

Being in debt can be a great motivator to find ways to earn more money.

The extra cash from a side gig or a raise can help you pay off your debt. And, bonus, when you no longer have those payments, it will be easier for you to save for retirement!

10. Cut Existing Expenses

Woman with piggy bank
Jason Stitt / Shutterstock.com

If ramping up your earnings does not seem to be an option, but you really want to accelerate your debt payments, you should consider cutting existing expenses and using those savings toward your debt.

It is not exciting or tricky, just the old-fashioned, tried-but-true method of eliminating debt.

11. Commit to Getting Out of Debt

Woman looking in the mirror while trying on new clothes
immfocus studio / Shutterstock.com

How do you get out of debt? You simply commit to getting out of debt! As your mom might have told you: Where there is a will, there is a way.

12. Stop Saving and Pay Off the Debt

Senior man gesturing stop to protect his money
Krakenimages.com / Shutterstock.com

Yes, you need to be saving money. You definitely need to save and invest those savings.

However, it may be a better short-term financial decision to stop saving and use the funds that you would otherwise be socking away to pay off your debt.

This is a good strategy if you have debt with high interest rates.

You may want to compare the interest rate on your debt with the rate of return you could earn on savings for a quick assessment of where to put your money. Put your finances toward the higher rate.

13. Run Scenarios and Compare!

Man using too much data on his phone, tablet and laptop
Bacho / Shutterstock.com

Not sure paying off your debt will really make a big difference to your financial life? Try it out.

The NewRetirement Retirement Planner is a really detailed and powerful DIY financial planning tool.

After configuring the system with your personalized profile, you can try different scenarios. See what happens if you:

  • Use the debt snowball or debt avalanche techniques.
  • Pay off all your credit cards in the next year or two.
  • Pay off your mortgage before retirement.
  • Downsize and eliminate your existing mortgage.
  • Consolidate all debts into a lower interest rate.

Once you see how accelerating your debt payoff can impact your finances (now and into the future), you may have the motivation you need to get rid of debt.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

5 Tips for Breaking the Payday Loan Cycle

An Amscot store, which provides payday loans, is pictured in Orlando, Fla., on Friday, July 19, 2017.

An Amscot store, which provides payday loans, is pictured in Orlando, Fla., on Friday, July 19, 2017. Tina Russell/The Penny Hoarder

A payday loan can offer a quick reprieve from unexpected expenses or a spell of tough luck.

But if you don’t have enough money to pay back the loan on your next payday, you may need to take out another loan — or roll your balance into a new loan with interest rates that can be well over 300%.

Almost 70% of payday loan borrowers take out a second payday loan within one month. And according to the Consumer Protection Financial Bureau, 1 in 5 new borrowers end up taking out at least 10 payday loans.

This payday loan cycle can turn a short-term loan of a few hundred dollars into a growing mountain of debt totaling thousands of dollars. The average repeat borrower pays $458 in fees on top of their principal over the course of a year.

And when you’re that far behind, it’s hard to ever get ahead.

If this sounds familiar, read on for practical tips for getting payday loan relief.

Tips to Stop the Pay Day Loans Cycle
Kristy Gaunt – The Penny Hoarder

1. Cut Your Costs

Reducing your expenses can be one of the toughest ways to get out of the payday loan cycle if you’re already living on a tight budget and struggle to find ways to save. If you can’t cut costs, you may need to ask for help to defray some of your costs temporarily.

Asking for help takes strength, but it might make it easier to find extra money in your budget, even if just for a month or two. You may be able to access free meals for your school-age children or visit a local food pantry to get by on a lower grocery budget. College students may be able to request help from an emergency financial assistance fund.

Your church or local community groups may be able to get you temporary help. You can also call 211, the United Way’s health and human services referral line, which can direct you to services in your area, or visit 211.org to locate resources.

2. Earn More Income

Kisha Howard of Orlando stands in front of the Amscot store she used to borrow money from after her mother suffered from a stroke.
Kisha Howard of Orlando stands in front of the Amscot she used to borrow money from after her mother suffered from a stroke. Tina Russell/The Penny Hoarder

Kisha Howard of Orlando, Florida turned to payday loans when she felt like she was out of options to make ends meet. “At the end of the day, if you didn’t have the money in the first place, you still won’t have it,” she warns.

To overcome her financial gap, she worked as much overtime as she could to boost her income. “Each pay period, I decreased the amount of the loan needed until I no longer needed the additional funds and was able to cover the bills with my income,” she says.

If you have any spare time and energy, it might be worth it to pick up a side gig. Think about selling your services as a pet sitter, weed puller or errand runner — these side hustles don’t require much in the way of startup costs.

3. Use a Windfall for Payday Loan Relief

Lisa Servon, a professor at the University of Pennsylvania, has studied the payday loan landscape for years, talking to hundreds of borrowers about their experiences.

She said getting out of the payday loan cycle often requires some sort of windfall, recalling one woman she interviewed who used her tax refund to pay off her loan. “She really targeted her tax refund from the earned income tax credit, paid off the loans and then really cut back on spending and watched her expenses,” Servon says.

Getting a huge tax refund isn’t ideal, but if you expect to get a little bit back from Uncle Sam, it can help get you out of that payday loan hole.

4. Ask for Payment Arrangements

Looking back at her payday loan experience, Howard regards it as “a very expensive shortcut.” She says it’s “better to budget accordingly and request arrangements for bills when necessary. Companies work with you when you communicate.”

You may be able to negotiate lower bills on essentials like utilities or set up an interest-free payment plan to make larger bills more manageable.

5. Talk About it

“Advocacy and organizing is the way out,” says Maurice BP-Weeks, co-director of Action Center on Race & the Economy.

He compares the payday lending landscape to the housing crisis of the recession. “If you’ve gotten into the spiral, it’s really not your fault,” he says. “Contact the CFPB or your local representative and explain your situation. This is not fair. Companies shouldn’t be allowed to peddle these products.”

Similarly, it can help to be open about your situation with friends and family. You may be able to provide valuable advice before someone you know turns to payday loans in a time of need.

More than a dozen states have banned high-interest, short-term loans, but it’s still easy to get a payday loan — and get trapped in the debt cycle — in three-quarters of the country.

Lisa Rowan is a writer and producer at The Penny Hoarder.



Source: thepennyhoarder.com

11 Ways to Pay Off Student Loans Fast

Whether you’re a recent college grad or you attended college years ago, there’s a good chance student loans have impacted you.

The current American student loan debt burden is $1.46 trillion — and over $166 billion of that is delinquent or in default.

While mortgage debt has risen with inflation by about 3.2% since 2009, student loan debt has grown 102% over the same time frame.

The stats are painfully depressing. But what does all that mean if you’re an average person trying to get by and have some promise of a future?

It means you need to prioritize paying back your student loans, and fast.

Why You Should Prioritize Paying Student Loans Off Fast

Easy enough to say, right? It’d be nice to pay off student debt, buy a house and not have to stress about money every month.

But to make it happen, you need to know how to pay off student loans quickly. It’s the best way to get out from underneath their burden and get your financial life on track.

If you aren’t convinced, here are some concrete reasons:

Student loan debt — whether it’s private or federal — is almost never dischargeable in bankruptcy. In the rare cases that you can get them discharged, most bankruptcy courts will require you to prove three things in what’s known as the Brunner test:

  1. Based on your current income and expenses, you can’t maintain a minimal standard of living if forced to pay off student loans.

  2. Your inability to pay is likely to continue for a significant portion of the repayment period of the student loans.

  3. You have a history of trying to repay your loans.

Even if you eventually qualify for forgiveness, you’re likely to pay taxes. Unless your federal student loan debt is discharged under the Public Service Loan Forgiveness (PSLF) program, which is only available to government and nonprofit employees, you’ll have to claim the forgiveness on your taxes in the year your loans are forgiven and pay taxes on that amount as if it were income for the year.

If you’re unable to make that payment to the IRS in a lump sum, you’ll have to pay fees and interest until it’s paid in full.

The consequences of student loan debt will continue to hold you back. According to Bloomberg, student loan borrowers ages 40 to 49 are defaulting at a faster rate than those in any age group — perhaps because they’re now sending their kids to college.

And you still want to retire, right? The later you get started investing in your 401(k) and IRA, the more money you’ll need to contribute to retire.

How to Pay Off Student Loans: 11 Simple Strategies

A dial with numbers that is set to 11.
Thinglass/Getty Images

So now you see why it’s so important to pay off student loans quickly. But how do you do it? We’re here to help you figure that out with these 11 strategies to paying off student loans fast.

1. Build an Emergency Fund

It may sound counterintuitive to save money instead of throwing it at your debt, but think about it: Emergencies come up all the time, especially in times when you’re low on cash.

Pro Tip

Aim to save at least $500 to cover unexpected expenses, and you’ll find your student loan repayment will face fewer setbacks.

By having a rainy day fund in a savings account, you won’t have to put those emergency expenses on a high-interest credit card or use the money you were going to put toward your student loan.

2. Take Inventory of Your Student Loan Debt

Log in to all your loan servicers’ websites, and write down the full amount you owe to each. If you’re unsure who your loan servicers are, you can use sites like Credit Sesame to run a soft credit check and see everyone you owe money to.

You’ll also need to determine if the loan is private or federal. You can check the National Student Loan Data Center for a list of your federal loans. Any loan not listed there is most likely private.

This is important, because your options for repayment will differ based on whether your loan is backed by the federal government.

3. Figure Out if You Qualify for Public Service Loan Forgiveness

Eligibility for the Public Service Loan Forgiveness (PSLF) program seems straightforward: If you’re a government or nonprofit employee, you can enroll in PSLF and have your federal student loans forgiven tax-free after 120 payments.

However, actually having your forgiveness approved can be difficult — 99% of the first applicants were rejected.

But if you’re working in an eligible field, it’s a no-brainer to at least try for it.

4. Determine Your Eligibility for Income-Driven Repayment Plans

The standard repayment term for federal student loans is 10 years, but if you have difficulty making payments, you have four main options for lowering them that take your income and expenses into account.

Note that these plans aren’t actually forgiveness programs; they’re repayment programs with a forgiveness option.

With all these plans, you must resubmit your income and family size every year to determine eligibility. Married couples will have to submit their combined income.

Pro Tip

You’ll be required to pay income tax on the amount forgiven, which you must pay in a lump sum to avoid fees and interest charges from the IRS.

Use a student loan calculator to determine which of these is the best for you to enroll in. Even if you don’t want to use the forgiveness option, it is worth enrolling in one if you’re eligible as a failsafe against future financial hardship. Here are your major options:

Income-Based Repayment Plan (IBR)

If you took out your loan on or after July 1, 2014, you’ll pay 10% of your discretionary income monthly. If your loan isn’t paid off after 20 years, you can apply for forgiveness for the remainder of your loans.

Income-Contingent Repayment Plan (ICR)

An income-contingent repayment plan caps your monthly payments at 20% of your discretionary income. You must consolidate your loans before you can apply for ICR. You will be eligible for forgiveness after 25 years of payments. If you have Parent Plus loans, you will only be eligible for ICR.

Pay as You Earn (PAYE)

This program is just like IBR but for those who took out loans after October 1, 2007, and before July 1, 2014. Forgiveness is available after 20 years of payments.

Revised Pay as You Earn (RPAYE)

RPAYE is like PAYE but for those who don’t qualify for any other program. Forgiveness is available after 20 years of payments for undergraduate loans and 25 years for graduate or professional school loans.

5. Lower Your Interest Rates

A woman looks at an on her mobile phone.
Aileen Perilla/ The Penny Hoarder

Federal student loans already have pretty low interest rates — 3% to 5% — compared with debts like credit cards and personal loans, so lowering them won’t make a huge impact. But every little bit helps, so here are a few ways to lower your rates:

Student loan refinancing. With a good credit score and steady income, you can refinance both private and federal student loans for a potentially lower interest rate. Sites like Credible let you compare rates across refinancing companies.

Make sure you’re on auto debit. Signing up for automatic payments not only ensures you make payments on time, but most servicers also lower your rate by 0.25%.

Call your loan servicer. Private student loans tend to have higher interest rates than federal loans, but the good news is that you have more flexibility in lowering your interest rates. Jessica Blydenburgh of St. Petersburg, Florida, made a call to her private loan servicer and was able to prove income hardship to get her interest rate dropped from 15% to 5%.

Blydenburgh’s loans were through Navient, which has an income-driven repayment plan for private loans. She had to list all her expenses and her income to show what monthly payment she could afford. “You literally have to itemize your whole budget,” she said.

Navient determined that at her current interest rate, her payments would only apply to the interest, so the company lowered her rate to allow her monthly payment to cut into the principal.

She has to update her income and expense status every year to maintain the rate.

6. Make a Plan for Repayment

After educating yourself on your options, you’ll need a plan to pay off your loans. Think of it like plugging your destination into Google Maps: There are a few routes you can take, and one might save you a few minutes, but any route is going to go more quickly than just winging it.

We’re big fans of the debt avalanche and debt snowball methods to pay off debt.

With the debt avalanche method, you’ll start with your highest interest loan. You focus on putting extra payments toward that loan first, then once it’s paid off, you focus extra efforts on your next highest interest loan.

The debt snowball method starts with your loan with the lowest balance. You put extra toward that loan, and once it’s paid off, you focus extra efforts on your loan with the next-lowest balance.

If you’re motivated by math, you might find that the slight savings of the debt avalanche appeals to you. If you’re motivated by quick wins, the accomplishments you’ll experience early on with the debt snowball will get you through those tough first months.

7. Budget for Your Monthly Payments

While there are several types of budgets to help you allocate your money, there’s one that stands out above the rest when you’re trying to pay off debt fast: the zero-based budget.

The zero-based budget model allows you to prioritize your expenses. Using your income, you’ll go down your list of expenses, “paying” all of them until you’re at zero.

Why does it beat out the rest in the need for speed? While percentage-based budgeting methods tell you how much to pay off every month, the zero-based model puts you in charge of that decision.

You can put debt as high on your list of priorities as you want and contribute more if you have money left over.

One month you could put 30% of your take-home pay toward your loans, and the next you could put 55%.

8. Get a Side Hustle

There’s no easier way to have more money to put toward debt than making more of it. Don’t be discouraged if you have limited spare time, are confined to your home or think you have no profitable skills to offer — trust us, there are a ton of ways to make extra money.

Some of our favorites are freelance bookkeeping, dogsitting, selling your stuff, delivering groceries and renting out a spare room.

9. Cut Your Expenses

There’s only so low you can go with cutting expenses, but by trying to cut a little more every month, you’ll gain momentum — and motivation to see how close you can get to zero.

Here are some ways people told us they saved money while they paid off their student loans.

  • Val Breit used a flip phone to avoid paying for a data plan as she got rid of $42,000 in student loans.
  • Cody Boorman traded in his car for a cheaper one to eliminate his car payment while he and his wife, Georgi, paid off $56,000 of student loan debt.
  • Phil Risher stuck to free activities like hiking to keep him busy while tackling $30,000 of student loans.

Your budget will help you examine your spending and identify options for creatively cutting your spending.

10. Make Above-and-Beyond Payments

Making minimum payments will help you tread water, but you won’t cross the ocean with that mentality. The only way to pay off student loans early is to make payments that are above the minimum due, or make extra payments throughout the month.

If you’re using all the strategies above, this will be a natural progression. But it can be tempting to treat yo’self with your newfound extra cash. A tip for sticking to extra payments is to schedule them.

If you’re increasing your regular monthly payment, schedule your larger payment for just before your regular payment, and select “advance due date” so you don’t get double-charged.

Pro Tip

Because interest accrues daily and is always the first part of your student loan payment, advancing is usually the best way to pay more principal and less interest in every payment.

If you think “advancing” the due date might tempt you to skip a few payments, make smaller, more frequent payments every week or every other week.

And lastly, plan to send any extra money from bonuses, windfalls or tax refunds straight toward your debt.

11. Go for a Raise or Promotion

One final tip is to focus on your career as a way of increasing your income. While side gigs are great for making some quick money, your long-term wealth relies on your main gig.

That means you should ask for that raise, going for that promotion and apply for better jobs outside of your company.

Even if you don’t intend to leave your job, having an offer from another company is a powerful negotiating tool when you’re seeking better compensation and benefits.

And when you’re deciding between jobs, check to see if the company offers student loan repayment assistance. Many companies, including Fidelity, Staples, Aetna and Live Nation, now offer student loan assistance as a benefit for employees.

Jen Smith is a staff writer at The Penny Hoarder. She and her husband paid off $78,000 of debt in less than two years on two less-than-average salaries. She gives money-saving and debt-payoff tips on Instagram at @modernfrugality.



Source: thepennyhoarder.com

The Fastest Proven Ways to Destroy Debt

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Ever since I wrote my first book, “Life or Debt,” nearly 20 years ago, I’ve been trying to guide readers and viewers to a debt-free life. Why? Because debt is like a cancer that eats away at your financial future.

The money you pay to use other people’s money — aka, interest — is money that’s not around to help you reach your financial goals.

Destroying debt is easier said than done, but whether you carry a small balance on your credit card or have a million-dollar mortgage, there are specific steps you can take to become debt-free at the earliest possible moment.

In this week’s “Money!” podcast, we’re going to find out what they are. As usual, my co-hosts will be financial journalist Miranda Marquit and producer Aaron Freeman.

Sit back, relax and listen to this week’s “Money!” podcast:

Not familiar with podcasts?

A podcast is basically a radio show you can listen to anytime, either by downloading it to your smartphone or other device, or by listening online.

They’re totally free. They can be any length (ours are typically about a half-hour), feature any number of people and cover any topic you can possibly think of. You can listen at home, in the car, while jogging or, if you’re like me, when riding your bike.

You can listen to our latest podcasts here or download them to your phone from any number of places, including Apple, Spotify, RadioPublic, Stitcher and RSS.

If you haven’t listened to a podcast yet, give it a try, then subscribe to ours. You’ll be glad you did!

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About me

I founded Money Talks News in 1991. I’m a CPA, and I have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com