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  • Debt, Personal Growth

    Avoiding the Debt Cycle

    Financially speaking, millennials have it rough. College is more expensive than ever, with college loans taking a chunk out of many millennials’ paychecks long after they graduate. Cost of living is high, while finding an entry-level job that will support a family is next to impossible. When you’re faced with the standards your parents and grandparents lived with–getting married young, easily affording that first home, and handling the cost of having children –it seems impossible to stay out of debt and still have the things you and your family deserve. Avoiding the debt cycle, however, can help you get ahead financially–and stay there.


    Stay off of social media pages that encourage a buyer mentality.

    This is particularly true of pages geared toward new parents. Everyone of them, from the admins to the other moms, seems determined to convince you to buy, buy, buy! The truth is, there’s no need to buy multiples of one item when one will do well enough. If you find that social media pages are encouraging you to make purchases that are rapidly draining your wallet, stop following them! Your finances will thank you.


    Save up and buy quality.

    When you’re stuck in a low-income spot and trying to stay out of debt, it’s tempting to buy a low-quality, low-price item instead of saving up for a higher-quality item. Unfortunately, that means that within a few weeks or months, you’ll find yourself right back in the same position! Instead, find ways to make do short-term in order to save for the higher-quality purchase. From work clothes to appliances, it’s often worth the higher price tag to invest in quality.


    Prepare mentally for bigger payoffs later.

    Early in your career, you may need to work for low pay or embark on expensive training programs in order to move ahead in your field. It’s alright to live frugally.  Don’t be embarrassed about packing a lunch or work.  Remind yourself that there are bigger payouts coming down the road and stick to your guns against debt.  Don’t fall victim to the lifestyle creep (3 Keys to Avoiding Lifestyle Creep). It will make it easier to make it through the tight times.


    Learn to live simply.

    Minimalism is a lifestyle that’s quickly coming back. Instead of an overcrowded house that seems to be exploding at the seams, look for ways to enjoy a minimalist lifestyle. Avoid buying “stuff” just to have it. You don’t have to go full-blown minimalist, living off the grid, with a capsule wardrobe and no knick-knacks to be found anywhere, but avoid buying things you don’t need.


    The trick to staying out of debt as a millennial is to avoid overspending. Avoiding excessive stuff, whether that means embracing minimalism or staying off of sites that encourage you to buy things you don’t really need, can make it easier to stay out of debt. Changing the way you think about your purchasing habits can keep you debt-free and your life moving smoothly.



  • Debt, Home Ownership

    How To Restructure Personal Debt – A Surprising Option

    You may or may not know that restructuring debt is a fairly common practice in business. The reason they do it is to save money by paying less interest on their debt. And by saving money on interest costs, they increase profits. Simple, right? But have you ever considered increasing your own “profit” (aka. discretionary income) by restructuring your personal debt? If you’re like most people, the answer is probably no. The reason you’ve probably never considered it is you never realized you could. The question is, how do you go about it?

    The answer is by refinancing your home mortgage. Of course, that eliminates some people because they either don’t have their own home yet or, if they do, they don’t have enough equity in that home to make restructuring feasible. But if you do have your own home and you have enough equity, here’s how to use that equity to restructure your consumer debt:

    Qualify Yourself

    The first step is to determine how much equity you have in your home. To do that, simply subtract the current balance of your mortgage from the current market value of the home. If your home equity is equal to or greater than the total amount of credit card you have, you might be a good candidate for debt restructuring.


    How It Works

    If you determine that debt restructuring is right for you, the next step is to do a cash out refinance, and use the cash you receive to pay off your credit card and other high interest debt.


    Why It Makes Sense

    Some people will tell you that using cash out refinancing to pay off consumer debt is just trading one debt for another. That’s true. But there are some very real benefits to restructuring in this way:

    • Your mortgage interest is much lower than your credit card interest, so you’re saving money there – a lot of it.
    • Your mortgage payment is much lower than the total of your current mortgage payment and your consumer debt payments, so you’re saving money there too – potentially a lot, depending on the loan terms and other variables that are unique to your situation.
    • You can use the increased discretionary contribute to your savings and retirement plans every month.
    • If your cash out is greater than the amount you need to pay off your consumer debt, you can put that extra cash into a separate savings account designated as your emergency reserve. Having an emergency reserve will keep you from having to use plastic when an unforeseen expense arises.


    A Huge Caveat

    Of course, as is the case with most good things, there is a caveat to using your cash out refinancing to restructure personal debt. It requires ongoing fiscal discipline to be successful. That means avoiding the credit card trap in the future. If you pay off your credit cards in this way, then run up those balances again, you’ll find yourself in worse financial shape than before. So it’s best to just cut those credit card up (don’t close out the account since it could negatively affect your credit), or at least hide the cards in the freezer or somewhere so that you’re not tempted to use it every time you open your wallet of handbag.

    As you consider this option, you should seek qualified professional advice on your specific situation.



  • Budgeting, Debt

    Car Buying: Why Buying Used Is the Best Option

    For some people, buying a different car is a lifestyle choice. For others, it’s a matter of necessity. Whatever your reason for entering the automobile market, the first choice you’re faced with is whether to buy new, buy used, or lease. From an economics standpoint, buying used is usually the most financial sound choice. Here are 3 reasons why you want to consider buying used for your next car purchase.

    1. You’ll save a lot of money.

    Of course, it’s obvious that a used car costs less than a new car; but the difference is substantial because new cars depreciate very quickly. According to Consumer Reports, a new car loses 46 percent of its value after three years. So if you paid $25,000 for a new car, it would only be worth $13,500 after three years. On the other hand, if you bought that three-year old car, you’d have a pretty nice vehicle, and will have spent much less on it.

    2. Today’s used cars are more reliable than used cars of the past.

    For years, there has been a big push by automobile manufacturers to lease cars; and that’s a boon to the used car buyer. Typically, lease terms run for two or three years, at which time the lessee turns the car back to the dealer. You can probably guess what happens to the car then – it’s sold as a certified pre-owned (CPO) vehicle. These CPO vehicles are a great value for the used car buyer because the lease terms limit the number of miles the car can be driven and require superior care and maintenance. Otherwise, the lessee pays a penalty. So the person who buys the CPO vehicle gets a low-mileage, like-new vehicle at a used car price. It should be noted that CPO vehicles are typically more expensive than a regular used car, but they’re still a great value, especially since the dealership is certifying that the car is essentially like new.

    3. Buying used is no longer like buying “a pig in a poke”.

    It used to be, when you looked at a used car, you were at the mercy of the person selling it when it came to the vehicle’s history.  We all know that image of the greasy, untrustworthy car salesman.  That’s no longer the case, at least when you buy from a reputable dealer. Today, most dealers offer a vehicle history report from providers like Carfax and AutoCheck. In fact, if the seller doesn’t offer a history report, it’s probably best to pass on that vehicle. Of course, a vehicle history report may not identify every possible cause for concern associated with a particular used car, but they still add some peace of mind when buying one.

    While buying a used is more risky than buying new or leasing; today’s used vehicles are, for the most part, better than ever. Vehicle history reports that can reveal important details about a car’s past, and automaker CPO programs offer a reasonable assurance that you’re getting the cream of the used car crop.

    Here is some additional information about buying used:




  • Debt

    How to Avoid Being Underwater on a Car Loan

    A growing number of people are underwater on their car loans. Simply put, that means their outstanding balance is worth more than the car. Roughly 32% of people in 2016 were underwater on their car loans in 2016, compared to approximately 23% just five years previously. Many of them were Millennials.

    Being underwater can exert a serious hit on your finances. You are paying every month to have negative equity. (Negative equity is another term for owing more than an asset is worth.)

    There are many reasons for the rise in underwater car loans. A chief one is lower down payments on car loans. Cars depreciate 15% to 20% every year. If you pay $20,000 for a car with no down or little down payment, you could still owe $15,000 in three years. The car, by contrast, has lost from 45% to 60% of its value. It’s only worth $9,000 to $12,000. Negative equity, to the tune of $3,000+.

    The price of cars is steadily rising, as well.

    The important money-saving question is, how do you avoid being underwater on your car loan? Here are seven ways.

    1. Keep driving your car.

      Negative equity only really matters if you come to sell or replace the car. Then, whoops, you can’t make a profit because you still owe more than you can sell or replace it for. As long as your payments are budgeted and your car is working, simply drive the car until the loan is fully paid.

    2. Research what cars are worth.

      Few things beat research as a way to save yourself from bad financial moves. Choose an unbiased source like Consumer Reports to find out price ranges, average repair records, and more. Don’t be stampeded into believing you must spend $18,000 or above once you’re on the lot. Know what the ranges are for the kind of car you’re interested in.

    3. Consider a used car.

      If depreciation is your enemy in car value, it can also be your friend in saving money if you buy a preowned car. New cars lose 15% to 20% of their value pretty quickly. That means you can buy a year-old car for 20% less than the owner paid for it 12 short months ago. If you’re willing to get a five-year-old vehicle, the savings can be substantial. Well maintained older cars can be very good buys for your buck.

    4. Save up for a large down payment.

      The more you can put down on your car, the less of a loan you will have to take out. If you pay 20% down on a $20,000 car, you only have $16,000 in a loan.

    5. Shop around to get the lowest interest rate.

      Car payments are determined by amount of loan, yes, but interest rates also play a role. The lower the interest rate, the lower your monthly payment. Your loan payments will be more affordable, which means you can pay down the principal more quickly if you want. Generally, credit unions can offer the most reasonable rates. Dealers are often the most expensive.

    6. Avoid frills.

      Knowing what you want is key. Once you hit the dealer’s lot, you may be talked into expensive tires, a sun roof, and more. All of those drive the price of the car up. The more car you buy, the more you pay for with the loan. All frills depreciate. Do you really want to be paying for a sun roof you use 5 times a month 10 years down the road?

    7. Pay down debt quickly.

      Be sure you get a car loan with no prepayment penalty. These allow you to pay down your loan quickly. If you double the amount of your payment, you’ll pay it off twice as quickly at least. Your loan will be discharged before you become underwater.

  • Banking, Debt, Home Ownership

    The Road to Home Ownership: FHA vs. Conventional Mortgage

    For many people, home ownership is the pinnacle of adulthood. Finally, you’re able to afford a house for yourself and your family! You have your dream home in mind, and you’re ready to take the plunge. First, however, you have to decide on the type of mortgage that’s right for you. Deciding  between a conventional mortgage and an FHA loan can be a headache, but understanding the two can help you make the best choice for your family.

    FHA Loans

    An FHA loan is a loan backed by the Federal Housing Administration. Under an FHA loan, you will receive:

    • Less stringent qualifications, since the mortgage lender will experience less significant losses if you’re unable to pay the amount of the loan
    • Lower down payment requirements
    • Better interest rates over the course of the loan

    This type of loan is intended to help first-time home buyers and others who have less than stellar credit acquire the homes they need. It provides security to both lender and borrower–but at a cost. Individuals who have FHA loans must take out mortgage insurance, including both an up-front premium and monthly payments throughout the lifetime of the loan.

    Conventional Mortgages

    Conventional mortgages are the standard mortgage typically acquired by home buyers. They have:

    • Fairly stringent requirements regarding credit scores
    • Increased down payment requirements
    • Reasonable and expected interest rates throughout the life of a loan

    Conventional mortgages are the option chosen by most home buyers with reasonable credit and the expectation that they’ll be able to pay their loan fairly easily. Most people, when setting out to purchase a home, choose a conventional mortgage without looking back.

    FHA vs. Conventional Mortgage: A Cost Comparison

    An FHA loan looks great up front. Lower interest rates? Where do you sign? Unfortunately, those interest rates don’t always add up to cost savings over the life of the loan. Assume that you’re purchasing a home valued at approximately $150,000. You have 10%–$15,000–to put down on the purchase price of the home. Over the thirty-year lifetime of a standard mortgage, paying approximately $725 per month, you’ll end up paying $261,000 for your home by the time it’s paid for. With a conventional loan, using the same 10% down payment, you’ll pay approximately $625 per month for thirty years–a total of $225,000. That’s a substantial savings over the life of your loan! Manage to scrape up a 20% down payment before you take out a conventional mortgage, and you’ll lower your monthly payment to $555, making the total cost of your loan just $200,000.

     open house sign

    The Loan That’s Right for You

    For most families, a conventional mortgage is the way to go. If you’re able to save up a substantial down payment–around 20% is generally recommended, though you may be able to get a conventional mortgage with a down payment of as little as 5%–and haven’t filed for bankruptcy within the last seven years, as long as you have a reasonable credit score, a conventional mortgage is likely the right choice. On the other hand, if your credit is poor or you’ve had to file for bankruptcy between three and seven years ago, an FHA loan is a great way to purchase the home you’ve dreamed.

    Choosing between a conventional loan and an FHA loan isn’t always easy. If you need additional advice, working with a qualified financial planner is a great way to ensure that you’re prepared for all of the financial challenges that come along with home ownership. By preparing appropriately and doing the calculations to ensure that you’re prepared for both the payments you’ll have to make each month and the final cost of your home by the time the loan is paid, you’ll avoid any unpleasant surprises down the road and make it easier for you to choose the home ownership solution that’s right for you.


    Need to know how much home you can afford?  Use this mortgage calculator to see how much your monthly payment will be. (Click Here For Calculator)


  • Credit, Debt

    The 3 Lies Society Has Told Us About Debt

    “A lie believed as truth will affect you as if it were true.” -Kevin Martineau


    Today’s society has sold us a bunch of lies about debt that we have believed. In fact, we’ve believed them so much that most of us are in debt today.

    So, how do we quit believing the lies and open our eyes to the truth? We educate ourselves and learn what debt really is and what it is not.

    There are 3 lies that culture has told us about debt. Let’s look at them and consider the truth about each one of them together.

    Debt Lie #1: Get a Credit Card to Build Your Credit

    The idea that you have to get credit to build credit means you need to go into debt so that later on you can go into more debt. This is ridiculous. Of course, the concern of buying a home later on arises. So, can you buy a home without having had a credit card? Lenders will tell you no. But that is not true.

    You can qualify for a mortgage from a company that does actual under-writing. In other words, they don’t just look at your credit score, they look at the history of your financial life. You can qualify for these mortgages if you have paid rent on time for at least 2 years, you have a history of paying your utilities/school tuition/etc. on time, you have been in the same career for at least 2 years, and you have a good down payment.

    You may feel like that is too hard. But why? Is it because it is impossible to accomplish or is it because someone told us there is an easier way, – a way to do it by getting into debt with credit cards? The fact is that you do not have to build credit to buy a home. A history of good, solid financial stewardship will qualify you for a home when it is your time to buy one.

    Debt Lie #2: Everyone Has a Car Loan, It’s Just a Way of Life

    Many financial professors and advisors purport this lie. They suggest that we get a car loan because we “need” one. The problem is that there are substantial risks involved when getting into debt. Additionally, we pay more for the car after the lifetime of the loan than what the car is worth. The biggest problem with this is that it takes our biggest wealth building tool from us every month – our income. The fact is that we do not have to get a car loan and pay the bank interest for five years. We can save our money and get what we can afford at the time. That way, we can use our money ever month to build our long-term financial future.

    Debt Lie #3: Debt Consolidation Fixes Our Problem with Debt

    Debt consolidation is a problem because it hides a bigger problem. From a purely financial standpoint, it may seem like a good idea. The problem is that we are the ones who got us into debt. We are the ones who created the problem. And when we consolidate our debts, we think we did something to fix the problem. We feel accomplished. But in reality, nothing changed.

    We still have the debt, and more importantly, we are still ourselves. Debt is a fundamental problem. It encompasses impatience, impulse buying, and poor financial management. To fix our problem, we need to look closer at ourselves than at our debt. Consolidating our loans doesn’t change us, it just transfers out debt from one lender to another. If we are going to see a long-lasting change that will permanently impact our financial future in a positive way, then we will have to address our own tendencies that resulted in the initial incurring of debt in the first place.

    Just because everyone does it doesn’t mean we should do it too. The truth is that you do not have to get a credit card to build your credit. Car loans are not a way of life. And you cannot fix your debt problem by consolidating it. By refusing to believe these lies and living in a way that is counter-cultural, financially speaking, you will set yourself up for success and for eventual, complete financial freedom.

  • Budgeting, Debt

    Getting Out Of Debt After College

    Universities taught you about the complexities of the English language while forgetting to educate about college debt (Eh-hem — throat clearing). If this is the case, it will be up to you to educate and plan for your financial future. First things first:

    Know your debt

    You need to understand the complexities of all your different loan types.

    • What are the interest rates?
    • What are the minimum monthly payments?
    • When do payments start?
    • What are the fees associated with the debt?

    Once you know the details you will be able to make a plan: Put your money where it counts.  A great way to track your debt is with a spreadsheet.

    Don’t incur late fees

    They may seem harmless – $10 here or $20 there – but these fees add up. If you’re not careful, late fees can total more than interest fees! Make all minimum monthly payments, no excuses! Set up an automatic payment system if needed.

    Focus on high-interest loans – credit cards

    Get rid of high interest as fast as possible! High is anything upwards of 7%. Most likely this will be credit cards. These guys can cost upwards of 20% per year. If you don’t have the money, it is best to get a loan for your loan. What? Did I just say that? Is the answer for debt more debt?

    Loan consolidation

    This is when you obtain a large loan to pay back several smaller loans. This allows you to pay a lower yearly interest rate. For example, you lock in a 7% rate to pay back your credit cards with a 20% rate!  This can be a risky strategy that I do not recommend for everyone.

    Postponing low-interest loans

    Often, college loans have very fair terms. This includes things like no interest until after graduation. Then, after school, they may only charge a small rate, like 3%. You don’t have to feel bad not to pay them right away. Once the credit cards are paid back, you will have freed up extra dollars. This may actually allow you to pay the student loans back more quickly.

    Financial planning

    It is a little overwhelming dealing with money. The anxiety associated with finances leads to procrastination. This, in turn, can keep you trapped in financial slavery. If this sounds like you, it is best to get a little help. A consultant can help you understand interest rates and repayment schedules. They can also act as a coach: helping you keep goals and stay on track.