Top Things to Know

Top Things to Know

1. Americans are loaded with credit-card debt.

The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

2. Some debt is good.

Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

3. Some debt is bad.

Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.

4. Get a handle on your spending.

Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.

5. Pay off your highest-rate debts first.

The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

6. Don't fall into the minimum trap.

If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.

7. Watch where you borrow.

It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be dangerous. You could lose your home or fall short of your investing goals at retirement.

8. Expect the unexpected.

Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.

9. Don't be so quick to pay down your mortgage.

Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)

10. Get help as soon as you need it.

If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.

Top Things to Know

Top Things to Know

1. Americans are loaded with credit-card debt.

The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

2. Some debt is good.

Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

3. Some debt is bad.

Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.

4. Get a handle on your spending.

Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.

5. Pay off your highest-rate debts first.

The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

6. Don't fall into the minimum trap.

If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.

7. Watch where you borrow.

It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be dangerous. You could lose your home or fall short of your investing goals at retirement.

8. Expect the unexpected.

Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.

9. Don't be so quick to pay down your mortgage.

Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)

10. Get help as soon as you need it.

If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.

Top Things to Know

Top Things to Know

1. Americans are loaded with credit-card debt.

The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

2. Some debt is good.

Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

3. Some debt is bad.

Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.

4. Get a handle on your spending.

Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.

5. Pay off your highest-rate debts first.

The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

6. Don't fall into the minimum trap.

If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.

7. Watch where you borrow.

It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be dangerous. You could lose your home or fall short of your investing goals at retirement.

8. Expect the unexpected.

Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.

9. Don't be so quick to pay down your mortgage.

Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)

10. Get help as soon as you need it.

If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.

Safety Net

-Building a Financial Safety Net -

Emergency Fund, Disability, and Life Insurance

Where do you turn when you're faced with a financial emergency? Do you have money set aside to cover the unexpected expenses? Is there some sort of insurance in place? Without the right financial safety net you could find yourself in financial ruin. What good is it to earn, save, and invest money if it isn't protected in the event of a financial crisis? Learn how to create your financial safety net so you can protect what you have.

Emergency Fund

Financial advisors suggest having enough savings in an easily accessible account to cover your living expenses for at least six months in the event of illness, job loss, or other serious emergency. This is money that you should have in a savings account or other liquid account that you can tap into without penalty in the event of an emergency.

Without an emergency fund your options for paying for an unexpected expense may end up going on a credit card. That will almost certainly carry a hefty interest rate and make your situation even worse. Beyond that, many people are left with tapping into their retirement assets to pay for these emergency expenses. This is a bad idea since you could seriously put your future in jeopardy.

So, start by setting some money aside for your emergency fund. The best way to do this is to create an automatic savings plan. When you make it automatic, you don’t even realize you’re saving money and before you know it you’ve got a nice financial cushion.

Long-Term Disability Insurance

Long-term disability insurance helps replace your income if you are unable to work due to illness or injury. Many people consider this coverage a luxury, when in fact, it should be considered a necessity for those who don't have other financial resources they could tap in the event of an illness or injury. Even if you do have other financial resources, would you want to use them to pay your monthly expenses if you were to become disabled? A disability can quickly eat through all of your savings or even lead you to tap into your retirement funds which could have a significant impact down the road.

Don't think it could happen to you? Although your chances of having a disability increase as you get older, illness and injury can happen at any age. Car accidents, sports injuries, back injuries, pregnancy, and disease are just a few examples.

Ask yourself this question: could you live without your income for three months? Six months? A year? If the answer is no, you need disability insurance. Employers often offer this coverage via a payroll deduction, which may be tax-deductible. You may automatically get short-term disability coverage through our employer, but check to see if they have additional coverage options.

Life Insurance

Life insurance is necessary if you have dependents who will suffer financially if you die. Whether it’s a spouse of children, if they depend on the money you earn from your job, they need to be financial secure if you’re no longer there for them. If you have no financial dependents, life insurance isn’t completely necessary, although many people also use insurance as part of their estate planning and cash accumulation regardless of their dependent status.

If you plan to buy insurance other than term insurance provided by your employer, you should educate yourself about the pros and cons of term, whole life, and other types of insurance. You may also want to talk to an adviser about how much insurance is enough.

Summary

Once you’re created a financial cushion with your emergency savings to handle life’s unexpected expenses, protected your ability to earn an income with disability insurance, and have life insurance in place to secure your dependents’ financial security, you can sleep easier knowing that you have a financial safety net in place that can help keep you on track through even the most difficult situations.

I wish everyone the best, and hope you never need to USE your safety net. BUT STILL HAVE ONE!

Brooke

Causes of our National Debt

Causes of our National Debt

I found this essay a week ago and it has been on my mind ever since. It is about our national debt and the causes. This essay was written in 2008, so all of the statistics and numbers are out of date, but our problems are still the same. I hope this impacts you the same way it did me.

Brooke

Essay by:

Lisa Harris

Emporia State University

The U.S. today spends way more money than needed. People are spending more and more money on wants instead of needs! Individuals just want more these days. Part of the constant growing debt is from people spending all of this money, even when they don’t have it. Individuals are taking out loans more often because it is so easy. They then have trouble paying off those loans. The banks that give out these loans don’t worry about it, until now, because the government has to bail them out. Companies are spending more and not making as much, therefore they are also going into debt, and when companies and individuals go into debt they have to ask the banks for help, but if the banks are having trouble, then they are not able to help out the businesses.

Something that was a huge impact on debt was sub-prime loans. When banks would give out loans with really low interest rates, individuals thought this was good, but once the initial low interest rate period was over, interest rates rose. Once this occurred, individuals couldn’t afford their loan payments anymore and therefore started going into debt. As well as when banks would give out loans and then sell the rights to that loan to another bank, once the second bank got the loan they could do with it as they pleased. So if they decided to raise the interest rate the individual who took out the loan would be in trouble and not be able to pay the payments on that loan.

Our current national debt comes to approximately 14 trillion dollars. This has about doubled since the year 2000. It seems like the cost of everything has increased. The Median household income has risen 17 percent, from 42,000 dollars in 2000, to 49,000 dollars in 2008 (Quinn). The consumer price index has risen from 168.8 in 2000 to 220.0 in 2008; this comes to a 30 percent increase (Quinn). Consumer credit went from 1.54 trillion dollars in 2000, to 2.59 trillion dollars in 2008, this is a 68 percent increase (Quinn). The average home price has increased by 49 percent, from 139,000 dollars in 2000, to 206,500 dollars in 2008 (Quinn). These are some drastic increases in prices that affect everyone.

These days, people have to spend more money on their everyday costs of living. The price of everything seems to have risen. Individual’s everyday costs have increased since 2000. Electricity cost has risen 25 percent, it was .084 dollars per kWh in 2000, and is now .105 dollars per kWh (Quinn). Milk was 2.78 dollars per gallon in 2000, and is now 3.87 dollars per gallon in 2008. This is a 37 percent increase (Quinn). Bread 41 percent, eggs have risen an outrageous 122 percent, orange juice 40 percent, and ground beef 57 percent (Quinn). These are some of the items that people use everyday that have gone up dramatically!

The war in Iraq has also changed everything dramatically! The government has spent so much money on that war, and it’s still not over! We have lost so many soldiers in this war, which when a soldier is injured or killed, that is another increase in cost, from hospital costs, to costs to send out a new soldier in their place! As of 2008 to date, we have spent approximately 600 billion dollars on this war! We should not need to spend near that much!

Since 1975 our federal debt has risen from 542 billion dollars to more than 9 trillion dollars (Quinn). Showing debt as a percentage of GDP, it is now at 60 percent when it was at 35 % (Quinn). Our tax dollars are going into things that we don’t have hardly any control over and we don’t see changing. Approximately 27 percent goes into the military whether we support the war or not (Quinn). 21 percent into health care (Quinn). 19 percent goes just into paying off the debt (Quinn). 12 percent into other stuff (Quinn). 6 percent goes into income security (Quinn). 5 percent, into education which I personally think this should be a lot more (Quinn). 3 percent into Veterans benefits (Quinn). 3 percent goes into nutrition (Quinn). 2 percent goes into housing (Quinn). 2 percent has gone into the environment (Quinn). And only 0.3 percent into job training (Quinn). So as you can see, instead of our tax dollars going towards things that affect us from housing to education. The government is spending it on things that they need it for. 


All of these things are some causes of why our national debt is so bad. Our inflation is sky high now because of this and we are on the edge of a recession, if not already in one. Individuals, as well as businesses need to start cutting back on everything they are spending and stick to the essential needs.

Works Cited

Quinn, James. America’s Fiscal Crisis: Tough Decisions Needed Now. Seeking Alpha. August 17, 2008. http://seekingalpha.com/article/91274-america-s-fiscal-crisis-tough-decisions-needed-now.

Bank VS Credit Union

Credit Union Vs. Bank:

Which is Best for You?

Everyone needs a place to store their money, and unless you plan on keeping it under your mattress or in the cookie jar, you’ll need to have an account with either a bank or a credit union. Aside from providing a safe place to store your assets, financial institutions also provide other benefits, such as a place to cash your checks, obtain money orders and wire funds.

A popular misconception is that a bank is the same thing as a credit union, but in reality, they are as different as night and day. Choosing between a bank and a credit union should reflect your own personal self interest, and should be decided after examining your particular financial situation.

Banks are the most popular financial institutions. Most are run by a group of investors who have a large amount of capital, which goes into the funding for the bank. Some are nationwide, while others are smaller, local institutions. Either way, a bank’s primary purpose is to make money for the investors and for the stock holders.

Banks are federally insured by the Federal Deposit Insurance Corporation. A paid Board of Directors makes all of the decisions for the bank, which are usually profit-driven and hold little benefit for the customers of the bank. Anyone, in any city or state, can open an account with a bank, and customers hold no voting privileges or decision-making power within the institution.

Credit unions, on the other hand, are designed to serve a particular group or neighborhood. People who use credit unions for their financial services are members of the credit union, rather than customers. Since credit unions are not-for-profit organizations, the profits incurred by the credit union directly benefit the members after covering overhead costs.

Credit unions are insured by the National Credit Union Administration, and are democratically controlled by the members. This means that members have more say in how the credit union is run, and hold decision-making power. Members elect a Board of Directors – rather than hiring one – who are chosen to fully represent the members in making decisions and upholding policies.

Many people choose credit unions over banks because the former allows for lower interest rates and low-cost services. They like the fact that they are treated as a benefit to the institution, rather than “just another account number”. The more members who deposit money into a credit union, the higher the benefits to the existing members. Credit unions are also tax-exempt.

In the past, credit unions have offered a limited range of resources, which included only low-interest loans and savings accounts. They have recently begun to expand their services to include checking accounts, IRA’s and credit cards. Some have also begun to diversify in the types of loans that they offer. Many credit unions worldwide offer student loans, small business loans and mortgages.

Banks, however, do offer a wider range of services, and are often more accessible to customers. For example, if you have an account with a branch of Wells Fargo in Texas, you can access that same account at branches and ATM’s in Michigan. This makes travel easier for many people.

Many companies – from small businesses to large corporations – have “adopted” credit unions as their source for maintaining IRA’s and pensions for employees. This is universally beneficial because it makes the company’s job much simpler, rather than having to deal with multiple institutions, and the employees are not only members of the credit union, but also owners, as all members of credit unions own a small share of the institution.

If you have a bank account a traditional bank and an IRA account with a credit union, you might be enjoying the best of both worlds. You can obtain the benefits of the credit union while still retaining access to the diversity of your bank.

Since credit union members usually have higher interest rates on savings accounts, you might also want to open a savings account with your credit union, while leaving your checking account with a traditional bank. Most credit unions offer ATM cards along with savings account for member convenience.

A current trend among banks, which is sending more people to credit unions, lies in the charging of monthly fees. For example, if you have a checking account with Bank of America, you will be charged a monthly maintenance fee unless you have direct deposit from your employer or maintain a specified balance.

With a credit union, this isn’t an issue. Since credit unions aren’t in the business of making money as not-for-profit organizations, they don’t charge the high fees and finance charges of traditional banks.

To find information about credit unions in your area, go to your local phone directory. Locate credit unions that are close to your home, and visit to learn more. Financial decisions should be based upon informed research of all options, and you might find that a credit union could be saving you money.

Likewise, if you know that you will be needing a monetary loan in the next several months, you might want to look into opening an account with a credit union. It will be easier to secure a loan if you are already a member, and the interest payments will be significantly lower than with a traditional banking center.

Whichever you choose – a bank or a credit union – make smart decisions with your money and be sure that you’re getting the most out of your banking institution.

Credit Card Blocking

Credit Card Blocking

Have you been traveling lately? Do you have an unexplainable “over the limit” fee? It is possible that your credit card was “blocked” and you didn’t even know it!

Credit card blocking occurs when a merchant contacts your credit card company with an estimate of what your total bill will be and "blocks" that amount even though he isn't charging your card for the total amount at that time and might not ever charge your card for that amount.

An example of a situation where credit card blocking occurs is when you use a credit card to register with a hotel or car rental service. They call in an estimate of what your total bill might be to your credit card issuer and have that amount set aside or blocked for possible future use. This way you can't stiff them on the final bill later on.

While an amount has been blocked it cannot be used to make other purchases. So, if you leave your hotel room to go shopping, you might find your credit card declined on the basis that you have reached your credit limit.

Some credit card companies will let you go over your limit and then access an "over the limit" fee on your next statement. These fees are heavy and you want to avoid them if at all possible.

For the above reason, it is not a good idea to use a credit card that you have nearly maxed out when you travel.

WAYS TO FIGHT BACK AGAINST CREDIT CARD BLOCKING

--Avoid punitive fees by calculating how much will be blocked from your credit card and make sure you don't exceed your credit limit.

--Use two different credit cards when you travel: one with lots of available credit to use when you expect amounts will be blocked; the other card for everything else.

--Ask the hotel / car rental clerk how long the card will be blocked. Pay your final bill with the same credit card you used to initiate the service. This way the block will be removed within two days of your paying the final bill.

--Ask your credit card issuer how long they block credit lines.