How to Make Better Financial Decisions

Woman learning how to make better financial decisions

A key financial decision people struggle to make is how to allocate savings for multiple financial goals. Do you save for several goals at the same time or fund them one-by-one in a series of steps? Basically, there are two ways to approach financial goal-setting:

Concurrently: Saving for two or more financial goals at the same time.

Sequentially: Saving for one financial goal at a time in a series of steps.

Each method has its pros and cons. Here’s how to decide which method is best for you.

Sequential goal-setting

Pros

You can focus intensely on one goal at a time and feel a sense of completion when each goal is achieved. It’s also simpler to set up and manage single-goal savings than plans for multiple goals. You only need to set up and manage one account.

Cons

Compound interest is not retroactive. If it takes up to a decade to get around to long-term savings goals (e.g., funding a retirement savings plan), that’s time that interest is not earned.

Concurrent goal-setting

Pros

Compound interest is not delayed on savings for goals that come later in life. The earlier money is set aside, the longer it can grow. Based on the Rule of 72, you can double a sum of money in nine years with an 8 percent average return. The earliest years of savings toward long-term goals are the most powerful ones.

Cons

Funding multiple financial goals is more complex than single-tasking. Income needs to be earmarked separately for each goal and often placed in different accounts. In addition, it will probably take longer to complete any one goal because savings is being placed in multiple locations.

Research findings

Working with Wise Bread to recruit respondents, I conducted a study of financial goal-setting decisions with four colleagues that was recently published in the Journal of Personal Finance. The target audience was young adults with 69 percent of the sample under age 45. Four key financial decisions were explored: financial goals, homeownership, retirement planning, and student loans.

Results indicated that many respondents were sequencing financial priorities, instead of funding them simultaneously, and delaying homeownership and retirement savings. Three-word phrases like “once I have…,", “after I [action],” and “as soon as…,” were noted frequently, indicating a hesitancy to fund certain financial goals until achieving others.

The top three financial goals reported by 1,538 respondents were saving for something, buying something, and reducing debt. About a third (32 percent) of the sample had outstanding student loan balances at the time of data collection and student loan debt had a major impact on respondents’ financial decisions. About three-quarters of the sample said loan debt affected both housing choices and retirement savings.

Actionable steps

Based on the findings from the study mentioned above, here are five ways to make better financial decisions.

1. Consider concurrent financial planning

Rethink the practice of completing financial goals one at a time. Concurrent goal-setting will maximize the awesome power of compound interest and prevent the frequently-reported survey result of having the completion date for one goal determine the start date to save for others.

2. Increase positive financial actions

Do more of anything positive that you’re already doing to better your personal finances. For example, if you’re saving 3 percent of your income in a SEP-IRA (if self-employed) or 401(k) or 403(b) employer retirement savings plan, decide to increase savings to 4 percent or 5 percent.

3. Decrease negative financial habits

Decide to stop (or at least reduce) costly actions that are counterproductive to building financial security. Everyone has their own culprits. Key criteria for consideration are potential cost savings, health impacts, and personal enjoyment.

4. Save something for retirement

Almost 40 percent of the respondents were saving nothing for retirement, which is sobering. The actions that people take (or do not take) today affect their future selves. Any savings is better than no savings and even modest amounts like $100 a month add up over time.

5. Run some financial calculations

Use an online calculator to set financial goals and make plans to achieve them. Planning increases people’s sense of control over their finances and motivation to save. Useful tools are available from FINRA and Practical Money Skills.

What’s the best way to save money for financial goals? It depends. In the end, the most important thing is that you’re taking positive action. Weigh the pros and cons of concurrent and sequential goal-setting strategies and personal preferences, and follow a regular savings strategy that works for you. Every small step matters!

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Want to know how to allocate savings for your financial goals? We’ve got the tips on how to make financial decisions so you can be confident in your personal finance! | #moneymatters #personalfinance #moneytips


Source: wisebread.com

15 Of The Best Money Books For Young Adults – Learn How To Live The Life You Want

Are you looking for the best money books for young adults?

best money books for young adults

Today, I want to talk about the best money and life books for new high school graduates, college graduates, and other young adults. These would be great for graduation gifts, or just for yourself!

I wasn’t always good with money when I was younger. I bought more clothes than I needed, financed a new car, spent a lot going out to eat, and spent a lot of money on things I didn’t need. It took me several years to realize how my spending habits were affecting the rest of my life.

I think this is fairly common when you’re younger, and there are lots of great financial books for young adults that can help you understand how money works and how to prepare for the future. 

The best money books for young adults explain personal finance topics like saving, investing, making more money, and more. And, reading them when you’re young can help you get on the right track with your money from a young age. 

Rather than spending years playing catch up with your money, you can get started on a great path now. 

I often get questions from young readers who are looking for help with their money, and I also get questions about how to help a young person with their money. These books are a great gift for yourself or someone you know.

For me, I love to give books as gifts, especially personal finance books for high school and college graduation gifts. And the best money books for young adults on this list make for great gifts – I’ve even given some of these books as gifts.

If you want to change your life, then I recommend that you start reading personal finance books. Yes, money is not everything, but improving your financial situation can help you gain control of your life.

Related: 6 Simple Steps That Will Teach You How To Write A Check

There are many different books listed below, so you will be sure to find at least one or two that meet your needs.

The best personal finance books may help you learn how to:

  • Understand basic financial concepts in an easier way
  • Reach financial independence or retire early
  • Take on your own yearlong shopping ban
  • Deal with and pay off debt
  • Better manage the 168 hours a week you have
  • Become more confident
  • Invest for your future
  • Choose your own dreams and adventures
  • Find the best path to pay off your student loans

And more!

Here are 15 of the best money books for young adults.

 

1. Broke Millennial

Broke Millennial was written by Erin Lowry, and is a must-read for young adults. She makes the topic of money entertaining, fun, and relatable for young adults. You won’t be bored with this money book!

Erin gives readers a step-by-step plan to stop being broke, and she discusses many topics, from tricky ones like how to manage student loans, how to discuss money with your partner, and more.

Please click here to check out Broke Millennial.

Another one of the best money books for young adults is Broke Millennial Takes On Investing. Erin recently published this one and it’s a great read, as it covers the topic of investing without making you feel dumb.

 

2. Work Optional: Retire Early the Non-Penny-Pinching Way

Work Optional is another one of my top picks for best money books for young adults, as it was written by one of my favorite writers, Tanja Hester. This personal finance book will show you how to reach financial independence so that you can live the life you want. 

I know retirement feels very far away when you’re younger, but this book explains how early retirement is a possibility if you start saving money now. Yes, retiring before the traditional age of 65 can happen, and it starts with the kind of guidance you’ll get in this book.

Please click here to check out Work Optional: Retire Early the Non-Penny-Pinching Way.

 

3. The Year of Less by Cait Flanders

If you’re looking for one of the best financial books for graduation gifts, check out The Year of Less by Cait Flanders. In this book, Cait writes about her yearlong shopping ban which will inspire you to simplify your own life and address your relationship with material possessions.

Cait talks about how for a full year, she only bought groceries, toiletries, and gas, and how it impacted her life. This is a great read for young adults as it is so easy to get into a spending cycle when you get your first real job and start earning larger paychecks.

Please click here to check out The Year of Less by Cait Flanders.

 

4. Dear Debt

Dear Debt was written by Melanie Lockert and focuses on people’s relationships with debt in a funny and endearing way.

Dear Debt is a must read for anyone who has debt or is taking on debt. Melanie shares her personal experience paying off $80,000 of student loan debt, how it affected her mindset, and more. This is one of the best money books for young adults because it’s a personal story about overcoming debt. There’s also tons of great money advice that will help others overcome the debt that may be holding them back.

Please click here to check out Dear Debt.

 

5. 168 Hours: You Have More Time Than You Think

Do you ever wish that you had more time in your week?

This book, written by Laura Vanderkam, focuses on helping people manage their time better so they can focus on what really matters.

Laura writes about tips and tricks to live a more efficient life. She teaches you how to prioritize things in your life, from how to get enough sleep every night to finding time for hobbies you’ve been wanting to try. You will learn how to use your 168 hours a week to make your life better, as you’ll learn many great life-changing strategies.

Please click here to check out 168 Hours: You Have More Time Than You Think.

 

6. How to Win Friends and Influence People

How to Win Friends and Influence People was written by Dale Carnegie in 1936 and has sold over 15,000,000 copies worldwide. This is one of the most best-selling books ever, and for good reason!

This book will show you how to approach situations differently, become more confident, and get people to like you. This is one of the best money books for young adults that people of all ages will benefit from, because this book is all about living a happier and more successful life at any age.

Please click here to check out How to Win Friends and Influence People.

 

7. Quit Like A Millionaire

Quit Like A Millionaire was written by Kristy Shen and Bryce Leung, who are well-known people in the FIRE community. And, if you’re not familiar with FIRE, it stands for Financial Independence Retire Early. Everyone approaches FIRE differently, but the point is to stop letting money hold you back from living the life you want.

Kristy retired early at the age of 31 with a million dollars, and has a very inspirational story. In this book, she explains how that was possible and how it can be a reality for you too. This is a great guide on how to save more money, retire early, and live the life that you want.

In this book, you’ll learn a step-by-step guide on how to reach success, whatever that may mean for you. This is a fun and inspirational book that will open you up to new possibilities and opportunities.

Please click here to check out Quit Like A Millionaire.

 

8. Get Money

Get Money is a book by Kristin Wong, and it’s an engaging read that will teach you how to manage your money.

Kristin gives you a step-by-step personal finance guide that will show you what you need to do in order to stop letting money control your life. You will learn how to create a budget, pay off your debt, build a better credit score, negotiate, and how to start investing.

Please click here to check out Get Money.

 

9. Financial Freedom: A Proven Path to All the Money You Will Ever Need

Financial Freedom was written by Grant Sabatier, who decided that he needed to change his life by learning how to make more money.

Here’s a bio I found about Grant to show you how awesome he is!

“In 2010, 24-year old Grant Sabatier woke up to find he had $2.26 in his bank account. Five years later, he had a net worth of over $1.25 million, and CNBC began calling him ‘The Millennial Millionaire.’ By age 30, he had reached financial independence. Along the way he uncovered that most of the accepted wisdom about money, work, and retirement is either incorrect, incomplete, or so old-school it’s obsolete.”

In his book, Grant writes about how to reach financial freedom through steps such as building side hustles, traveling the world for less, building an investment portfolio, and more. 

Please click here to check out Financial Freedom.

 

10. The Simple Path To Wealth

The Simple Path To Wealth was written by JL Collins, and it’s one of the most popular and best money books for young adults that’s available.

Collins writes about many important financial topics in his book, such as how to avoid debt, how to build wealth, what the 4% rule is and how to use it to your advantage, and more.

This is an easy book to read, and it makes complicated personal finance topics much easier to understand. Many people have said that JL Collins is the reason why they were able to retire early, thanks a lot to his website and book.

Please click here to check out The Simple Path To Wealth.

 

11. Student Loan Solution

Student Loan Solution was written by David Carlson, and it’s a great book for anyone who has student loan debt.

Student loans can be extremely difficult to understand, as there is so much different terminology as well as different ways to pay them back (such as loan forgiveness, consolidation, and so on). This book explains a 5-step process that will help you to better understand your student loans, the best ways to pay them off, and more.

Please click here to check out Student Loan Solution.

 

12. The Millionaire Next Door

The Millionaire Next Door is another classic personal finance book, and it was written by Thomas J. Stanley.

In his book, he writes about the common traits of those who are wealthy, and how the wealthy can be even someone such as your neighbor, even though you might not realize it. This book shows readers that anyone can retire with wealth, not just your traditional multi-millionaires living in huge mansions with airplanes.

This is one of the best finance books for graduation gifts because it will make you rethink what it means to be rich, which is important to understand from a young age.

Please click here to check out The Millionaire Next Door.

 

13. The Infographic Guide to Personal Finance: A Visual Reference for Everything You Need to Know

The Infographic Guide to Personal Finance, written by Michele Cagan, is one that I learned about from my readers. What’s great about this book is that it gives you a visual guide to important personal finance topics, and many people learn better from visuals.

This book is different in that it is full of infographics, which make it fun and easy to read. You will learn how to find a bank, build an emergency fund, how to pick health and property insurance, and more.

Please click here to check out The Infographic Guide to Personal Finance.

 

14. Choose FI

Choose FI was written by Chris Mamula, Brad Barrett, and Jonathan Mendonsa. These guys are behind one of my favorite Facebook communities, Choose FI, and they explain how to reach financial independence and retire early. 

While retiring early may seem out of reach if you’ve just graduated, this book teaches you how to “choose your own adventure” and improve your financial situation.

Please click here to check out Choose FI.

 

15. I Will Teach You To Be Rich

I Will Teach You To Be Rich was written by Ramit Sethi and is a excellent book for beginners. It would make a great gift for a recent high school or college graduate.

Ramit’s I Will Teach You To Be Rich is packed full of great lessons, and it is written in a fun way. He covers the basics of personal finance such as budgeting, saving money, investing, and more.

Please click here to check out I Will Teach You To Be Rich.

What do you think are the best money books for young adults?

The post 15 Of The Best Money Books For Young Adults – Learn How To Live The Life You Want appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

I taught English in China to pay off my student loans

Hello! Here’s a guest post from a reader, Nick. Nick was feeling stuck a few years ago and wasn’t making progress on his student loans. He ended up researching a lot about salaries and the cost of living for English teachers in China and realized that he would be able to save far more money in China than back home. Even without teaching experience, and still living very comfortably, including taking vacations, it has been easy for him to save $20,000 in a year. For him, it had a huge impact on his life and financial freedom. Enjoy his story on how to teach English in China below!

I taught English in China to pay off my student loans #teachenglish #movetochina #makeextramoneyIt must have been about 4.5 years ago. I remember walking out of an interview in Chicago feeling completely dejected.

The interviewer mentioned the salary, and along with it, how most new hires take on a second job during the weekend. 

I wasn’t expecting to find an amazing job, but this was just too much. None of my past decisions looked particularly good on a resume. I had just returned from a 3.5-year stint traveling around Latin America while earning a very modest living playing online poker.

But, I was burnt out, making no progress on my student loans, and realizing it was time to get a normal job. I was actually really excited to do so but job hunting was incredibly frustrating and when I realized how little money I’d be earning, I began looking for alternative options. 

Somewhere along the way, I had heard about teachers in Asia making good money and motivated by the frustration of the job search, I began looking into it more seriously.

After spending countless hours reading online, I ended up settling on China as that seemed to be where it’d be easiest to save the most money. 

I’ve since been in China for four years, paid off my student loans, and finally feel comfortable with my finances. 

Without a doubt, moving to China isn’t for everyone or even most people. However, for those that are a little bit adventurous, not opposed to working as a teacher, and want to save money fast, it’s an option worth considering. 

It’s not at all difficult to save $20,000 per year, without needing to be particularly frugal, and still have plenty of vacation time. 

Related articles on how to make extra money:

  • 12 Work From Home Jobs That Can Earn You $1,000+ Each Month
  • 30+ Ways To Save Money Each Month
  • The Best Online Tutoring Jobs

How to start teaching English in China.

 

The demand for teachers in China

Chinese parents spend an average of $17,400 per year on extracurricular tutoring for their children. 

More than 60% of students receive tutoring outside of school at an average of six hours per week and English is among the most popular subjects for after school tutoring. 

While these numbers look insanely high from my Midwestern American point of view, it barely scratches the surface for the demand for English tutoring in China. 

In fact, English is a required subject in Chinese schools. Private schools often take this a step further, with many classes and programs taught exclusively in English. Meanwhile, the online tutoring industry has created lots of opportunities to teach English online

Chinese parents are obviously willing to pay for English education. This demand for English teachers becomes even more apparent when you consider just how huge of a country it is. With a population of over 1.3 billion people, there are 32 cities with more people than Chicago

 

The requirements to be an English teacher

It’s not difficult to become an English teacher in China. The huge demand has made for relatively lax requirements. These are…

  • A bachelor’s degree
  • Two years of work experience
  • 120 hour TEFL certificate
  • Clear criminal background check
  • Pass a health check
  • Native English speaker

The bachelor’s degree doesn’t need to be in any specific subject, nor do the two years of work experience. The 120-hour TEFL is easy and pretty cheap to do online. 

Of course, having these doesn’t necessarily mean you’ll be able to get a great job right off the bat. Some of the best schools will have a very rigorous hiring process. However, even a standard first job in China can allow you to save a lot of money. 

 

The types of English teaching jobs in China

Most foreign teachers in China come to teach English. However, there are other opportunities as well, such as with teaching sports, a specific subject, or as a homeroom teacher who teaches a variety of subjects. 

There’s a wide range of salaries and teaching environments, with the main positions being in kindergartens, public schools, international schools, training centers, and universities. Salaries, working hours, and work environment can vary quite a bit depending on the type of school.

Additionally, the chosen city will have a large impact on your life with bigger cities paying more but also having a higher cost of living. ESL Authority has a good breakdown of the different salary ranges for different school types and locations. 

My teaching experience in China has exclusively been in Beijing at two public schools and one international school. I’ll share a bit about my experiences and salary at these schools. 

 

Teaching at a public school in China

Public school teaching jobs typically focus on oral English, meaning you’ll help students with their speaking and listening comprehension. The class sizes tend to be quite large. I often had 30-40 students in a class and would see each class only a couple of times per week, while often teaching multiple classes and different grade levels. In a given week I’d see 200-300 students. 

At the public schools I taught, I earned around $1,600 per month, which included a round-trip plane ticket to America, and housing. A typical schedule for public schools would be Monday-Friday, from 8 am – 4 pm, with 16-20 classes per week, with each one lasting around 45 minutes. There would be a lot of down-time during the day which I used to study Chinese

Many public schools, but not all, will let foreign teachers leave if they don’t have classes. Both public schools I taught at while in Beijing allowed me to leave when my classes were finished, which meant I’d often be done for the day around 2 pm. 

Vacation time is very generous, exceeding 3 months for summer and winter vacation, plus all of the national holidays during the year. Both public schools I’ve taught at allowed foreigners to finish the semester earlier and start later than their Chinese counterparts which makes sense as foreign teachers aren’t usually responsible for grading homework or preparing exams. 

The salary at public schools is more than enough to live comfortably and save quite a bit of money. Still, many teachers use their substantial free time to teach extra on the side with private students or at training centers. Doing so can be quite lucrative with an average rate of around $30 per hour. 

Having said that, it’s not exactly legal to teach with a different school than the one that sponsored your visa. If you got caught, it could get you in trouble and you could have your visa canceled and your time in China cut short. But, it’s one of those things that nearly everyone does and almost nobody gets in trouble for. So, if you choose to teach on the side, you should be aware of the risks. 

It isn’t difficult to teach an extra six hours per week during the ~8 months of the school year. This would earn an extra $5,760. Teaching 20 hours per week during 2 months of the summer/winter vacation would earn an extra $4,800. Combining these with the public school salary would make your yearly after-tax income $29,760 – with housing already paid for.

Plus, you’d still have close to two months’ vacation throughout the year. 

While I didn’t keep good track of my earnings and expenses while teaching at the public schools, these numbers are very close to my own experience. 

 

My experience teaching at an international school in China

If you’re more interested in teaching a subject like history or math, as opposed to English, an international school would be your best bet. 

These are the schools where wealthy Chinese and expats typically send their children to study. Teaching positions at some of the better schools can be very competitive, often requiring a teaching license, graduate degree, and a number of years of experience. Of course, those who qualify for these positions will earn higher salaries. 

However, a large number of international schools don’t have any additional requirements for teachers above the bare minimum required to teach in China. 

The work at these schools can be very demanding, much like teaching in America would be, requiring things like communicating with parents, creating exams, giving and grading homework, and plenty of meetings. Vacation periods are typically shorter than those for public school teachers. Likewise, working hours may be from 8 am – 5 pm, but most international school teachers will find themselves with very little downtime throughout the day. 

On the plus side, class sizes are generally much smaller and salaries higher. While teaching at an international school, I earned around $2,800 per month or $33,600 per year after taxes, with housing and a round-trip plane ticket included. 

However, due to the shorter vacations and more tiring day-to-day work, I didn’t have any interest in tutoring on the side. 

 

What does a typical budget look like for an English teacher?

This can be hard to say as everyone has a different lifestyle and things they’re willing or not willing to spend money on. I’ll share my budget below. 

Housing and Healthcare – $0/mo – In China, especially in the bigger cities, rent would make up the largest portion of a budget. Fortunately for foreign teachers, most schools include housing or a housing allowance. Housing would typically be a one-bedroom apartment, which may be on or off-campus, depending on the school. Some teachers may choose to add some of their own money to the housing allowance so that they can stay in a nicer place. But, I’ve been happy with the provided accommodation and didn’t pay any extra.  Health insurance is also provided and many schools have gyms on campus that you can use for free. 

Food – $350/mo – You can spend a lot of money on food or not much at all, depending on your preferences. Cheaper meals can be had for under $3 but you could easily spend $30 on a meal if you choose to go to fancier places. It also depends on how much you cook vs eat out and whether you like buying imported groceries. Most schools will offer free lunch to their teachers. Even so, I tend to spend quite a bit on food but am cheaper in other areas, so my food budget would be something like:

Groceries: $150

Restaurants: $200

Entertainment – $100/mo – Being the old man I am, I rarely go out for drinks at bars and my preferred entertainment is also the cheaper kind – hanging out, eating, and playing games with friends. Still, my wife and I will go to the occasional show. 

Transportation – $60/mo – Public transportation in China is fantastic and a single trip on the subway or in a bus can cost less than 50 cents. Shared bikes are everywhere and extremely cheap. Even using Didi, the Chinese version of Uber, is very affordable.  This is another area where I spend more than necessary, often taking a Didi out of laziness when there are cheaper options. 

Utilities – $15/mo – I think most schools typically pay for household utilities, like electricity and water. At least, the schools I worked at did. So, the only expense here is my phone which is on a pay as you go plan.

Travel – $250/mo – Living in China and working as a teacher opens up lots of travel opportunities, both within China and around Asia. Unfortunately, although plentiful, teacher’s vacation time is usually during national holidays when the cost of tickets is a bit higher.  Still, I tend to go on at least one international trip a year and also like to travel within China. Plus, almost every school also provides a round-trip ticket to your home country. If I were to guess, I probably spend around $3,000 per year on travel. I know people who spend much more and others who spend much less, so this cost will depend a lot on each individual’s preferences. 

Miscellaneous – $50/mo – These are other expenses such as buying household appliances, clothes, and other random things. I’m not a big shopper, but random things do come up. 

Total Expenses – $825/mo or $9,900/year

Although I’m conscious of my spending, I wouldn’t say that I’m especially frugal while in China. Far much less than I’d be if I were still living in Michigan. 

Some people might consider my spending extravagant while others might think I’m cheap. For me, it’s a good balance of comfort and enjoying my lifestyle with saving for the future. 

 

How much money can you save teaching English in China?

In my experience, I earned between $29,760 and $33,600 per year with expenses around $9,900 per year. This led to savings between $19,860 and $23,700 per year. Unfortunately, I didn’t track my exact earnings and spending each year, but these ballpark numbers are pretty accurate. 

It’s not particularly difficult to save $20,000 in a year of teaching in China while still living comfortably, traveling, and leaving yourself with enough free time to pursue other interests.

Plenty of people save more than this each year. There are also opportunities to increase your earnings as you gain more experience. 

However, like most places, life can be as expensive as you make it. If you’re bad with money back home, it’s unlikely you’ll suddenly become good with money by moving abroad. In fact, the money may disappear even faster than it would back home as there are lots of exciting ‘once in a lifetime’ opportunities. 

But, if you’re somewhat frugal and work fairly hard, you’ll have no problem saving a lot of money. 

 

How to find a job teaching English in China

There are tons of websites with job listings for English teachers in China. I can’t comment on most sites as all the jobs I found started with a search on the eChinacities job board

The start of your job search can be a bit overwhelming, especially if you’re still not sure where you’d like to live in China. This isn’t helped by the fact that a lot of recruiters will earn more money if they can get a teacher to accept a lower salary. 

I’ve known teachers that came to China and received terrible salary packages, earning less than half of what a typical salary would be and with an apartment far from the school. These people tended to not do enough research beforehand and accepted the first offer they received.

I would strongly recommend talking with lots of recruiters before accepting any position. Be sure to ask tons of questions, and be willing to say no to a jobs that don’t fit your criteria. There is no shortage of opportunities, so be patient when looking for your ideal position. 

Before accepting any position, be sure to do your due diligence on the school.

Most schools are fine and professional, but there are some sketchy ones. You won’t always find much information online about the school, but if they’ve done shady things in the past, you’ll probably see people talking about it.

Asking to speak with any current or former teachers can give you a bit more insight into the school as well.

 

Final thoughts on teaching English in China

Not everyone will be excited to live in China and I can understand that. It’s far from home, the language is difficult, and many people have a negative perception of the country. 

However, I’ve really enjoyed my life here and the experience has been exceptionally positive. Sure, there are small annoyances, but these will happen anywhere. Plenty of people worry about air quality, and while still not great, it has been improving every year

Beijing is extremely modern with no shortage of interesting and unique things to do. Moving here has been one of the best decisions I’ve made. 

I came here with only a few thousand dollars in the bank and what felt like an endless pit of student loan debt. In only a few years, I’ve been able to completely turn around my finances, pay off my loans, and save up a nice nest egg. 

I know that it’s not for everyone, but if you’re open to new experiences, can see yourself enjoying teaching, and want to save a lot of money, moving to China to teach English is an option worth considering. 

Nick Dahlhoff is an English teacher living in Beijing. Since moving there in 2016, he’s paid off his student loans, studied Chinese, gotten married and started a blog. At All Language Resources, he tests out lots of language learning resources to help language learners figure out which resources are worth using and which ones are better off avoiding. 

Would you take a job in another country to pay off your debt? Would you start teaching English in China?

The post I taught English in China to pay off my student loans appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

You CAN Reach Retirement! Avoid These Top 5 Retirement Mistakes

retirement mistakes

Wondering what retirement mistakes will ruin your retirement? Here are the biggest retirement mistakes we all make.

Have you ever checked in to see if you are on track for retirement? I know this can feel like a daunting task, but preparing yourself for retirement can help you save more and avoid common retirement mistakes.

For some, retirement means quitting their job after 40+ years, but it can also mean working towards early retirement, in your 20’s, 30’s, 40’s, and so on.

I know that’s not for the “average” American, but by avoiding some of the retirement mistakes I will talk about today, you can start preparing for retirement at any age.

Related: How To Save For Retirement

The thing about retirement is that sadly many out there are not saving enough money. In fact, according to Zacks Investment Research, 72% do not save enough for retirement each month.

Also, according to surveys done by Bankrate, 20% of people aren’t saving any money, and 61% of Americans have no idea what they will need to save for retirement.

These numbers are very alarming.

Saving money in general is an important thing to do, but if you don’t want to work for the rest of your life, saving for retirement should be something that you are thinking about. And, I believe that saving for retirement is possible if you start working towards it and avoid retirement mistakes when it comes to planning and saving.

While many believe the economy ruins their chances for retirement, in reality most retirement mistakes come from specific beliefs people have about retirement. Some of these beliefs come from expectations of what their budget will be during retirement, that they can rely on their pension or social security, and more.

There are many reasons for why a person might not be saving for retirement, and by looking at the various retirement mistakes you might be making, I feel that more people can be aware of and overcome their retirement preparation problems.

Here are five retirement mistakes and how they might be hurting your chances for retirement:

 

1. You ignore saving for retirement altogether.

Many people skip out on saving for retirement for several reasons, including:

  • Believing you don’t have enough money to save for retirement.
  • Thinking that you’re too young to care about retirement or that it’s too late to start.
  • Relying too much on pensions and social security.

No matter how young or how old you are, you should be saving and preparing for retirement. You never know when you will need it, and I am all for a person being in charge of their own retirement plan instead of relying too much on other sources of retirement (such as relying on social security 100%).

Millennials are especially at risk and according to an article by Business Insider, a shocking 40% of millennials have nothing saved for retirement. This is a scary number because these people will all have to retire one day and I’m not sure what they will do when the time comes.

But, it isn’t just young people who aren’t saving for retirement. Bankrate found that only 60% of people aged 45-54 have some type of retirement savings. You can read more crazy retirement statistics here.

It is important to realize that part of the reason for these low savings rates is that many are currently living paycheck to paycheck, which makes it hard to even approach saving for retirement. Fortunately, you can start investing with very little money, and you can learn how to start investing for beginners if you are wanting to start planning for retirement.

There is never a bad time to start saving for retirement, and you can correct this retirement mistake by starting today.

Side note: I highly recommend that you check out Personal Capital if you are interested in gaining control of your financial situation. Personal Capital allows you to aggregate your financial accounts so that you can easily see your financial situation. You can connect your mortgage, bank accounts, credit card accounts, investment accounts, retirement accounts, and more. And, it’s FREE!

 

2. You take on debt for others and don’t think about your future.

I talked about this topic in the post Should I Ruin My Retirement By Helping My Child Through College? This is a hard thing for a lot of parents especially as student loans are out of control, and I am hearing from parents nearly every week saying that they cannot afford to retire because they are paying for their child to go to college.

If this is your situation, I want you to STOP making this one of your retirement mistakes. Unless you are on track for retirement, I honestly think you need to seriously start prioritizing your future. Your child will be fine without your monetary support.

There are lots of ways to support your child through school that don’t involve leveraging your future for their education. You can help them find a job, find scholarships, be an emotional support, and more.

You can take out loans for college, but you cannot take out loans for retirement.

 

3. You think you’ll never have to retire.

Recently, I read an article about someone who made hundreds of thousands of dollars a year, had a monthly budget of around $30,000 (yes, MONTHLY!), and yet hardly saved anything. This person said they didn’t really feel the need to save for retirement because they enjoyed their job so much. That’s just crazy!

See, even wealthy people make retirement mistakes.

Assuming you will love your job forever can be a huge mistake. While it’s great that you love your job now, it’s hard to judge what you will love decades down the line.

Also, you never know if something will come up in the future that will completely prevent you from working, such as a medical issue or some sort of major life change. Beyond realizing that you will need to prepare for retirement, an emergency fund should be something you already have or are working on – emergency funds are there to protect you from the what-ifs.

Related articles:

  • Everything You Need To Know About Emergency Funds
  • Is A Credit Card Emergency Fund A Smart Idea?

 

4. You miscalculate how much money you’ll spend in retirement.

For some reason, many people just assume they will spend less money in retirement, but that is not always the case.

While you might find some ways to save money on things like commuting expenses, work clothes, lunch if you weren’t bringing it, you will probably experience a very similar budget to the one you had while working.

You are still going to spend money on housing (even if you pay off your home completely, you will still need to pay property taxes, utility bills, etc.), food, clothing, entertainment, and so on.

Many retirees also take up new hobbies or activities. And, some retirees just have more time to pursue things they’ve already been doing, which can add up to a lot of extra expenses.

Plus, medical expenses may come up, you might decide to travel more, and like I said, the truth is that retirement spending is not usually much different than what you are currently spending.

Some make plans to become super frugal after they enter retirement, but life doesn’t always work out so perfectly. To make sure this isn’t one of the retirement mistakes you are making, I recommend starting to cut down your budget now.

By living frugally before you retire, you will be able to save more, will have less expenses going into retirement (the less money you spend, the less you need in the future), and you might even reach retirement sooner. Really, if you cut your spending now and become more frugal, you will be used to living with less. I’ve been living a more frugal and minimalist lifestyle since we moved onto our boat, and it can be a life changing thing.

 

5. You use your retirement funds for expenses other than retirement.

This is one of the worst money mistakes out there, and unfortunately many young people are making it. I’ve actually heard far too many stories about people taking money out of their retirement funds in order to pay for a vacation, a timeshare, pay off low interest debt, and more.

When preparing for retirement, this is a HUGE mistake.

While I don’t know everything about taking money out of retirement funds, I do know that this can usually hurt you more in the long run. Taking funds out of a retirement account can lead to large penalties and paying extra towards taxes.

The other thing about saving for retirement is that the longer you have funds invested, the more you will have for retirement. Compound interest is a powerful thing, and if you are taking money out of your retirement account it means that you don’t get the full benefit of it.

You should always just use your retirement funds purely for retirement. If you are struggling with debt or need help differentiating between wants and needs, it’s time to make a change. Don’t wreck your future by making this huge retirement mistake.

What retirement mistakes have you seen? Do you think you will have enough money to retire and how are you preparing for retirement? What age do you expect to retire?

The post You CAN Reach Retirement! Avoid These Top 5 Retirement Mistakes appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

I Dropped Out of College: My Student Loan Repayment Options

No one intends to drop out of college. If you show up to campus for your freshman year, chances are you plan to graduate in four years and use your degree to land a job. Maybe you even have the whole thing mapped out, step-by-step.

But then life happens. Whether it’s a family emergency, deteriorating health, stress burnout, or just the realization that college isn’t the right choice, plenty of people choose to drop out of their university every year. The problem is, your student loans don’t go away just because you never ended up with a degree.

So how should someone in this position approach student loan repayment? Are there any unique considerations to take into account? Here’s what you need to know.

Choose an Income-Based Repayment Plan

If you have federal student loans, you’re eligible for the same repayment options available to borrowers with a degree.

You may currently be on the standard 10-year repayment plan, which will have the highest monthly payments and the lowest total interest. You have the option of switching to a less expensive option if you’re struggling with those payments. Use the official repayment calculator to see which plan lets you pay the least.

When you choose an extended, income-based, or graduated repayment plan, you’ll pay more interest overall than if you stuck with the standard plan. If you’re not working toward a specific forgiveness program, then it’s best to switch back to the standard plan as soon as you can afford it to minimize the interest.

Refinance Private Loans

Private student loans have fewer income-based repayment options than federal loans, and they rarely offer deferment or forbearance options. But you can refinance private loans for a lower interest rate, even if you dropped out.

There are a few lenders that service borrowers with uncompleted degrees.

These may include:

  • MEF
  • RISLA Student Loan Refinance
  • EDvestinU
  • PNC
  • Wells Fargo
  • Purefy
  • Discover Bank
  • Advance Education Loan
  • Citizens Bank

To be a good candidate for a student loan refinance, you must have a high credit score and no recent bankruptcies or defaults on your credit report. You also need a low debt-to-income ratio, and some lenders may have income requirements.

Financial aid expert Mark Kantrowitz of SavingforCollege.com said borrowers are unlikely to be good refinance candidates immediately after college because lenders usually require a minimum amount of full-time employment.

If you dropped out recently, you may want to wait a year before trying to refinance private loans. During that time, check your credit score through Mint, pay all your bills on time, avoid opening new loans or lines of credit, and pay your credit card bill in full every month.

Explore Deferment and Forbearance

Once you leave school, you’re eligible for a six-month grace period where federal student loan payments are put on hold. You won’t accrue interest during this time if you have subsidized loans, but you will if you have unsubsidized loans.

If you still need more time after the grace period has expired, you can apply for deferment or forbearance. Borrowers have to apply for deferment and forbearance manually and wait to be approved.

Deferment and forbearance are both federal programs that let borrowers avoid paying their student loans while still remaining current. The main difference between the two options is that interest will not accrue on your loan balance during deferment, but it will accrue during forbearance. For that reason, it’s harder to qualify for deferment.

Be careful about putting your loans in deferment or forbearance for a long time. The interest that accrues will capitalize, meaning it will be added to your loan’s principal. This will increase your total monthly payments and could delay your debt payoff timeline.

Apply for Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) is a program that encourages borrowers to choose a non-profit or government job. In exchange, your remaining loan balance will be forgiven after 10 year’s worth of payments, which do not have to be consecutive. It’s even available to borrowers who dropped out and never finished a degree.

“PSLF is always an option because it’s employer-dependent,” said student loan lawyer Joshua R. I. Cohen.

PSLF is only available for federal loans, and only those loans that are part of the Direct Loan Program. If you have FFEL or Perkins loans, you’ll have to consolidate them as part of the Direct Consolidation Program. This process will render them eligible for PSLF.

Be sure not to consolidate loans that are already part of the Direct Loan Program. If you’ve already been making payments, consolidating loans will restart the clock on PSLF, and you could lose credit for eligible payments you’ve already made.

The employer you work for must also be an eligible non-profit or government entity. Only full-time employees qualify for PSLF, which excludes part-time workers and independent contractors.

To be eligible for PSLF, you should fill out the employment certification form every year. This form asks for your employer’s contact information, your employment status, and more.

Once you submit the form, you should receive a notice verifying your employer and how many eligible payments you’ve made. Doing this every year will make it easier when you apply for forgiveness after your 120 payments have been made.

“It also gives borrowers an opportunity to dispute any errors or undercounts well before they reach eligibility for loan forgiveness, giving them plenty of time to address disputes,” said student loan lawyer Adam S. Minsky.

Borrowers can save money while working toward PSLF by choosing an income-based repayment plan instead of the standard 10-year plan. They also won’t owe taxes on the forgiven amount, so it’s best to choose the least expensive monthly option.

Try to Discharge Your Loans

If you couldn’t complete college because the department you were studying in closed, or your school committed fraud, you may be a good candidate for discharging your student loans completely. If this happened to you, contact a student loan lawyer who can help you file a case.

 

The post I Dropped Out of College: My Student Loan Repayment Options appeared first on MintLife Blog.

Source: mint.intuit.com

The Best Cities for Working Students in 2017

The Best Cities for Working Students in 2017

Not all students can cover the cost of their college education with the grants or scholarships in their financial aid packages. Some begin their college careers by taking out student loans, while others look for part-time jobs and work-study positions. Students who are trying to avoid taking on too much debt may wonder what their job prospects look like outside of their college campuses. To help them out, we ranked the best cities in the country for working students.

This is the second annual study of the best cities for working students. Read the 2016 study here.

Study Specifics

For the second year, SmartAsset took a look at the best cities for working students. Our analysis focuses on the employment opportunities for college students attending the top-ranking four-year university in 232 different cities.

To complete our study, we created two different scores: a college value score (based on findings from our study of the best value colleges in America) and a jobs score (based on three factors, including the local minimum wage, the median rent and the unemployment rate for adults with some college education). It is important to note that we changed our methodology slightly this year, so this year’s study is not directly comparable to last year’s. For a full explanation of how we conducted our analysis, read the methodology and data sections below.

See how long it’ll take to pay off your student loans.

Key Findings

  • Minimum wages are rising. Nineteen states and dozens of cities saw their minimum wages increase at the start of 2017. Any boost in pay is sure to benefit working students and other low-wage workers around the country.
  • Check out the Midwest. Four of the best cities for working students are located in this region, thanks in part to their low unemployment rates. In places like Lincoln, Nebraska and Fargo, North Dakota, the unemployment rate among adults with some college education is below 2%.
  • New England ranks well. Four other cities in the top 10 are part of this region, where minimum wages are relatively high. In Portland, Maine and New Britain, Connecticut, for example, the minimum wage is above $10.

The Best Cities for Working Students in 2017

1. Springfield, Massachusetts

Springfield is about 91 miles from Boston by car. One reason why it’s on our list of the best cities for working college students is its high minimum wage. On Jan. 1, Massachusetts’ minimum wage rose from $10 to $11. Massachusetts, Washington state and Washington, D.C. currently have the highest minimum wages in the nation. That’ll change eventually since cities and states like California are planning for their minimum wages to hit $15.

2. Lincoln, Nebraska

Thanks to its strong job market conditions, Lincoln ranks as the second-best city for working students in 2017. The unemployment rate for workers with either an associate’s degree or some college education is just 1.5%, according to one-year estimates from the 2015 American Community Survey. Among all workers ages 16 and over, the city’s unemployment rate is about 3.1%

In addition to having access to a lot of job opportunities, students who attend the University of Nebraska-Lincoln can get plenty of bang for their buck. Our analysis of the best value colleges found that UNL was the top-ranking university in the Cornhusker State in 2015 and 2016.

3. New Britain, Connecticut

New Britain has a few different colleges. Central Connecticut State University is the oldest public university in the state of Connecticut. Finding a job in New Britain shouldn’t be too difficult for students trying to pay their way through school. The unemployment rate for workers with some college education is just 3%.

4. Omaha, Nebraska

This is the second time that Omaha has appeared on our list of the best cities for working students. Last year, the “Gateway to the West” took the 10th spot on our list. Since we published the 2016 edition of our study, the city’s unemployment rate for workers with some college education has fallen to 2.7%.

Working students in Omaha face a diverse economy. Key industries include health services, education, transportation and utilities, meaning that there are a variety of options for students looking for part-time gigs and internships.

5. Portland, Maine

Finding part-time work may not be difficult for students in Portland, Maine. In this city, the unemployment rate among adults with an associate’s degree or some college education is just 3%.

Students who live off campus may have to pay a pretty penny for rent. The median rent in Portland is $923. Fortunately, the city’s minimum wage is relatively high at $10.68.

Related Article: The Best College Towns to Live In – 2016 Edition

6. Tempe, Arizona

Arizona is another state that saw its minimum wage increase on New Year’s Day. In fact, it went up by almost $2. Thanks to the approval of Proposition 206, part-time and full-time workers will now earn $10 per hour. By 2020, the minimum wage will be $12. That’s good news for working students attending one of the many colleges and universities in Tempe, such as Arizona State University.

7. Tacoma, Washington

Tacoma is a mid-sized city in southwest Washington. The unemployment rate for workers in the city with some college education is 5.6%. According to the Census Bureau, that’s lower than the unemployment rate among all adults in Tacoma ages 16 and over (6.5%).

The state of Washington has one of the highest minimum wages in the country and Tacoma’s minimum wage is a bit higher. In 2017, working students in Tacoma will get paid $11.15 per hour.

8. Fargo, North Dakota

Fargo has the lowest unemployment rate in our study among workers with some college education: 0.6%. And thanks to the state’s low income tax rates, working students don’t have to worry about taxes taking a big bite out of their paychecks. Best of all, many students attending colleges in Fargo have access to a quality, yet affordable education. For the 2016-2017 school year, base tuition at the North Dakota State University – the top-ranking college in the state according to our best value colleges list – will be less than $7,000.

9. Lowell, Massachusetts

Since we released the 2016 edition of our analysis, the median rent in Lowell has increased by about 9%. But the state’s minimum wage has risen as well. College students who need to find part-time jobs can expect to be paid at least $11 per hour in 2017.

10. Sioux Falls, South Dakota

Sioux Falls is the largest city in South Dakota and has a population of roughly 171,530. The unemployment rate for workers with some college education is only 2.4%. So students have a good chance of finding a job, particularly if they’re looking for positions in one of the city’s top industries, such as the banking, food processing or bio-medical fields.

The Best Cities for Working Students in 2017

Methodology

To find the best cities for working students in 2017, SmartAsset found the unemployment rate (for workers with some college education or an associate’s degree) and the median rent for 232 U.S. cities with at least one four-year college or university. We also pulled the minimum wage for each of these places.

We took each of our three factors (the median rent, unemployment rate and the local minimum wage) and found the number of standard deviations each city rated above or below the mean. Then we totaled those values and created a single job score reflecting the strength of the job markets in all 232 major cities.

We also developed a score using the index from our study of the U.S. colleges offering the best bang for your buck (based on several factors including average starting salaries and the cost of college tuition). Whenever we had a city with multiple schools on our list of best value colleges, we looked at data for the local top-ranking school (based on our analysis).

Finally, we combined our job score with our college value score, giving the job score triple weight and the college value score full weight. We created our ranking by assigning each city a score between 0 and 100. The highest-ranking city for working students received a 100 while the lowest-ranking city for working students received a 0.

Note that in the 2016 edition of our analysis, we created our ranking by averaging our two scores. This year, we changed our methodology slightly to give more weight to our job-related factors.

Data Sources

Rent and unemployment data are based on one-year estimates from the U.S. Census Bureau’s 2015 American Community Survey. Minimum wage data is based on the appropriate city, state or federal minimum wage.

In some states, the minimum wage for large companies is higher. In these instances, we used the state’s lowest minimum wage (i.e. the minimum wage for small businesses). In states with a different minimum wage for small business employees with benefits, we used the minimum wage for employees without benefits. In the states with a minimum wage that’s below the federal threshold, we used the federal minimum wage.

The data analysis for this study was completed by Nick Wallace.

Questions about our study? Contact us at press@smartasset.com.

Photo credit: ©iStock.com/oneinchpunch

The post The Best Cities for Working Students in 2017 appeared first on SmartAsset Blog.

Source: smartasset.com

Should You Roll Your Student Loan Debt Into Your Mortgage?

More students have student loan debt, and their total debt is larger than ever before. Would it be worthwhile to roll student loan debt into a mortgage?

The post Should You Roll Your Student Loan Debt Into Your Mortgage? appeared first on Bible Money Matters and was written by Melissa. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.

Source: biblemoneymatters.com

75 Personal Finance Rules of Thumb

A “rule of thumb” is a mental shortcut. It’s a heuristic. It’s not always true, but it’s usually true. It saves you time and brainpower. Rather than re-inventing the wheel for every money problem you face, personal finance rules of thumb let you apply wisdom from the past to reach quick solutions.

I’m going to do my best Buzzfeed impression today and give you a list of 75 personal finance rules of thumb. Some are efficient packets of advice while others are mathematical shortcuts to save brain space. Either way, I bet you’ll learn a thing or two—quickly—from this list.

The Basics

These basic personal finance rules of thumb apply to everybody. They’re simple and universal.

1. The Order of Operations (since this is one of the bedrocks of personal finance, I wrote a PDF explaining all the details. Since you’re a reader here, it’s free.)

2. Insurance protects wealth. It doesn’t build wealth.

3. Cash is good for current expenses and emergencies, but nothing more. Holding too much cash means you’re losing long-term value.

4. Time is money. Wealth is a measure of how much time your money can buy.

5. Set specific financial goals. Specific numbers, specific dates. Don’t put off for tomorrow what you can do today.

6. Keep an eye on your credit score. Check-in at least once a year.

7. Converting wages to salary: $1/per hour = $2000 per year.

8. Don’t mess with City Hall. Don’t cheat on your taxes.

9. You can afford anything. You can’t afford everything.

10. Money saved is money earned. When you look at your bottom line, saving a dollar has the equivalent effect as earning a dollar. Saving and earning are equally important.

Budgeting

I love budgeting, but not everyone is as zealous as me. Still, if you’re looking to budget (or even if you’re not), I think these budgeting rules of thumb are worth following.

11. You need a budget. The key to getting your financial life under control is making a budget and sticking to it. That is the first step for every financial decision.

12. The 50-30-20 rule of budgeting. After taxes, 50% of your money should cover needs, 30% should cover wants, and 20% should repay debts or invest.

13. Use “sinking funds” to save for rainy days. You know it’ll rain eventually.

14. Don’t mix savings and checking. One saves, the other spends.

15. Children cost about $10,000 per kid, per year. Family planning = financial planning.

16. Spend less than you earn. You might say, “Duh!” But if you’re not measuring your spending (e.g. with a budget), are you sure you meet this rule?

Investing & Retirement

Basic investing, in my opinion, is a ‘must know’ for future financial success. The following rules of thumb will help you dip your toe in those waters.

17. Don’t handpick stocks. Choose index funds instead. Very simple, very effective.

18. People who invest full-time are smarter than you. You can’t beat them.

19. The Rule of 72 (it’s doctor-approved). An investment annual growth rate multiplied by its doubling time equals (roughly) 72. A 4% investment will double in 18 years (4*18 = 72). A 12% investment will double in 6 years (12*6 = 72).

20. “Don’t do something, just sit there.” -Jack Bogle, on how bad it is to worry about your investments and act on those emotions.

21. Get the employer match. If your employer has a retirement program (e.g. 401k, pension), make sure you get all the free money you can.

22. Balance pre-tax and post-tax investments. It’s hard to know what tax rates will be like when you retire, so balancing between pre-tax and post-tax investing now will also keep your tax bill balanced later.

23. Keep costs low. Investing fees and expense ratios can eat up your profits. So keep those fees as low as possible.

24. Don’t touch your retirement money. It can be tempting to dip into long-term savings for an important current need. But fight that urge. You’ll thank yourself later.

25. Rebalancing should be part of your investing plan. Portfolios that start diversified can become concentrated some one asset does well and others do poorly. Rebalancing helps you rest your diversification and low er your risk.

26. The 4% Rule for retirement. Save enough money for retirement so that your first year of expenses equals 4% (or less) of your total nest egg.

27. Save for your retirement first, your kids’ college second. Retirees don’t get scholarships.

28. $1 invested in stocks today = $10 in 30 years.

29. Inflation is about 3% per year. If you want to be conservative, use 3.5% in your money math.

30. Stocks earn 7% per year, after adjusting for inflation.

31. Own your age in bonds. Or, own 120 minus your age in bonds. The heuristic used to be that a 30-year old should have a portfolio that’s 30% bonds, 40-year old 40% bonds, etc. More recently, the “120 minus your age” rule has become more prevalent. 30-year old should own 10% bonds, 40-year old 20% bonds, etc.

32. Don’t invest in the unknown. Or as Warren Buffett suggests, “Invest in what you know.”

Home & Auto

For many of you, home and car ownership contribute to your everyday finances. The following personal finance rules of thumb will be especially helpful for you.

33. Your house’s sticker price should be less than 3x your family’s combined income. Being “house poor”—or having too expensive of a house compared to your income—is one of the most common financial pitfalls. Avoid it if you can.

34. Broken appliance? Replace it if 1) the appliance is 8+ years old or 2) the repair would cost more than half of a new appliance.

35. Used car or new car? The cost difference isn’t what it used to be. The choice is even.

36. A car’s total lifetime cost is about 3x its sticker price. Choose wisely!

37. 20-4-10 rule of buying a vehicle. Put 20% of the vehicle down in cash, with a loan of 4 years or less, with a monthly payment that is less than 10% of your monthly income.

38. Re-financing a mortgage makes sense once interest rates drop by 1% (or more) from your current rate.

39. Don’t pre-pay your mortgage (unless your other bases are fully covered). Mortgages interest is deductible, and current interest rates are low. While pre-paying your mortgage saves you that little bit of interest, there’s likely a better use for you extra cash.

40. Set aside 1% of your home’s value each year for future maintenance and repairs.

41. The average car costs about 50 cents per mile over the course of its life.

42. Paying interest on a depreciating asset (e.g. a car) is losing twice.

43. Your main home isn’t an investment. You shouldn’t plan on both living in your house forever and selling it for profit. The logic doesn’t work.

44. Pay cash for cars, if you can. Paying interest on a car is a losing move.

45. If you’re buying a fixer-upper, consider the 70% rule to sort out worthy properties.

46. If you’re buying a rental property, the 1% rule easily evaluates if you’ll get a positive cash flow.

Spending & Debt

Do you spend money? (“What kind of question is that?”) Then these personal finance rules of thumb will apply to you.

47. Pay off your credit card every month.

48. In debt? Use psychology to help yourself. Consider the debt snowball or debt avalanche.

49. When making a purchase, consider cost-per-use.

50. Make your spending tangible with a ‘cash diet.’

51. Never pay full price. Shop around and do your research to get the best deals. You can earn cash back when you shop online, score a discount with a coupon code, or a voucher for free shipping.

52. Buying experiences makes you happier than buying things.

53. Shop by yourself. Peer pressure increases spending.

54. Shop with a list, and stick to it. Stores are designed to pull you into purchases you weren’t expecting.

55. Spend on the person you are, not the person you want to be. I love cooking, but I can’t justify $1000 of professional-grade kitchenware.

56. The bigger the purchase, the more time it deserves. Organic vs. normal peanut butter? Don’t spend 10 minutes thinking about it. $100K on a timeshare? Don’t pull the trigger when you’re three margaritas deep.

57. Use less than 30% of your available credit. Credit usage plays a major role in your credit score. Consistently maxing out your credit hurts your credit score. Aim to keep your usage low (paying off every month, preferably).

58. Unexpected windfall? Use 5% or less to treat yourself, but use the rest wisely (e.g. invest for later).

59. Aim to keep your student loans less than one year’s salary in your field.

The Mental Side of Personal Finance

At the end of the day, you are what you do. Psychology and behavior play an essential role in personal finance. That’s why these behavioral rules of thumb are vital.

60. Consider peace of mind. Paying off your mortgage isn’t always the optimum use of extra money. But the peace of mind that comes with eliminating debt—it’s huge.

61. Small habits build up to big impacts. It feels like a baby step now, but give yourself time.

62. Give your brain some time. Humans might rule the animal kingdom, but it doesn’t mean we aren’t impulsive. Give your brain some time to think before making big financial decisions.

63. The 30 Day Rule. Wait 30 days before you make a purchase of a “want” above a certain dollar amount. If you still want it after waiting and you can afford it, then buy it.  

64. Pay yourself first. Put money away (into savings or investment accounts) before you ever have a chance to spend it.

65. As a family, don’t fall into the two-income trap. If you can, try to support your lifestyle off of only one income. Should one spouse lose their job, the family finances will still be stable.

66. Every dollar counts. Money is fungible. There are plenty of ways to supplement your income stream.

67. Savor what you have before buying new stuff. Consider the fulfillment curve.

68. Negotiating your salary can be one of the most important financial moves you make. Increasing your income might be more important than anything else on this list.

69. Direct deposit is the nudge you need. If you don’t see your paycheck, you’re less likely to spend it.

70. Don’t let comparison steal your joy. Instead, use comparisons to set goals. (net worth).

71. Learning is earning. Education is 5x more impactful to work-life earnings than other demographics.

72. If you wouldn’t pay in cash, then don’t pay in credit. Swiping a credit card feels so easy compared to handing over a stack of cash. Don’t let your brain fool itself.

73. Envision a leaky bucket. Water leaking from the bottom is just as consequential as water entering the top. We often ignore financial leaks (e.g. fees), since they’re not as glamorous—but we shouldn’t.

74. Forget the Joneses. Use comparisons to motivate healthier habits, not useless spending.

75. Talk about money! I know it’s sometimes frowned upon (like politics or religion), but you can learn a ton from talking to your peers about money. Unsure where to start? You can talk to me!

The Last Personal Finance Rule of Thumb

Last but not least, an investment in knowledge pays the best interest.

Boom! Got ’em again! Ben Franklin streaks in for another meta appearance. Thanks Ben!

If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

Source: bestinterest.blog

How to Pay Off Credit Card Debt Faster

I've received several questions from Money Girl podcast listeners about paying off credit card debt. It's a fundamental goal because carrying card balances come with high interest, a waste of your financial resources. Instead of paying money to card companies, it's time to use it to build wealth for yourself.

7 Strategies to Pay Off Credit Card Debt Faster

1. Stop making new card charges

If you're carrying card balances from month-to-month, it's essential to understand what it costs you. As interest accrues, it can double or triple the original cost of a charged item, depending on how long it takes you to pay off.

The first step to improving any area of your life is to acknowledge your mistakes, and financing a lifestyle you can't afford using a credit card is a biggie. So, stop making new charges until you take control of your cards and can pay them off in full each month.

As interest accrues, it can double or triple the original cost of a charged item, depending on how long it takes you to pay off.

Yes, reining in your card spending will probably require sacrifices. Consider ways to earn extra income, such as starting a side gig, finding a better-paying job, or selling your unused stuff. Also, look for ways to cut costs by downsizing your home, vehicle, memberships, or unnecessary expenses.

2. Consider your big financial picture

Before you decide to pay off credit card debt aggressively, look at the "big picture" of your financial life. Consider any other debts or obligations you should prioritize, such as a tax delinquency, legal judgment, or unpaid child support. The next debts to pay off are those already in default or turned over to a collection agency.

In many cases, not having a cash reserve is why people get into credit card debt in the first place.

Assuming you don't have any debts in default, focus your attention on your emergency fund … or lack of one! I recommend maintaining a minimum of six months' worth of your living expenses on hand. In many cases, not having a cash reserve is why people get into credit card debt in the first place.

3. Make more than the minimum payment

Many people who can pay more than their monthly minimum card payment don't do it. The problem is that minimums go mostly toward interest and don't reduce your balance significantly.

For example, let's assume your card charges 15% APR, you have a $5,000 balance, and you never make another purchase on the card. If your minimum payment is 4% of your card balance, it will take you 10½ years to pay off. And here's the worst part—you'd have paid almost $2,400 in interest!

4. Target debts with the highest interest rates first

Make a list of all your debts, including credit cards, lines of credit, and loans. Include your balances owed and interest rates charged. Then rank your liabilities in order of highest to lowest interest rate.

Getting rid of the highest interest debts first saves you the most.

Remember that the higher a debt's interest rate, the more it costs you in interest per dollar of debt. So, getting rid of the highest interest debts first saves you the most. Then you can use the savings to pay more on your next highest interest debt and so on.

If you have several credit cards, evaluate them the same way—tackle them in order of highest to lowest interest rate to get the most bang for your buck. And if a credit card isn't the most expensive debt you have, make it a lower priority.

In general, debts that come with a tax deduction such as mortgages, home equity lines of credit, and student loans, should be paid off last. Not only do those types of debt have relatively low interest rates, but when some or all of the interest is tax-deductible, they cost you even less on an after-tax basis.

5. Use your assets to pay off cards

If you have assets such as savings and non-retirement investments that you could use to pay down high-interest credit cards, it may make sense. Just remember that you still need a healthy cash reserve, such as six months' worth of living expenses.

If you don't have any or enough emergency money saved, don't dip into your savings to pay off credit card debt. Also, consider what you could sell—such as unused sporting goods, jewelry, or a vehicle—to raise cash and increase your financial cushion.

6. Consider using a balance transfer card

If you can’t pay off credit card debt using existing assets, consider optimizing it by moving it from higher- to lower-interest options. That won’t make your debt disappear, but it will reduce the amount of interest you pay.

Balance transfers won’t make your debt disappear, but they will reduce the amount of interest you pay.

Using a balance transfer credit card is a common way to optimize debt temporarily. You receive a promotional offer during a set period if you move debt to the account. By transferring higher-interest debt to a lower- or zero-interest card, you save money and use it to pay down the balance faster.

7. Consolidate your high-rate balances

I received a question from Sarah F., who says, “I love your podcast and turn to it for a lot of my financial questions. I have credit card debt and am wondering if it’s a good idea to get a personal loan to pay it down, or is that a scam?”

And Rachel K. says, "I love listening to your podcasts and am focused on becoming more financially fit this year. I have a couple of credit cards with high interest rates. Would it be wise for me to consolidate them to a lower interest rate? If so, will it hurt my credit?" 

Depending on the terms you’re offered, using a personal loan can be an excellent way to reduce interest and get out of debt faster.

Thanks to Sarah and Rachel for your questions. Consolidating credit card debt using a personal loan is not a scam but a legitimate way to shift debt to a lower interest rate.

Having an additional loan added to your credit history helps you build credit if you make payments on time. It also works in your favor by reducing your credit utilization ratio when you reduce your credit card debt.

If you qualify for a low-rate personal loan, here are some benefits you get from debt consolidation:

  • Cutting your interest expense
  • Getting a fixed rate and term (such as 6% APR for 60 months with monthly payments of $600)
  • Having one monthly debt payment
  • Building credit

A couple of downsides of using a personal loan to consolidate debt include:

  • Being tempted to continue making credit card charges
  • Having potentially higher monthly loan payments (compared to minimum credit card payments)

While it may seem counterintuitive to use new debt to get out of old debt, it all comes down to the interest rate. Depending on the terms you’re offered, using a personal loan can be an excellent way to reduce interest and get out of debt faster.

What should you do after paying off a credit card?

Credit cards come with many benefits, such as purchase protection, convenience, and rewards. Don't forget that they're also powerful tools for building credit when used responsibly. If maintaining good credit is one of your goals, I recommend that you keep a paid-off card open instead of canceling it.

You don't need to carry a balance from month to month or pay interest on a credit card to build excellent credit.

To maintain or improve your credit, you must have credit accounts open in your name, and you must use them regularly. Making small purchases charges from time to time that you pay off in full and on time is enough to add positive data to your credit reports. You don't need to carry a balance from month to month or pay interest on a credit card to build excellent credit.

To learn more about building credit and getting out of debt, check out Laura’s best-selling online classes:

  • Build Better Credit—The Ultimate Credit Score Repair Guide
  • Get Out of Debt Fast—A Proven Plan to Stay Debt-Free Forever

Source: quickanddirtytips.com