create a budget

Apache is functioning normally

Hello! Today, I have a great debt payoff story from a reader, Ashlee Binderim. This is how she paid off $162,000 in debt. Enjoy! When you get married, you’re supposed to ride off into the sunset and live happily ever after, right? Well, not for us. That “honeymoon phase” came to a screeching halt when…

Hello! Today, I have a great debt payoff story from a reader, Ashlee Binderim. This is how she paid off $162,000 in debt. Enjoy!

When you get married, you’re supposed to ride off into the sunset and live happily ever after, right?

Well, not for us. That “honeymoon phase” came to a screeching halt when we quickly realized our financial situation wasn’t ideal (to say the least).

Let me set the stage for you – we were in our early twenties, still going to college full-time, and working part-time jobs when we said “I do”.

We were barely making ends meet and money was really tight.

We knew that we were walking into this marriage with debt, but we didn’t actually know how that would impact our financial future. 

My husband was in that sweet spot where his parents made too little money to send him to college but too much money to qualify for financial aid. This resulted in him taking out $150,000 in student loans.

During his time in college his student loans accrued $15,000 in interest. Bringing his grand total to $175,000 in student loans.

I put myself through college and was able to qualify for financial aid and I also received some scholarships but it didn’t cover everything. I took out $11,000 in private loans and $20,000 in student loans. I worked part-time and was able to pay back about $10,000 while in college, leaving $21,000 that I brought into our marriage.

Finally, we decided to purchase a brand new car at $29,000. 

Bringing the grand total to: $225,000 in debt.

We were barely old enough to legally drink and had $225,000 in debt. 

With an income of less than $3,100 a month starting out, our debt felt like we were chipping away at Mount Everest with a pickaxe. 

These loans were holding us back in just about every area of life. We were already paying a mortgage payment for a student loan, so we knew that we couldn’t afford to purchase a house. 

We were trying to pay off debt as quickly as possible which meant investing took a backseat. 

We had to say no to just about everything that we wanted to do or buy. Especially during the first year of our marriage because we could barely afford to eat.

So, how did we pay off $162,000 in debt in 6 years? I’m going to walk you through year-by-year our income and approximately how much we put towards debt each year. 

Related content:

How we paid off $162,000 in debt in 6 years

2016 –  I made around $25,000 that year and my husband made $35,000. We brought in $3,100 a month – collectively. With rent on a small one bedroom apartment at $1,050 which is the cheapest place that we could find. That left us with $2,050 for the rest of our basic necessities. My husband and I were still in college so we didn’t have a student loan payment yet. We knew that we wanted to pay off debt as quickly as possible so we put all of our extra income (which wasn’t much) towards debt. That first year, we were able to pay off $13,800 in student loans. 

2017 – I graduated college and got a full-time job as an Instructional Designer where I made $51,000 a year. My husband worked part-time and attended college full-time. He made about $35,000 a year. Which brought our collective income to $86,000 a year or $5,100 take home a month. 

In 2017, we also moved from our apartment to a larger apartment. Well, apartment may not be the right word, it was the converted hayloft of a barn. We had an agreement with our landlord that we would do things around the property, like yard work, maintenance, and other miscellaneous things. This agreement meant that we only paid $760 for rent and utilities. 

We had to pause our financial goals for a couple months during 2017 because my husband was experiencing loss of vision which resulted in dozens of doctors appointments and specialists to diagnose a rare medical condition. Luckily, we had insurance with a low deductible so we only had to pay a very small amount out of pocket and any travel expenses.

That year we put $22,100 towards paying off debt and saving to pay off my husband’s student loans. 

2018 –  My husband graduated college and was hired full-time as a Project Manager for a construction company with a starting salary of $71,000. With my $51,000, we made a combined income of $122,000. After medical insurance, taxes, and retirement our monthly take home was around $7,500.

We refinanced my husband’s student loans from his parents name to his, because that was the verbal agreement that they had upon him entering college. 

Quick note from Michelle: Companies, such as Credible, help you to refinance your student loans. With refinancing, the average person can save thousands of dollars on their loan, and that’s incredible! You can save a lot of money with student loan refinancing, such as with Credible, especially if you have high interest federal or private loans.

The best interest rate we could get was 6.5% on $175,000 – which meant that over half of the monthly payment of $1,315 went towards interest. According to our student loan provider, we should’ve been in debt for 15 years but knew that we needed to get out of debt as quickly as possible. After doing the math, we were looking at paying over $135,000 in interest alone over the lifetime of the loans.This would’ve brought the total amount of the loan to $310,000 – which as you can imagine, we weren’t ok with. 

So, in 2019 we really buckled down and linked arms to make major changes to our finances and put everything we had towards paying off debt which also meant making some hard decisions.

We put $24,229 extra towards debt in 2018 on top of our monthly payments of $1,315 bringing the total towards debt to $40,009 (but remember, only half of our payment was actually going towards the principal). 

2019 – This year we got really serious about paying off debt. We were making the most money that we had ever made and we were honestly really tired of saying no to everything. We knew that it was going to take some hard decisions and we needed to refocus our priorities but we knew that it was going to be worth it in the end.

My husband and I both received a raise and were now making a collective $139,000 a year. Monthly take home was around $7,900. 

We cut back much of our spending in many areas including insurances, monthly streaming services, and we made one of the hardest financial decisions – we sold our car back to the dealership. 

It was a really humbling experience. The car salesman was pretty surprised that we wanted to sell our brand new car back but in just a couple of hours we paid off $21,393 and walked out of the dealership with a paid for car that ran just fine for $1,500. It didn’t have all the fancy bells and whistles but it drove and meant we were able to achieve our financial goals faster. I still drive this car around today and love it!

Again, we experienced another financial setback due to health issues. I received a diagnosis that required several specialized treatments that our insurance didn’t cover. Despite this setback, we were still able to knock down our debt. 

We put $57,820 in debt in 2019 alone (a big portion of that was the car that we sold back to the dealership).

Through our debt journey I learned that I really have a passion for helping other people reach their financial goals and decided to pursue a financial coaching certificate and started to build a financial coaching business. 

Because we were paying off debt left and right our credit score dramatically increased and we decided to refinance our student loans for a lower interest rate of 4% but kept our monthly payments the same.

Refinancing for an interest rate just 2% smaller drastically changed how much money was going towards the principle. We went from paying about $600 a month in interest to $250 from a 20 minute phone call with our student loan provider. 

2020 – I quit my job in February to pursue working full-time on my financial coaching business – our income took a huge hit as world events hit the U.S. in March of 2020 and I focused on helping people for free during this tumultuous time. Although we didn’t pay off as much debt as we wanted to, I knew I was helping people gain some semblance of security during an unprecedented time and that was worth our financial goals taking a small backseat.

By November we were under $100,000 in debt and for the first time our debt finally felt more tangible and like we were making serious headway in becoming debt free! 

That year we brought in $106,000 and our monthly take home was around $6,000. We received several stimulus checks that we also put towards debt which really helped and my husband also received a company car which cut down on our monthly insurance payments and gas budget almost completely. 

In 2020, we put about $33,488 towards debt during such an unprecedented time which we were very grateful for making any progress towards our goals because we knew that wasn’t the case for a lot of families out there.

2021 –  As of today, our income is around $112,000 with a monthly take home pay of $6,400. Now that we’re in the home stretch – we’re doing everything that  we can to pay off the remainder of debt. This year we’ve sold a travel trailer, small fishing boat, extra vehicle, and many other miscellaneous things around the house. I also started a fine art painting business to sell some paintings that I’ve done over the years.

We just refinanced our student loan again to get an all time low interest rate of 2.25% which will save us about $1,500 a year that will go directly to the principal instead of interest! 

Literally anything and everything we can do to pay off this debt – we’re doing it!

By the end of this year, we’re looking at approximately $42,000 in debt and we have a goal of becoming debt free by September 2022! 

As you can see, there were a lot of things that came up during paying off debt. But I wanted to give you a really clear and honest picture of what our payoff story looked like!

I feel like there’s a lot of stories out there that don’t show you the hard parts of paying off debt – which for us, there were several moments where we felt like we were stalled out and not gaining any forward momentum.

But, each and every month that we put money towards debt we feel just lighter, more secure in our future, and that much closer to hitting our goals. Despite the setbacks, it’s still worth it. 

Let’s dive into the three specific things that we did to pay off $162,000 in debt in 6 years and not lose sight of our goals. 

1. Get on the same page 

This is one of the most important steps that you can take if you’re married or in a committed relationship.

If you’re not on the same page with finances, you’re going to pull in opposite directions and make little progress.

But, when you both agree on working together and in the same direction, you’ll gain momentum faster and also hold each other accountable to achieving your financial goals. 

In order to get on the same page, I recommend that you sit down at the beginning of the month to create a budget and have that budget readily available to look at.

Hang it on the fridge if you need to.

This way it’s a constant reminder of what you’re working towards and will keep you moving forward together with momentum.

2. Set priorities 

You can’t accomplish everything in a year, so set your top 3 financial priorities that you want to focus on in that given year and only focus on those three things. 

For example, let’s say you make $65,000 a year and your priorities are paying off $15,000 in debt, taking a $4,000 vacation, and saving $3,000 in an emergency fund. 

You can’t, however, max out your retirement, Roth IRA, take 3 luxurious vacations, save $100,000 for a down payment on a house, and do everything else that I mentioned above.

It’s just not feasible. 

Not only that, but you would be setting yourself up for failure because your goals are not realistic and probably would feel very overwhelming and limit you from taking any steps forward.

By focusing on our top three priorities, it helped us to say no to things that didn’t fit into our priorities and kept us on track to hitting our financial goals.

3. Still have fun

As a financial coach, I’ve done a ton of research on human psychology around money. I’ve learned that your brain’s sole job is to keep you safe – to your brain, that means the same.

Because anything different from what you’re doing is scary, uncomfortable, and maybe even a little painful and your brain will do anything to make sure you don’t feel those feelings to keep you safe.

So, let’s say that you have a goal to pay off $50,000 in the next 2 years.

In order to do that, you will likely have to do a couple of things: ask for a raise, cut your spending back, sell things around the house you don’t use anymore, or pick up a side job.

All of these things are outside of your normal routine which means the brain goes on high alert and you might feel stressed out.

When you feel stress over something, your brain will try and keep you from feeling those uncomfortable emotions so it’ll have you focus on something else instead.

When you feel stress, your brain will get you to do something else that brings you happiness or at least procrastinating from the feelings that you’re feeling – like scrolling on social media, binging Netflix, eating that pint of ice cream, etc. Then you feel stress that you didn’t make any forward progress and you rinse and repeat.

Achieving your financial goals doesn’t have to be so difficult when you help your brain understand the benefits to achieving that goal.

To circumnavigate human psychology, it’s important that you still have fun while you’re going after your financial goals. I’m not talking about taking a luxurious vacation every month.

But I am saying that you need to set aside a little money to have fun! This will actually help your brain adapt to new habits and help you achieve that financial goal faster because you’re not fighting against your brain.

It also helps to know that it’s going to be a marathon, not a sprint.

Financial goals, especially large ones, are going to take some time. Unless you win the lotto (that you likely don’t even play), it’s going to take an extended amount of time to accomplish your goals and that’s a good thing!

Long-term financial goals can teach us the importance of patience, delayed gratification, and finding joy in the little things.

This can be translated to everyday life. You learn to say no to the little things because you’re so focused on the long term goal.

Because my husband and I have paid off over $162,000 in debt we know that we can tackle any financial goal that we set for ourselves and we’re actually stronger and a better team because of it!

There are several areas where we saved money that might help you as well – 

  1. Car insurance – We were able to lower car insurance by shopping around regularly. If we felt like our car insurance was too expensive or when they raised the prices after a year, we would shop around for a better quote. On average we save $700 a year by shopping around.
  2. Phone bill – We switched from Verizon to PureTalk to cut our phone bill by $120 a month! Now, I only pay $31 a month for the same service. 
  3. Sold stuff – We sold many many things over these 6 years. We sold a total of 4 cars, a travel trailer, small fishing boat, furniture, vegetables from our garden, old artwork from college, and many other things that I’m sure I’m forgetting! 
  4. Get creative with housing – The housing market is insane right now so I know how hard it can be to find affordable housing. When you think outside the box and find creative solutions you’ll be surprised with how much money you can actually save. You can live in a mother-in-law suite, buy a trailer and rent someone’s backyard to park it on, live in a van, or do a work-trade for discounted housing like we did. 
  5. Refinance student loans – A fun fact about student loans is that you can refinance them as much as you want to. We refinanced our student loans 3 times to get a better interest rate and it’s usually pretty painless.

When we first refinanced our student loans the best interest rate that we could get was 6.5% meaning that about $600 a month was only going towards interest and not even touching the principle. When we refinanced our student loan again a year or so later we were able to save about $350 a month!

As you can see our journey in paying off $162,000 in debt wasn’t a clear path.

It had bumps in the road, things came up that we couldn’t foresee and that’s okay. That’s life! But, you shouldn’t let those bumps completely halt your progress.

We never exceeded $140,000 a year in our income and were still able to pay off our debt in half the time. I’m not saying that it’s easy, but it’s possible. We got on the same page, focused on our main priorities and still had fun in the process.

We’ve traveled to Texas, Montana, Oregon, Utah, Colorado, Nevada, Washington, and California while paying off debt. 

I hope that reading through our journey to paying off $162,000 in debt has been inspiring and given you hope. 

If you want to watch our journey to become financially free by September 2022 and pay off $63,000 in debt, you can follow us over on Instagram where we’ll be giving regular updates! 

Author bio: Ashlee and her husband started their marriage with over $225,000 in debt. They were both working part time, going to college full time, and barely making ends meet. After years of struggling they finally figured out how to link arms and tackle financial goals together. Current debt payoff: $162,000 to date! Now, she’s a certified financial coach and on a mission to help other couples reach their goals by getting on the same page with their finances so they can set up a secure future. You can find her on her website Beyond Millions as well as on Instagram.

Do you have debt? Are you trying to pay it off?

Source: makingsenseofcents.com

Apache is functioning normally

My friend Gillian called the other day — she’s been having money trouble and was looking for help. “I’m not really a financial advisor,” I told her. “I write about money, and I try to help people at my web site, but I’m not qualified to coach you one-on-one.” Still, she’s a friend, so I resolved to at least give her some advice. I asked her to explain the situation.

“Tom and I are working all the time, but we’re always broke. He just wrecked his car, but we don’t have money to get it repaired. We’ll have to use the credit cards again. We don’t have any other choice. There’s never anything left at the end of the month,” she said. “I need some help budgeting so that we don’t keep having this problem.”

“Well, let’s see what we can do. I guess the best place to start is with your monthly income and your monthly expenses. How much do you and Tom bring home each month?” I asked.

“About $4,000 after taxes.” That was about what I expected.

“How much do you spend?” I asked.

“All of it,” she said, laughing. I expected that, too.

“How much do you have saved?” I asked. “Do you have any savings at all?”

“No, we don’t,” she said. “There’s never been anything left over to save.”

They don’t have anything left to save because they’re very good at spending money. Gillian and Tom live well:

  • They have a nice custom-built home.
  • Each of them drives a late model SUV.
  • They have no kids.
  • They enjoy expensive hobbies.

I have friends who make half what Gillian and Tom do, but have built a nest egg because they maintain a frugal lifestyle. It should be easy for these two to reduce their spending to create a budget surplus. “Well, let’s see if we can find a way to free up some cash,” I said. “Let’s list your fixed monthly expenses.”

Gillian listed their bills one-by-one. I jotted them down, making note of anything that seemed particularly extravagant. “Okay, let’s see what we have,” I said. “You’re paying a housekeeper $50 a week. If you were to clean the house yourself, you’d save $200 a month.”

“But…” she began.

“I think you’d be surprised at how much difference $200 a month can make,” I said. “I know from experience that even a $50 positive cash flow can make the difference between feeling broke and feeling flush. A $200 difference is huge.”

“Yeah,” said Gillian, “but I don’t want to clean the house. It’s too much work.” I was puzzled. To me, this was a quick and obvious way to free up money. If I were in her shoes, the housekeeper would be the first thing to go — it would be worth some extra work on my part. I tried a different approach.

“You each have a cell phone,” I said. “Do you both need one?”

“Yes,” said Gillian. “I don’t know what I’d do without one. And Tom needs one for work. I need to be able to reach him.”

Her reasoning seemed thin, but I pressed on. “Well, what about the cable bill,” I said. “You’re paying $60 a month for that. That’s an easy one. What about cutting back to basic cable?”

“Oh, we can’t get rid of cable,” Gillian said. “We watch TV all the time.” I was silent. “Are you there?” she asked.

“I’m here,” I said. “I’m just trying to figure out what to do. In order for you to turn things around, you’re going to have to make some sacrifices.”

“Yeah,” she said, “but we can’t cut cable. Tom would have a fit.”

“Gillian,” I said, “this is a little frustrating. I thought you wanted to get out of your money situation.”

“I do,” she said, “but so far you’re just suggesting things for me to get rid of. Isn’t there something else we can do? Can’t we use a budget to get more money?”

“That’s what I’m talking about,” I said. “Cutting things like these is making a budget. I know it seems terrible to have to give things up, but you need to make sacrifices — at least in the short term — in order to get ahead. You don’t have any savings. Any disaster means you’re putting money on your credit card. You need to build up some savings. You need to pay off your existing debt. In order to do this, you need to spend less than you earn. Right now you’re spending exactly what you earn, and you’ll never get ahead that way. I know, because for years that’s how I operated. You’re going to have to tighten the belt, Gillian. It’s the only way.”

I paused, and then said, “You need to decide what’s important.”

It was obvious I wasn’t going to be able to help her. I hadn’t even explored the Big Ideas, like moving down to a smaller home or trading one of their SUVs for a used car. I had started with the medium-sized stuff — the obvious chaff. But Gillian wasn’t interested in making changes if it meant altering her lifestyle. I changed the subject.

We talked about summer. Gillian asked how our garden was. I described the knee-high corn, the ripe raspberries, and Kris’ monster tomatoes. “I’m jealous,” she said. “I don’t have time to garden. I did get a chance to go to the nursery last week, though. I was able to pick up five shrubs on sale for about $10 each.”

The shrubs were the final straw. There was nothing I could do to help her because she wasn’t ready to be helped. She wasn’t ready to listen. She said she wanted to change, but she didn’t really. She was looking for a magic pill, something that would make life easier without any effort on her part. That’s not how it works. Eventually Gillian will reach a place so bad that she’ll begin to see the need to take responsibility for improving her situation, but she’s not there yet.

Our conversation reminded me of an episode of This American Life I heard recently. The show profiled debt guru Dave Ramsey, and at one point the reporter played a segment in which Dave experienced similar frustration:

Tina calls Dave because she’s upside-down on her car loan. She recently wrecked the car, but rather than use the money to repair the vehicle, she spent it. “Ooooo-kay,” says Dave, obviously flustered. “I’m afraid what you’re looking at is probably a really good part-time job, about six or eight months of 80 hour weeks.”

“Eighty hour weeks?” says Tina. “That’s too much work.”

“I can’t help you, Tina,” says Dave.

And I can’t help you, Gillian.

This story is based on actual events. Names and situations have been changed to protect Gillian’s identity.

Source: getrichslowly.org

Apache is functioning normally

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.

Can you pay a loan with a credit card? Yes, paying a loan with a credit card is sometimes possible. Yet, whether or not you can do so depends on factors such as the lender’s policies or the type of loan you want to pay off.

Good credit can open doors, but bad credit can keep them shut. In fact, research shows one in 10 Americans were denied work because of poor credit history! Good credit is important because it tells lenders you’re not a risk and that you pay loans on time. A good score can help you get approved for mortgages, financing, loans, and credit cards. Bad credit leads to more fees, higher interest rates, and rejected applications.

Aside from securing loans, your credit can impact your ability to secure housing and even employment. Understanding your credit score can help you make more informed decisions. We’ll explore how credit works, why it’s important, and how to maintain a good credit score.

What Is Credit?

We often hear people saythat it’s important to build credit. But what is credit? When you pay for something “on credit,”you’re actually borrowing money to make the purchase, which you pay back later. But when people say “your credit,” they’re usually talking about a credit score.

Your credit score is a three-digit number calculated by FICO®, VantageScore, or other scoring models. Your score indicates how well you manage credit. Institutions and agencies use this score to determine risk, such as how likely you are to repay loans on time. A credit score of 670 or higher is considered good by most standards.

Why Is Credit Important?

Good credit is important because it helps you secure loans, mortgages, rentals, and other important financial goals. Financial institutions perform a credit check before approving applications, and use your credit history to determine available options, associated fees, and interest rates.

Credit can impact our daily lives in many ways. Potential lenders, landlords, and employers might reject your application if you have bad credit. But good credit can help you get approved for loans and save money.

There are many benefits to a good credit score. You’ll need a strong credit score for things like:

  1. Loan applications: Lenders assess your credit to determine how likely you are to repay a loan. People with poor credit may face higher interest rates, smaller loans, or rejection.
  2. Credit card applications: Banks and credit card companies need to look at your credit report before you can get a credit card. With good credit, you can get lower interest rates and higher limits.
  3. Mortgage applications: Your credit score will determine monthly payments and interest rates. Good credit is essential if you can’t afford a large down payment.
  4. Rental applications: Landlords can run a credit check or ask you to provide one. Credit score won’t impact the rental costs, but a landlord can reject an application due to poor credit.
  5. Job applications: Prospective employers can ask for credit checks, especially if you are dealing with sensitive information. You may need a credit check for jobs in accounting, sales, the military, and other industries.
  6. Insurance applications: Depending on where you live, you might need a credit check for insurance. Not all states allow insurance companies to access your credit information.
  7. Vehicle rentals: You might need a credit check for vehicle rentals if you don’t pay with a credit card. And depending on your state and the company, your credit may impact your rental options.
  8. Credit card benefits: Good credit can help you secure credit cards with benefits, including airline miles, travel credits, cashback rewards, and other perks.
  9. Lower interest rates: Poor credit leads to higher interest rates, making borrowing money expensive. The better your credit, the more money you will save.
  10. Better loan terms: Good credit gives you more options and freedom for repayment. Bad credit can limit your options to short-term loans with higher monthly payments.

Credit is always important, no matter how high or low your score. At the end of the day, everybody needs good credit to achieve their financial goals. That’s why it’s important to understand what can impact your credit score.

What Can Impact a Credit Score?

It might be surprising, but personal savings and stocks don’t impact your credit score. Credit score calculations look at your detailed credit history, and anything that impacts these calculations will impact your score.

The five main factors that impact your credit score are:

  1. Payment history: when you make payments
  2. Credit utilization: the amount of credit you use compared to your limit
  3. Credit age: how long you’ve had credit and how old your accounts are
  4. Credit mix: the types of credit you hold
  5. Credit inquiries: how often your credit is reviewed

While this might look simple, many surprising scenarios can affect your credit. Unpaid parking tickets in collections can impact your payment history, for example. And closing a credit card can lower your credit utilization. You can review your free annual credit reports to watch for drops in your credit and work toward preventing a bad score.

What Happens with a Bad Credit Score?

Keep in mind that you can improve a bad credit score over time. But until you do, there can be negative consequences. Most credit scores range from 300-850, depending on the scoring model. A bad credit score generally ranges from 300-600.

Bad credit scores can lead to:

  • Rejected applications
  • Higher fees and interest rates
  • Lost work opportunities
  • Difficulty renting a vehicle
  • Required deposits for utilities
  • Difficulty securing a student loan
  • Expensive insurance rates
  • Difficulty opening bank accounts

Bad credit doesn’t shut every door, but it can make life more difficult and expensive. It’s important to check your credit score before buying a home, applying for student loans, and other important life events. This will give you time to understand your situation and make a plan to build and improve your credit.

How Do You Build and Improve Credit?

Now that you understand what credit is and why it’s important, you can plan for success. There are many ways to build and improve your credit without overextending yourself. No matter your score today, you can work toward a bright future with good credit.

  1. Understand how credit works: Learn how your credit score works and what can impact it.
  2. Set goals for yourself: Use this knowledge to set goals for minimizing debts, increasing utilization, and more.
  3. Address your debts: Assess your debts and plan to pay them off.
  4. Monitor your credit score: Look for suspicious activity on your credit report and be aware of the potential impact on your score.
  5. Clean your credit report: Dispute errors on your credit report.
  6. Get a secured credit card: Use it regularly and pay your bills on time.
  7. Become an authorized credit card user: Build credit in association with somebody you trust.
  8. Apply for a credit builder loan: Improve your score if you have poor or no credit.
  9. Create a budget: Manage your finances to ensure consistent repayments.

Achieving a good credit score isn’t the end of your credit journey—once you have a good credit score, you will need to maintain it. Stay diligent and follow best practices to keep a good credit score.

How Do You Keep a Good Credit Score?

Don’t take good credit for granted. To keep a good credit score, you need to stay organized and sensible about your credit usage. This means understanding your responsibilities and following best practices for credit management.

Follow these tips for keeping a good credit score:

  1. Stick to your budget: Committing to a budget can help you make payments on time, which is key to achieving a good credit score.
  2. Avoid carrying debt: Credit utilization is the second most important factor that makes up your credit score. Unpaid debts accumulate interest, which means less money for you.
  3. Pay bills and parking tickets on time: It’s important to pay all utility bills, phone bills, and parking tickets on time. Not paying bills can lead to collections and this impacts your credit score.
  4. Don’t let debts go to collections: You should avoid collections at all costs. When unpaid debts go to collections, it can cause significant damage to your credit score.
  5. Monitor your credit score and reports: When it comes to your credit, ignorance is not bliss. It’s important to watch your credit report for changes, errors, and suspicious activity.
  6. Protect yourself from identity theft: A large drop in your credit score can be a sign of identity theft. Stay aware, protect your information, and consider a credit card with security features.
  7. Use your credit card consistently: Using your credit card will help you build credit—just don’t spend more than you’re able to pay back each month.
  8. Don’t close old credit cards: Closing a credit card lowers your credit mix, so it’s a good idea to leave old credit cards open, even if you don’t use them. Keep an eye on them for suspicious activity.
  9. Only authorize people you trust: Authorized users on your accounts can impact your credit score. Only authorize accountable and trustworthy people.
  10. Avoid retail credit cards: While retail credit cards can be easy to get, they can come with expensive rates and fees. And not all retail credit cards report payments, making them less ideal for building credit.
  11. Don’t treat credit like extra cash: Building credit takes organization and discipline. You should always stick to a budget and avoid spending beyond your means.

Your credit score is like a financial reflection of you, so take pride in your credit and make an effort to keep a good score. Knowledge is power—the more you understand credit, the more confident you’ll feel when preparing for large purchases and other financial ventures.

Whether you have good or bad credit, it’s all about setting goals and staying organized. Remember, your current score is not set in stone. You can always improve credit management and make a difference in your future.

If you’re worried about bad credit or just want to see where you stand, get your free credit score today.

Source: credit.com

Apache is functioning normally

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.

Are you struggling with debt and feeling overwhelmed? You might also be tired of hearing the same old tips that don’t help at all, like “Don’t buy coffee out” or “Just stop spending money.” Don’t worry — you’re not alone.

Many hardworking individuals like you face similar challenges. The good news is that there are effective strategies for paying off debt faster, even on a tight budget.

This guide will walk you through 10 practical and actionable steps that can significantly impact your journey to financial autonomy. Are you ready to better control your finances? Here is how to pay off debt fast with low income.

In This Piece:

  1. Take Inventory of Your Debts
  2. Create a Realistic Budget
  3. Avoid Any New Debts
  4. Try the Debt Avalanche Method
  5. Consider the Debt Snowball Method
  6. Increase Your Income
  7. Negotiate a Better Rate
  8. Increase Your Credit Score
  9. Consider Debt Relief or Consolidation
  10. Stay Consistent

Step 1: Take Inventory of Your Debts

Before tackling your debts, taking inventory of them is a crucial first step to clearly understanding what you owe, allowing you to understand the full extent of your financial obligations, and developing a comprehensive and more effective action plan.

Start by gathering all your financial statements and creating a comprehensive list of your debts. This includes credit card balances, student loans, medical bills, and other outstanding obligations.

You gain a complete picture of your economic landscape by documenting each debt, including the creditor, outstanding balance, interest rate, and minimum monthly payment. This knowledge empowers you to make informed decisions and prioritize debt repayment strategies.

Step 2: Create a Realistic Budget

A budget can help track your income and expenses, clearly showing where your money goes, but if you want a successful budget, it needs to be realistic.

Creating a realistic budget is essential to pay off debt fast with a low income. You can start by identifying areas to cut back on unnecessary expenses, like reducing discretionary spending, such as eating out. Look for creative ways to save money, such as using coupons, shopping sales, or negotiating lower bills. Though this is good advice, it might not be enough or as simple as it sounds.

Here are more steps and tips to help you create a budget that could work for you:

  1. Track income and expenses: Start by calculating your total monthly income, including your salary, freelance earnings, or any other sources of income. Next, track your expenses for a month to understand where your money is going. Categorize your expenses into fixed costs (rent, utilities, etc.) and variable costs (groceries, entertainment, etc.). 
  2. Set attainable goals: Determine how much you can allocate toward monthly debt payments while covering your essential expenses. It’s crucial to set realistic goals that consider your income. Remember, even small monthly contributions can make a significant difference over time.
  3. Prioritize debt repayment: Allocate a specific portion of your budget to debt repayment. Consider prioritizing your debts using the debt avalanche or snowball methods mentioned earlier. By focusing on one debt at a time while making minimum payments on the others, you can make steady progress and gain a sense of accomplishment.
  4. Monitor and adjust: Regularly review your budget and track your progress. Adjust as needed to stay on track and meet your financial goals. Be flexible and willing to adapt your budget as your circumstances change.

Creating a realistic budget requires discipline and commitment, and it’s crucial to paying off debt. By understanding your income, tracking your expenses, and making intentional choices, you can take control of your financial situation.

Step 3: Avoid Any New Debts

It might sound obvious but avoiding new debts can help greatly. Avoid the temptation to rely on credit cards or take out additional loans. Instead, focus on living within your means and prioritizing your financial goals. Of course, implementing this step is easier said than done.

Here are some recommendations to help you avoid accumulating additional debt:

  • Change your mindset: Understand that taking on new debts will only prolong your journey to becoming debt-free. Embrace living within your means and making conscious choices to avoid unnecessary borrowing will help you pay off your debt faster.
  • Cultivate healthy financial habits: Practice mindful spending, distinguishing between needs and wants, and make conscious choices aligned with your financial goals.
  • Building an emergency fund: This is a crucial step to prevent relying on credit or loans during unexpected expenses or financial setbacks. Start by setting aside a small amount from your monthly income until you have a comfortable cushion to cover unforeseen emergencies.
  • Practice delayed gratification: Avoid impulsive purchases and practice delayed gratification. Before making a nonessential purchase, give yourself a 24-48 hour cooling-off period. This allows you to assess whether the item is a genuine necessity or a momentary desire.
  • Seek alternative solutions: When faced with financial needs, explore alternatives before committing to new debts, like borrowing from friends or family, negotiating payment plans with service providers, or seeking assistance from local community resources or nonprofit organizations that offer financial aid or low-interest loans.

Remember, avoiding new debts requires discipline and commitment. By adopting a proactive approach to managing your finances and being mindful of your spending, you can stay on track toward paying off your existing debts and achieving financial freedom. Stay focused, make intentional choices, and celebrate your progress.

Step 4: Try the Debt Avalanche Method

The debt avalanche method is a powerful strategy for paying off debt efficiently. With this approach, you prioritize the debts based on interest rates. Additionally, this method provides a clear road map for debt repayment, allowing you to stay focused and motivated as you see progress with each debt you eliminate.

Start by arranging your debts in descending order based on their interest rates, with the highest interest debt at the top of the list. This order will determine the repayment priority. Doing this minimizes the interest that accrues over time, saving you money in the long run. Once you pay off the highest interest, move on to the next one and continue the process.

Remember to continue making at least the minimum payments on all your debts to maintain a good credit standing and avoid penalties. By staying committed to this method and directing your extra funds strategically, you’ll make significant strides toward paying off your debts.

Step 5: Consider the Debt Snowball Method

Another effective debt repayment strategy is the Debt Snowball method. It involves listing your debts from smallest to largest balance and focusing on paying off the smallest debt first while making minimum payments on the others. Once you pay off the smallest debt, you apply the money you were putting toward it to the next smallest debt.

Begin by creating a comprehensive list of all your debts, including credit cards, personal loans, student loans, and other outstanding balances. Arrange your debts in ascending order based on their balances, with the debt carrying the lowest balance at the top of the list. This order will determine the repayment priority.

Continue focusing on one debt at a time until you can pay off all your debts. The debt snowball method is advantageous because it focuses on building momentum and providing a sense of accomplishment by creating small wins, motivating you to continue your debt payment journey.

While this method may not prioritize debts based on interest rates, it provides a structured and motivating approach that can be particularly beneficial for individuals seeking emotional and psychological encouragement along their debt repayment journey.

Step 6: Increase Your Income

How to get out of debt when you are broke? Finding ways to increase your income can significantly impact you but can also be challenging. Consider taking up a side hustle or part-time job to generate extra money.

There are numerous opportunities available, such as freelance work, online tutoring, or selling handmade crafts. Dedicating your additional income solely to debt repayment accelerates your progress. It helps you achieve financial goals sooner, and if everything goes well, you’ll only need to do this for a short time.

Here are a few ideas on how to make extra money to pay off debt fast:

  • Explore freelance opportunities in your field of expertise
  • Take on part-time jobs or gig work
  • Monetize your hobbies or skills
  • Consider renting out a spare room or property
  • Participate in online surveys or market research studies
  • See if you qualify for blood and plasma donations, some places pay for this help

Step 7: Negotiate a Better Rate

Lowering the interest rates on your debts can help you save money and pay them off faster. Reach out to your creditors and explore the possibility of negotiating a lower interest rate. Even a slight reduction in interest rates can make a significant difference.

Here’s a detailed explanation of how to negotiate a better rate and why it can be beneficial:

  1. Review your current rates: This includes credit cards, personal loans, and other forms of debt. Take note of the interest rates, promotional offers, and the terms and conditions associated with each debt.
  2. Research and compare: Understand market rates basics and terms for similar financial products. This will provide you with a baseline for negotiation and help you determine if your rates are higher than what is commonly available. Look for competing offers, promotions, or lower interest rates from other lenders or credit card companies.
  3. Prepare your case: Highlight your payment history, creditworthiness, and loyalty as a long-term customer. Compile improved financial stability or credit score evidence since you obtained the debt. The goal is to present a compelling case for why you deserve a better rate.

If negotiating directly with your creditors doesn’t yield the desired results, consider other options like balance transfers or refinancing.

Balance transfers involve moving high-interest debt to a credit card with a lower interest rate, often with an introductory 0% interest period. Refinancing involves replacing an existing loan with a new one with better terms and a lower interest rate. Both options can help reduce the overall interest you’ll pay and accelerate your debt payoff.

Step 8: Increase Your Credit Score

Improving your credit score can have a positive impact on your financial well-being. A higher credit score can lead to lower interest rates on future loans and credit cards, potentially saving you thousands of dollars in the long run. To boost your credit score, make timely payments, reduce your credit card balances, and keep your credit utilization ratio low. Regularly review your credit reports to identify and address any errors or discrepancies.

Step 9: Consider Debt Relief or Consolidation

If your debts feel overwhelming and unmanageable, exploring debt relief or consolidation options might be a viable solution. Debt relief programs, such as credit counseling or debt settlement, can help you negotiate with creditors to reduce the amount you owe or establish more manageable payment plans.

Debt consolidation allows you to combine multiple debts into a single loan with a lower interest rate. However, it’s essential to research and choose reputable organizations to ensure you make an informed decision that aligns with your financial goals.

Step 10: Stay Consistent

So, what is the best way to pay off debt fast? Consistency is always key. Make your debt repayment a priority and stick to your plan. Celebrate small victories along the way to stay motivated and maintain your momentum.

Remember, achieving financial freedom takes time and dedication. You can overcome your debts and build a brighter financial future with persistence.

Congratulations on taking the first step toward improving your financial well-being. Remember, Credit.com is here to support you on your journey.

Explore our ExtraCredit® program, which provides valuable resources to help you monitor and manage your credit for a small monthly price Or sign-up for our free service that provides an Experian Vantage 3.0 score along with a free credit report card.

Source: credit.com

Apache is functioning normally

Every month, Bonnie gives thanks for the arrival of her mother’s long-term care insurance check.

Long-term care insurance pays for her mother’s home care–which means that, while her mom receives the care she needs, Bonnie can run errands, attend programs at the kids’ school and take a few moments to breathe.

The long-term care benefit also taught Bonnie the importance of a budget for care. With a budget, Bonnie can plan appropriately for her mom’s care needs, giving Bonnie a sense of control in a situation that can feel so out-of-control.

The budget also means that Bonnie schedules regular time off for herself. Looking forward to having a break has become a critical coping strategy for Bonnie. She finds the she can manage her stress much better when she knows she soon will have a few hours to herself.

Role Reversal

Bonnie isn’t alone in caring for her mom; a 2009 survey sponsored by National Alliance for Caregiving in collaboration with AARP found that that 29% of the U.S. adult population, or 65.7 million people, provide care to a family member.

Unfortunately, caregiving comes as a surprise to many. According to a recent survey of Americans aged 35 and older sponsored by Genworth Financial, long-term care is rarely top-of-mind until an event actually occurs.

The stress of helping a parent or another family member after a crisis or a diagnosis can be overwhelming. Understanding how to create a budget for care can be critical in helping to manage that stress.

These suggestions can help you create your care-giving budget:

1. Think short-term. Look at the needs for each month for your parent and for yourself. During the day and night, when will your parent or family member need care? During the day, when do you need a break?

2. Think long-term. The true struggle of a budget for care is determining how long you’ll need a budget. It’s so difficult to predict how long caregiving will last. So, do your best to map out how long finances and benefits, like long-term care insurance, could last. Use a  cost-of-care calculator, like this one from Genworth Financial,  to understand what costs will look like next year, in two years and in five years.

3. Be flexible. Care needs will increase which means the amount of help you and your parent will need will increase. Recognize that the care budget will change as your parents care needs change.

4. Pick a day each month that you’ll review the budget. Perhaps on the 15th of each month you review the monthly budget. Ask yourself:

Is my parent getting the help he or she needs when he or she needs it? Am I getting the breaks when I need them?

Your budget may stay the same. Or, it might adjust as care needs increase in the morning or at night or during another time during the day. Or, it may change depending your need for much-deserved time away from caregiving.

5. Pick a day each year that you’ll review the budget. Perhaps November 30 becomes the day that you review how you used finances during the year to pay for care. Consider: What worked well that you’d like to bring into the next year? What would you like to adjust or change?

6. Pass on the lessons learned about budgeting. If you have children, teach them what you’ve learned about a budget. This  article from SmartMoney.com offers suggestions and ideas on teaching kids about saving money for their own future.

Where Can You Find Help?

Because budgeting can be intimidating, look to professionals who can offer guidance. A financial planner and a geriatric care manager can be great resources for you. The financial planner can offer insights on managing the money; a geriatric care manager, typically a social worker or nurse, can help you find and organize your parent’s care.

You can find a financial planner through National Association of Personal Financial Advisors and can learn more about hiring a geriatric care manager here.  You also can purchase a subscription to tools that can help you organize your parent’s care.

Source: goodfinancialcents.com