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How To Pay Off Credit Card Debt Faster
The post How To Pay Off Credit Card Debt Faster appeared first on Penny Pinchin' Mom.
According to NerdWallet, the average credit card debt for the American Family is nearly $16,000. Â That is a considerable amount, and the monthly financial burdens can quickly become overwhelming
You may feel as if there is no light at the end of the tunnel as you see no end in site. How in the world did I let this happen and what can I do about it now?
You certainly do not want to be like me and go down the path of bankruptcy. Don’t do that.
Instead, you simply need to know where to turn for in order to get the help you need to pay off your credit card debt as quickly as possible.
The truth is that you may not even realize how much debt you have or where to begin. Let’s tackle your debt by helping you figure out the simplest way to get rid of your credit card debt as fast as possible.
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HOW TO QUICKLY PAY OFF CREDIT CARDS
The first thing you have to do is take responsibility for it.  Whether your debt is a result of severe financial times or frivolous spending, it doesn’t matter. But, before you even think about getting out from beneath your credit card debt, you need to be ready to make it happen. That means you have to be willing to put in the hard work and make the lifestyle changes necessary to achieve your goals.
Once you do that, you are ready to take steps to pay it off.
1. Transfer your balances to zero or lower balance cards
When you have a lot of credit card debt, you will want to try to lower the amount of interest you pay. Since that compounds every month, it can mean your $50 payment will only reduce the debt by $10.
Take some time to do some research to find zero interest rate transfer cards or those with a low introductory rate. Â If you can drop your interest payments, that will allow you to focus on paying off your credit card debts.
By consolidating your credit card debt onto one or two cards, you may find you save a significant amount of money in interest while working to pay off the balances.
2. Use your house
When mortgage rates are low, it might make sense to refinance your home. Doing so may allow you take out a loan large enough to cover the balance you owe on your home plus your total credit card debt, without increasing your monthly payment.
If you can borrow more money, you can use that additional amount to pay off your credit card debt. Then, all of your debt will be in one monthly payment – your mortgage.
Or, if you would rather not refinance, consider taking out a home equity loan. Use what you’ve paid towards your home to pay off your credit cards. The interest rate is often lower what your credit card company charges.
3. Use a personal loan to pay off credit card debt
If you do not own a home, talk to your bank about a personal loan (secured or unsecured). Just like a home equity loan, you can pay off your balances and have a single monthly payment, often at a lower rate than credit card companies charge.
4. Get rid of your cards
If you are committed to paying off your credit card balances cut them up. That way, you will not be tempted to add more debt to your balance. However, what you should not do is close the account. Keep it open and continue to pay on it to help increase your credit score.
For some people, cutting them is just not an option. If you find this is you, then you need to put your cards on ice. Literally. Put the card in a baggie filled with water and drop it into your freezer.  Now,  you won’t be tempted to dig it out and use it as you would have to put in a LOT of effort to do so.
Do what you have to do to stop spending. There is no way around this. Until you are ready to change your attitude towards spending money, you will not be able to get out of debt. This starts by cutting off the spending. Period.
Read more: Â How to Break the Cycle of Credit Card Debt
5. Know how much you owe
Sadly, most people have no idea how much credit card debt they have accrued. You have to know how much you owe before you can implement a plan to pay it off.
Make a list of the current balances owed, minimum monthly payment and the interest rate. Then add up total the amount of debt you have AND the total minimum monthly payments. Â This gives you a better picture of the amount of debt you currently have outstanding (and, it may not be pretty to look at).
The debt payoff bundle gives you every form you need to track, monitor and pay off your debt once and for all!!
6. Find money
Once you know how much debt you have to pay off, take a second look at your budget. Find places where you can cut back to have more money to pay your debt. That may mean scaling back or eliminating dinner out for a while, so you have another $100 to use towards your credit card balances.
Think about making some short-term sacrifices for long-term gain. You will not need to scale back forever. Once you are out of debt you may even find you don’t miss those items you cut out of the budget!
7. Start paying them down — One at a time
There are two different rules of thinking when it comes to paying off credit card debts.  One says pay the higher interest rate, and the other says the highest balance. You can read more about those below.
No matter which method you decide to use, start with ONE debt and work on it first. Get it paid in full before you try to pay others.
You can use a debt payoff calculator to find out long it will take to pay off your credit cards and know how much you’ll save in interest along the way.
8. Consider debt consolidation
Sometimes, the best way out of debt is to consolidate them all into a single payment. You may find that you ultimately pay less over the life of the loan vs. what you would pay in interest on each card alone.
While credit card transfers are an option (as mentioned above) you may also want to try debt management or a consolidation program. These include counselors who may be able to negotiate (on your behalf) to reduce the rates or payment terms.
Rather than make the individual payments on each debt, you make a single payment each month to the agency. They then transfer the payment to the creditor on your behalf.
If you do not own a home or are unable to qualify for a credit card or personal loan then debt consolidation may be the answer.
HOW DO YOU PAY DOWN YOUR CREDIT CARD BALANCES
If you do not opt for one of the options above and instead want to tackle your balances on your own, there are two methods you can use.
Highest Interest Rate First (Avalanche Method)
The avalanche method of debt repayment starts by first tackling the debt with the highest interest rate. You will want to pay as much as you can towards this debt first, continuing with minimum payments on all other debts.
For example, if the minimum monthly balance is $25, try to double, if not triple, the payment. Combine this amount with any additional income freed up in your budget to pay towards your debt. Your focus should be only on this single debt until it is paid off. Continue making the minimum required payments on your other credit card balances.
Once your first card is paid off, roll the monthly payment you were making on that card onto the next card. So, if you were paying $150 on card one and $30 on card two each month, you will now pay $180 towards the balance of your credit card. Continue to do this until all of you are debt free.
Using this method results in paying less interest, therefore, less overall debt. Â As you tackle the one that accrues interest at a higher rate first, you will eventually pay out less to the company. Â The downside is that you may end up tackling an overall higher balance first, which can result in it taking longer to make progress, and you becoming discouraged.
Lowest Balance First (Snowball Method)
The snowball method does not take interest rate into account, but rather balances. Review your list of debts and find the one that has the lowest balance. This is the one you will focus on first.
You will follow the same rule as you would if you were paying down the higher interest rate card first. Â Find any additional money you can in your budget and add that to the minimum monthly payment of the lowest balance card. Â Continue paying on that card until it is paid in full. Â Once that happens, roll that payment into the next balance. Â Repeat this process until all debts are paid off.
The reason that this works is that it tends to be more encouraging. Â You will see that you are actually making progress as you can achieve a balance paid in full more quickly, which gives you the motivation to proceed. Â The downside of this method is that you may have to pay a bit more in overall debt due to additional interest on the cards.
The thing is that one of these is not “right or wrong.” I hate when I see so-called experts trying to degrade someone for trying one over the other. Â We are all different and we know what will motivate us to help us stay on track. Â Decide which of these two works best for you.
8. Use Windfalls
While you are working yourself out from beneath your mountain of debt, there may be times when extra money finds its way to you. You may get a raise or a bonus at work. This may be the year you qualify for a tax refund. When you get extra money of any amount, do not use it as you want. Instead, apply it towards your debt.
If you want to tackle this as quickly as possible, you may need to sell things you do not need or even get a second job. There are many ways you can make money at home, many of which will not interfere with your regular full-time job.
STAYING OUT OF CREDIT CARD DEBT
Once your credit card debt is paid in full, you never want to allow yourself to get into that situation again. Â Here are things you need to do:
1. Figure out why you got there in the first place
Was the reason you had debt due to poor saving? Are you a spender? Did you just not have a budget and had to use it to cover living expenses?
Whatever the reason, you need to make sure you know what lead you down that path, to begin with, and make changes in your life so that it doesn’t happen again.
2. Have an emergency fund
Many times, people turn to credit cards when they have an unexpected expense. This is where your emergency fund will come into play. Instead of turning to a credit card to bail you out, you will use your emergency fund balance instead.
Read more: Â How to Rapidly Build an Emergency Fund
3. Never charge more than you have in the bank
Far to often, people will charge in advance of a paycheck or other income source they plan on coming their way. Â But, what happens if that fails to come through? Â Can they pay off the balance?
If you can not pay off your balance with the money in your checking or savings account, then do not charge it. Â Just because you are owed money does not mean it will come through.
4. Always pay balances in full every month
It can be tempting not to pay off your card and keep more of the money for yourself. Â However, this will just put you back into the same situation you just got out from. Â Make sure your entire balance is paid off every single month. Â No exceptions.
5. Review the perks
Many people use credit cards because of the perks. These include cash back, free offers or even airline miles. Â However, what do you have to spend to earn the reward? Is it worth racking up a hefty balance just to get something free?
Companies can change their programs at any time. Â You could lose those you’ve earned or no longer be eligible to earn new ones. Â The perks may sound great, but are they really worth it?
Trying to pay off credit card debt is not easy. However, can you continue to live with the financial strain they are causing you? Only you can decide that it is the right time to pay off credit card debt.
The post How To Pay Off Credit Card Debt Faster appeared first on Penny Pinchin' Mom.
Source: pennypinchinmom.com
Novo Vs. Azlo Vs. BlueVine Vs. Radius Bank â The Battle Of Online Business Checking Accounts
I took a look at Azlo, Novo, BlueVine, and Radius Bank. Each business checking account has pros and cons depending on the type of small business you run. We compare so you donât have to.I took a look at Azlo, Novo, BlueVine, and Radius Bank. Each business checking account has pros and cons depending on the type of small business you run. We compare so you donât have to.
The post Novo Vs. Azlo Vs. BlueVine Vs. Radius Bank â The Battle Of Online Business Checking Accounts appeared first on Money Under 30.
Source: moneyunder30.com
15-Year Fixed vs. 30-Year Fixed: The Pros and Cons
It’s that time again, where I take a look at a pair of popular mortgage programs to determine which may better suit certain situations. Today’s match-up: “15-year fixed mortgage vs. 30-year fixed mortgage.” As always, there is no one-size-fits-all solution because everyone is different and may have varying real estate and financial goals. For example, [&hellip
The post 15-Year Fixed vs. 30-Year Fixed: The Pros and Cons first appeared on The Truth About Mortgage.
Source: thetruthaboutmortgage.com
Standard vs. Itemized Deduction: Which One Should You Take?
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Standard versus itemized deduction: Which one should you claim? If this question is weighing heavily on your mind as you file your taxes, now that all the new tax reforms have taken effect, let this guide help you decide.
Itemizing your deductionsâparticularly if you’ve bought a home recentlyâcould save you major bucks when you file. But, more than ever, you need to understand what you can and can’t do. We’ll break it down to help you make the decision on whether to select a standard or an itemized deduction.
What is the standard deduction?
The standard deduction is essentially a flat-dollar, no-questions-asked reduction to your adjusted gross income. When you file your tax return, you can deduct a certain amount right off the bat from your taxable income.
For 2019, the standard deduction is $12,000 for single filers and $24,000 for married couples filing jointly. (The standard deduction nearly doubled as a result of the Tax Cuts and Jobs Act, which went into effect in 2018.)
Here are some of the benefits to taking a standard deduction:
- It allows you a deduction even if you have no expenses that qualify as itemized deductions.
- It eliminates the need to keep records and receipts of your expenses in case youâre audited by the IRS.
- It lets you avoid having to track medical expenses, charitable donations, and other itemizable deductions throughout the year.
- It saves you the trouble of needing to understand the fine nuances of tax law.
What are itemized deductions?
Although claiming the standard deduction is easy and convenient, choosing to itemize can potentially save you thousands of dollars, says Mark Steber, chief tax officer at the Jackson Hewitt tax service.
âDonât be lulled into thinking the standard deduction is always a better answer,â Steber says. That advice especially applies to homeowners.
âBuying a home has the single largest impact on your tax return,â he adds, noting that a home purchase is âan anchor item that can move someone into the itemized taxpayer category.â
Itemizing your deductions may enable you to deduct these expenses:
- Home mortgage interest (note the exceptions below)
- Real estate and personal property taxes (note the cap below)
- State and local income taxes or sales taxes (but not both)
- Gifts to charities
- Casualty or theft losses
- Unreimbursed medical and dental expenses
- Unreimbursed employee business expenses
Why itemizing often makes sense for homeowners
Under the new law, current homeowners can continue to deduct interest on a total of $1 million of mortgage debt for a first and second home. But new buyers can deduct interest on only $750,000 for a first and second home.
It’s still possible that if you own a home, your mortgage interest alone might exceed the standard deduction, says Steve Albert, director of tax services at the CPA wealth management firm Glass Jacobson. In this case, it’s a no-brainer to itemize your deductions.
This is particularly true if you bought a house recently, since most mortgages are front-loaded to pay mortgage interest rather than whittle down the principal (which is the amount you borrowed).
For instance: If you have a 30-year loan for $400,000 at a fixed 5% interest rate, in the first year of your mortgage, you’ll pay off only $5,901 in principal and a whopping $19,866 in interest.
That alone exceeds an individual’s standard deduction of $12,000 deduction for 2019. So if you’re filing taxes this year, itemizing would make total sense.
Plus: If you bought your house in 2019 and paid pointsâwhich are essentially a way to prepay interest upfront to lower your monthly mortgage billsâthese points count as mortgage interest, too, amounting to more tax savings.
On the other hand, if you’ve owned your home for a while, then your mortgage interest may not amount to much. By the 25th year of that same $400,000 loan, you’ll pay only $6,223 in interest.
However, keep in mind that your property taxes of up to $10,000 are an itemized deduction, tooâand combined with mortgage interest and other deductions, could push you over the top into itemizing territory.
Itemized vs. standard deduction: Which is right for you?
Not sure how much you paid in mortgage interest and property taxes last year? To get a ballpark, you can punch your info into an online mortgage calculator.
Also, early in the new year, your mortgage lender should have mailed you a mortgage interest statement (Form 1098) showing the total you paid during the previous year.
âAnd if you had your property taxes impounded in your loan, your taxes will appear on your 1098 as well,” says Lisa Greene-Lewis, a CPA and tax expert at TurboTax.
Another DIY approach for seeing whether your combined itemized tax deductions are higher than your standard tax deduction is to fill out the IRS Schedule A form, which outlines all federal itemized deductions line by line.
You can also consult an accountant (you can search for a tax professional in your area using the IRS directory of tax return preparers). But as a general rule, if you bought a home recently, you could be a prime candidate for itemizing, so don’t let these potential savings pass you by without checking!
The post Standard vs. Itemized Deduction: Which One Should You Take? appeared first on Real Estate News & Insights | realtor.com®.
Source: realtor.com
The Difference Between Credit Cards and Debit Cards: Explainedâââ
Have you ever wondered about the uses of a credit card vs. a debit card? It’s likely you have both types of cards in your wallet at this very moment, and you’re given the option to choose one of themâsometimes in a matter of secondsâevery time you make a purchase. Still, you have lingering uncertainty about whether you’re making the best choice… and that same question pops into the back of your mind every time you buy something: “Should I use a credit card or debit card?”
Being uncertain about the difference between a credit card and debit card or the best time to use either is a common dilemma. The better you understand the benefits of eachâbeyond the fact they offer a way to access money without having to carry cash or a checkbook aroundâthe savvier a spender you’ll become.
Managing revolving credit vs. a bank account balance
Credit cards and debit cards both offer a convenient way to pay for things, but they work quite differently behind the scenes. As a result, they each appeal to different types of consumers, says Lou Haverty, financial analyst and founder of Financial Analyst Insider.
A credit card is a form of revolving credit. When you spend with your credit card you are borrowing, and you pay interest if you carry a balance, Haverty says. A debit card, by contrast, is linked to a bank accountâusually a checking accountâand the money is withdrawn as soon as you make the transaction, typically using a PIN.
A difference between credit cards and debit cards is that with a credit card, the exact amount you can spend depends on your credit limit and the balance you are currently carrying on the card, Haverty explains. If you have a $1,000 credit limit and a $600 balance from previous purchases, you can continue to charge an additional $400. If you’ve reached your credit limit, you won’t be able to use the card for more purchases until you pay off at least part of the balance. You owe a minimum payment each month.
When considering credit card vs. debit card, know that most credit cards carry an interest rate, expressed as an annual percentage rate (APR), which is essentially what you pay to borrow. You’ll have to pay interest on that $600 balance mentioned above if you carry the balance from month to month. âCredit cards require a responsible approach to your personal finances because you have the ability to spend beyond what you might have as cash in your bank account,” Haverty says.
A difference between credit cards and debit cards is that with a debit card, funds are pulled directly from the balance you have in the checking account to which the card is linked. In a traditional account setup, you can’t spend more than what you have in the account, which helps reduce the chance of racking up debt. If your account offers overdraft protection, you may be able to spend more than your account balance by leveraging funds from a different, linked bank account.
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âCredit cards require a responsible approach to your personal finances because you have the ability to spend beyond what you might have as cash in your bank account.”
Knowing the requirements for each card
Another key difference between a credit card and a debit card is the criteria you’ll need to meet for each. âGetting approved for a credit card is usually dependent on your personal credit score. The higher your credit score, the more likely you are to be approved,” Haverty says. âIf you have a lower credit score, you may still get approved, but you might have a lower credit limit.”
Patricia Stallworth, certified financial planner and money coach, says that in addition to your credit history, factors such as your employment status could play a role in credit card approval.
When analyzing credit cards vs. debit cards, consider that a debit card is typically issued automatically when you open a checking account. This process usually requires some personal information, such as a Social Security number, driver’s license, employment information and valid email address. A deposit may also be needed to fund the account and complete the application. Then stay tuned for your debit card in the mail!
When should I use credit vs. debit?
While it’s easy to have credit card vs. debit card on the mind, there are some scenarios in which using either a debit card or a credit card could fit the bill, depending on your financial needs and goals. Use the outline below as a guide for when the question of “When should I use credit vs. debit?” comes up:
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Use your debit card if…
- You’re new to using a card to make purchases. Until you know you have the discipline to control your spending with a card, a debit card could be the way to go, as it’s a great tool for ensuring you don’t charge more than you can afford. âDebit cards are great for everyday purchases that you have budgeted for because the money comes directly out of your account,” Stallworth says.
- You want cash back without the fees. If your debit card is linked to a checking account that offers rewards, Stallworth says you may have rewards-earning potential without the hassle of fees. âWhile there is generally no cost to participate in debit card rewards programs, the costs and fees may be higher with some credit card programs,” she adds. For instance, Discover Cashback Debit charges no fees1 and allows you to earn 1% cash back on up to $3,000 in debit card purchases each month.2
Why should credit cards have all the fun?
Now you can earn cash back with your debit card.
Discover Bank, Member FDIC
- You have debt you can’t pay off. When should I use credit vs. debit? âIf you’re struggling to manage or get out of debt, a debit card should be your ‘go-to card,’” Stallworth says. “You can’t get out of debt if you keep charging.”
- You want cash at the register. If you still like to have cash in your wallet, consider this difference between credit cards and debit cards: Most retail stores will allow you to get cash at the register when you pay with your debit card. âA credit card will most likely charge you a cash advance fee if that feature is available,” Haverty says.
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“Debit cards are great for everyday purchases that you have budgeted for because the money comes directly out of your account.”
Use your credit card if…
- You want product coverage. Some credit cards come with purchase protection, which makes them a great option for online and large purchases, Stallworth says. “If I have a dispute with a merchant, I have more leverage with a large credit card company behind me.”
- You’re trying to build (or rebuild) your credit. âYou will need a single credit card with a small limit that you pay off in full each month to build a credit history,” Haverty says. A key difference between credit cards and debit cards is that debit card usage can’t help you build a credit history. A debit card can help you build strong budgeting skills so you’re better prepared to transition to a credit card.
- You want to earn travel rewards. If you’re debating credit card vs. debit card and are focused on travel, consider that credit card rewards programs may offer robust rewards in a specific category, like travel, Stallworth says. While it’s always important to read the fine print (so you’re not paying more than you intend in fees or interest rate charges just to get rewards), you could find a credit card that offers opportunities to earn free flights and pay less for checked baggageâjust for using the card regularly.
How to use both cards to maximize your finances
Now that you understand which circumstances might be best to use a credit card vs. debit card, you can make the point-of-purchase decision of “When should I use credit vs. debit?” a little easier. It really depends on the goals you have laid out for your personal finances.
Get comfortable using both financial tools for their respective features. But be sure to stick to your budget, and don’t accidentally overspend from your bank account or charge more than you can afford to pay in full by your credit card’s monthly due date. When you learn to confidently use both of these cards to your advantage, you can enjoy all the various perks and protectionsâtimes two!
1 Outgoing wire transfers are subject to a service charge. You may be charged a fee by a non-Discover ATM if it is not part of the 60,000+ ATMs in our no-fee network.
2 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal
, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.
The post The Difference Between Credit Cards and Debit Cards: Explainedâââ appeared first on Discover Bank – Banking Topics Blog.
Source: discover.com
How to Build Good Credit in 10 Painless Steps
If you want to whip your finances into shape, hereâs a good New Yearâs resolution: improving your credit score.
A lot of New Yearâs resolutions fail because theyâre so extreme. Think of all the bonkers weight-loss and money-saving goals that surface at the start of every year.
This resolution is different. No extreme measures are required. But there arenât any shortcuts. Building good credit is a goal you need to commit to 12 months a year.
How to Build Good Credit in 10 Steps
Ready to make 2021 the year you finally prove your creditworthiness? Or are you looking to recover from a 2020 setback? Hereâs how to build good credit in 10 steps.
1. Stay on Top of Your Credit Reports
Itâs essential to monitor your credit reports, especially if you received a hardship agreement from a lender due to COVID-19. Under the CARES Act rules, lenders are supposed to report your account as paid in full while the agreement is in effect, as long as you werenât already delinquent. But mistakes happen. Even in normal times, about 1 in 5 credit reports contained inaccurate information.
Through April 2021, you can get one free credit report per week from each bureau. (Typically, youâre only entitled to one free credit report per year from each bureau.) Make sure you access your reports at AnnualCreditReport.com, rather than one of the many websites that offer âfreeâ credit scores but will make you put down your credit card number to sign up for a trial. File a dispute with the bureaus if you find anything you think is inaccurate or any accounts you donât recognize.
Your credit reports wonât show you your credit score, but you can use a free credit-monitoring service to check your score. (No, checking your own credit doesnât hurt your score.) Many banks and credit card companies also give you your credit scores for free.
If the bureaus agree to remove information from your credit reports, expect to wait about 30 days until your reports are updated.
2. Pay Your Bills. On Time. Every Single Month
Yeah, you knew we were going to say this: Paying your bills on time is the No. 1 thing you can do to build good credit. Your payment history determines 35% of your score, more than any other credit factor.
Set whatever bills you can to autopay for at least the minimums to avoid missing payments. You can always pay extra if you can afford it.
A strong payment history takes time to build. If youâve made late payments, theyâll stay on your credit reports for seven years. The good news is, they do the most damage to your score in the first two years. After that, the impact starts to fade.
3. Establish Credit, Even if Youâve Made Mistakes
You typically need a credit card or loan to build a credit history. (Sorry, but all those on-time rent and utility payments are rarely reported to the credit bureaus, so they wonât help your score.)
But if you have bad credit or youâre a credit newbie, getting approved for a credit card or loan is tough. Look for cards that are specifically marketed to help people start or rebuild credit. Store credit cards, which only let you make purchases at a specific retailer, can also be a good option.
4. Open a Secured Card if You Donât Qualify for a Regular Card
Opening a secured credit card is one of our favorite ways to build a positive history when you canât get approved for a regular credit card or loan. You put down a refundable deposit, and that becomes your line of credit.
After about a year of making your payments on time, youâll typically qualify for an unsecured line of credit. Just make sure the card issuer you choose reports your payments to the credit bureaus. Look for a card with an annual fee of no more than $35. Some secured card options we like (and no, weâre not getting paid to say this):
- Discover it Secured
- OpenSky Secured Visa Card
- Secured Mastercard from Capital One
5. Ask for a Limit Increase. Pretend You Never Got It
Increasing your credit limits helps your score because it decreases your credit utilization ratio. Thatâs credit score speak for the percentage of credit youâre using. The standard recommendation is to keep this number below 30%, but really, the closer to zero the better.
If you have open credit, ask your current creditors for an increase, rather than applying for new credit. That way, youâll avoid lowering your length of credit, which could ding your score.
The downside of a higher credit limit: Youâll have more money to spend that isnât really yours. To get the biggest credit score boost from a limit increase and avoid paying more in interest, make sure you donât add to your balance.
Donât believe the myth that carrying a small credit card balance helps your credit score. Paying off your balance in full each month is best for your score, plus it saves you money on interest.
6. Prioritize Credit Card Debt Over Loans
Tackling credit card debt helps your credit score a lot more than paying down other debts, like a student loan or mortgage. The reason? Your credit utilization ratio is determined exclusively by your lines of credit.
Bonus: Paying off credit card debt first will typically save you money, because credit cards tend to have higher interest rates than other types of debt.
7. Keep Your Old Accounts Active
Provided you arenât paying ridiculous fees, keep your credit card accounts open once youâve paid off the balance. Credit scoring methods reward you for having a long credit history.
Make a purchase at least once every three months on the account, as credit card companies often close inactive accounts. Then pay it off in full.
8. Apply for New Credit Selectively
When you apply for credit, it results in a hard inquiry, which usually drops your score by a few points. So avoid applying frequently for new credit cards, as this can signal financial distress.
But if youâre in the market for a mortgage or loan, donât worry about multiple inquiries. As long as you limit your shopping to a 45-day window, credit bureaus will treat it as a single inquiry, so the impact on your score will be minimal.
9. Still Overwhelmed? A Debt Consolidation Loan Could Help
If youâre struggling with credit card debt, consolidating your credit card debt with a loan could be a good option. In a nutshell, you take out a loan to wipe out your credit card balances.
Youâll get the simplicity of a single payment, plus youâll typically pay less interest since loan interest rates tend to be lower. (If you canât get a loan that lowers your interest rate, this probably isnât a good option.)
By using a loan to pay off your credit cards, youâll also free up credit and lower your credit utilization ratio.
Many debt consolidation loans require a credit score of about 620. If your score falls below this threshold, work on improving your score for a few months before you apply for one.
10. Keep Your Credit Score in Perspective
All the credit-monitoring tools out there make it easy to obsess about your credit score. While itâs important to build good credit, look at the bigger picture. A few final thoughts:
- Your credit score isnât a report card on the state of your finances. It simply measures how risky of a borrower you are. Having an emergency fund, saving for retirement and earning a decent living are all important to your finances â but these are all things that donât affect your credit score.
- Lenders look at more than your credit score. Having a low debt-to-income ratio, decent down payment and steady paycheck all increase your odds of approval when youâre making a big purchase, even if your credit score is lackluster.
- Donât focus on your score if you canât pay for necessities. If youâre struggling and you have to choose between paying your credit card vs. paying your rent, keeping food on the table or getting medical care, paying your credit card is always the lower priority. Of course, talk to your creditors if you canât afford to pay them, as they may have options.
Focus on your overall financial picture, and youâll probably see your credit score improve, too. Remember, though, that while credit scores matter, you matter more.
Now go crush those goals in 2021 and beyond.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Source: thepennyhoarder.com
How Much Your Monthly Food Budget Should Be + Grocery Calculator
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Your grocery bill can add up fast. From dinner entrées to snacks, the amount you spend directly affects your other financial goals. Luckily, there are some guidelines to ensure youâre not overspending.Â
Use the grocery calculator below to estimate your monthly and weekly food budget based on guidelines from the USDAâs monthly food plan. Input your family size and details below to calculate how much a nutritious grocery budget should cost you. Of course, every family is different. Some love coupons and leftovers, while others prefer fresh fish and aged cheese. Once youâve established your budget, use the slider to adjust your estimate to your spending habits.Â
Getting your food budget on point takes practice. With this grocery calculator and the right spending habits, youâll have enough for your living expenses and exciting financial goals like paying off loans or buying a house.
Grocery Budget Calculator
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A moderate grocery budget will run you:
Weekly Grocery Cost 
Food costs per individual are based on USDA research regarding Dietary Reference Intakes and Dietary Guidelines for Americans, and follow MyPyramid nutrition guidelines.
$0.00
Monthly Grocery Cost Food costs per individual are based on USDA research regarding Dietary Reference Intakes and Dietary Guidelines for Americans, and follow MyPyramid nutrition guidelines.
$0.00
What kind of spender are you?
Does your estimate look right? If your spending habits don’t add up, explore these other budget options and choose what’s best for your lifestyle.
Thrifty This is the USDAâs estimated food budget for families that receive food assistance like WIC or SNAP.
Cost-Conscious This is an ideal budget for nutritious meals if youâre looking to save a little extra cash with leftovers and coupons.
Moderate This is the standard for affordable, nutritious, and balanced portions for most families.
Generous This budget gives you some spending wiggle room for finer foods or extra portions.
See where the rest of your budget is going Sign up for Mint
Monthly Grocery Budget
Ever wonder how much you should spend on groceries? The average cost of food per month for one person ranges from $150 to $300, depending on age. However, these national averages vary based on where you live and the quality of your food purchases.
Hereâs a monthly grocery budget for the average family. This is based on the national average and likely varies by location and shop. For instance, New York City grocers are going to be far more expensive than Kansas City shops. Additionally, organic grocery stores like Whole Foods are pricier than places like Walmart or Aldi.
Youâll also want to consider dietary choices, like gluten-free or vegan diets. These can significantly affect your budget, so consider planning your grocery list online to compare prices and find your preferred alternatives.
| FAMILY SIZE | SUGGESTED MONTHLY BUDGET |
|---|---|
| 1 person | $251 |
| 2 people | $553 |
| 3 people | $722 |
| 4 people | $892 |
| 5 people | $1,060 |
| 6 people | $1,230 |
Finding a reasonable monthly grocery budget ensures you and your family have what you need, while not overspending. Look back at previous months using a budgeting app or credit card statements to see what youâve spent at the grocery store. Decide if you want to maintain your current budget or cut back.
Purchasing Groceries vs. Dining Out
Donât forget what you spend at restaurants when you consider your food budget. According to the U.S. Department of Agriculture, Americans spend 11 percent of their take-home income on food. It doesnât all go towards groceries, though. Approximately six percent is spent on groceries, while five percent is spent dining out â including dates, lunches with coworkers, and Sunday brunch.
With this framework in mind, you can calculate your total food budget based on your take-home income. For example, Rita makes $3,500 per month after taxes. She would budget six percent for groceries ($210) and five percent for restaurants ($175). So sheâll need a total of $385 for food each month. With a little practice, sheâll better learn her habits and be able to accurately adjust her budget.
Tips for Reducing Your Budget
There are several ways to cut back on what you spend without sacrificing the quality and taste of your food. Trimming your food budget can help you stow away more for your financial goals, such as building an emergency fund or saving for a dream vacation.
Cut Coupons
Coupons are easy to find in the mail, in store, in your inbox, and even in a Google search. Many popular grocery stores are rolling out apps that track your coupons and savings. Be sure to download and register your email for new updates and sales. These usually work in person or online, so you can shop when and how you like.Â
While a single coupon might not give you a large discount, you can save a lot with multiple coupons. Itâs also important you make sure you actually need the item youâre purchasing instead of buying it for the sale. This can quickly get out of hand and push you over budget.Â
Freeze Your Food
Freezing your fresh food before it goes bad helps your wallet and the environment. You can plan ahead and freeze prepared produce to save time on weekday cooking, or chop and freeze last weekâs produce before shopping for more. Frozen vegetables are great in soups and stews, and you can use frozen fruits for healthy breakfast smoothies.Â
Plan a Weekly Menu Ahead of Time
Plan your meals ahead of time to determine the food items and quantities you need before you head to the grocery store. This way youâre more likely to buy the exact items you need and can plan for breakfast, lunch, and dinner. Try to plan for recipes that use the same ingredients so thereâs less to purchase. You can also make larger meals and plan leftovers for lunch so you have less to plan and purchase.
Bring Lunches to WorkÂ
A $13 lunch out might not seem like much, but it can blow your food budget fast if it becomes a habit. Push your monthly food budget further with delicious lunches from home. Salads, sandwiches, and leftovers are all easy, inexpensive, and nutritious.Â
Buy Store BrandsÂ
Many packaged products have a huge price disparity between brand name and generic items, and store brand items tend to be cheaper without sacrificing much quality. You can easily save 10 cents to a dollar per item, which adds up quickly over many trips.Â
Shop at a More Affordable Store
Your local farmers market, chain grocery, and organic store will all offer different specialties and sales. Check out the different shops in your area to find the best combination of quality and price. Some stores might even offer bulk items â great for your favorite products and those with a long shelf-life. Choosing cheaper staple items like milk and yogurt can also make a huge difference over time.Â
An accurate food budget that works for you helps you feel more confident and in control of your finances. Build a budget, learn your spending habits, and keep a grocery list to keep you on track and responsible so you can reach bigger goals, like a new vehicle or a down payment on a house.Â
Sources:Â USA Today |Â EurekAlert | Persistent Economic Burden of the Gluten-Free Diet
The post How Much Your Monthly Food Budget Should Be + Grocery Calculator appeared first on MintLife Blog.
Source: mint.intuit.com
A Guide to Schedule K-1 (Form 1041)
Inheriting property or other assets typically involves filing the appropriate tax forms with the IRS. Schedule K-1 (Form 1041) is used to report a beneficiaryâs share of an estate or trust, including income as well as credits, deductions and profits. A K-1 tax form inheritance statement must be sent out to beneficiaries at the end of the year. If youâre the beneficiary of an estate or trust, itâs important to understand what to do with this form if you receive one and what it can mean for your tax filing.
Schedule K-1 (Form 1041), Explained
Schedule K-1 (Form 1041) is an official IRS form thatâs used to report a beneficiaryâs share of income, deductions and credits from an estate or trust. Itâs full name is âBeneficiaryâs Share of Income, Deductions, Credits, etc.â The estate or trust is responsible for filing Schedule K-1 for each listed beneficiary with the IRS. And if youâre a beneficiary, you also have to receive a copy of this form.
This form is required when an estate or trust is passing tax obligations on to one or more beneficiaries. For example, if a trust holds income-producing assets such as real estate, then it may be necessary for the trustee to file Schedule K-1 for each listed beneficiary.
Whether itâs necessary to do so or not depends on the amount of income the estate generates and the residency status of the estateâs beneficiaries. If the annual gross income from the estate is less than $600, then the estate isnât required to file Schedule K-1 tax forms for beneficiaries. On the other hand, this form has to be filed if the beneficiary is a nonresident alien, regardless of how much or how little income is reported.
Contents of Schedule K-1 Tax Form Inheritance Statements
The form itself is fairly simple, consisting of a single page with three parts. Part one records information about the estate or trust, including its name, employer identification number and the name and address of the fiduciary in charge of handling the disposition of the estate. Part Two includes the beneficiaryâs name and address, along with a box to designate them as a domestic or foreign resident.
Part Three covers the beneficiaryâs share of current year income, deductions and credits. That includes all of the following:
- Interest income
- Ordinary dividends
- Qualified dividends
- Net short-term capital gains
- Net long-term capital gains
- Unrecaptured Section 1250 gains
- Other portfolio and nonbusiness income
- Ordinary business income
- Net rental real estate income
- Other rental income
- Directly apportioned deductions
- Estate tax deductions
- Final year deductions
- Alternative minimum tax deductions
- Credits and credit recapture
If you receive a completed Schedule K-1 (Form 1041) you can then use it to complete your Form 1040 Individual Tax Return to report any income, deductions or credits associated with inheriting assets from the estate or trust.
You wouldnât, however, have to include a copy of this form when you file your tax return unless backup withholding was reported in Box 13, Code B. The fiduciary will send a copy to the IRS on your behalf. But you would want to keep a copy of your Schedule K-1 on hand in case there are any questions raised later about the accuracy of income, deductions or credits being reported.
Estate Income and Beneficiary Taxation
If you received a Schedule K-1 tax form, inheritance tax rules determine how much tax youâll owe on the income from the estate. Since the estate is a pass-through entity, youâre responsible for paying income tax on the income thatâs generated. The upside is that when you report amounts from Schedule K-1 on your individual tax return, you can benefit from lower tax rates for qualified dividends. And if thereâs income from the estate that hasnât been distributed or reported on Schedule K-1, then the trust or estate would be responsible for paying income tax on it instead of you.
In terms of deductions or credits that can help reduce your tax liability for income inherited from an estate, those can include things like:
- Depreciation
- Depletion allocations
- Amortization
- Estate tax deduction
- Short-term capital losses
- Long-term capital losses
- Net operating losses
- Credit for estimated taxes
Again, the fiduciary whoâs completing the Schedule K-1 for each trust beneficiary should complete all of this information. But itâs important to check the information thatâs included against what you have in your own records to make sure that itâs correct. If thereâs an error in reporting income, deductions or credits and you use that inaccurate information to complete your tax return, you could end up paying too much or too little in taxes as a result.
If you think the information in your Schedule K-1 (Form 1041) is incorrect, you can contact the fiduciary to request an amended form. If youâve already filed your taxes using the original form, youâd then have to file an amended return with the updated information.
Schedule K-1 Tax Form for Inheritance vs. Schedule K-1 (Form 1065)
Schedule K-1 can refer to more than one type of tax form and itâs important to understand how they differ. While Schedule K-1 (Form 1041) is used to report information related to an estate or trustâs beneficiaries, you may also receive a Schedule K-1 (Form 1065) if you run a business thatâs set up as a pass-through entity.
Specifically, this type of Schedule K-1 form is used to record income, losses, credits and deductions related to the activities of an S-corporation, partnership or limited liability company (LLC). A Schedule K-1 (Form 1065) shows your share of business income and losses.
Itâs possible that you could receive both types of Schedule K-1 forms in the same tax year if you run a pass-through business and youâre the beneficiary of an estate. If youâre confused about how to report the income, deductions, credits and other information from either one on your tax return, it may be helpful to get guidance from a tax professional.
The Bottom Line
Receiving a Schedule K-1 tax form is something you should be prepared for if youâre the beneficiary of an estate or trust. Again, whether you will receive one of these forms depends on whether youâre a resident or nonresident alien and the amount of income the trust or estate generates. Talking to an estate planning attorney can offer more insight into how estate income is taxed as you plan a strategy for managing an inheritance.
Tips for Estate Planning
- Consider talking to a financial advisor about the financial implications of inheriting assets. If you donât have a financial advisor yet, finding one doesnât have to be complicated. SmartAssetâs financial advisor matching tool can help you connect with professional advisors in your local area in minutes. If youâre ready, get started now.
- One way to make the job of filing taxes easier is with a free, easy-to-use tax return calculator. Also, creating a trust is something you might consider as part of your own estate plan if you have significant assets you want to pass on.
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Source: smartasset.com
What Is a Recourse Loan?
In borrowing, there are two types of debts, recourse and nonrecourse. Recourse debt holds the person borrowing money personally liable for the debt. If you default on a recourse loan, the lender will have license, or recourse, to go after your personal assets if the collateralâs value doesnât cover the remaining amount of the loan that is due. Recourse loans are often used to finance construction or invest in real estate. Hereâs what you need to know about recourse loans, how they work and how they differ from other types of loans.
What Is a Recourse Loan?
A recourse loan is a type of loan that allows the lender to go after any of a borrowerâs assets if that borrower defaults on the loan. The first choice of any lender is to seize the asset that is collateral for the loan. For example, if someone stops making payments on an auto loan, the lender would take back the car and sell it.
However, if someone defaults on a hard money loan, which is a type of recourse loan, the lender might seize the borrowerâs home or other assets. Then, the lender would sell it to recover the balance of the principal due. Recourse loans also allow lenders to garnish wages or access bank accounts if the full debt obligation isnât fulfilled.
Essentially, recourse loans help lenders recover their investments if borrowers fail to pay off their loans and the collateral value attached to those loans is not enough to cover the balance due.
How Recourse Loans Work
When a borrower takes out debt, he typically has several options. Most hard money loans are recourse loans. In other words, if the borrower fails to make payments, the lender can seize the borrowerâs other assets such as his home or car and sell it to recover the money borrowed for the loan.
Lenders can go after a borrowerâs other assets or take legal action against a borrower. Other assets that a lender can seize might include savings accounts and checking accounts. Depending on the situation, they may also be able to garnish a borrowerâs wages or take further legal action.
When a lender writes a loanâs terms and conditions, what types of assets the lender can pursue if a debtor fails to make debt payments are listed. If you are at risk of defaulting on your loan, you may want to look at the language in your loan to see what your lender might pursue and what your options are.
Recourse Loans vs. Nonrecourse Loans
Nonrecourse loans are also secured loans, but rather than being secured by all a personâs assets, nonrecourse loans are only secured by the asset involved as collateral. For example, a mortgage is typically a nonrecourse loan, because the lender will only go after the home if a borrower stops making payments. Similarly, most auto loans are nonrecourse loans, and the bank or lender will only be able to seize the car if the borrower stops making payments.
Nonrecourse loans are riskier for lenders because they will have fewer options for getting their money back. Therefore, most lenders will only offer nonrecourse loans to people with exceedingly high credit scores.
Types of Recourse Loans
There are several types of recourse loans that you should be aware of before taking on debt. Some of the most common recourse loans are:
- Hard money loans. Even if someone uses their hard money loan, also known as hard cash loan, to buy a property, these types of loans are typically recourse loans.
- Auto loans. Because cars depreciate, most auto loans are recourse loans to ensure the lender receive full debt payments.
Recourse Loans Pros and Cons
For borrowers, recourse loans have both pros and and at least one con. You should evaluate each before deciding to take out a recourse loan.
Pros
Although they may seem riskier upfront, recourse loans are still attractive to borrowers.
- Easier underwriting and approval. Because a recourse loan is less risky for lenders, the underwriting and approval process is more manageable for borrowers to navigate.
- Lower credit score. Itâs easier for people with lower credit scores to get approved for a recourse loan. This is because more collateral is available to the lender if the borrower defaults on the loan.
- Lower interest rate. Recourse loans typically have lower interest rates than nonrecourse loans.
Con
The one major disadvantage of a recourse loan is the risk involved. With a recourse loan, the borrower is held personally liable. This means that if the borrower does default, more than just the loanâs collateral could be at stake.
The Takeaway
Loans can be divided into two types, recourse loans and nonrecourse loans. Recourse loans, such as hard money loans, allow the lender to pursue more than what is listed as collateral in the loan agreement if a borrower defaults on the loan. Be sure to check your stateâs laws about determining when a loan is in default. While there are advantages to recourse loans, which are often used to finance construction, buy vehicles or invest in real estate, such as lower interest rates and a more straightforward approval process, they carry more risk than nonrecourse loans.
Tips on Borrowing
- Borrowing money from a lender is a significant commitment. Consider talking to a financial advisor before you take that step to be completely clear about how it will impact your finances. Finding a financial advisor doesnât have to be difficult. In just a few minutes our financial advisor search tool can help you find a professional in your area to work with. If youâre ready, get started now.
- For many people, taking out a mortgage is the biggest debt they incur. Our mortgage calculator will tell you how much your monthly payments will be, based on the principal, interest rate, type of mortgage and length of the term.
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Source: smartasset.com