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Debt Management

Americans Owe $1 Trillion in Credit Card Debt

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In an age of consumerism and improving economy, Americans are borrowing more as the appetite for household debt grows remarkably. The new data from Federal Reserve shows that Americans owe $1 trillion in credit card debt. U.S. consumers now owe $1.0004 trillion on credit cards, up 6.2% from a year ago and 0.3% from January. It is also the highest amount since January 2009.

Credit-card debt hit the $1 trillion threshold in the U.S., joining auto loans and student debt to cross that level. The US Federal Reserve had raised the interests rate three times since late 2015, making it more expensive for borrowers. While savers might rejoice as the Fed continue to raise interest rates, credit card borrowers will have to pay more in interest monthly. According to WalletHub, the Fed’s three interest-rate increases so far have added  $4.3 billion in additional interest charge that credit card debtors have to pay. By reducing your credit card debt or pay off the balance every month, you can keep more money in your pocket instead of giving it to the banks.

Widespread Financial Vulnerability Among American Households

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A team at Harvard Business Review tracked every dollar 235 U.S. households spent for a year and found widespread financial vulnerability. Harvard Business Review reported:

Income inequality in the United States is growing, but the most common economic statistics hide a significant portion of Americans’ financial instability by drawing on annual aggregates of income and spending. Annual numbers can hide fluctuations that determine whether families have trouble paying bills or making important investments at a given moment. The lack of access to stable, predictable cash flows is the hard-to-see source of much of today’s economic insecurity…

Our first big finding was that the households’ incomes were highly unstable, even for those with full-time workers. We counted spikes and dips in earning, defined as months in which a household’s income was either 25% more or 25% less than the average. It turned out that households experienced an average of five months per year with either a spike or dip. In other words, incomes were far from average almost half of the time. Income volatility was more extreme for poorer families, but middle class families felt it too…

It doesn’t have to be that way. Volatile income and spending needs are not problems in themselves. When a business, rather than a household, faces such volatility, it responds by building up working capital. Many people can do the equivalent in household terms: They plan, save, rely on family wealth, and use credit and insurance. But the challenge for a growing number of Americans is that they have insufficient ways to cope with the ups and downs. For households, just as for businesses with shaky cash flows, effective ways to cope with the ups and downs are least available to those who need them the most.

The practical way to avoid the financial vulnerability is to maintain an emergency fund. By building up a cash hedge over time, you can borrow from yourself when things go south even if your income is volatile. Having cash on hand can solve a lot of problem. In this way, your emergency fund acts as your insurance.

Once you follow the golden rule of personal finance and live below your means, your savings will increase over time. Having a saving buffer frees you from having to waste time dealing with shortfalls in income or spikes in expenses.

These 6 Student Loan Statistics Will Blow Your Mind

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The topic of student loans is in the news nearly every day, and has evolved into a hot button political issue as talk of the “student loan debt crisis” heats up. While the U.S. is praised for the increasin­gly high number of people attending colleges, there is a lot of criticism and finger-pointing concerning the true economic cost of having a country mired in student loan debt. With all the talk, articles, and pundits, it helps to have a few concrete statistics to keep in mind. Here are six student loan statistics that are hard to believe are true.

Total U.S. Student Debt

The total amount of U.S. student loan debt is a staggering $1.3 trillion dollars. You read that number right – we’re talking thirteen digits. That’s the number reported by the Federal Reserve Bank of New York as of the end of 2016, and that number is continually rising. Why does it always rise? Most experts attribute the rise at least partially to expanded use of income-driven repayment plans for federal student loans, which limit borrowers’ payments in many cases to less than what the loans accrue in monthly interest. This negative amortization causes individual loan balances to rise over time, instead of decrease. It seems as though the national student loan balance is rising along with them.

Default Rate

Roughly a tenth of student loan borrowers are delinquent or defaulted on their student loans. In fact, the default rate for student loans is higher than any other category of debt, including mortgages, credit cards, and auto loans. This may be due in part to the high cost of higher education, which is for many people an investment only dwarfed by their home purchase (and in rare cases, not even then). The good news is, while income-driven repayment plans may be contributing to the rise in total debt, their increased use has been directly tied to a decrease in the national default rate, likely due to the wider availability of more manageable payment options. [Read more…]

Change is Hard! This Prisoner Refuses to Leave Jail

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Why certain individuals keep getting into debts even with good income? For some, change in their behaviors is very hard. But none of those stories are as unusual as a 70-year-old Saudi inmate who refused to leave prison after completing his jail term. He said he feels better in jail than being at home.

The man was jailed in the central town of Buraidah in northwestern Saudi Arabia on charges of failing to pay his debts. So why this prisoner refuses to leave jail? He says he met good people in jail.

“When he was told to get ready to be released, he begged the prison chief to let him stay,” the Saudi newspaper Okaz reported.

“He said that he feels psychologically better than being at home after meeting some good old people in prison,” the newspaper added, without mentioning whether he was allowed to stay. Newspaper Okaz also mentioned that a consultant at the prison, Sheikh Mohmmad Al Ghadhiya, said that he discussed the issue with the prisoner, who told him that his release would not help him solve his debt problem.

After being in jail, this 70-year-old debt inmate is better off in there than outside with better social interaction in prison. Similarly, for some wealthy 70-year-old they are better off in the office than outside with better social interaction in the workplace. They refuse to leave their jobs to retire and enjoy life outside of work. Do they love their office environment as much as the Saudi debtor loves the prison? [Read more…]

How to Refinance a Paid Off Car

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A great way to save money is to refinance your paid off car at a low rate and use the money to pay off debts with higher interest rates. You take advantage of the low cost money by cashing out $10,000 or $20,000 at 1.99% to pay other debts such as student loans, mortgages and credit card debts. That’s a very quick and easy way to make profit and save money with this arbitrage method. Don’t worry! I will show you step by step on how to refinance a paid off car.

Real-Life Example for Cash-Out Refinance on a Paid Off Car

My wife and I own two vehicles outright. During my journey to be completely debt free, I have used this great arbitrage twice to refinance a paid off car, in 2012 for my Toyota Camry and in 2015 for my Toyota FJ Cruiser. See the following picture about Truth in Lending Disclosure for proof: [Read more…]

Why Dave Ramsey’s Debt Snowball Method Works for the General Public

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One way to reach financial freedom is to completely pay off all debts, except the mortgage. Dave Ramsey’s strategy to accomplish this financial goal is detailed in his Baby Step 2: The Debt Snowball.

In the debt snowball method, Dave Ramsey advocates paying off the debts one by one starting from smallest to largest. His method ignores the debt’s interest rates, which bother many rational savers including me. But this method really works for the general public and here is why.

In Sun Tzu’s Art of War, when you are doing battle, seek a quick victory. A protracted battle will blunt weapons and dampen ardor. By tackling the smallest balance first, you can quickly eliminate that debt to claim a small victory. In turn, it motivates the general public to achieve the ultimate personal finance goal of paying off all debts. [Read more…]

Average iPhone Users Waste $40 on Apps in 2016

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Zoey Chong wrote on CNET: “iPhone users in the US are spending more and more on apps and in-app purchases. Spending climbed to an average of $40 per person last year, according to research released Monday by Sensor Tower. This is up from $35 in 2015. Gaming continued to lead the way, accounting for more than 80 percent of Apple App Store revenue in the US. Spending in that category increased from $25 on average per person in 2015 to $27 last year. This may not be the biggest surprise, given that 2016 witnessed the rise of Pokemon Go, which crossed $1 billion in revenue worldwide last month.” (cnet.com)

Americans Are Taking On a Lot More Debt

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CNN reported: “Total household debt climbed to $12.58 trillion at the end of 2016, an increase of $266 billion from the third quarter, according to a report from the Federal Reserve Bank of New York. For the year, household debt ballooned by $460 billion — the largest increase in almost a decade. That means the debt loads of Americans are flirting with 2008 levels, when total consumer debt reached a record high of $12.68 trillion. Credit card debts rose by $32 billion to hit $779 billion.”(cnn.com)

Teenager Won The Lottery at 17 and Now It’s Ruining Her Life

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Many lottery winners squander their fortunes and eventually wind up unhappy and broke. Jane Park, who won the EuroMillions lottery in 2013 when she was 17 years old, is now blaming the lottery officials for ruining her life. The Washington Post reported: “Buying things for the sake of buying things got old. Instead of finding happiness via conspicuous consumption, Park uncovered an age-old maxim preached by holy men for thousands of years and ignored by enthusiastic lottery winners for almost as long: Money can’t buy happiness, and large amounts of it have a way of, well, complicating things.” Park blames the lotto bosses for “ruining her life.” “I thought it would make it 10 times better but it’s made it 10 times worse,” Park told the Sunday People. “I wish I had no money most days. I say to myself, ‘My life would be so much easier if I hadn’t won.’” After Park won the lottery, shopping became a huge problem for her. She went out and bought more than 50 designer handbags including a Louis Vuitton, a lot of shoes, and a purple Range Rover. Now she’s contemplating about suing lottery company for negligence. “People look at me and think, ‘I wish I had her lifestyle, I wish I had her money,’ she added. “But they don’t realize the extent of my stress. I have material things, but apart from that my life is empty. What is my purpose in life?” [Read more…]

Don’t Waste Your Money on Fitness and Health Apps

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Fitness apps are getting more popular lately. So should you consider getting one of these apps? Don’t waste your money on fitness and health apps as scientists warn that these apps might be doing more harm than good because they don’t work but force people to focus on ambitious goals that they will never reach.

The Guardian reported: Greg Hager, professor of computer science at Johns Hopkins University, said that in the absence of trials or scientific grounding it was impossible to say whether apps were having the intended effect. Hager cited the one-size-fits-all targets provided by some fitness trackers, such as the Fitbit, which sets users a goal of taking 10,000 steps a day. Hager claimed the 10,000 steps target dated back to a 1960s Japanese study that showed there were health benefits for men who burned at least 2,000 calories per week through exercise — roughly equivalent to 10,000 steps each day. An early pedometer was known as the manpo-kei, which means ‘10,000-step meter’ in Japanese. “But is that the right number for any of you in this room?” Hager asked. “Who knows. It’s just a number that’s now built into the apps.” “We have an incredible number of apps in the wild basically being downloaded by people who may or may not understand what they are actually telling them or what the context for that is,” he said. “Until we have evidence-based apps you could amplify issues. I mean, imagine everyone thinks they have to do 10,000 steps but you are not actually physically capable of doing that, you could actually cause harm or damage by doing so.” (theguardian.com)

12 Million Americans Have Hidden a Credit Card or Bank Account from Their Partners

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An estimated 12 million Americans have hidden a credit card or bank account from their romantic partners or spouse, according to a new CreditCards.com survey. Relationship experts warn, though, that keeping a hidden bank account or credit card is a risky move with potentially explosive consequences. Electronic snooping can reveal the truth and lead to a lack of trust that imperils the relationship. “Any time you get into these kinds of things where you are operating behind the scenes, it usually comes out at some point,” says Corey Allan, a marriage and family therapist in the Dallas area. “We can’t keep things hidden, especially in today’s technological world. Any spouse who has any kind of suspicion can become a detective and find it.” The survey also found that older folks are more likely than younger ones to have maintained a secret account. (creditcards.com)

NFL Standout Failed at Personal Finance and Jailed for Not Paying Child Support

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Former NFL wide receiver Robert Meachem is behind bars after failing to pay nearly $400,000 in child support and alimony. Meachem, 32, can be released once he paid his ex-wife, Andrea Rhodes. The couple divorced in 2014 and agreed to split custody of their two children. Over his eight-year career in the NFL playing for the Saints and the Chargers, Meachem made more than $20 million. In 2012, Meachem also signed a lucrative long-term deal with the Chargers that included $14 million in guaranteed money. By failing to manage his personal finance, Meachem doesn’t have enough money to pay the child support and alimony. In fact he had to borrow money from former NFL associates to get by. According to the Advocate and NOLA.com, Meachem testified that he believed much of his money had been taken by a former officer of one of his charitable foundations and another assistant, since he didn’t pay enough attention to his bank balances. (espn.com)

How to Achieve High Credit Score

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How good your credit score determines what loans you will qualify for and the interest rate you will pay. A high credit score means that you will pay a much lower interest rate over a lifetime. Hence, with a high credit score you will save more money by keeping more cash in your wallet. Here are 7 steps to achieve high credit score by Bankrate:

  1. Watch those credit card balances. One major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating.
  2. Eliminate credit card balances. “A good way to improve your credit score is to eliminate nuisance balances,” says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax. Those are the small balances you have on a number of credit cards.
  3. Leave old debt on your report. One of the ways to improve your credit score: Leave old debt and good accounts on as long as possible, says Ulzheimer. This is also a good reason not to close old accounts where you’ve had a solid repayment record.
  4. Use your calendar. If you’re shopping for a home, car or student loan, it pays to do your rate shopping within a short time period.
  5. Pay bills on time. One of the biggest ingredients in a good credit score is simply month after month of plain-vanilla, on-time payments.
  6. Don’t hint at risk. Sometimes, one of the best ways to improve your credit score is to not do something that could sink it. Two of the biggies are missing payments and suddenly paying less (or charging more) than you normally do, says Dave Jones, retired president of the Association of Independent Consumer Credit Counseling Agencies.
  7. Don’t obsess. You should be laser-focused on your credit score when you know you’ll soon need credit. In the interim, pay your bills and use credit responsibly. Your score will reflect these smart spending behaviors.

(bankrate.com)

 

The Debts That You Can’t Discharge in Bankruptcy

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Many people think that once discharge is granted by the Bankruptcy Court, the debtors are released from the liability of paying all debts. Think again! Not all your debts can be discharged in bankruptcy. Super Saving Tips lists several types of debts you can’t kick out in bankruptcy.

  • Debts you owe the government: “Have you been penalized or fined by the government? If so, I’m afraid bankruptcy can’t give you any relief. No one can give you any relief. You have to pay the fines and penalties or they will stay with you till your last breath. If you have more questions regarding government debt and how it will be treated in bankruptcy, then consult an attorney.”
  • Child support and alimony: “Child support payments and alimony aren’t dischargeable in bankruptcy. These two basically comprise the amount your child or ex-spouse needs for covering basic living expenses. Debts you owe due to marital property division don’t come under this kind of support. In a few states, these debts are dischargeable in bankruptcy.”
  • Student loans: “Millions of students and parents would have given a sigh of relief if student loan debts could be eliminated through bankruptcy. Unfortunately, in most cases, they can’t be discharged in bankruptcy proceedings. Private student loans, federal student loans, loans taken out from a school or university all can’t be kicked out by filing bankruptcy.”
  • Income tax: “Most people think about bankruptcy to discharge unpaid income tax. It isn’t impossible to discharge income tax in bankruptcy.”

(supersavingtips.com)

Top 5 Personal Finance Apps for Windows 10

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Managing your personal finance can be a pain sometimes. Luckily, there are many useful personal finance apps out there. Here are the top 5 personal finance apps for Windows 10 to help you plan your spending and manage your finances efficiently. These Finance apps which are available in the Windows Store, help you to track its flow and limit your spending and create budgets.

  1. Money Keeper:  “An amazing application with all the required features that lets you maintain accounts, keep track of your income and your expenses. You can generate reports, see summaries and also forecast your expense. You can even create budgets to limit your spending and save some amount of money.”
  2. Money Lover: “A fluid, easy to use expense tracker available in both free and premium variants and comes with great tracking and budgeting features. You can manage loans and debts using this application.”
  3. Homeasy: “A financial application designed to track the spending in normal households. You can create your own monthly billing calendar which would include recurring bill payments, rents and all those monthly expenditures of your household.
  4. MoneyPoint: “A complete offline application and does not synchronize any data to other devices. All data is stored locally in the device and you can export data in form of reports and expense summaries. All other major features like expense management, budgeting, goals, and performances are offered by this tool.”
  5. Spending Tracker: “Another great personal finance app that tracks your monthly expenditure and generates category wise reports and summaries. With not many advanced features, Spending Tracker is quite simple to use. It can generate all sort of reports including weekly, monthly, annually, categorized and cash flow reports as well.”