When people hear the word “debt,” they often think of it as a bad thing or associate negative connotations with it. The truth is, some debt can be good. So, how do you differentiate good debt from bad debt? The difference does not necessarily refer to the amount of money you owe, but rather the reason you owe. Good Debt Definition The general dividing factor is whether the debt is something that will add value to your financial position over time or reduce it. Good debt is debt that can help you improve your financial position in one way or another. For instance, the following are prime examples of what are considered to be good debt: If you make wise purchasing decisions when buying homes or real estate, over time, the expectation is that real estate will gain value. Buying low in areas where you anticipate market growth allows you to sell high at a later date, once the value of property in the area grows. Education is an investment in yourself that is expected to pay off in higher paying jobs in the future. Taking out a student loan to pay for college often equates to higher lifetime earnings. Borrowing money to expand a business, buy new equipment, or hire new employees to meet growth are all viewed as good reasons to incur debt. Most everyone who takes out a business loan expects the loan to generate positive economic value for themselves and their business. Bad Debt Definition Bad debt, on the other hand, is a debt incurred to purchase items that will depreciate or lose value over time. This accounts for a large amount of consumer debt. The following types of debt are considered to be bad debt. In the case of auto loans, depreciation attacks fast and hard. According to Edmunds, you lose nine percent of a new car’s value the moment you drive off the lot. By the end of the first year of ownership, the value drops to 81 percent of the purchase price. By the end of the second year of ownership, it is only worth 69 percent of the purchase price. By the fifth year, the car is worth less than half of the purchase price. Credit card and other types of revolving debt work in much the same way. By the time you leave the store, most items have lost some in value. Moreover, using credit cards for consumables, like dining out, entertainment, and vacations, adds no long-term value. What can you take away from this? If you have debt, seek to pay off bad debt first. Then reassess your finances and look for ways to avoid bad debt in the future by paying in cash or saving for big purchases. Reserve credit for items that will add value over time instead of those that will lose it.

Good Debt, Bad Debt

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Your phone contains sensitive information about you, your finances, and your family. It is critical to protect this information from falling into the wrong hands. As the owner, there are several one-time changes you can make and ongoing habits you should learn to keep your mobile phone secure. Setting up Security on Your Mobile Phone The first and most important thing you should do to protect your mobile phone is to set up a lock screen with a password, PIN, or pattern. That way, if your phone is stolen or you lose it, all of the information on the phone will not be automatically available to whoever has it. Adjust your phone’s settings so it locks just a minute or two after being used. If you delay the locking process, you risk having it fall into the wrong hands before it is locked. Even if you have the best intentions, the chances are that at some point, your phone will become separated from you. Make it easier to recover if it is lost by activating a tool to locate your phone remotely. Also, you want a feature on the lock screen that allows someone who finds your phone to have sufficient contact information to get in touch with you. If you store particularly sensitive information on your phone, consider signing up for a service that allows you to wipe your phone remotely if needed. Best Practices for Mobile Phone Security Update your software whenever a new operating system or fixes to your current one are available. The updates often address security loopholes, so it is important for you to have the latest version to give your phone the best possible protection. It is also a good idea to update apps, particularly banking apps, whenever they release new versions. Only download apps from trusted sources, and pay attention to the permissions that apps request. For example, you may notice that an app requires access to your complete browsing history, GPS location, and all of your text messages. Unless the app has good reasons to have this information and you fully trust the developer, you probably want to avoid it. Use caution on unsecured Wi-Fi networks. Do not allow your phone to connect automatically to any available open network, and when you do connect, pay attention to what websites you visit and apps you use over that connection. Any information you send or receive is vulnerable to interception, so save your banking for a secured network. Log out after making purchases, and don’t store passwords on your phone. If someone can get past your lock screen, you do not want them to have open access to all of your accounts. They could run up some serious bills if your login is active on shopping sites with stored credit or debit card information. Pitfalls to Avoid Don’t use the same PIN or password on your lock screen that you use elsewhere. You unlock your phone all the time, and if someone is watching, you do not want them to have information that he or she could then use to hack into your other accounts. While it may be tempting just to use the same PIN as your ATM card, that is not a number you want to have floating around. Remember that your address is not a very secure PIN either. Don’t recycle or trade in your phone without fully wiping it. You may think that you do not have to worry about security once the phone is not yours, but traces of information on the phone could be enough to leave you vulnerable. Complete a full wipe and reset the internal memory to factory settings before letting the phone go.

Keeping Your Mobile Phone Secure

View Resource Keeping Your Mobile Phone Secure
According to Forbes, considerably more people are embarrassed to admit their credit scores than their weight (30 percent compared to 12 percent). With about a third of Americans qualifying as obese, this news is quite shocking. The good news for these Americans is that it is not difficult to improve your credit score. However, you need to know where to begin. Things to Do Now Boosting your FICO score is not an overnight process. It will take time and a little bit of effort on your part. The hardest part, though, is getting started. These are things you can do today that will help improve this important score. Impact of Payment History Your payment history is important. If you have missed payments in the past, get current and stay that way. Even paying a few days late can have a big impact on your credit history according to myFICO, who also reports that payment history accounts for 35 percent of your credit score calculations. Impact of Amounts Owed It is not the amount owed that is the problem so much as the amount owed compared to what credit you have available. The impact of your debt will vary greatly according to income and other items on your credit history. However, if you owe a great deal and have little available credit, that can have a negative impact on your FICO score – especially if the bulk of your credit owed is in the form of revolving credit accounts like credit cards. You can make relatively easy improvements to this particular score by paying down your debt and keeping balances on your credit cards low. You do not necessarily want to close accounts – especially older accounts as they have a positive stabilizing impact on your credit score. You should also avoid the temptation to open a lot of new accounts in an attempt to have a higher available balance as this raises red flags in its own right. Impact of the Length of Credit History It is better to seek to build your credit history slowly and over time. Don’t go all in after opening your first credit account. At the same time, don’t close older accounts the first time something shiny and new comes along. Those older accounts show that you’ve developing long-term relationships with creditors and that’s a great thing for your FICO score. Impact of the Types of Credit There are two essential types of credit. Asset building credit, is generally referred to as good credit. This credit is used to: Revolving credit accounts for pretty much everything else. This includes: from These things are considered bad credit. You definitely want more good credit than bad in your credit history. This shows a habit of living within your means and making investments in your future. Even if you’re paying your bad credit in a timely manner, it appears better on your score to have a lower amount of this type of credit. Impact of New Credit When it comes to your credit score, new credit is always somewhat suspect. There is no history with this type of credit so it cannot really be part of the equation. It becomes even more suspect when there is a large amount of new credit applied for and/or received all at once. In fact, Bankrate recommends paying off (not closing) all credit cards that have low balances and stick with one or two cards as your main credit cards. Opening new lines of credit speaks against that strategy for keeping your credit score higher. Small changes like these can have a huge impact on your credit. If you have trouble making timely payments, consider setting up a calendar of payments each month and automating the process as much as possible so that your FICO score can thrive.

Boosting Your FICO Score

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Life insurance is one of those things that many people do not want to think about, but that almost everyone needs. Most simply don’t want to think of a world without them in it. They do not want to wonder what will happen to their families or even imagine their families facing life without them. Unfortunately, failing to plan ahead for that possibility can leave their families devastated not only emotionally, but also financially, if they are no longer there to provide for them. Who Needs Life Insurance? Most experts will tell you that if you are financially responsible for someone else – anyone else, you need life insurance. While that is certainly true, that is not the only instance in which life insurance is recommended. For instance, young adults who have careers, but aren’t yet married or romantically involved with another person should consider having a life insurance policies of their own. That way, if something should happen to them, their parents aren’t left with the burden of not only saying goodbye to their child but the financial burden of doing so. Another consideration involves families with children where one partner provides for the family finances. It is conventional wisdom that says the provider needs life insurance coverage. However, the value the non-working family brings to the table has real world dollar value too. Imagine the costs of hiring one person to do the following things: When the “non-working” parent is no longer able to provide these services, it could lead to significant lifestyle changes for the family or considerable financial hardship for the family. In the case of aging or older adults, life insurance is also necessary to help pay for final expenses or to pay off residual medical bills. There are some smaller policies that are easily available to older adults – without medical examinations that are worth considering if you are afraid you will not be able to qualify due to the state of your health. Evaluating Your Needs Once you realize the importance of having life insurance, the next question is: “how much life insurance do I need?” It often depends on your intentions. Some people only really need enough to cover their final expenses and to pay off their debts, so they do not burden that someone else with those debts. If you are young and single and just want to help your parents out, then you may only need enough to cover those debts and final expenses. If on the other hand, you have dependents, you are going to need to take into account a few more considerations. These are a few things to keep in mind when deciding on an appropriate amount. Arriving at a Coverage Amount The good thing about life insurance is that if you invest while you are still young and in reasonable health, it is not all that expensive. Look for plans that lock in rates for as long as possible and avoid the temptation to over-insure yourself or your spouse. The “just right” number will be different from one family to the next and may diminish or increase over time as life changes occur. If you are unsure how much life insurance coverage you need, calculate the appropriate numbers mentioned above (debt, income replacement, and children’s education) and add in between $10,000 to $15,000 to cover final expenses to be on the safe side.

How Much Life Insurance Do You Need?

View Resource How Much Life Insurance Do You Need?
Different factors will determine what you pay for life insurance premiums. This can confuse many individuals when they are trying to understand why their premiums are higher than others. Below are some factors that can impact the cost of life insurance and perhaps take some of the confusion out of it. Factors that Determine your Life Insurance Rates Once you decide on a particular life insurance policy that suits your needs, the next step is learning the factors that will determine if you qualify and how much you will pay for the premium. Your Age The strongest factor many insurance companies start with to determine your rate is your age. Your premium will be lower the younger you are. This is because they assume you have many years of paying on the premium before you pass away. Your Gender The next factor they look at after your age is your gender. There are statistical models that some insurance providers use to approximate your longevity. For instance, on average, women have a life expectancy of about five years longer than men. Therefore, their rates are a bit lower since they are anticipated to live a longer period than men. Smoking Because you put yourself at a higher risk of health problems when you smoke, it is an automatic red flag for most insurance providers. If you smoke, you can even expect to pay as much as twice the premium as non-smokers with the same or comparable coverage. By kicking the habit, you can — and probably will — lower your rates. Your Health and Family History Another essential deciding factor in how much your premiums will be is your medical and family history. If you have any chronic conditions or potential for one, your rates could increase. Also, if you have a family history of certain illnesses, your rate could also be high. Your Current Health Most insurance companies will have you go through a medical examination so they can see if you have any types of health issues that could cause problems in the future. If you are in good health, you will most likely enjoy a lower rate. Your Weight This is also a factor. Since obesity, for instance, can cause health problems and a shorter lifespan, this could affect your premium. Your Occupation Another thing insurance companies look for is if you hold a dangerous job, such as a coal miner, race car driver, or you work in any profession that can cause accidents. Although rare, the insurer might consider some occupations to be too risky due to their high potential of causing an accidental death and might not give you coverage. Your Lifestyle Your lifestyle activities are accounted for as well. If you are a thrill seeker and like to climb mountains, sky dive, or bungee jump off of high bridges, you could end up paying higher rates for life insurance. Thrill seekers are a major concern for many insurance companies since their lifestyle could lead to their early end. The insurance company will weigh in these and other factors to determine what you will pay out in premiums for your policy. The importance that each company weighs on them could be different and will depend on your insurance provider. It is important that you sit down and discuss your lifestyle and other factors with your insurance agent to take out a policy that will best fit your specific needs.

Factors That Impact Life Insurance Premiums

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Your home may very well be your most valuable possession. It is important to make sure you protect the investment you’ve made in your home with the right kind of insurance coverage. These insurance tips will help. Getting the Right Coverage It is important to get the right coverage for your home, your family, and the area in which you live. Don’t buy a policy without first knowing what you are getting. In fact, it is a good idea to get quotes from several different companies and explore the differences between the policies you are considering. Remember that all policies are a little different when it comes to coverage. That is why there is such diversity in price from one carrier to the next. Break it down so that you can make an apples to apples comparison. Then take the time to find out if the coverage is enough to meet your comfort levels. Consider working with an independent agency that will show you a range of plans and coverages and walk you through the protections they provide. This allows you to make an informed decision about the insurance policy you ultimately purchase for your home and possessions. Make sure to ask about things like the following before you buy too. Ask about any specific concerns you may have about your home and how well it and your family will be protected by the policies you are selecting. It is always better to know than to find out you do not have certain coverage when you need it. Identify ways to lower insurance premiums. There are many ways you can do this that aren’t very expensive – and some that are. These are a few fixes that can have a big impact on your insurance premiums. Of course, there are bigger investments you can make that will reduce insurance costs, like updating wiring and bringing your home up to current code, but you’ll need to weigh the value of the reduction vs. the costs of the upgrades. Making Sure You are Compensated Correctly for Losses When it comes to filing claims, it is important to file the claim sooner rather than later and to make sure you document everything. We are fortunate today in that almost everyone carries around a smartphone so that photographs and video evidence are easy to document. This will provide evidence of the devastation. However, having photographs and/or videos of valuable items inside the home before the covered disaster helps to provide evidence of ownership if your home is destroyed by fire or tornado. Consider storing documentation offsite in a safety deposit box or online for digital images and video. There are many programs that allow digital storage for these things that can be critical in ensuring your compensation. Photo documentation may not be enough, however, if you have valuable items like antiques, jewelry, and furs. You will need to have special valuable items coverage and an appraisal of the item before the covered event. When you have the right documentation and the right policies, you are much more likely to get the correct compensation for your losses. That is why these things are so important.

Insurance Tips for Homeowners

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Your auto insurance is not only about protecting your car. It is also about protecting the people inside your car, on the road, in other cars, and the property around it. It is also about protecting your financial interests if someone gets injured in an accident in which you are determined to be “at fault.” Finding the right auto insurance can be quite challenging. Especially since most people feel like they need to learn to speak another language to understand what is, and isn’t, covered by their insurance policies. That is why it is so important to ask questions before you buy and always make sure the answers make sense to you. Understand Key Features of Insurance Policies Different auto insurance policies offer different kinds of features. All of them are important to different drivers for different reasons. The following are some of the more common, and desired types of features people want from their auto policies. These features aren’t available through all insurance carriers and you may need to shop around in order to find these exact or very similar features. Identify Which Features are Important for You Most drivers want to find an insurance provider they can feel confident about having and be loyal to for the long haul. Before you do that, though, you need to decide what’s most important to you. Getting the right insurance coverage can make a world of difference for you and your family when it comes to financial security and peace of mind. Little things can be important when accidents occur and can make a big difference in your financial outlook afterward. Make sure you set the stage for a good outcome if you are ever involved in an accident. Comparing Prices and Coverage While it may seem like a simple concept to compare prices from one insurance policy to the next, it is not always so cut and dried. Not all policies are created equal. You’ll need to break down the policy into bite-sized pieces to see what is covered and why the prices are so different. Make sure you take the time to know what the policy offers for the price before choosing the lowest priced policy. Those deeply discounted policies often fail to offer the type of protection and coverage you are expecting for the money. Auto insurance is one of the most important types of insurance coverages to purchase today. It is doubly important to get the coverage and coverage amounts on these policies right to provide invaluable protection. Working with an independent insurance agency can help you do that and more – so that you never need to worry about having the right protection again. Just remember to choose a reputable agency with a history of doing the right things for its policyholders.

Finding the Right Auto Insurance

View Resource Finding the Right Auto Insurance
Owning a home. It is the American dream, right? However, once you get started on your path to home ownership, you will find that there is much work in the process that goes beyond choosing a home and acquiring the loan to pay for it. Closing on your home requires quite a few thoughtful steps. This guide will help walk you through them. CFPB “Know Before You Owe” CFPB stands for the Consumer Financial Protection Bureau. It was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and offers protection for consumers when it comes to loans, including mortgage loans, and credit cards. In October of 2015, the CFPB created the “Know Before You Owe” initiative. The purpose of this initiative is enhance the ability of consumers to make informed decisions about their home loan choice. The CFPB offers several resources and tools on Owning a Home at consumerfinance.gov that can help you avoid unpleasant surprises at the closing table or that could jeopardize your ability down the road to stay in your home. Items to Shop Around For Every little bit you can save at the closing table is money you do not have to come up with up front to purchase your home and is money you can later invest in things to make your new house feel more like your home. Understanding Your Loan Estimate One of the key documents that the “Know Before You Owe” program requires is the Loan Estimate. The Loan Estimate shows all of the details of the loan program you have selected to finance your home purchase. This document provides, in simple and easy to understand terms: The “Know Before You Owe” program makes it illegal for lenders to initially offer you a loan under one set of terms and then to switch out that loan offer with much higher costs in a revised offer. However, there may be legitimate reasons for a Loan Estimate to change. These include changes to the loan programs offered by the lender, changes in the down payment amount you have available, changes to the home value that become apparent after an appraisal, changes in your credit score, or the inability of the lender to verify income information. If your Loan Estimate changes, make sure the lender explains why the changes were made and you know how those changes impact your ability to afford the home over the long term. Right Before Your Closing Date Your lender is legally required to provide you with a Closing Disclosure three days before you are scheduled to close on your home. The Closing Disclosure provides the same information included in your Loan Estimate, including Loan Terms, Projected Payments, and Costs at Closing. Additionally, it will provide a more detailed breakdown of the following: You should contact your closing agent one week before closing to ask who will be sending the document and how you’ll be receiving it. It may come via postal services, email, or you may be required to download it from their website. Compare the Closing Disclosure to the most recent Loan Estimate and make sure it matches your Closing Disclosure. Also, carefully review your Closing Disclosure during this time to make sure you understand it fully, allowing yourself time to ask any questions you may have. Some fees will change by small increments, which is normal, though some fees may change substantially. If you are surprised by some of the changes, don’t hesitate to question them. If anything is different from what you were expecting, especially regarding your loan, make sure to ask questions and demand answers before you close. Once you have gone through all the steps above, asked and received answers to all your questions, and have the funds in hand, it is time to close on your new home. Congratulations! It is a big step and one you are sure to enjoy for many years to come.

Closing on a Home

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When it comes to your money, one of the most important decisions you will make is how you go about saving for retirement. It can also be one of the trickiest decisions too. The good news is, you can stay on track with your saving by following some simple retirement milestones. Savings Goals by Age Most people save a part of their income (typically 15 percent ) for their retirement. This is fine if you are young and have many years left for saving. But, what happens when you are trying to catch up on your retirement savings or if you began your retirement savings very early? Well, you can see if you are on track by checking out age-based savings milestones. Your retirement savings goal is broken down by your present salary amount that you needed to have already saved up at certain ages. Savings Milestones Guidelines by Age Below is a retirement savings guidelines to help you set yourself up with a secure retirement. Remember, these are guidelines, and your retirement savings may be more or less than what the table advises. Keep in mind, that you have the opportunity to “catch up” if you see you are falling far behind the recommended milestones. Your specific circumstances will vary, of course. Power of Compounding Compound interest works the best over longer periods of time, particularly in growth investments like stock mutual funds within a 401K or an IRA account. The earlier you invest, the more time compounding has to make your money work for you by generating interest, requiring you to save less of your earned income at a later date. If you have a tax-deferred account, your investment earnings aren’t taxed until you withdraw them, typically at retirement. In the earlier decades, your savings will double slowly at first. In later years, your money will then begin to grow faster since you will now be doubling higher dollar amounts after you have been investing for a while. Compounding Works like Magic For effective retirement saving, the key is to begin early to allow your money over time to earn money by itself. For instance, if you invest your dollars wisely, it will earn a potential seven percent. At seven percent, within 10 years, a single dollar will double. In an additional 10 years the $2 will now double to $4. Ten years more and you are up to $8 and so forth. Milestones before Retirement Starting your 401K This happens when you start your first job. If you have a 401K plan option in your workplace, take it. This will allow you to start getting that tax-free compound interest working for you. Age 50 and Beyond If you have slacked over the years in putting money away in your 401K plan, this is the time where you can play catch-up to make up for the time you lost. You can increase how much you contribute to your retirement plan and even add an extra $5,500 to your contribution limit if you are over 50 years old. Age 59 1/2 and Beyond It is at this point that you can begin withdrawing from your 401K retirement plan penalty-free. If you are younger than 59 1/2, you will pay a 10 percent penalty for early withdrawal. You will also have to pay income tax on the money you take out. Age 70 and Beyond At this age, the government requires you to start taking your IRA and Social Security disbursements. If you have been diligent about adding money into your 401K plan and have not made any withdrawals, this could be where you can finally bank on your saved money and have a great retirement. You can withdraw your money from your 401K plan and begin living the life you have always dreamed about. If you follow these guidelines, you should have around 8 to 10 times your ending salary by retirement age. You can then replace 85 percent of your pre-retirement income, which is far better than trying to save up a million dollars.

Important Retirement Savings Milestones

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The minimum wage could be as little as $7.25 an hour, depending on where you live in the United States. You could be struggling to live off your minimum wage job and pay for your meals and living expenses each month. Although some have pushed to raise the minimum wage, amd succeeded in some areas of the country, it’s still a challenge that requires lifestyle and living adjustments just to be able to afford everyday expenses. Minimum Wage Budget Figures Below are some estimates of what your monthly income and expenses could look like while living off a minimum wage job. These estimates include: Using these estimates, you can see that you are up to over $900 a month for rent, utilities and health insurance alone, leaving around $225 a month for the rest of your essentials. Budgeting Tips You can help to stretch your income by applying some sound budgeting tips. Cut Down your Housing Costs If you are paying more rent than you can really afford at the moment, you might want to consider downsizing to a less expensive place or part of town. Conduct research and find apartments that are more affordable. Saving a couple hundred dollars each month can make a meaningful impact on your budget, allowing you to use your money for other expenses or necessities. Reduce Commitments Do you have debts you are repaying at the moment? Give your debtors a call and explain your situation to them. They may be able to reduce and consolidate your debt into one lower monthly payment. Check into different forms of child care. For instance, you can ask family or friends to watch them while you are at work instead of putting them into a daycare. Reduce your Possessions Do you really need an expensive ice-making refrigerator or new car? These things can really take a huge chunk out of your budget. In addition, the more unnecessary appliances you have like a dishwasher, microwave or even a dryer (hang your clothes) will eat up your electricity bill. Taking Advantage of Available Programs Use Food Stamps Look to see if you’re eligible for the Supplemental Nutrition Assistance Program (SNAP) to get food stamps. This is a US government run program that gives you money (stamps or electronic debit card) to purchase food. You can save yourself hundreds of dollars each month in food alone. Eligibility is based on the benefits your state provides and the income you make. Apply for Medicaid Coverage Your budget can be significantly burdened by healthcare costs and if you live in the US and are a minimum wage job worker with a low income, you might be eligible for Medicaid. It can lower your healthcare cost and even cover it completely in many cases. Lifting yourself up Create a Budget for Yourself and Stick to it Determine what your basic monthly expenses are and don’t spend more than what you don’t have. Basic expenses include: Most importantly, you should continuously be looking for opportunities to advance through promotions with your present employer, or by finding a new one. Going the extra mile on assigned tasks or roles can get you noticed and give you an advantage when higher paying opportunities arise. You should also look to spend whatever spare time you have on enhancing your skills via local education or training that can help you take that next step up the career ladder. Living on a minimum wage budget is a challenge for almost everyone. Forget the credit cards and save whatever money you have left after your bills are paid. Make the commitment to succeed. You can get by on a minimum wage job if you make a plan for yourself and take steps in the right direction to grow from there.

Getting By on a Minimum Wage Job

View Resource Getting By on a Minimum Wage Job