Category Archives for Invest & Retire

First Time Home Buyers – Top 5 Thoughts to Avoid When Investing Into Real Estate

The following is a guest post by Anna Suzdenkova. Anna resides in Toronto, where she works for a major financial institution, runs her own financial blog, Vostro Financial Help, and manages a summer driveway maintenance business. Currently, she’s writing her own personal blog on tips and tricks to better control your finances, stay aware of your path in life, and reach your financial goals sooner. She loves helping people stay out of the dark when it comes to personal finances. Enjoy! 

Purchasing a property is one of many people’s dreams. It is the biggest purchase many of us will make in our lives. The decision to buy a property isn’t an easy one. When it comes to deciding what is best suitable for you and your family, the options are numerous and there is a lot to consider. Location, schools, work distance, number of rooms etc are all basic considerations you should make before investing into real estate but which thoughts should you avoid? I hear people talk about real estate with fear and intimidation, as if the decision to buy is bigger than them and can potentially control their lives. What thoughts should you stay away from before diving into the real estate market?

1. Fear of Ownership – The Pressures of Being a Landlord

Being a landlord does have its share of responsibilities, but relative to being a tenant it’s not a significant difference. As a landlord you will be calling the shots on what needs repair, replacement and other maintenance decisions. The living conditions of your house will be in your hands. You’ve been making decisions all your life, what’s to stop you from making household decisions in your own home? There are many resources out there to help you with ownership including local classifieds, YouTube tutorials, online forums, friends and family etc. Being in charge doesn’t have to be difficult, it becomes easier when you know how to use your above resources when looking for answers.

2. Thinking Your Savings Account will be Depleted for the Downpayment

A few of my friends mentioned the reason they don’t want to purchase a condo or a house is because they won’t have any savings left and will have to start saving from zero. This is the biggest misconception when it comes to purchasing property. Meanwhile the same friends are buying the latest technology, cars and are depleting their savings in a slower way. Your downpayment isn’t depleting your savings account, you’re simply moving your money from a bank account into a real estate account, kind of like from one of your pockets to another. Your savings is still in your hands in the form of real estate, which means your money is being invested, likely at a much higher interest rate. Real estate price growth varies, depending on the state or province, regardless of the rate if you are investing long term the value of your property is bound to increase over time. In Toronto, Canada, the average price of a house increases by 8.9% over one year as of August 2014. This kind of rate of return cannot be found in a savings account.

3. You’re Unprepared for Unexpected Costs

Ownership comes with responsibilities. These include maintenance, repairs, utility price increases, property tax hikes etc. All these items the landlord would be responsible for. When something breaks unexpectedly, it would be up to the landlord to fix. For example, if the roof is leaking all of a sudden, of course there is home insurance which can cover some of the cost of the damages but it would be at the owner’s expense to replace the roof. These scenarios would have to be taken into consideration before purchasing property. A good way to prevent most of the unexpected expenses is to do a home inspection before closing the purchase. It’s also good to have emergency funds available so you can be better prepared. As a homeowner, these expenses are seldom and if they do come up, it’s usually something small such as a leaky faucet or a broken washing machine, which can be fixed for cheap throughout the local classifieds.

4. Wanting to Travel or “Enjoy Life” First

Why not do both? If you want to travel and explore the world, that’s great. Remember though, it’s easier to save money for a downpayment when you’re younger because you have less expenses and more discretionary income, so rather than spending money on extravagant trips consider downgrading the trips and saving the extra money for a downpayment. Once you’re moved out and on your own the bills come rolling in and so does the rent. Travelling is great, as a home owner I still travel, but I downgrade on the destination. I choose cheaper destination and always look for deals or last minute vacation discounts. I believe both travelling and owning property can be done simultaneously, the fancier destinations can wait until I am more established and have a higher income or even when I’m retired. Having a plan, managing your money wisely and having a travel account can help tremendously. Setting money aside, even $20 a month, for travelling will add up quickly and mean taking a vacation sooner.

5. I can’t Afford Buying A Property

We all have the same 24 hours as anyone else does, so how come some of us can manage to afford real estate and some of us can’t? The answer lies in three factors: income, existing debt and credit score. These are the top three things the bank looks at when reviewing your mortgage application. Some of us don’t earn enough to be able to afford a house, the solution is to downgrade to a townhouse or a condo, which can be more affordable. Some of us have a lot of existing debt which prevents us from acquiring more credit such as a mortgage. The solution to that is to consolidate all debt into one loan, make one monthly payment and attempt to pay off the debt faster. And some of us have a low credit score, which can be improved by paying bills on time, having less credit applications and not using credit cards too often to show we are not dependent on them. If you have a combination problem, such as having too much debt, low credit score and low income, attempt to change this around by seeking a higher paid job though a job agency, attaining a consolidation loan and making your payments on time. Everyone can afford a property in due time, whatever your financial situation is, the trick is to turn it around with solutions and steer onto the road of success.

How about you all? What helped you overcome any of the above thoughts regarding investing in real estate or home ownership?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/axiomestates/3200993224/in/

How To Keep Your Kids From Turning Into Rich Brats

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Have you ever stopped and really studied kids today? The typical kid demands money from his parents, avoids you because he is playing an important video game, and ignores all advice because he assumes you are old and know nothing. Kids today are brats. There is simply no sugar-coating it.

So, how can you keep your kids from becoming rich brats?

Do you have young children and are afraid that they will become ungrateful and disrespectful like the rest of today’s children? If you do nothing, then this fear will likely come true, but if you are intentional, your children could grow up to be resourceful, generous, and wise stewards of their money.

Step One: Start when they are young

The key to raising children is to start good habits when they are young. Instead of doing everything for them until the age of 10 and then suddenly imparting chores on them, teach them how to pick up their toys soon after they turn one. At this point, they might only be able to pick up one toy and put it away, but you must praise them for this and encourage them to pick up a greater ratio of their toys with each passing month. By the age of three, they should really understand how to clean up and play nicely with their things.

As you instruct them how to pick up after themselves early, you must also teach them about money at an early age. Now, obviously they won’t be able to balance the checkbook while they are still in diapers, but kids are learning about money every day whether you teach them or not. They see you at the store when you buy groceries and they notice your payment at the cash register. In order to give your children a better understanding of money early, I would encourage you to use cash instead of credit cards. Kids understand money, but credit card payments are a little more difficult to grasp.

Now that your kids understand the value of responsibility and the importance of money, begin combining the two. When your children are able, give them certain chores that merit a payment – something like drying the dishes or setting the table. Pay them immediately for their hard work so that they understand what they are being paid for.

Step Two: Show them what their money can buy

When your kids begin earning money, they will likely want to go out and buy some things. At this point, they might have only saved up $5, and they really want to buy a brand new video game (which costs $60). As hard as it may be, take them to the mall with you and bring them into the store. Show them the cost of the video game they want and let them know that the video game simply costs too much for them to buy. If there are discounted games in a bin, bring them over to it and show them what their money can afford to buy. If they do not want any of these games, then teach them their two options: (1) wait and save up the money for the new game, or (2) purchase only what they can afford at the moment.

By allowing your kids to earn money through chores and by not giving into their wants (by simply buying the game for them), your kids will certainly not turn into rich spoiled brats. Instead, they will turn into hard working young adults. If your kid really values that video game enough, he will go back home and immediately come up with a list of things he can do to earn more money. Then, once he works hard enough and finally has the funds to purchase the game, either of two things will happen: (1) he will decide not to buy the game because he has worked too hard to spend his money on something so frivolous, or (2) he will purchase the game and take excellent care of it! No longer will he leave that game out on the floor or kick it around in anger. He will carefully place it back in the box, put it on its appropriate shelf, and make it last forever.

How about you all? Do you have any more advice on how to keep your kids from becoming rich brats?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/stevegatto/362852690/in/

Mid-Year 2014 Financial Goals Check-In and Progress Update

Happy first few official days of Fall 2014 everyone! I hope you’ve been enjoying the milder temperatures, some pumpkin and Octoberfest beers, and have been able to get outside every once in a while!

The past few months have been very much action-packed, hence the reason I am about 2 months late getting this “mid year” financial goal check-in post up!

I finished up my PhD in Chemical Engineering on August 25th (also involved losing my health insurance coverage, but that is a whole separate post in itself), got married on September 20th, have been knee-deep in the post-PhD job hunting/interviewing process, and am currently on my honeymoon in Belize until October 2nd. The picture to the right is one of the wife and I on our wedding day.

Back in January of this year, I set my financial goals for 2014. Since the year is now more than half finished, I figured it would be a good time to sit down and take a few minutes to review how I’ve been doing thus far in reaching or NOT reaching (in some cases) the various targets I set for myself. 

Overall, I would rate the 1st 3/4 of the 2014 year as being top-notch from a personal perspective, but a great deal of mixed feelings from a financial and professional perspective.

The financial markets have done pretty well, the wife and I executed our wedding on September 20th perfectly, I was able to finish my PhD in exactly 4 years, and I was able to max out my Roth IRA contributions for the 2014 year already.

On the other hand, even though I started the job hunting process last September, it has taken longer than I expected this time around to solidify. Couple this with us being very busy preparing for the wedding in September, we are currently living on my cash savings until I secure a job. Additionally, both the wife and I are having to pay for our own health insurance – mine being through healthcare.gov marketplace, and hers being a COBRA extension from her job she discontinued at the end of August, which in total between the two of us is around $850 per month. All of this, plus paying lawyers around $2000 (at least initially, we may get some of this trust account/deposit money back) for our pre-nuptial agreement, has caused me to be in a more “reactionary” personal finance mode versus what I am used to in saving a substantial portion of my income. In addition, since I am not currently receiving a paycheck, I have had to temporarily pause all non-essential savings and charity donation initiatives.

So, here goes, a progress update (in bold below) on how I’ve been doing so far in 2014 reaching my financial goals. Enjoy, and I look forward to reading any comments you all have!

Short Term (Less Than 1 Year) Goals

• Continue building, optimizing, and balancing a Three-Legged Stool for Retirement.
  • On Track. 
    • Currently, I am at a 34%, 37%, 28% split of my assets between tax-deferred (regular IRA / 401k), taxable, and tax-free (Roth IRA / 401k) account types. The goal is to try to keep each category’s allocation close to 33%.
• 1) Contribute maximum allowed for 2013 Roth Individual 401k.
  • Complete.
• 2) Contribute $5500 (or ~$458 per month) to my Roth IRA with Vanguard this year (maximum allowed)
  • Complete.
• 3) After maxing out Roth IRA for 2014, contribute equivalent amount ($5,500) in taxable Vanguard mutual fund account.
  • Not On Track / On Hold.
    • With me currently being “unemployed” and all of the financial changes mentioned above surrounding the wedding and honeymoon, I have placed this goal on hold until things stabilize and I find a job.
• 4) If have additional funds available after completing #3 above, contribute >=20% of blogging income to Individual Roth 401(k) with Vanguard.
  • Not On Track / On Hold.
    • This is on hold for reasons similar to #3 above.
• Reach short-term net worth target for this year.
  • Achieved/complete.
• Maintain target 6-9 months of expenses in cash reserve emergency fund in Dollar Savings Direct account.
  • On Track.
• Put together Purpose-Focused Financial Plan together with wife, including long-term and short-term financial goals. Also read up on marriage/couples/family finance books as well.
  • On Track, looking to finalize in 4Q2014.
• Organize new joint / individual financial accounts for wife and I. Integrate our two finances together.
  • On Track. 
    • So far, we have successfully set up and are using a joint checking account and joint savings account with Ally Bank. The way our pre-nuptial agreement is configured is that when we get back to a position to save money again, we will contribute money to each of our retirement accounts.
    • Another part of integrating our two finances is that I am tracking every penny/dollar we are spending for the next few months to get a complete picture of all of our recurring financial commitments and patterns.
• Evaluate whether or not to rollover some of tax deferred retirement accounts to Roth status since tax bracket low.
  • On Hold since excess cash for taxes is not available right now for this type of rollover. 
• Rebalance mutual fund portfolio to meet asset allocation target %’s (70% equity, 30% fixed income overall).
  • On Track. 
• Keep maintaining zero-based budget that I have set up to strategically manage my personal finances.
  
  • On Hold. 
    • Since we are not currently receiving any income, there is not much of a need for zero-based budgeting since we are in “get by” mode.
    • Once we start receiving income again, we will resume the use of this budget system to help us achieve our short and long term savings goals while still keeping the bills paid.
    • One intriguing piece of this budget system we are working on now is creating our joint zero-based budget now that I am married.
• Towards end of 2014/after get married, evaluate if need to obtain life, disability, and long-term care insurance.
  • On Track. 
• Have draft of my will + wife’s will (which she needs to draft) reviewed by a lawyer. Also try to use same lawyer to create wedding contract for our wedding in September 2014.
  • On Track. 
    • We are in the stages of finalizing our wedding contract. Once that is signed and finalized, we will use one of our 2 lawyers for drafting wills, but that would likely take place after I land a job.
• Create and keep updated a Google Document listing out all of wife and I’s account types/locations in event either of us is injured.
  • On Track. 
    • We currently updated this with my wife’s asset accounts as well.
• Continue to save $50 per month for trip to Grand Canyon or Niagara Falls as part of freedom life values account.
  • On Track for most of year, but currently On Hold since am currently unemployed. 
• Invest $500 in Microloans with Microplace.com to support Latin American micro entrepreneurship. This equates to $42 to invest per month.
  • On Track for most of year, but currently On Hold since am currently unemployed.
  • Since Microplace.com stopped accepting new investments in January of 2014, I have had to find other alternatives for this goal. Two good ones I have found are Kiva.org and now Vested.org. Vested.org is currently my preferred provider since they offer return of principal as well as some level of interest rate of return. Kiva.org only provides return of principal. Both seem to be dependable so far!
• Invest $25 each month ($300 total for year) in Lending Club A Safety Grade Person-2-Person loans.
  • On Track for most of year, but currently On Hold since am currently unemployed.
• Donate $1,500 to Multiple Sclerosis Foundation in 2014 (5% of take-home pay in my graduate school research assistantship job).
  • Complete.
• Fund raise $5000 for MS 150 bike event in June 2014.
  • Complete. raised $5,571 (approximately). 
• Save 3% of take home pay each month (after taxes) for Dream Account.
  • On Track for most of year, but currently On Hold since am currently unemployed.
• $30 per month save for doing running races / bike rides as part of health life values account.
  • On Track for most of year, but currently On Hold since am currently unemployed.
• $20 per month save for buying fresh vegetables as part of health life values account.
  • On Track for most of year, but currently On Hold since am currently unemployed.
• Save ~20% of (blogging income minus amount of income deferred to Individual 401k with Vanguard plus untaxed graduate fellowship income from my research job) in a DollarSavingsDirect.com online savings account in preparation for 2014 taxes and to pay quarterly estimated taxes.
  • On Track. 
    • So far this year, my quarterly tax payments have been above 20% of my blogging income, so I have mostly just been focusing on paying those.
• $30 per month save for trips to visit friends/family in other states as part of friends/family and freedom life values account.
  • On Track for most of year, but currently On Hold since am currently unemployed.
• $10 per month save for purchasing food for backpacking trips in the Blue Ridge Mountains once a month as part of health life values account.
  • On Track for most of year, but currently On Hold since am currently unemployed.
• Execute any business tax deductions I can for 2013 taxes.
  • Complete. 
• Send out 1099-MISC for staff writers for 2013-2014 taxes.
  • Complete. 
  • This was an interesting process since not all of the staff writers were a) living in the United States and b) received over the $600 threshold limit for needing a 1099-MISC.
• Use 1% home value home maintenance fund to fix various small things that are broken around my condo after 3.5 years of use. These things include a closet door off the hinges, the light-switch in the bathroom not working all the time, the bathroom towel rack holder coming unscrewed, and some pipes under the sink that need to be re-caulked. This will especially be important if we sell our condo this year in the event of a move. Once I get these things repaired, I will then need to replenish the depleted funds in the home maintenance account.
  • On Track. 
  • We had the bathroom light fixed, the hot water heater replaced, and the pipe under the kitchen sink fixed. However, there are still some other minor items that require attention if we are to sell the condo.
• Execute 4 estimated tax payments for blogging + graduate research fellowship income on the following dates – 1) April 15, 2014, 2) June 16, 2014, 3) Sept. 15, 2014, and 4) Jan. 15, 2015.
  • On Track. 
• Maintain a total of $1600 for health expenses for dogs we adopted (for annual health checkup, Frontline/Interceptor, and miscellaneous health emergencies/treatments needed.
  • On Track. 
  • In some sad news, we received word that our greyhound, Coaty, had to be put to sleep while we have been on our honeymoon due to bone cancer causing his humerus to shatter.
• Help friends become debt-free.
  • On Track. 
• Continue investing in long-term content growth of blog.
  • On Track. 
• Determine if it is more efficient to file taxes jointly or separately once wife and I get married in September 2014. Also optimize (minimize) tax bracket by balancing tax-free and tax-deductible/deferred retirement savings.
  • On Track. 
  • Since the 2014 tax earning year is not yet over, this will be something to evaluate in December. However, my initial calculations reveal that it will be more tax efficient for us to file jointly.
• Save >50% of after-tax / take-home income.
  • Was On Track until finished graduate school. 
• Save $1 per day in Making Future Child a Millionaire Account, invested in the Vanguard Total World Stock Market ETF.
  • On Track. 
  • Currently this account’s value is $243! Nice.
• Save $10 per day as a sneaky trick to stash away even more money.
  • Completed. 
  • This worked really nicely to save up some extra cash for the current unemployment period I am going through. The total that I was able to save in this way was $2400 between January and end of August.

Mid-Term (3-5 years out) Goals:

• Continue contributing maximum allowed to Roth IRA and Individual Roth/Traditional 401k each year using dollar cost averaging.
• Reach intermediate net worth target (~2X my current net worth).
• Own a rental property by 2018.

Long-Term (greater than 5 years out) Goals:

• Obtain a net worth of $1,000,000.
• Own a home free of mortgage payments.
• Own a vacation home in the mountains or a ski resort.
• Accumulate enough funds not have to work, but will probably anyways because I would get bored. 

How about you all? How have you been doing on the goals you laid out for yourself in 2014? What technique have you found is most effective in holding yourself accountable for your goals you set?  

Share your experiences by commenting below!

5 Free Ways to Show Your Spouse You Love Them

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

People always told me that marriage gets really tough when you have kids. I never knew what they meant until now of course. At first I thought, shouldn’t having children bring you closer together as you both soak in the amazing miracle of raising a little human (or two)? Well the answer is both yes and no, but at this point, mostly no!

With so many demands on both of us, the most time we spend together is when we’re side by side in the kitchen at 11 p.m. washing bottles and trying to squeeze in as many chores as possible before we both collapse in bed out of exhaustion. It’s a really hectic and crazy time for us, and sometimes we love it and sometimes we really miss sleeping in on Saturday mornings.

We know we’re lucky beyond belief to have two healthy and beautiful children, but I think it’s completely normal to go through a rollercoaster of emotions as a new parent. At least, that’s what I always tell myself.

So, whether you’re elbow deep in diapers like us, empty nesters, or blissful newlyweds, here are some ways you can show your spouse you love them for free and keep the love alive even when things get busy or downright crazy.

Let Them Sleep In

If there are tasks to do in the morning like taking the dog out, making breakfast, feeding tiny humans, or other chores in general, let your spouse sleep!

Whether you have kids or not, chances are as soon as you wake up, you probably have to at least make coffee right? Well, I can tell you from experience that it’s pretty much the best surprise ever to wake up and have all of these things already finished.

If you do this for your spouse I can promise you that when 9:00 rolls around, they’ll wake up so confused wondering how they were able to sleep so long. The bonus for you is that they’ll likely be in a good mood for the rest of the day. I know I always am when I can sleep a little more.

Write a Love Note

It doesn’t have to be sappy. It doesn’t have to be long. Just jot a quick, “I love you” on a scrap piece of paper and put it on the kitchen counter. It only takes a minute. You can even be funny or silly or witty. Write a joke or put down a funny memory. Just do it because it’s free and it will make them smile.

Make Them Their Favorite Meal

We tend to save favorite meals for birthdays or special occasions, but I think we should make our spouse’s favorite meal randomly and surprise them. Frankly my husband would be so happy and impressed if I planned and made dinner at all because I absolutely hate to cook. So, he’d probably love me forever if he walked in to steaks or a Thanksgiving style dinner. Actually, he’d probably think an alien spaceship came and took me and replaced me with some evil-yet-awesome-cook twin. Still, as I write this, I realize I should probably do this more!

Print Out a Picture

We never print out pictures anymore. Gone are the days when grandparents would take out a whole roll of pictures from their wallets. Now we have smart phones that we let people flip through. However, one of the best gifts I ever got from my husband was tiny little magnets that he had made from my Instagram feed. He picked several different photos that were taken during my pregnancy and with friends. They are all up on my fridge now and are actually a nice, flat, clutter free way to hold up important things on the fridge.

Give Them Some Affection

I was walking through the mall with my husband and twins, and suddenly it felt like every single couple was holding hands. Didn’t we used to hold hands all the time I thought. It took me about two seconds to grab his hand, but then we had to hold hands one on top of each other while we pushed the stroller. Ah, young married love when you have kids! Still, a little affection and attention goes a long way!

Ultimately, it doesn’t matter how busy you are. The above tips prove that you can easily show your spouse you love them in small ways that don’t cost a dime. There’s no need to buy a dozen roses or even make reservations at expensive restaurants. Just a little attention, a few thoughtful notes, or even a simple hug can go a very long way in the midst of our busy and chaotic lives.

How about you all? How do you show your spouse you care?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/epsos/6943704482/in/

Why You Should Payoff Your Car Loan Ahead Of Your Credit Cards

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

There are different ways to prioritizing the payoff of debt and no one method is right for everyone. As long as you’re paying off debt, you’re headed in the right direction.

The most common advice on paying off debt however usually centers on tackling credit card debt first. But we’re going to focus on a different approach and suggest that she should payoff your car loan ahead of your credit cards.

There are at least five reasons why paying off your car loan first will work to your advantage:

1. A Car Loan Payment is Usually Bigger than Any Single Credit Card Payment

One of the most compelling reasons to pay off your car loan ahead of your credit cards is that a typical car payment is much larger than any single credit card payment. In fact, it’s probably is big as several credit card payments. By paying it off first, you achieve the greatest budgetary relief.

One of the reasons why people often fail at paying off their debt is because they simply don’t have enough room in their budget. By paying off your car loan first, you knock out a big chunk of your monthly debt service, that will make your progress obvious much earlier in the game.

2. A Car Loan is a Fixed Payment

Though most people will see the fixed payment feature of a car loan as a positive, the flipside is that you’ll get no relief on your car loan payment until the loan is paid in full. That should provide the motivation to pay it off as soon as possible.

By contrast, monthly credit card payments drop as the balance owed is paid down. But that can be both good and bad. Sure, the prospect of lower credit card payments will improve your cash flow in the short run. The bad side however is that as your monthly payments decline you may start to get comfortable with them again and decide that paying them off isn’t quite as important as it seemed at the beginning. You might even get lazy and start running them up again.

Once a car loan is paid, it’s gone. With credit cards – well – they don’t call them “revolving” for nothing!

3. Freeing Up Your Budget to Concentrate on Your Credit Cards

In #1 we focused on the fact that a car loan payment is typically much bigger than even the largest credit card payments. But the budgetary freedom you’ll gain from paying it off will free up a lot of cash flow that can be used to pay off your credit cards.

For example, let’s say that you manage to carve an extra $600 per month out of your budget to use toward reducing your debts. If you concentrate the extra cash flow on paying off your car loan first – because the car loan payment is an uncomfortable $400 per month – you will have an extra $1,000 per month to throw at your credit cards once your car loan is paid (the $600 budgeted for debt payoff, plus $400 from the now paid off car loan).

Using $1,000 per month to payoff your credit cards will make the process a lot faster than trying to do it with $600.

Paying off debts with big monthly payments – like a car loan – makes the biggest difference in your cash flow.

4. Paying Off Your Car Removes the Likelihood of Repossession

This is a factor that never gets discussed in the debt payoff priority debate, but it certainly needs to. If you reach the point where paying off debt becomes necessary, it’s most likely because your financial situation has long since begun to experience stress. If you are walking the financial edge in life, the last thing you need to have happen is having your car repossessed.

That’s exactly what will happen if you’re unable to make your monthly car payment. It’s unlikely that you will experience an outcome nearly as dramatic should you fail to make the payments on one or more credit cards. That’s because credit cards are entirely unsecured loans.

No matter what happens with your debts, you will still need to earn a living, which you may not be able to do if you lose your car. By paying it off, you will remove the possibility of that disastrous outcome from happening.

In a real way, your car is a business asset if it is used in connection with earning an income in any way, even if it’s only to commute back and forth to work. That makes it an asset worth protecting.

5. Paying Off Your Car Will Give You More Options When You Need to Replace It

Cars are no respecter’s of your debt payoff plans. They can crap out at any time, and require repairs so expensive that either the car will need to be replaced, or your debt payoff efforts will be thrown for a massive loss. For that reason, you should want to keep your self in the best possible position to be able to replace your car on short notice, should it be necessary.

Having a loan on your car always complicates replacement efforts. This is especially true if you have little equity in the car over and above the loan amount, and even more so if you owe more on the car than it is worth.

By paying off your car loan, you remove this is a potential problem. And if you do have to buy a new car, the absence of a loan will improve your ability to do that immensely.

Keeping your car free and clear of debt is the best possible way to keep your options wide open – whether you plan to keep the car, and especially if you need to replace it.

How about you all? Can you see the logic in paying off your car loan ahead of your credit cards?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/lendingmemo/11442079145/sizes/n/

What Do You Devote Your To Money Once You Are Debt Free?

This is a post by Staff Writer Jeff, who blogs about sustainability and finances at Sustainablelifeblog.com and blogs about his efforts to earn a (semi) passive income online at Online Side Income.

In mid July, me (and my wife) hit a target we have been aiming for since 2009 – we are now debt free except for the house. I had one last student loan of mine that was hanging around like an annoying sibling, and after changing jobs and cashing out what was left of my vacation time, I used all those banked days to knock out the student loan once and for all.

We are very excited about this, as we know we are one step closer to freedom, and we have started working that much harder to earn it and make that day come even quicker. Previously, we were paying $400 a month to the student loan, and now we have gotten that all back – it’s time to invest, and here’s what we are going to do with it.

1. Max Out Both Roth IRAs for 2014

We have both been contributing monthly to these accounts, but we were not at the level to hit a yearly max. Each one of these accounts needs approximately $1,750 to reach the IRS limit of $5,500 for 2014, and we will be able to hit that now that we have freed up all this cash.

2. Pay down our Mortgage

While our mortgage isnt that large (it’s approximately 1 year of earnings for both of us) we would like to pay this down sooner rather than later as our mortgage payments eat up a very large chunk of our monthly nut – almost 80% of our monthly fixed expenses are from the mortgage alone, so once this is gone it will be nice in terms of cash flow. To pay this down, we will be increasing our payment frequency and our payment amount.

3. Ride Out Lower Paychecks

I switched jobs in June to a position where I was getting about 15% less in base pay, and paying approximately 750 more per month for health insurance. This has resulted in a take home income of almost $1,100 less on my side per month, which we have been able to manage fine (mainly because we have very little debt). However, since my wife and I had a child earlier this year, she will only be going back to work part time come fall, and income from her side of the equation will go down about 33%. All told, we are going to see an income reduction of about 25k per year starting in 2015.

4. Invest the remainder in a Tax Advantaged Account

We continue to save diligently for our goals and have a 3 month emergency fund that we are slowly building as well. We are going to start putting money into a tax advantaged account (probably my wife’s 457 plan) as well.

This is our plan to build our savings and investments, fund our retirement and pay down our mortgage now that we are out of debt. All of these small goals will help us fuel our larger goals in life, which we are talking about pretty much on a daily basis at this point, and I will reveal on my blog soon.

How about you all? What are your plans for when you become debt free except the mortgage? If you have already reached that point, what are you doing with your money?

Share your experiences by commenting below! 

***Image Source: Flickr

Does Online and Mobile Banking Excite Or Scare You?

The following post is by MPFJ staff writer, Grayson Bell. Grayson, who runs the finance blog Debt Roundup, is a fan of personal finance, brewing beer, and working on cars.

More than two-thirds of the American public have basic banking privileges.

This means they have access to a bank or credit union to store their hard-earned cash. Yet with a majority of the population having bank accounts, why are many not utilizing online/mobile banking? According to the Pew Research Center, just 61 percent of internet users bank online, while only 35 percent of cell phone users bank using their phones. What is it about these services that scare us? This begs the question: Does mobile banking excite or scare you?

The Pros of Online/Mobile Banking

There are many advantages to online banking. Most are based around use and convenience for the account holder. There are also some advantages for banks to use such a service, mainly surrounding cost reduction. Here are some basic pros to using online banking.

• Quick Access – You can easily check your balance or see recent transactions with a few clicks of your mouse or swipe of your finger. With our account information available when we need it, we can be more informed. You can even transfer money to other people or accounts with ease.
• Better Rates – When you bank strictly online, you will most likely get a better rate on your checking or savings account. You can even get better loan rates. Online only banks can provide their customers with higher rates because they have less overhead.
• Convenience – You can now deposit a check without even driving to the bank. If you have a smartphone with a camera, then you might have the ability to deposit your check right from your couch. Most banks have mobile apps for this feature.

These pros translate to both online and mobile banking. As long as you have an internet connection or mobile data, you can be connected with your money at any time.

The Cons of Online/Mobile Banking

I am the type of person who doesn’t see too many issues with online banking. That said, I realize there is one big con for online/mobile banking and that is undoubtedly security. With massive data breaches from sites like Target and other retailers, we have to be very careful about our financial data.

When we get too careless, we tend to make mistakes. When people ask me about how I do my banking and I tell them I haven’t stepped foot in a bank in a long time, they look at me funny. I don’t have much need for my traditional bank. They hold my money for me and it is FDIC insured, so why worry about it? After they stopped looking at me in a funny manner, I tell them about how I try to keep my information secure. My main defense is keeping my passwords regularly updated and hard to crack. Sometimes they are so hard to crack that I forget them.

The other way I protect myself is by having money in different banks with different usernames and passwords. Yes, it requires more time for me to manage my money, but it is less likely I will be the victim of total loss because my money is spread out. When I use mobile banking, I make sure to never have the mobile app remember my username. I also have a security pin to unlock my phone. These are just small steps I can take to protect myself and make it harder to hackers or criminals to get access to my financial data.

Are You Excited or Scared by Online/Mobile Banking?

This question is more geared toward those who haven’t jumped into online/mobile banking. What is stopping you? Is it the lack of knowledge on how to do basic bank transactions online or via your phone? Does the advancement of technology scare you or make you feel intimidated?

As more and more of our financial lives move into the online space, we have to be cognizant about our security. It is extremely hard to get back on your feet from fraud. Since fraud just continues to rise each and every year, we have to be prepared. That doesn’t mean we should shy away from advancement or be slow to adopt new changes. Online and mobile banking are here to stay and taking the time to understand the security and how to protect your information is the key to enjoy the full benefits.

How about you all? Do you fully utilize online and/or mobile banking? Have you ever been a little scared of fully utilizing all of the tools due to security purposes?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/84335369@N00/6791147275/

Everything You Need To Know To Get A Peer To Peer Loan

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

Peer to peer lending is an alternate funding method that is becoming increasingly popular across the United States.

This lending method is funded by individual investors willing to provide money for loans in return for an attractive interest rate on the money they invest in the loans. Peer to peer loans may be a viable alternative if you are unable to obtain a loan from a traditional bank or lender. Once obtained, the funds can be used for anything the borrower desires, including paying off high interest debt, purchasing a vehicle, or starting a business.

Peer to peer loans are often cheaper for borrowers than traditional loans. These loans allow borrowers to bypass the banks, which often have higher fees, higher interest rates, and lower loan limits for their loans. Investors earn a higher return on their money than they would using many of the saving options available at traditional banks, supplying borrowers with a large pool of investors willing to fund their loans. This keeps interest rates reasonable and payments low for borrowers.

Peer To Peer Lending Companies

Prosper.com

Prosper.com was one of the first players in the peer to peer lending industry. All of the loans made through the company are fixed rate loans with terms lasting either three or five years. Prosper’s website advertises a 6.73 percent starting APR for the best borrowers, meaning the borrowers with the highest credit scores. According to the website of the Better Business Bureau, Prosper has recently received an A+ rating from the rating agency.

LendingClub.com

LendingClub.com was founded shortly after Prosper.com. The company has helped thousands of borrowers secure millions of dollars in loans from private investors over the years. During Lending Club’s first year of operation, it facilitated more than $3.5 million in loans. That figure has since grown to $3.4 billion annually. LendingClub offers personal loan amounts up to $35,000 and interest rates as low as 6.78 percent on loans with terms of three or five years.

FundingCircle.com

FundingCircle.com is another popular peer to peer lending business. The company specializes in small business loans to finance expansions, inventory purchases, marketing launches, and the hiring of new employees. The company offers loans up to $500,000 at interest rates of little more than 9 percent for borrowers with excellent credit. The term of the loan can be three, four, or five years.

Obtaining A Peer To Peer Loan

Securing a peer to peer loan is easier than you may think. The first step in the application process is providing your personal information to the peer to peer lending company so a credit check can be performed. Most companies offering peer to peer loans require applicants to have a credit score of at least 600. The minimum credit score for both Lending Club and Prosper is 640. Funding Circle uses a complicated calculation process designed to determine the company’s ability to repay the requested loan.

Before applying for a peer to peer loan, make sure that your credit score is as high as possible so you will get the best rate for your loan. Obtain your credit report and go over it with a fine toothed comb for any errors that could be bringing down your credit score. You can obtain a free copy of your credit report from each of the three major credit bureaus annually from www.annualcreditreport.com.

Correcting errors on your credit report can increase your credit score by a significant amount. These errors could include someone else’s information combined with your own, missed payment entries for payments you know were made on time, or accounts in your name that you did not open. If any errors are found, you should alert the credit bureau that issued the report immediately to get the process started for removing that information from your credit report.

You will also be asked to disclose your debt to income ratio so the underwriters can determine your ability to repay the loan you are requesting, so it is important to reduce your debt to income ratio as much as you can before applying for the loan. After your personal and information has been reviewed, your request will be assigned a score based on your perceived credit-worthiness, essentially a credit score for the website. This score is typically displayed in the form of a letter grade, with AA or A1 ratings equaling the best ratings down to E or G1 ratings for riskier borrowers. The rating you receive determines the interest rate that you will be charged for the loan and the interest rate that the lenders will receive for funding your loan.

In order to obtain the loan, you must provide the peer to peer lending company with a valid bank account number. The requested funds will be deposited into this bank account and the payments for the loan will be automatically withdrawn from this account on the payment due date each month. Your loan may be completely funded by a single lender or divided into smaller portions by multiple lenders. Regardless of the number of people that fund your loan, you will make a single payment to the peer to peer lending company that facilitated the loan. That payment is then divided into the accounts of the investors that funded your loan.

Final Tips

In order to ensure that the peer to peer loan process goes as smoothly as possible, fill out the requested information completely and honestly. The information you provide will be scrutinized and any potential errors can hold up the process or result in your application being rejected. Depending on the funding process, it could take a couple days or a couple weeks for your loan to be entirely funded. Make sure that you read all of the terms and conditions associated with the loan so you will know how much you will pay in fees and interest as well as when the monthly payments will be taken out of your bank account.

How about you all? Have you obtained a peer to peer loan from one of these companies?

Share your experiences by commenting below! 

***Photo courtesy of http://pixabay.com/en/hand-finger-thumb-high-positive-105725/

Advice Needed On Health Insurance Coverage Gap Until Sept. 1st

Howdy everyone!

Among the many financial changes I am going through right now with finishing up graduate school this week, I learned today that my student health insurance ended (without notifying me) on August 14th.

Since I will likely not be starting a full time job until October, I needed to explore my options for maintaining health insurance (the top priority in the account hierarchy). Unfortunately, the health insurance plan I had does not have a COBRA extension coverage option.

Therefore, I had to scramble today to find a new individual insurance plan on my own. I went through the HealthCare.gov site and enrolled for a Gold level plan ($260 premium per month for individual plan), but the trouble is that the coverage doesn’t start until September 1st. 

Does anyone know if it is possible to obtain immediate health care coverage with Healthcare.gov, or am I simply out of luck and need to be careful for the next 10 days? 🙂

***Photo courtesy of https://www.flickr.com/photos/marinadelcastell/10273621876/in/

What Should You Expect From Your Banker When Applying For A Loan?

The following post is by MPFJ staff writer Travis.  Travis is a customer blogger for CareOne Debt Relief Services, and also appears weekly at Enemy of Debt.  Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband he provides a unique perspective on balancing debt, finances, and family.

I walked into our bank last November to discuss the possibility of getting a loan to consolidate our remaining unsecured debt.

We were just a few payments away from eliminating $109,000 of credit card debt through a debt relief program but had two accounts that we were unable to include in program.  I hadn’t ever applied for a consolidation loan before, and didn’t know what to expect with regard to what the process would entail, or how long it would take.

I didn’t know it at the time, but I was about to have a horrible experience.  When it was all said and done, we had been denied mainly because we still had accounts being managed by a debt relief plan.  We were told to try again after we had completed the program.

My wife and I agreed that when we made another run at it, we would go to a different branch of our same bank, and deal with someone new.  Last week we did exactly that, and had a completely different experience.

This is a tale of two loan applications; one fantastic, and one miserably sub-par. 

Tale #1: The Agonizingly Slow Path of Failure

My first meeting with the banker was setup at my request as an exploratory meeting.  I thought I should explain our situation with the debt relief program, what our goals were, and discuss our potential options.  The banker seemed optimistic that we would be approved and wanted to meet with both my wife and I to go over details.

We setup a meeting for a week later at his suggestion.

One week later, we both sat in the banker’s office as he asked us for some basic information, then sent us home with a list of documentation including W2s and tax forms that we needed to gather for him.  Since that meeting was on a Saturday afternoon, I wasn’t able to get him the paperwork until the following Monday.   He was to take the paperwork and submit a loan application.

The next few days were riddled with unreturned messages.  The banker was either not available, or out of the office.  Finally, on Thursday, I got the banker on the phone and found he was still working on the application.  He was to call us with an update by end of day on Friday.

Close of business came and went and no phone call was received.

We did, however, receive an email during the evening from him notifying us the loan application had been submitted, and we would likely hear back regarding the decision the next day.  The next day, of course, went by without any notification from the banker.

On Monday, I called several times leaving messages.  Towards the end of the day, I physically walked into the branch to find him in his office.  He quickly apologized for not returning my messages, and broke the news to me:  Our application had been denied.   But, he was going to attach a note to our application reminding the underwriters that we had been customers for a long time, that we were just a few months away from completing our debt management program, and ask for reconsideration.

A few more days went by.  Finally on Thursday, nearly three full weeks from our initial meeting, we were informed that our application had been denied again.  Tough luck, try back in a few months.

Tale #2:  The Fast Lane of Success

We met our new banker at 10am on a Saturday morning.  We quickly explained our situation, to which banker #2 nodded his head and tapped on his keyboard.

“I think we can help you now,” he said.

He asked us for our personal information, typing it directly into a loan application as we gave it to him.  He asked for the account names and numbers we wanted to consolidate, which we were able to give him since we had our smart phones handy.  He then asked for estimated income information, stating that if they needed specifics they would ask for them.  A message popped up after hitting the “Submit” button telling him that it may take up to 24 hours to turn around the application.

“Let’s see if we can do better than that,” he said as he picked up the phone.

He dialed an internal number and asked if they could expedite the loan application as the customers were sitting right in front of him and really wanted to know.  The underwriter  calmly explained that they were swamped and it would take 24 hours.

Kudos to the guy for trying.

We were in the bank for a total of 23 minutes, and in that time we were further along than in the first two weeks of our previous attempt.  When we got home I found a pleasant surprise from the bank in our email inbox.

We were able to check the status of our loan online.

On Sunday evening we were notified through their automated system that our application had been conditionally approved.  We needed to provide additional documentation such as W2s and pay stubs.  I quickly gathered them all and put them in a manila envelope.

On Monday, banker #2 called and reiterated what we already knew.  When I delivered the documentation to him, he made copies and was told to expect a phone call from him the next day.  True to his word, he called Tuesday morning telling us we could come in at any time to close on the loan.

Three days after our initial meeting, we signed the paperwork for our approved loan.

Lessons Learned

These were obviously two very different experiences from the same bank no less, even if you disregard the decision on the loan. Having gone through these two experiences, I learned several lessons that could benefit anyone who may be looking to apply for an unsecured personal or consolidation loan:

1. Filling out a loan application takes minutes.  Banker #2 did it while we sat in his office and watched!
2. Gather the account number and balance of any accounts you want to pay off with the loan
3. Collect W2 forms from the last two tax years for all income streams and make copies of them
4. Collect the last pay stub from all income streams and make copies
5. Bring the information from 2,3 and 4 with you to your meeting with the banker
6. Ask your banker how long the decision will take, and if they have a way for you to check  he application status online.
7. Get a business card from your banker, and ask for his schedule so you know when he will and will not be in the office.

Knowing and executing these pieces of advice will help speed up the process of applying for an unsecured loan, not to mention reduce your own stress level while you go through the process.

How about you, readers? Have you ever applied for a personal or consolidation loan?  What was your experience like?

***Image courtesy of Stuart Miles / FreeDigitalPhotos.net