Controlling Your Personal Debt

Debt has become a four-letter word in the United States, and there is good reason to avoid the unnecessary accumulation of debt. However, borrowing money remains easy to do, and people who struggle to manage their budgets may feel helpless when it comes to controlling personal debt. Here is everything you need to know about avoiding debt, paying down your existing debt and managing your finances in the future.

Preventing the Accumulation of Debt

Millions of Americans carry debt loads that they just cannot handle. The best way to control your personal debt is to avoid running into problems in the first place. However, this is easier said than done. While borrowing regulations are stricter than they once were, it is still relatively easy for the average consumer to rack up tons of debt.

How do you control your debt before it becomes a problem? These tips will help you keep your finances under control.

• Set a strict budget.

Budgeting can be difficult because of the realistic view that it gives you when it comes to household finances. However, people who are successful at controlling debt take the time to budget every expense. Be sure to evaluate your budget at the end of each month to determine whether your budgeted amounts are practical.

• Never spend money that you do not have.

This does not mean that you cannot use credit cards, but you have to have the cash on hand to pay off the amount that you are charging. The only time this piece of advice does not apply is when you are buying a house. A home purchase is considered an investment, so the debt is going toward something.

• Cut out the extras.

Cable service, fancy cell phones and fast food are all unnecessary expenses that can put a strain on your budget. Cut out the extras to avoid taking on debt to pay for these unnecessary products and services.

Dealing With Existing Debt

What do you do when you are already dealing with debt that you cannot pay? The answer is to avoid ignoring your problem. It is tempting to pretend that debt does not exist, but the calls from creditors are not going to stop. Penalties and fees will be assessed to balances that are already accruing interest, so it is important for you to face this problem.

Fortunately, there are many methods from which to choose when it comes to paying down debt to make it more manageable. Choose the techniques that work best for your lifestyle and spending habits to take control of your debt.

• Talk to your creditors.

Shutting your creditors out keeps them in the dark when you are unable to pay your bills. Imagine how you would feel if a friend stopped talking to you after borrowing money from you. Since no information is being relayed, creditors assume that you are being purposefully irresponsible.

Call your creditors to let them know what is going on. If your income has decreased, explain why this happened. Outline your income and expenses to display the hardship that you are facing. Many creditors are willing to lower your minimum payments temporarily.

• Negotiate your debts.

If you are able to pay a portion of your debts in full, you may be able to negotiate significantly reduced balances with your creditors. Again, it is essential that you contact lenders to discuss this option.

• Make drastic adjustments to your budget.

Even though debts may seem overwhelming, it is possible that you could get a handle on them without having to negotiate payments. Cutting down your budget to the bare necessities will help you pay down your debt. While it seems difficult to do, cutting your budget is a temporary hardship. As long as you are careful to avoid accumulating debt again, you will be able to add some small extras to your budget in the future.

Preventing debt accumulation and dealing with overwhelming debt can be difficult tasks to face, but being proactive about controlling your debt is important for your financial future. Use the tips outlined above to get a handle on your debt.

Emerge How-To: Saving for a Big Purchase

 

When you’ve got your eye on a big-ticket item, like a shiny new appliance or a new set of tires, it can be all too tempting to charge it to your credit card or even take out a loan to cover the cost. And while those may seem like simple options, you’ll end up spending more for the entire purchase because of pesky interest fees. Instead of buying now and paying (more) later, you can approach the purchase proactively by saving in advance.

Identify the Need

Now, if your refrigerator stops refrigerating or your air conditioner decides to retire during the dog days of summer, sometimes you have no choice but to look for an immediate replacement. But often, you’ll know when it’s nearly time to replace a household item. If the mattress is starting to sag or you know your washer is nearing old age, it’s the perfect time to start saving.

Set a Savings Goal

Like any savings goals you’re working toward, it’s necessary to have a target amount. Do some research on your purchase, aiming to get the most “bang for your buck.” Online reviews can be very helpful in determining the best product for the best price. Also, check out this chart to identify the best time of the year to buy certain items. Once you’ve figured up an approximate price, it’s time to start saving!

Schedule Your Savings

Now that you have an amount, you’ll want to decide how long you have until you need to make the purchase. It can be a good idea to plan for a little less time than expected in the event that you need it sooner rather than later. Once you have a timeline, divide the purchase price by the number of months you plan to save. There’s your monthly savings goal!

How to Save

Finding extra money in your budget to save can be the tricky part. Try cutting out fast food meals or trimming back on any pricy weekend expenditures. You could also brainstorm ways to bring in a little extra money, like selling unwanted household items online or monetizing a skill. It may feel like you’re pinching pennies, but it will be worth it.

When it comes time to make your major purchase, you’ll feel relieved to know it’s paid for upfront, and that you won’t be dealing with any high-interest bills in the future. Once you’ve achieved the satisfaction of saving for a big-ticket item, it will feel even easier the next time you need to fund a large expense!

Celebrate Financial Literacy Month

Throughout the month of April, schools, organizations and more will celebrate Financial Literacy Month by sharing their knowledge to help others become more financially savvy. From online and in-person workshops to an array of budgeting and savings tools, April is an excellent time to improve your financial wellbeing.

Get involved by taking the pledge at financialliteracymonth.com, the first step on the path to achieving financial wellness. Once you’ve taken the pledge, there are thirty steps to follow for each day of the month (it’s never too late to start!).

A bank of resources and downloadable worksheets can help you get organized and start making sense of your financial situation. You can even print a “goal certificate” to hang on the fridge that helps you track your progress toward any of your financial priorities.

Financial Literacy Month is a great time to reflect on just how important long-term financial stability really is. It also serves as a reminder that there are countless organizations working toward a better financial future for all.

Financial Literacy Month resources:

• JumpStart Coalition provides financial education for pre-school through college-age youth
• Huffington Post has a collection of financial articles for each generation
• U.S. Mint H.I.P. Pocket Change is all about coins for kids
• Follow hashtag #FinancialLiteracyMonth on Twitter

Tax Preparation Checklist

Whether you welcome tax season with open arms or you can’t wait to be done with all the paperwork and forms, it’s an inevitable part of your yearly finances. Lucky for you, we’ve put together a tax preparation checklist so you know which documents to gather in advance to simplify your filing for tax year 2015. No matter if you handle everything yourself or obtain professional assistance, this guide will get you prepared for a faster and more accurate online tax filing or meeting with your accountant.

Personal Info

• Your social security number or tax identification number (TIN)
• Your spouse’s full name, date of birth and social security number/TIN
• Tax returns from the last three years
• If divorced, ex spouse’s full name, social security number and any amount of alimony paid
• Bank account and routing numbers for direct debit of refund

Dependents

• Date of birth and Social Security number (or TIN) of any dependents
• Childcare records, including the provider’s TIN (if applicable)
• Form 8332 showing the child’s custodial parent is releasing the right to claim the child to you, the noncustodial parent (if applicable)

Employment

• Forms W-2 for you and your spouse

Self-Employment

• Forms 1099-MISC, Schedules K-1, income records to verify amounts not reported on 1099s
• Records of expenses: check registers/credit card statements and receipts
• Business-use asset information for depreciation
• Home office information (if applicable)

Education

• Forms 1098-T from the college or university
• Receipts detailing qualified education expenses
• Records of any scholarships received
• Form 1098-E if you paid student loan interest

Business Use of Car

• Log of total miles driven for the year, total business miles driven for the year, and the business purpose of the mileage
• Amount paid in parking and tolls
• If claiming actual expenses: receipts/totals for gas, oil, car washes, licenses, personal property tax, lease or interest expense, etc.

Rental Property

• Records of income and expenses
• Rental asset information for depreciation

Retirement

• 1099-R for pension/IRA/annuity income
• 1099-SSA for Social Security/RRB-1099 for RRB income

IRA

• Form 5498 showing IRA contributions
• Traditional IRA basis

Savings and Investments

• 1099-INT, 1099-OID, 1099-DIV for interest, dividend income
• 1099-B, 1099-S for income from sales of stock or other property
• Dates of acquisition and records of cost/other basis in property you sold (if basis is not reported on 1099-B)

Miscellaneous Income

• 1099-G for unemployment, state tax refund
• W-2G for gambling income (or records showing income and expenses)
• 1099-SA or 1099-LTC for Health Savings Account and long-term care reimbursements
• Records of jury duty
• Hobby income and expenses
• Prizes and awards
• Other 1099

Other Deductions/Credits

• Receipts for classroom expenses (for teachers K-12)
• Form 5498-SA showing HSA contributions
• Record of moving expenses not reimbursed by employer
• Forms 1098 or other mortgage interest statements
• State/local income tax paid, or amount of state and local sales tax paid
• Real estate and personal property records
• Invoice showing amount of vehicle sales tax paid
• Cash amounts donated to houses of worship, schools or other charities
• Records of non-cash charitable donations
• Amounts paid for healthcare insurance and to doctors, dentists, hospitals
• Miles driven for charitable or medical purposes
• Expenses related to investments
• Amount paid for preparation of last year’s tax return
• Employment-related expenses
• Job-hunting expenses
• Receipts for energy-saving home improvements
• Record of estimated tax payments made

Affordable Care Act

• Form 1095-A if you enrolled in an insurance plan through the Marketplace
• Marketplace exemption certificate if you applied for and received an exemption

If your income is below $60,000 the IRS offers Free File, where you can file your federal taxes online for free.

Still have questions? Log onto IRS.gov for more tax resources.

Organize Your Finances in 2016

January is Get Organized Month, which makes it the perfect time to organize your finances so you stand a better chance of achieving the financial goals you set yourself for 2016. By the end of this article you’ll have the tips you need to ensure your funds are free of clutter and dust bunnies – and that you can reach your goals just as planned.

1. Start a Finance File

Keeping all of your financial information in one place is a great first step toward getting organized and will set the stage for the rest of your efforts. Whether you prefer to have a physical drawer or folder; or if you’d rather keep a digital file on your computer, having all of this information in one place should make money management convenient and simple. Just be sure that your information is safe and secure, no matter where you decide to put it. If you’re unsure how long to keep your financial information, here’s a handy guide from ButtonedUp to download.

2. Establish a Budget

If you haven’t yet created a budget, now is the time to start one. A budget is essential for regulating where your money goes – an integral part of setting and achieving your goals. The FTC has a helpful guide on making and using a household budget. Once you’ve made your budget, start tracking your spending to stay within the parameters you outlined.

3. Outline a Bill Schedule

Chances are, you’ve got a lot of bills filtering through your mailbox (or email inbox) each month. With so many expenses to track, it’s helpful to create a calendar to remind yourself when your monthly bills are due, and the amount. Simplify your bill paying process even further by having regular bills automatically drafted from your account.

4. Close Inactive Accounts

Old bank or credit accounts may be cluttering up your finances, so take some time to evaluate if they’re really necessary. Once you’ve done that, close out the ones you no longer need, but do keep a record of them in your financial file. When considering which accounts to close, keep in mind that older credit accounts are beneficial to your credit, so try to leave them in place, if possible.

5. Start Saving

Whether you’re planning a wedding, heading off to college, welcoming a new member of the family, or have any other big life event coming up in 2016, the best way to handle the cost is to start saving now. Be sure to make room in your monthly budget to transfer funds into your savings account. Even if you can only set aside a little each month, you’ll be glad you started early when the time comes.

6. Determine Your Net Worth

Your net worth is the value of your assets, minus any liabilities (or, put differently, what’s owned minus what’s owed). It’s helpful to periodically assess your net worth in order to track your overall financial wellbeing. Try it out for yourself using this free calculator.

 

Get Financially Fit in 2016

A brand new year is quickly approaching, leaving many folks pondering what goals they’ll set for themselves in 2016. You know the usual – lose weight, quit smoking, put a little extra in the piggy bank. A recent survey from Fidelity Investments uncovers some interesting trends in New Year’s financial resolutions and sheds light on the outlook for 2016.

Crunching the Numbers

More people are resolving to work on their finances this year – up to 37% compared to just 31% at the beginning of 2015. Among those respondents who’d made resolutions to improve their finances last year, 51% reported feeling they were better off financially than those who didn’t make the commitment. All this research begs the question: what will you strive to do when the clock strikes midnight on January 1?

Common Goals

The top three financial resolutions have held steady over the past four years, with saving more, paying off debt, and spending less among the most popular goals. Many also choose to save more for retirement or set additional money aside for an emergency fund. Resolving to pay down credit card debt is at an all-time high, with 11% of respondents citing it as their top goal.

Keeping Your Resolution

If you’re embarking on a new financial resolution for this year, the first step is to define exactly what you want to achieve. If you want to pay down a loan or credit card in 2016, calculate how much you’ll have to pay out of each paycheck to achieve your goal. Want to increase your retirement fund? Try increasing your 401(k) or retirement plan contribution by 1%. At the end of the year, you’ll be amazed how quickly it adds up, and if the payment is made pre-tax, it will have minimal impact on your take-home pay.

Whatever your financial resolution for 2016 may be, creating a plan with a specific goal is essential. This way, you’ll know exactly how much you have to spend each month and can adjust your current budget accordingly. By making a financial commitment to yourself, you’re already setting the path to financial success.

Frugal Holiday Gift Guide

The holiday shopping season is in full swing, but if you’re like most people, you still have some work to do on that long list of Christmas gifts. While the holidays can easily get pricey, there are ways to cut down your costs and leave a little extra dough in your wallet once the gifting season is done.

Shop the Sales

Just because Black Friday and Cyber Monday have passed doesn’t mean that the holiday sales are over. Most stores continue to offer special holiday deals throughout the month of December to entice customers. Keep an eye on your favorite retailers’ website and social media pages for sale announcements.

Doing your holiday shopping online will also keep you focused on your gift list, and less likely to be tempted by impulse buys for yourself.

Give from the Heart

Few things are more special than a handmade gift, so work your creativity this holiday season. If you’re not particularly artistic, don’t worry – there are still plenty of ways to make a creative gift for loved ones. Baked goods, scrapbooks, scented bath crystals, and dry baking mixes make excellent presents. To get started, just do a quick Pinterest search for handmade gift ideas. Just knowing that you put the time and thought into personalizing your gift will make all the difference to your recipient.

Plan Ahead

While it’s a bit too late to budget for this year’s Holiday festivities, there’s always next year! Total your spending on this holiday season, including gifts, traveling and decorations; and then decide if you’d like to spend more or cut back next year. Once you have your number, divide by 12 and schedule an automatic savings transfer for each month of next year. Your holiday savings are made effortless and gift giving will be much easier on your finances next year. And don’t forget post-Holiday sales for deeply discounted lights, decorations, gift wrapping and cards. Now that’s something to make your holidays even merrier!

 

A “Scary” Future without Savings

On Halloween night, tiny witches, monsters and ghouls will roam the streets, hunting for treats and avoiding any “tricks” along the way. As fun as this spooky and frightful holiday may be, the season of terrors can serve as a reminder that your future may look a little “scary” without some savings stashed away. Let’s explain.

Savings reduce your need for credit

The reasons to save money are too numerous to list. You can save up for retirement, cover yourself in the event of unexpected expenses, put money aside for a big purchase, or anything else you choose. Rather than relying solely on credit (which is usually accompanied by a myriad of fees), you can make a purchase outright or greatly diminish your need for credit. Plus, your savings are rewarded as they earn interest from the bank. Below, we’ll talk about one fund you won’t want to be caught without: rainy day savings.

Emergency funds

The amount you need to save in an emergency fund is hotly debated. Some swear by a $1,000 balance; but many folks prefer to have more. Lots of people try to save between three to nine months of their salary in the event that they lose their job or become faced with a large expense, like a medical bill. No matter how much you decide to save, it’s always a good idea to save for that rainy day.

It may sound impossible, but you can budget for emergency expenses. How much might a doctor’s visit cost? An unanticipated gift for your cousin’s impromptu wedding? Divide those estimated costs by 12 and factor them into your current monthly budget. Those unforeseen expenses may still surprise you, but they won’t hurt your wallet as much.

To make savings simple, talk to someone in your HR department about setting up a direct deposit to your savings account. That way, you won’t even miss the money and you won’t be tempted to spend it on something else. Set a goal for how much you’d like to save along with your target date, and then watch your account balance grow.

By starting your savings now, you’ll be doing yourself a huge favor for the future. In the spirit of Halloween — you’ll avoid the tricks and get the treat!

“Fall” Into Positive Financial Habits

While most of us are regularly looking to make some self-improvements, it can be all too easy to return to the very habits we were trying to overcome. That’s why only 4% to 7% of people who try to quit smoking without any kind of help actually succeed, according to research from the American Cancer Society. And once you do achieve that behavior change, how do you prevent yourself from returning to old ways when temptation comes knocking?

As the temperatures begin to drop and autumn fully sets in, we must remind ourselves not to “fall” into old financial habits. This is the time to reevaluate where you are now and where you’d like to be. It’s also a good opportunity to de-clutter your life, both literally and figuratively.

De-Cluttering

We all know the tips for cleaning our homes: Rather than ignoring that overflowing closet or crammed garage, take a day to cull through all the “stuff” that has collected over the years. And, as it turns out, it’s pretty easy to make a few extra dollars selling those unwanted belongings online, in a yard sale, or by handing them over to a consignment shop. Feeling generous? Donate them to a thrift store.

Getting your financial “house” in order is also time well spent. If you take a few hours to find the “clutter” in your budget, you can learn where you’re overspending and how to turn that into more savings. Can you get rid of a few unnecessary items here, just like you did in your garage? Are there some habits you’ve ignored that are costing you more than you’d like?

Get Ready for the Holiday Season

Although the holidays may still seem miles away, they’ll be here before you know it. Luckily, there’s still time to make extra room in the budget for travel, gift-giving, and other holiday-related expenses. This way, you’re not hit with all those costs at once. Planning ahead can make a big difference, so drafting up a new budget for fall can give your money a whole new outlook.

Starting Good Habits

So, when you’re thinking about the changes you’d like to make this season, take a moment to also consider how you’ll stick with those changes. You could write reminders on your calendar, keep a note in your wallet, or have a friend or family member hold you accountable. Making a feasible plan for yourself is the first step to improving your financial health. Setting it in motion is next.

Managing Student Debt

As college students nationwide head back to campus for the fall semester, this annual trek may remind you of your own collegiate adventures. Or, like many graduates, that monthly student loan bill is reminder enough. The average student loan debt in the United States has climbed to $29,400, and financial experts don’t expect that number to decrease anytime soon.

If you are struggling with student loan debt, you may feel that you will never have a hold on your financial well-being. Fortunately, being proactive about managing this debt can help you live comfortably. Here is everything that you need to know about that mounting pile of student loan debt.

Repayment Options

The good news is that the federal government has recognized the struggle that student loan debt has caused. There are several repayment options from which to choose when you are trying to manage student loan debt.

Graduated repayment involves a steady increase in the monthly amount that you pay over a period of 10 years. Extended repayment options allow you to stretch out your payments for a period of up to 25 years. Income-based repayment ensures that you do not put more than 15 percent of your income toward student loan payments.

Consolidation

There are benefits to consolidation, but this choice is not for everyone. You will reduce your student loan debt to one payment. This is beneficial if you struggle to remember to pay each individual loan.

Interest rates may also be lower when you consolidate your loan. However, be aware that some types of student loans are not eligible for consolidation. Private loans and PLUS loans are generally not eligible.

Keeping an Open Line of Communication

It is important to stay in contact with your lenders when you are having a hard time paying back your loan. The worst thing that you can do is ignore the problem. While you may enjoy the luxury of not making payments in the present, penalties, fees and the eventual transfer of your account to a collection agency will cause major problems in the future.

The best thing you can do when you know that minimum payments are not reasonable for your budget is to call your lender. Be sure to have information related to your income and expenses at hand to demonstrate the squeeze that student loan payments are causing when it comes to your budget. Negotiating lower payments is a much better option than letting your credit score be destroyed by non-payment.

Student loan debt is a crushing weight on the shoulders of millions of young Americans. Addressing the issue and talking with your lenders is the best way for you to pay down your debt while having enough left over to pay other bills.