How to Utilize the Debt Snowball

Many Americans are overwhelmed by finances. It is hard enough for many to budget for food, gas, and utilities without adding debt payments to the mix. However, there is a solution that can help reduce anyone’s debt quickly and effectively: The Debt Snowball.

The Debt Snowball is a method that seems complex, so I’m going to break it down with an example. Let’s say you have a monthly mortgage payment of $1000, a car payment of $300, a credit card payment of $100, and a student loan payment of $100. Altogether, you’re paying $1500/month toward debts.

The Debt Snowball has you pay off your smallest debts first, while leaving your larger ones for later. I will note that I generally agree with this, although I suggest paying off the debt with the lowest interest rate instead of the lowest total amount. It may seem counterintuitive, but it works.

Let’s say you have three monthly payments of $100 toward your credit card before it is paid off. You go about those three months paying the minimum amount you owe toward each debt. Once month 3 is over and your credit card is paid in full, you do not charge anything else to it. Some people cut up their card (which can be helpful if you are prone to overspending), while others save it for an emergency. Either is fine, but you must not use your card for non-essential purchases.

Now that your card is paid off and that bill is no longer an issue, you still have your mortgage, your car payment, and your student loans. Your car payment may be your next lowest debt. Let’s say it is a flat amount of $12,000. If you pay $300 per month, you will have the car paid off in 40 months. However, the Debt Snowball means you roll over the $100 you previously put toward your credit card and apply it to your car payment. By paying a total of $400 per month, you would now have 30 months of payments, saving yourself almost an entire year of payments. During this time, you continue to pay the minimum amount toward your student loans and mortgage.

Once you’ve paid your car off, you can quickly pay your student loans (remember, you’re rolling over $400 per month instead of $100). Then, you can go after your mortgage. By utilizing the Debt Snowball, you will eliminate your debt quickly. And, although this example does not include interest, you would also potentially save hundreds of dollars in interest by applying this method.

The average American can utilize this method effectively, for one simple reason: it requires you to pay one flat amount the entire time. Some debt-elimination plans have people pay different amounts during different times of the year, and some suggest throwing every penny you have at your debt. However, the Debt Snowball allows people to save and spend money freely, as long as they can pay their bills. If you are struggling to get out of debt and you feel the bills piling up, I suggest you make a list of everything you owe and begin applying the Debt Snowball to your life.

This blog post was originally posted on Brett Fingerhut’s website.

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Best Uses for Your Tax Return

It’s tax return time, and that means millions of Americans will receive a sizable check straight from the government. Many Americans spend this money right away, but others hang on to it, unsure of what to do. After all, we don’t often receive several hundred dollars with no strings attached (or bills to pay). If you are unsure of how to use your tax return, consider one of these options.

If you have any credit card debt or a loan with a high interest rate, take the opportunity to pay down this debt right away. Just make sure to pay it the way you want; paying toward principal will lower your future payments, but making future payments is smart if you think you may be strapped for cash in a few months. You should still continue to pay each month, regardless.

If you don’t have high-interest debt, you can also apply your tax return to a low-interest loan, such as a mortgage or student loans. Any dent in your total amount of debt will result in less headaches down the line, so consider it a present to yourself.

Everyone should have an emergency fund for the unexpected problems in life. A tax return is a great opportunity to add a large chunk of money to that fund. If you have a sizable emergency fund, though, you may still want to add your return to a savings account. It can be helpful for buying a house, a car, or even a vacation.

Investing is one area I won’t give strict advice on, because everyone has their own investment style. However, one thing everyone should consider investing in is themselves. Whether this means contributing to your retirement fund or taking an online class to learn a new skill, you should consider spending your money in a way that will positively affect your future. Other than that, you could invest in the stock market or cryptocurrency, or even government bonds.

Everyone needs something at one point or another. If you absolutely need a certain item or need to get something fixed or replaced, take your tax return as an opportunity to get this done. Just make sure that what you need is an actual necessity and not something you just really want.

Having an extra couple hundred dollars on hand is a great way to overspend and get yourself in trouble. However, there are plenty of responsible ways you can use your tax return to benefit yourself. Consider using one of these tips and making a smart decision with your money.

Originally published at https://brettfingerhut.com on March 15, 2018.

Ways To Get Excited About Budgeting

Budgeting is nobody’s favorite activity, but it is crucial to ensuring financial stability. It can be daunting, though, to come face-to-face with your finances, and many adults can attest to rarely checking their bank account. However, I am of the mindset that budgeting can be more than scary, and maybe even fun. Don’t believe me? Here are some tips to make it fun.

Reward Yourself

Let’s face it: after beginning to budget, you might feel overwhelmed and worn out. Finances are both tiring and stressful for anyone. If you want to find a way to look forward to budgeting, reward yourself with something extra special right afterward. What it is could change from week to week, but you could see a movie, get lunch from your favorite restaurant, or set aside time to work on a hobby you never have time for. This method works the best if you check your budget once a week, as any more often will make the reward mundane.

Get Creative

Creativity is a great motivator to completing tasks we hate. One thing you could do is start a bullet journal planner. You can customize it to fit your needs, and using colorful pens or washi tape will surely liven up your pages. Opening up your journal to see the artistic indicators of your progress will make you want to progress even further.

Set Aside Money

One of the obvious points to budgeting is saving money for important things, like an emergency fund and retirement. However, I suggest setting aside money for something fun, such as a vacation or a new experience. If you regularly set aside $20 or so, you will see a fair amount of money stack up. Looking at your budget worksheet will remind you that you are one step closer to a great time, and since you have the worksheet there, you will be more likely to complete the rest of it.

Make It A Routine

Starting to add budgeting into your daily or weekly routine is a sure way to stick to it. You might need a reminder of when to do it, but eventually it will become second-nature. You may even appreciate the small chunk of time you can set aside to get the budget up to date, as it is typically a very consuming task.

Pick The Right Time

Budgeting can be done at any time, but choosing a time where you are in a good mood will help you associate budgeting with happiness. Consider how you feel after a long day at work where nothing goes right. You are probably pretty angry, frustrated, or just sad. If you budget while feeling these emotions, it will be harder to make it a routine, because you will associate these negative emotions with budgeting.

Anyone can budget, but using these tactics is the best way to ensure you continue the process, even when you might not feel like it. You will also see positive results in your finances, since you will regularly confront any issues. Next time you go to budget, try using these tips for optimal success.

This article was originally published on BrettFingerhut.com

Ways to Teach Kids About Financial Responsibility

Parents want the best for their children, and attempt to pass on all the skills they will need to be happy and successful adults, but an area that is often overlooked is financial responsibility. A little effort and a few basic principles can go a long way to setting children on the path to good financial habits.

Money Doesn’t Grow On Trees

Children need help understanding that money comes from work. Parents can set up a chore board with dollar amounts listed next to each task to help make the concept of money real. Even young children can empty trash cans, wipe tables, water plants, weed the garden or feed pets. Children will feel the value of money when it is tied to the hard work that they have done.

Set Some Aside

Children can be taught early to divide their earnings into saving, spending and giving categories. They will enjoy having their own spending money, but will also be excited to watch their savings grow. Additionally, it’s an invaluable lesson to teach children that money isn’t just used to buy things that one wants or needs; it can also be used to help people.

Let Them Make Mistakes

It can be difficult for parents to watch their children suffer regret or disappointment, but it is far better to allow them to make small mistakes when they are young than see them suffer larger and more painful mistakes in adulthood. If a child has been saving his money for a special toy but decides to spend it on candy instead, it’s best to let him experience the consequences of his decision. Dave Ramsey advises that parents talk through the consequences, but ultimately give the child the dignity of making his own choice.

Model Financial Responsibility

A parent is a child’s main source of knowledge about the world around them, but as always, actions speak louder than words. As Shannon Ryan from The Heavy Purse writes, “The reality is your children are learning now, regardless of whether or not you are actively teaching them about money. They observe how you handle money and will mimic your behaviors and inherit your hang-ups. So I suggest you take control now and help shape their money views, rather than having to play clean-up later.”

This article was originally published on BrettFingerhut.com

Honeydue: The Best Finance App For Couples

Majority of the couples around the world constantly have financial disputes. This is because one party may be unaccountable or they rarely communicate on matters finance. Honeydue is an app that seeks to develop great financial habits and literacy for couples.

How it works

A user downloads the app and sends their credentials that are validated by the bank. The bank gives a token that is used to check balances and transaction. The user may add different bank accounts and invite their spouse/partner. After the two are set up, they can select privacy settings that allow the partner to see everything, completely hide accounts information or see balances only.

The conspicuous features

The user can see all the bank accounts and credit cards account balances in one organized place. When adding the accounts, users select whether the account is personal or joint. Couples share information about an activity and transaction, and they may comment on it. The emojis available allows partners to express shock or support for a particular activity.

The automatic budget categories allow couples to budget their spending. The two can see how and on what they are spending their money. Users manage their bills through the bill reminders. The partners can choose bill splitting, and if one owes the other, they can settle the bill by linking to PayPal or Venmo. A couple can pay for their expenses in good time and ensure they are within their financial means.

Benefits of the app

• The app gives a sense of accountability and transparency, and couples think critically before making any purchases.
• Regular email updates, alerts and notifications provide a platform for couples to discuss their finance frequently.
• The account balances help partners keep their credit in check and motivate them to save more for a particular goal.
• Honeydue supports over 10,000 banks, and it exposes the users to better financial services and products that will save them money.
• The financial updates are also a great way of planning for future expenses or investment.

Partners willing to share financial responsibility and literacy are rarely likely to have arguments, as they are always on the same page on matters money. Honeydue is an innovative finance app best for couples who want to avoid conflicts.

This article was originally published on BrettFingerhut.com

Why You Should Plan For An Inheritance

Those fortunate enough to receive an inheritance should consider important factors, such as estate taxes and liability protection. Otherwise, they may struggle to preserve their wealth. Beneficiaries need a game plan to protect their inheritance, so they can one day leave behind a legacy to their heirs. When devising a plan, there are specific risks to mitigate.

Taxes Can Hurt

Estate tax and tax rates are subject to change, making it important to know what the current thresholds are and how they impact one’s family. There is no getting around paying taxes, but it is helpful to know how much the net inheritance will be after taxes. This will allow beneficiaries to plan for the future and help them select investment vehicles. Also, if the owner of the estate has a lot of money tied up in an IRA account, it makes sense to have that account roll down to their beneficiaries. This will prevent the liquidation of the retirement account, in most instances.

Family Disputes

Siblings and other heirs can potentially fight over their inheritance money, which is a bad situation for families to be in. Feelings can get hurt, and grudges may ensue because someone feels they’ve been slighted or treated unfairly. Having a will in place is important for everyone involved in the inheritance and estate planning process. Beneficiaries will not be surprised at the moment they’re entitled to an inheritance if all stakeholders have read the will associated with the estate.

Liability Protection

If one inherits a large sum of money, they can potentially become a target for lawsuits and fraudsters that want to take their wealth. Having trusts and other instruments to mitigate risks, and limit liability is wise and takes research. Speaking with a qualified attorney about estate planning and what to do with an inheritance is a process that can take multiple sessions to figure out. The sooner beneficiaries get started, the better.

Receiving an inheritance is a positive thing that can change the dynamics of one’s life. There are important steps to take before any portion of an estate passes into one’s hands, to avoid excessive taxes, family squabbles and loss of wealth. With a solid plan in place, beneficiaries can avoid inheritance pitfalls and expand their estates.

This article was originally published on BrettFingerhut.com

Why College Grads Should Have A Financial Advisor

When college graduates are thrust into the real world, they have to make a lot of financial decisions. Consulting with a financial advisor can help make these graduates’ decisions much easier, especially when dealing with issues they weren’t taught in school.

Many college graduates don’t know if they have the financial skills necessary in the real world.

A financial planner can help graduates navigate the many financial firsts that they will have to experience, and start on the right path. As a young college graduate, poor financial habits haven’t been established yet. A financial advisor can help graduates figure out their money paths, rather than experimenting with trial and error. Even decisions made in his or her 20s can have a lasting impact on an individual’s future. A planner can help consult on decisions so that they don’t have a lasting negative impact on the future.

With a financial advisor, there can be a plan to pay down student loan debt. Many recent graduates have more student debt than any other generation. Student loans are confusing and can take a huge chunk out of new paychecks. A financial advisor can help see if loans can be deferred, or if there are payment option plans.

With new financial responsibilities and hopefully more income, individuals need a budget. A financial planner can help work with the graduate to create a budget that makes sense with their income, lifestyle and existing debt. Many new grads don’t have a budget and don’t have savings to cover any financial events. Since most new grads are earning a bigger income than before, they may be tempted to go out and spend on things that are unnecessary. Creating a budget can help them make better financial decisions.

With a budget, it’s easier to prioritize financial goals, whether that’s paying down student loans, saving for a home, or another expense. Each individual is different, and the right planner can help work with the individual to figure out the right course of action in order to achieve these priorities.

Saving for retirement may be the last thing on a graduate’s mind, but it’s important to save and invest as soon as possible to have payoffs later. A financial planner can help with these decisions, which can be overwhelming.

This article was originally published on BrettFingerhut.com

Best Ways To Learn All About Personal Finance

Personal finance is an important subject to learn about, but it is often overlooked until the knowledge becomes a necessity. People in their 20s will find that they don’t have the information they need to make smart decisions for their future, and bad decisions can cause disastrous effects for their future. Before you wade through the vast wealth of knowledge available, read on to find out some of the best ways you can learn about personal finance.

Books

Reading books is one of the oldest methods of learning about a new subject, and it’s a timeless method. You should be wary about reading books on time-sensitive information (real estate, stocks, etc.), however, books can be a useful resource for a few subjects. If you’re looking for debt elimination help or a budget system that can work for you, try checking out a few of the books below.

Recommendations:

The Total Money Makeover by Dave Ramsey is a great start for someone looking to crush their debt and create positive money habits.

The Budget Kit by Judy Lawrence is a workbook that can help you track your finances and get started with budgeting.

Podcasts

Although podcasts are becoming more trendy each year, they’ve been around for quite some time. There are podcasts about any subject you could think of, and there’s no shortage of podcasts covering personal finance topics. If you have a long commute or prefer listening to something while working, try an episode of one of these podcasts.

Recommendations:

The Disciplined Investor covers all kinds of investment topics and does not shy away from current trends.

Epic Real Estate Investing is a great way to learn about entering the real estate market with the intention of building wealth.

Blogs

Blogs like mine aim to provide information on any financial topic you could think of. While there are tons of blogs out there and it’s difficult to know where to start, try looking at a few of these popular options.

Recommendations:

The Penny Hoarder helps anyone looking for ways to save and earn more.

Couple Money provides a place to start for couples looking to work on their finances together.

Of course, I should mention that while these are all great places to start, nothing quite beats speaking with a financial advisor. However, if you need some supplemental help to get started on your financial journey, check out one of these options and you’ll be on your way to financial success.

This article was originally published on BrettFingerhut.com

Learning to Budget as a Family

As your family grows, so does the need and importance for a proper budget. It’s essential for every member of your family to know how to make healthy financial choices and learn how to save money. This will set everyone up for a brighter and stronger future. In order to have an effective budget, everyone needs to be on the same team. It’s very important to learn how to budget as a family:

Creating the Budget

In order to learn to live on a budget as a family, you must create one together. When creating a budget, it’s imperative to keep track of all the money that goes in and out. Make sure to take note of all major bills, paychecks, and always keep bank statements on file. This will help to understand how much is going in and out, and where cutbacks can be made. When a budget is planned out ahead of time, there is less room for error.

Build a Savings

By identifying where cutbacks can be made, you now know how much money you could be saving. As a family, it’s important to have money set aside for future major expenses such as accidents, college fund, or a rainy day fund. Setting up a savings account should be a top priority as a family.

Create Financial Goals

As a family, think of where you would like to be financially in the future. For example, as you set up your savings account, set a goal for how much you’d like saved in the next six months. It’s also good to set goals for getting out of debt if that is something for family struggles with. Even if it’s a smaller goal of paying your cable bill ahead of time. When you budget as a family, you will succeed as a family. 

This article was originally published on BrettFingerhut.com

The State of the Auto Industry

Brett Fingerhut blog post –

The decline of the American auto industry is something that’s fresh in the minds of many Americans.  It’s what turned eastern Michigan from a thriving industrial center into the buckle of the Rust Belt.  You can argue that Detroit is making a gradual comeback, but that’s in spite of, rather than because of, the auto industry.  While the European auto industry was going strong for a long time, I recently read an article that discussed how a plunge in sales of diesel cars in two of Europe’s biggest markets could drive down the value of used vehicles, and in turn hinder the lucrative financing plans that major carmakers use to sell millions of automobiles.

After Volkswagen’s emissions scandal, authorities across Europe are trying to raise taxes on diesel vehicles that are polluting more than previously thought, and in some cases restrict or even ban them in some cities.  This has decreased demand, with new diesel car registrations this past month dropping in both Germany and the UK, in turn weighing on used car prices.  In addition, the shift to cleaner vehicles doesn’t hint at any sort of recovery.

In Britain, where car sales hit a record high last year thanks to finance packages accounting for 90 percent of sales, this is particularly disconcerting.  Customers under “personal contract plans” pay a small deposit toward a new car, then make monthly payments for the next two to three years.  They can then choose to either buy the car outright or return it to be sold second-hand, then use the equity to take on a new car and start this cycle of monthly payments over again.  The finance company then determines how much they can borrow by determining how much they think the vehicle will be worth at the end of the payment period.  If it falls more than expected, then customers won’t have as much money to buy a new car, hurting demand for all new vehicles.

In recent years, the US has seen a sharp fall in residual values as demand decreases and automakers try to keep up by slashing prices.  Both leasing and finance contracts are priced through an assumption of stable residual values, and a similarly sharp fall across the Atlantic could trigger a spike in leasing prices that in turn could hurt demand and increase defaults.  A mere 5 percent cut in residual values in Europe could equal 1.6 billion Euros.  This would hit the “big three” German carmakers – Volkswagen, BMW and Daimler – the hardest.  Concern about how finance packages are sold has led to the UK’s Financial Conduct Authority to conduct a review due to a potential “lack of transparency, potential conflicts of interest and irresponsible lending”.

 

from Brett Fingerhut http://ift.tt/2pOXGQW