6 Ways To Break Up With Your debt!

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There's nothing like having financial independence from debt. Our debt comes from both smart choices and bad choices. I have personally been trying over the last four years to really get control over my own debt. I realize that paying off my debt was not a priority and that I made a lot of excuses and went on a couple of shopping sprees that were counter productive. But now I know if I want to be serious about buying a home, then I'll have take a different approach. I want the same for my readers, the ability to have more access to your income for your own personal enjoyment. If you are seeking control over your debt, here are 6 powerful ways to break up with your debt:

1.   Balance transfer

It is exactly how it sounds, transferring one balance to another. Your credit account sends you an offer to transfer a high interest credit account to a lower or zero interest rate. Consider the terms of the agreement-interest rate and the time period if there's promotional interest rate. This works best if the account is transferred to an account that is already paid off or has a low balance that can be paid off within the fast time period as well. This will save you money in interest and force you to accelerate your payments.

2.       Credit card balance settlement

Call your credit card company and ask if you can make any arrangement for a temporary reduction in interest or a payment plan for a reduced balance with accelerated payments. You do not want to close your account because it reflects negatively on your credit history but you should stop using the account if you are going to pay it off.

Courtesy of www.creditcardchaser.com

3.       Debt consolidation

Obtain a personal loan that can pay off all of your debts into one monthly payment. This may possibly save you money in interest but absolutely consolidate all of your debt into one place.

4.       Increase your income

Create additional income from a part time job or an investment. You can sell unused household items like furniture, electronics, clothes and shoes. You can seek a job that pays a higher salary. Become your own boss and invest in a small business opportunity.

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5.       Reduce your expenses

Plan accordingly with your budget to minimize your costs. Consider your expenses and making lifestyle changes like reducing your data plan on your phone, removing premium channels on your cable bill, utilizing less electricity. In extreme situations, consider downsizing your lifestyle. For example, renting a more affordable home or selling your car to pay off debt and using public transportation if more affordable.

6.       Snowball your payments

As you pay off one account, take the money you were using for that payment and roll it into the next accounts payments. Now you are building more disposable income to place toward reducing your debt. Either you can choose to pay the higher interest rate account first or the lowest balance account first. See march practical wallet posts for additional reasons to not let debt nail your down.

The Risks And Rewards of Buying Life Insurance

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Life insurance can be an important tool to pay for any expenses after your death and some expenses while living depending on your policy. Once you have the magic number for amount of coverage you want, seek out comparisons for monthly premium rates and plan benefits. Be sure to check the company’s reviews. Also, get to know the financial strength ratings from S&P, Moody’s, Fitch, or A.M. Best, this will show how stable the company is. 

There are many rewards for buying life insurance

                                              -Paying off debt and hospital expenses
                              -Leave less financial responsibility on your grieving family
                                                            -Covering funeral costs
                                          -Providing a cushion for your spouse and/or kids
                                                      -Creating wealth for your heirs
                                                           -Protect a small business`
                -Some policies offer cash reserve--additional source of supplemental income

courtesy of www.sentinelgroup.com

But there are also many risks to buying life insurance:

      -The purchase price for your coverage changes as you age

                  -Health conditions diagnosed prior to buying life insurance can limit the amount of coverage you can purchase

-The financial institution or the company holding your benefit can go under, making it impossible to pay your benefit 

-Purchasing too little insurance can leave a burden on your family and purchasing too much coverage can be a waste

-Purchasing life insurance with your employer is more cost effective but if you leave your employer the plan may not transfer to an individual policy

The most common types of life insurance is term, whole, and variable. Term life is the purchase of a death benefit based on a group of years usually in 5 or 10 year increments. It is usually a cheaper alternative with high coverage but if you do not pass away within that time then you have to purchase another term. Whole life is the purchase of death benefit for the remainder of your life, stays in effect from purchase date until death. This type of policy offers a cash reserve and it is invested by the insurance company until the benefit is paid. Variable life is not as commonly selected but operates like whole life insurance with changes throughout a term of years for investment on cash reserve. For example, you would personally choose where your cash reserve is invested every ten years.

Last words of advice—keep your contact information up to date and your policy information accessible for people to find upon your passing. Hopefully, we will all live a long, beautiful life. In meanwhile, this gives you a head start to a make a decision on what will be best for you. Feel free to comment or share below or on social media at Instagram @practicalwallet, Twitter @practicalwallet,  and Pinterest @practicalwallet.

The Dreaded Budget Talk

Catching back up with the beginning stages of the buyer process, we are gonna make the dreaded dive into the less infamous budget talk. Everyone knows what it is but not everyone sees the value. To justify my viewpoint, let me tell you about a story of person I'll call Cotton. Cotton was excited to start college. Everyone told Cotton this is what he has to do because its the next step after high school. But Cotton lost interest in just following the "trend" and took a break. A concerned counselor met with Cotton emphasizing the need to continue to build his knowledge and to use college as a tool to lifetime relationships and personal growth. Cotton found his own value in the message and returned to flourish in his studies.

Now I say all that to say that when we have responsibilities with our income, the next step is budgeting. But people give all kinds of reasons of why budgeting is dreaded but we have to find our own value in it. Some may say its too much work, there's no room for error, its a boring way to live, they aren't discipline enough to keep to the budget, or it makes their money feel small. But to all those reasons, I have one response--cater your budget to you. By doing so, you can allocate money for miscellaneous or error, reward yourself to make budgeting fun, develop habits to create the discipline, monitor your spending to see all the many places your money is used, and understand there is value in pre-arranging your money. So if your dreading the budget just consider this...

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Budgeting is as instrumental to our finances as sleeping is to our personal health. The average adult should maintain 7-9 hours of sleep per day. Too much or too little will have an impact on our body’s functions. Too much or too little budgeting will cause over usage of credit cards, under-utilization of income, or inability to meet bill payments. So for our future home buyers and savers, budgeting is going to be key to achieving our goals. If you are a future home buyer; give yourself some "curb appeal" by showing great payment history and discipline with debt. If you are a saver, we need to continue to grow our disposable income. 

The principal of budgeting is to add up the income and assign an allocation for each thing that you usually spend your income on. Everyone's budget will be different, you can be general or you can be very specific. It can be from daily to monthly monitoring. So I’ll give an example of a balanced budget—one that can include personal interests and responsibilities...

Pay check for 3/12/16:      $1800
Item	Budget
Rent	$900
Utilities	$100
Food	$175
Transportation	$50
Subscriptions: Netflix, Kindle	$20
Entertainment	$60
Hair	$45
Credit Card 1-Discover	$50
Tithe/Donation	$160
Savings 1-Retirement	$70
Savings 2-Miscellanous	$20
Savings 3-House	$150

I now entrust you, my readers, to start or continue to budget to find ways to maximize your income. Theoretically, the budget should be categorized by the following percentages: 50% to bills, 10% to savings, 10% to personal wants/needs, and 30% to insurance, food, travel/entertainment. Catch our next post on March 30th about how much life insurance is enough? Comment or share below or on social media at Instagram @practicalwallet, Twitter @practicalwallet,  and Pinterest @practicalwallet.

Does your debt nail you down?

 It's time to get MOTIVATED! It's time to get ENGAGED! It's time to be HOPEFUL!
Our current financial status whether good or bad is not a description or map of who we are. We decide who we are and we are in control at all times. Take back your control mentally by building confidence in knowing you can achieve your goals. Once we open our mind to it, we can begin to create the tools to knock our debt down and out. Debt shouldn't nail you down. By nailing you down, I mean debt should not control you and limit your personal life enjoyment.

Courtesy pic by www.animatedviews.com

Our financial status is simply a creation of past decisions and current income. If  we want to change it to make it better, we have to be optimistic. You can't win a fight if you think you are going to lose. If your money is limited, there are ways to have fun without spending money or by being frugal with your money. For example, try substituting a night out at the restaurant for a family potluck or substituting a day at an amusement park for a nature walk or picnic at the park. If your money is not limited but you make spontaneous purchases that limit your savings then you should put place your savings in an account before your go freely spending. 

The biggest way to fight debt is to increase our disposable income. Disposable income is everything you have after you pay your essentials. Three debt fighting strategies that have helped me are below:

      1.  Find out how much interest is added monthly to your credit card or loan account. Then pay the total interest plus your minimum payment plus a little extra cushion. These payments can be divided into weekly or biweekly submissions but will help you aggressively take control of the account.

Courtesy pic by www.idcwebs.com

                2.     Pay the account with the highest balance first; preferably the higher interest rate too. As you pay one account off, snowball the payment used for the previous account to remaining accounts. You can pay each credit card account until it is under 35% of the credit limit or you can pay it off to use only during emergencies.

3.      When creditors threaten to report you to the credit bureaus, be proactive early, and find out if you have other options. Ask for a payment plan to avoid reporting and see if you qualify for a reduction for being concerned about the account being paid.

Watch for our next personal finance post on ways to increase our income so we can begin to increase our disposable income. Feel free to leave comments on this post or social media on Instagram @practicalwallet, Twitter @practicalwallet,  and Pinterest @practicalwallet.

  

W.W.Y.D.: RENT OR BUY?

Are you on the fence about whether to rent or to buy? You just need a wee bit of emotional readiness to choose a home with your style in a location that meets your lifestyle needs. For home buyers, the challenge is building a good credit history and saving for the deposit. For renters, the challenge is in paying monthly payments to something you will not own in the end. So below are three questions to help you decide if you want to buy.

courtesy of www,dreamstime.com                                     

 What is driving you to want to buy?

•  The cost of renting is growing more and more expensive.

•  Need more independence and space from parents or roommates.

•  Looking for a wealth building tool to pass down to your family.

•  Want to customize a home to your personal preferences and lifestyle.

       How does your finances measure up?

• Utilities and parking are not always included with home owner association fees and therefore it becomes an additional expense. But renters can find most times that the utilities are included with the rent payments. Other expenses for home owners are hazard insurance, co-op/home owner association fees, property taxes, and sometimes private mortgage insurance.

• Most mortgage lenders require your loan to carry a monthly payment lesser or equal to 36% of your net monthly income. Use calculators like ones on Bank Rate to determine how much you can afford. 

• Just like rent applications require a security deposit, home purchases require 3.5 to 20% of the total purchase price in earnest money to show how serious the buyer is for the investment.

 How much freedom do you require?

• If you own the home, you are given more freedom to build, reconstruct, and redesign but there are some home owner associations that restrict renovations.
• There is a return on the investment in the form of equity as the home appreciates for home buyers.
• If you buy your home, you may be able to receive a more direct benefit from renting the entire home or a room as an additional source of income.
• Buying a home is a long term commitment since most mortgages are 15-35 years for a payoff. Also, if you choose to sell the home it can take months or years depending the property and its location.

	BUY	RENT
Credit history plays a major role in payments	X
Receive a return on the investment	X
Consequences for 3 missed payments	X	X
Freedom to renovate freely	X
Home maintenance and upkeep needed	X	X
Avoid scammers that seek vulnerable people	X	X
Requires emotional readiness	X
Long term commitment	X
Pay property taxes	X
Property insurance encouraged	X	X
Tax benefits are available	X
Require a form of earnest money or deposit	X	X

Home is where you make it so there is no right or wrong answer, just a search for the best answer for you. If you still need to decide, take your time and keep researching sites like realtor.com. If you made your decision keep following us for ways to grow financially to continue to be at peace with that decision. Catch our next blog on February 30th about the steps in the home buying process! Feel free to leave comments on this post or social media on instagram @practicalwallet,, twitter @practicalwallet,  and pinterest @practicalwallet.

  

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