Equifax Data Breach: Settlement Options

In the fall of 2017, Equifax experienced a massive data breach. Approximately 147 million people were victims of this data breach. Recently a federal court has purposed a class action settlement. If you are part of this data breach, you are able to file a claim today.

Was I Part of The Equifax Data Breach?

You can check if you are part of the Equifax data breach by going to Equifax’s data breach settlement website. You will need to enter your last name and last six digits of your social security number. After entering in this information on the settlement site, it will say if you were or were not a victim of the Equifax data breach.

Can I File a Claim?

You can file a claim if you if you are a victim of the Equifax data breach. To file a claim go to the Equifax data breach settlement site mentioned above to verify your eligibility. If you were a victim, the website will take you to a screen where you can file a claim.

What are My Claim Settlement Options?

Victims of the Equifax data breach, you can select from the following options:

  • A one-time cash payment up to $125 (if you already have credit monitoring)
  • Free credit monitoring service for 10 years. Which includes $1 million in identity theft insurance, identity restoration services (for seven years), and options to add more monitoring from Equifax.
  • Exclude yourself from the Equifax settlement

You can file a claim for eligible for reimbursement for time spent recovering from this incident if you were a victim of the Equifax data breach. You can also request compensation for reimbursement for out-of-pocket expenses if you spent or lost money recovering from this incident.

Which Settlement Option Should I Pick?

A one-time cash payment of $125 sounds great, right? But the actual cash payment amount is expected to be much less. Equifax set aside $31 million for cash payouts. This means that if only 248,000 people select a cash payment, they will get the full $125. Don’t forget, there were 147 million affected by the Equifax data breach.

If you do the math and estimate 10% of the affected victims select the one-time cash payment, that is approximately $2.10 per claim. If 1 million people select the one-time cash payment, that is about $31 per claim.

Credit monitoring cost about $9 to $40 per month depending on the company you select and the credit-monitoring package. Estimating $15 a month for 10 years, this equals $1,800 – far more than a one-time cash payment of $125.

There has been a lot of publicity about the Equifax settlement. They are expecting a high rate of people filing claims. The FTC is warning victims not to expect the full one-time cash payment of $125.

What do you do if you have already selected the one-time cash payment but want to change to the credit monitoring option? You can contact Equifax to change your settlement option.

Changing Your Equifax Settlement Option

The Credit.com Editorial Team called the Settlement Administrator to find out. Settlement members can email Info@EquifaxBreachSettlement.com to change their settlement option. In the email to Equifax include the following information: your claim number, full name, and details about changing the settlement option. You only need to do this if you want to change your claim option.

Whichever selection you decide, make sure to do it before time runs out. You have until January 22, 2020 to file.

 Preventing Identity Theft

It may seem impossible to prevent your personal data, but there are steps you can take to be proactive. Here are some ideas:

  • Be mindful of what your share on social media. A data thief can find out a lot of information about a person on social media. Limit your exposure by limiting what you share and whom you share it with. Don’t give away your address, date of birth and mother’s maiden name on social media. Are you already doing this? It’s a good idea to check your security settings every so often.
  • Take outgoing mail to the post office or a collection box. When you mail your mortgage payment and put the flag up on your mailbox, it is an open invitation to thieves to come check your mailbox to see what they can find. You can put a stop payment on a stolen check but the thief now has your bank account and routing number, which is a much bigger issue. Go for online bill payments or dropping off at a secure location.
  • Keep your Wi-Fi secure. Make sure your home Wi-Fi is password protected. If you are using public Wi-Fi, be careful what information you enter and view while on a public browser as others could see this information.
  • Opt out of prescreened credit card offers. You can opt out for five years or permanently. If you go with the permanent option, you have to mail something in. The five-year option allows you to complete the request online. To opt out, go to optoutprescreen.com. This will also eliminate waste since you will not receive offers you are not interested in. Next time you are in the market for a new credit card, visit Credit.com’s Credit Card Marketplace to review top offers instead. It is a much easier way to compare various credit card offers.
  • Freeze your credit if you have been a victim of identity theft. Freezing your credit report makes it harder for a data thief to open an account in your name. You can place a fraud alert on your credit report by contacting the three credit bureaus – Experian, Equifax and TransUnion.

Final Thoughts

If you have been a victim of the Equifax data breach, or any other data breach, there are things you can to do to help prevent identity theft. Monitoring your credit report and credit scores are a very important part of preventing identity theft.

Make sure to review your personal data (bank accounts and other sensitive info), credit report and credit scores from the credit bureaus on a regular basis to help prevent identity theft. Consumers are entitled to a free credit every 12 months from AnnualCreditReport.com. You can also sign up with Credit.com to view your credit score. With Credit.com you get two credit scores every 14 days and a credit report card for free.

The post Equifax Data Breach: Settlement Options appeared first on Credit.com.

Source: credit.com

How to Buy a HUD Home at the Hudhomestore Website?

Using the Hudhomestore to buy a HUD home is easy.

If you’re looking to buy a HUD home, the Hudhomestore website is the best place to do it. It can be found here at hudhomestore.com. HUD homes are listed for sale at the site.

While anyone can buy a HUD home, you will need to get approved for a loan first.

Just like buying a house through the conventional route, all financing options are available for HUD homes. That includes conventional loans, FHA loans, VA loans, etc.

However, most people used an FHA loan to buy a HUD home due to its low down payment and credit score requirements.

If you have questions beyond buying a HUD home at the hudhomestore website, consult a financial advisor.

What is the Hudhomestore?

The hudhomestore is a website operated by the U.S Department of Housing and Urban Development (HUD). The website can be found here at hudhomestore.com.

Homes are listed there for sale after they have gone through foreclosures. Real estate agents and/or brokers can place bids on your behalf to buy a house.

What is a HUD home?

A HUD home (usually a 1 to 4 unit) is a property owned by HUD. Before a home became a HUD home, it was owned by a homebuyer who had purchased the home with an FHA loan.

Once the borrower stopped paying his or her FHA loan, the home went to foreclosures. Then the home goes to HUD and becomes a HUD home.

Why you should buy a HUD home at the Hudhomestore?

The benefits of buying a HUD home are huge. The main benefit is that most of these homes are priced below market value.

In addition, if you’re an EMS personnel, police officer, firefighter, or teachers, and live in revitalized areas and plan to live there for at least 36 months, HUD’s Good Neighbor Program offers HUD homes at a 50% discount.

This program is listed at the hudhomestore website.

In addition, HUD offers other perks such as low down payment and sales allowances you can use to pay for moving, repair and closing costs. The low down payment, that is on top of the FHA financing that you may be qualified for.

Another huge benefit of buying a HUD home is that HUD gives preferences to buyers who intend to live in the home for at least one year. So this puts you ahead of investors.

Are you qualified to finance a HUD Home?

All financing options, including conventional loans, VA, and FHA loans, are available when it comes to buying a HUD home.

But FHA loans are very popular among first time home buyers, due to its low requirements. But before you start searching for HUD homes through the Hudhomestore website, you should compare multiple loan offers so you can the best mortgage rates.

FHA loan requirements:

  • 580 Minimum score
  • 3.5% down payment

If your credit score is below 580, you can still be qualified but you’ll have to pay at least 10% down. Or, you can always take time to raise your credit score.

Don’t know what your credit score is, visit CreditSesame.

Our Review of Credit Sesame.

Steps to buy a HUD Home at the HUDhomestore website:

HUD homes can be hard to find if you don’t know where to look. In other words, they are not listed on conventional real estate websites such as Zillow or Redfin.

Instead, they are listed at the HUDhomestore webiste, which can be found at hudhomestore.com. They also have HUD Homestore Mobile Apps.

Knowing these steps is important to mastering one of the best strategies to buy a house at below market or wholesale prices.

Step 1: Shop and compare home loans

Before you start searching your house through the hudhomestore site, it’s a good idea to

The worst thing that can happen is to find a house that you like to then realize that you cannot secure a home loan.

To get the best mortgage rates, you need to compare multiple loan offers. Buying a home is major expense, and getting the best rates could save you a lot of money. I can spend a lot of time talking about why it is a bad idea to only speak with one mortgage lender.

But when it comes to having multiple loan offers, I highly suggest LendingTree.

LendingTree is an online platform that connects you to several mortgage lenders without visiting a dozen bank branches.

LendingTree will provide you up to 5 loan offers from multiple lenders for free, so you can compare and make sure you get the best deal.

So if you’re at this step right now, go and compare current mortgage rates for free at LendingTree, and come back to this article.

Our LendingTree Review.

Step 2: Finding a HUD Home at the HUDhomestore website.

To find a HUD home, simply go to the hudhomestore website. It can be found at hudhomestore.com.

There are three ways to find HUD homes on the hudhomestore website. The first way is through a map.

Once you on the website, you will see a map to the right with all of the states listed there. You simply look for your state and click on it to see all of the available HUD homes.

The hudhomestore site will show you a list of all of the HUD homes available for that particular state. It will include the photo of the HUD home, the address, the asking price, etc.

If you click on the photo of the house, you will be able to see more information of the property, including more photos, street views and information of the property.

Another way to find a house through the hudhomestore website is by clicking on the HUD Special program links.

The hudhomestore site specifically lists three HUD Special Programs: Good Neighbor Next Door; Nonprofits; $1 Homes-Government Sales. It specifically states on the hudhomestore website that if you click on any of these special programs, you will see available properties.

The third way to find a HUD home via the hudhomestore site is through the Search Properties. At the middle of the homepage, you will see a Search Properties where you can enter more detailed criteria.

Step 3: Buy your HUD home

Once you have found your desired HUD Home at the hudhomestore, it’s time to buy your HUD home.

But note that HUD homes are sold through an auction process. When you’re searching for the property through the hudhomestore site, it will tell you a deadline by which to submit your offer.

So if the deadline has not passed, submit your bid. Once it has passed, HUD reviews all offers. Just like any auction, the highest bid wins. If all of the offers are too low, HUD will extend the offer period and/or lower the asking price.

Note that you will not be able to place the bid yourself. Only real estate agents need to register to place bids on the hudhomestore website. You will need to find a real estate agent or you can specifically search for HUD registered agents at hudhomestore.com.

For more information on buying a home through the hudhomestore website, visit www.hudhomestore.com.

More on Buying a Home:

  • How to Buy a House: A Complete Guide
  • How Long Does It Take To Buy A House?
  • Buying a Home for the First Time? Avoid These Mistakes.
  • 10 First Time Home Buyer Mistakes to Avoid.

Work with the Right Financial Advisor

If you have additional questions beyond buying a HUD home at the Hudhomestore, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).

So, find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post How to Buy a HUD Home at the Hudhomestore Website? appeared first on GrowthRapidly.

Source: growthrapidly.com

Why Refinance Rates Are Higher Than Purchase Loan Rates

Mortgage interest rates dropped dramatically over the summer, to the point where home loans have never been cheaper in most of our adult lifetimes. With rates at historic lows, you might’ve considered taking advantage of them, either by purchasing a new home or refinancing your current mortgage.

Recent figures from Freddie Mac show that mortgage refinances surged in the first quarter of 2020, with nearly $400 billion first home loans refinanced. However, as it turns out, refinancing your mortgage might actually be more expensive than purchasing a new home. 

This surprised us, too — why would there be a difference at all? 

We investigated how refinancing rates and new purchase home loan rates are set, and found several reasons for this rate disparity. On top of the rate difference, mortgage refinancing is even more difficult to qualify for, given the current economy.

Before rushing to refinance your home, read on to gather the information you need to make the right financial decision for your situation.

Pandemic Effects on Home Lending

Just as mortgage rates have stumbled, banks and lenders have tightened the screws on borrowers due to COVID-19, requiring higher credit scores and down payment amounts. Chase, for example, raised its minimum FICO score requirements for home purchases and refinances to 700 with a down payment requirement of at least 20%. 

Low rates have also driven a massive move to mortgage refinances. According to the same Freddie Mac report, 42% of homeowners who refinanced did so at a higher loan amount so they could “cash out.”

Unfortunately, homeowners who want to refinance might face the same stringent loan requirements as those who are taking out a purchase loan. Mortgage refinance rates are also generally higher than home purchase rates for a handful of reasons, all of which can make refinancing considerably less appealing. 

How Refinance Rates Are Priced

Although some lenders might not make it obvious that their refinance rates are higher, others make the higher prices for a home refinance clear. When you head to the mortgage section on the Wells Fargo website, for example, it lists rates for home purchases and refinances separately, with a .625 difference in rates for a thirty-year home loan. 

There are a few reasons why big banks might charge higher rates to refinance, including:

Added Refinance Fees

In August of 2020, Fannie Mae and Freddie Mac announced it was tacking on a .5% fee on refinance mortgages starting on September 1. This fee will be assessed on cash-out refinances and no cash-out refinances. According to Freddie Mac, the new fee was introduced “as a result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty.”

By making refinancing more costly, lenders can taper the number of refinance loans they have to process, giving them more time to focus on purchase loans and other business.

Lenders Restraining New Application Volume

Demand for mortgage refinancing has been so high that some lenders are unable to handle all requests. Reluctant to add more employees to handle a surge that won’t last forever, many lenders are simply limiting the number of refinance applications they process, or setting additional terms that limit the number of loans that might qualify.

Also note that some lenders are prioritizing new purchase loans over mortgage refinance applications since new home buyers have deadlines to meet. With the housing market also on an upswing in many parts of the country, many major banks and lenders simply can’t keep up.

Rate Locks Cost Money

Generally speaking, it costs lenders more to lock the rate for refinance loans when compared to purchase loans. This is leaving lenders disinterested in allocating resources on the recent surge in mortgage refinance applications.

This is especially true since many refinancers might lock in a rate with one provider but switch lenders and lock in a rate again if interest rates go down. Lenders exist to turn a profit, after all, and it makes sense they would spend their time on loans that provide the greatest return.

Tighter Requirements Due to COVID-19

According to the Brookings Institute, Fannie Mae and Freddie Mac have been asking lenders to make sure any disruption to a borrower’s employment or income due to COVID-19 won’t impact their ability to repay their loan. 

Many lenders are also increasing the minimum credit score borrowers must have while making other requirements harder to meet. As an example, U.S. Bank increased its minimum credit score requirement to 680 for mortgage customers, and it also implemented a maximum debt-to-income ratio of 50 percent.

This combination of factors can make it difficult to save as much money with a refinance, or to even find a lender that’s willing to process your application. With this in mind, run the math and to see if refinancing is right for your situation before contacting a mortgage lender.

How Mortgage Purchase Rates Are Priced

Mortgage purchase rates are priced using a similar method as refinance rates. When you apply for a home mortgage, the lender looks at factors like your credit score, your income, your down payment and your other debt to determine your eligibility.

The overall economy also plays a giant role in mortgage rates for home loans, including purchase loans and refinance loans. Mortgage rates tend to go up during periods of speedy economic growth, and they tend to drop during periods of slower economic growth. Meanwhile, inflation can also play a role. Low levels of inflation contribute to lower interest rates on mortgage loans and other financial products.

Mortgage lenders can also price their loans based on the amount of business they have coming in, and whether they have the capacity to process more loans. They might lower rates to drum up business or raise rates when they’re at or nearing capacity. This is part of the reason rates can vary among lenders, and why it always makes sense to shop around for a home loan.

Many people believe that the Federal Reserve sets mortgage rates, but this is not exactly true. The Federal Reserve sets the federal funds rate, which lenders use to ensure they meet mandated cash reserve requirements. When the Fed raises this rate, banks have to pay more to borrow from one another, and these costs are often passed on to consumers. Likewise, costs can go down when the Fed lowers the federal funds rate, which can mean lower costs and interest rates for borrowers.

The Bottom Line

Refinancing your existing mortgage can absolutely make sense in terms of interest savings, but don’t rule out buying a new home instead. Buying a new home could help you save money on interest and get the space and the features you really want. 

Remember, there are steps you can take to become a more attractive borrower whether you choose to refinance or invest in a new place. You can’t control the economy or the Federal Reserve, but you have control over your personal finances.

Improving your credit score right away, and paying down debt to lower your debt-to-income ratio are just a couple of strategies to start. And if you’re planning on buying a new home, make sure you save a hefty down payment amount. These steps help you improve your chances at getting the best rates and terms whether you choose to move or stick with the home you have. 

The post Why Refinance Rates Are Higher Than Purchase Loan Rates appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Marital Debt After Divorce: Who is Responsible?

The average couple has a number of topics to discuss on their to-do list before heading to the altar. The least romantic topics, if they even make the list at all, are probably concerning debt and the possibility of divorce. If you foresee a divorce in your future or are currently going through one, it’s safe to say that you have some burning questions about your finances. Perhaps you and your spouse acquired some debt during the course of your marriage and you’re now wondering who is going to be responsible for what. While it’s important to note that each situation is unique, there are some ground rules in the Divorced with Debt arena. In the below sections, we’ll address the usual ways in which debt is divided up between each spouse.

Community Property vs. Common Law Property Rules

If you’re trying to figure out what debts you will be responsible post-divorce, you will first need to know if you live in an equitable distribution state that follows common law or if you live in a community property state. When it comes to debt and the divorce process, most states follow common law for property, meaning that following a divorce, each ex-spouse will be held responsible for the debt that they took on. In a community property state, both spouses, considered to be the “community,” may both end up equally responsible for debt that incurred throughout the marriage, known as “community debt.” The following states are Community Property States:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Most of the time, the banks aren’t interested in how the courts decide to split up your debt. Even after a divorce, the original contract or credit card agreement will typically overrule a divorce decree. This means that if the original agreement was set up under your spouse’s name, the banks are going to expect the payments to be as such. As you can imagine, this could potentially cause problems with an ex-spouse who is being asked to pay off debt that is not under their name, or at least under a joint account.

To put it into perspective, let’s imagine that the court orders your ex-spouse to make payments on credit card debt under your name. If your ex neglects to make the payments on time, it’s going to have an effect on your credit report. The good news is that if this happens, you have a right to pursue legal action against your former spouse for not following court orders. However, it’s possible that by the time legal action is taken, your credit score may already be damaged.

Prenuptial agreements will affect these outcomes as well. Depending on yours and your spouse’s marital assets, the debt in question will vary. Here are the typical categories of debt that are affected during divorce proceedings:

  • Credit Card Debt
  • Mortgage Debt
  • Auto Loan Debt
  • Medical Debt

Credit Card Debt

It’s possible that you could be responsible for your former spouse’s credit card debt, but it’s not likely. If you have a joint account, then the outcomes may vary. Usually, marital debt is considered to be any debt that was created during the time of the marriage. So if you racked up credit card debt under a joint account, expect that both of you will be equally responsible for paying it off.

Mortgage Debt

If both spouses have their names on the mortgage, the easiest way of solving the mortgage debt is to sell the house and divide the earnings between both parties. It might be tempting to keep the home for a multitude of reasons, but at the end of the day, selling the property and splitting the money is usually the least complicated solution for everyone involved.

Once the house is on the market, it’s time to start communicating with your former spouse about who is going to be responsible for what amount. Come up with an agreement on who will pay which portion of the mortgage, so that neither parties’ credit score is negatively affected.

If selling the home and dividing the earnings isn’t a viable option for you and your ex, then one of you will end up fully responsible for the debt. In most cases, mortgage debt following a divorce is assigned to:

  • The spouse with the higher annual income.

OR

  • The spouse who gains full custody of the children.

When this happens, one spouse will have to buy out the other spouse’s equity in the property.

Car Loan Debt

When it comes to car loans, things become more complicated. If the car loan has both names on it, here are the two best options:

  • Refinance the car without your ex.
  • Propose automatic payments to come directly from your former spouse’s account.

Let’s say one person ends up with the car loan debt, but the other person was also on the loan as a cosigner. Unfortunately, if one spouse is held responsible for picking up the tab on a debt, and they neglect their payments, both parties can suffer those consequences.

Medical Debt

Each state has different laws surrounding medical debt and divorce agreements. If you live in a Community Property state, you might have to pay for your former spouse’s medical debt. However, if you live in a state that follows common law, the court will ultimately make the decision about who is responsible for what debt.

Pay off your debt before the divorce is finalized

 If you and your spouse can find a way to work out the kinks of your debt issues before the divorce is finalized, it’ll make things a lot easier in the long run. Work together to figure out who should be responsible for which debt, so that you can lower your chances of having to pay off a debt that isn’t yours.

If you’re working with credit card debt, one of you may need to transfer your credit card balance to a separate card. Consolidating your credit card balances is another common option when dividing debts.

Generally, credit card debt is going to be easier to deal with than the big things, like home loans and car loans. In many cases, couples who are going through a divorce will have to consider refinancing their loans under one party’s name.

Keep in mind that the original loan agreement supercedes the divorce agreement, so if you wait until your divorce is finalized, you might have a harder time moving things around. You can ask your lender to take your name off of an account and have it replaced with your former spouse’s name, but be prepared to provide the divorce decree as evidence. If it doesn’t work out this way, then seek legal advice from your divorce attorney about your options. Another common solution is to sell the asset in question and use the earnings to pay off the debt.

How your former spouse’s bankruptcy can affect you

If your ex-spouse isn’t able to keep up with the payments on their share of the debt, they might decide to file bankruptcy. This could cause problems for you if you didn’t choose to file as well.

Filing for bankruptcy does not erase the debts, instead it erases your ex-spouse’s liability for the debt. In this instance, you could find yourself in a situation where the creditor is now pursuing you for the debt. It’s also important that you check your credit report. Even if you weren’t the one who filed bankruptcy, it could still end up on your credit report.

Be cautious about any joint accounts you may still have open post-divorce. If you leave joint accounts open and your former spouse has access to them, he or she could potentially transfer balances from other accounts onto those ones. Safeguard your credit by paying off any debts you can manage to pay off ahead of time, so that you don’t have to worry about it later.

Marital Debt After Divorce: Who is Responsible? is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

Dave Ramsey’s Baby Steps Explained

Whereas Dave Ramsey’s Baby Steps have often been dissected one at a time, my goal in this post is to give an overview of the steps as a unit and explain why the order is essential.

dave ramsey baby steps explained

Hopefully, these steps can help you create a focused life plan for your finances, regardless of your age or financial well being.

First, the Baby Steps:

  • Step 1: $1,000 in an emergency fund.
  • Step 2: Pay off all debt except the house utilizing the debt snowball.
  • Step 3: Three to six months of savings in a fully funded emergency fund.
  • Step 4: Invest 15% of your household income into Roth IRAs and pre-tax retirement plans.
  • Step 5: College Funding
  • Step 6: Pay off your home early.
  • Step 7: Build wealth and give.

The Power of Focus

Dave’s premise with the Baby Steps is that people can accomplish great things IF they can just be focused. When you read over these seven steps, you think, “Yes. I need to be saving. But I also need to be investing for retirement. I should get my house paid off early. But I also need to be getting out of debt and saving for my kid’s college.”

You would readily agree that all of these goals are important for successful financial planning. The problem is that your stress level kicks into overdrive with the prospect of doing them all. You clench your jaw and do what you are capable of doing while feeling anxious about the goals you place on the back burner.

The Baby Steps plan works because when you stay focused on one step at a time, you can knowingly put some important goals on hold without the nagging feeling that you are leaving something undone.

You can also check out my YouTube video where I break down each of Dave’s Baby Steps here:

Why?

Because accomplishing each step puts you in a great position to accomplish the next one.

You begin to feel an empowerment and a sense of control as you get one step behind you and start the next one. You are making progress instead of treading water.

Why Are the Baby Steps in the Order They Are In?

Dave Ramsey's Baby Steps

Steps 1 and 2: $1,000 Emergency Fund and Debt Snowball

Notice that Steps 3 through 7 are all about using your money to do something positive for you and your family. Of course this money comes from your income, but the problem with most of America is that we are using our income on debt payments.

Because we are paying others instead of ourselves, we need to get rid of our debt (Step 2) in order to free up our income for Steps 3-7.

Ask yourself,

“What if I could use all the money I am currently paying to creditors to start “paying myself”?

For many people this is $1,000 to $3,000 a month.

Baby Step 2 debt snowball is designed to do just that. Step 1 is necessary before Step 2 because you don’t want to start paying off debt without having a small cushion to absorb the little unplanned expenses that will occur during Step 2.

Step 3: 3 to 6 months of Savings

After completing the first two steps, you are out of debt (except for your house) and now have that cash flow you dreamed about: all of the money you used to pay others is at your disposal. The temptation is to start investing for retirement or saving for your kid’s college or pay off your house early.

NOT SO FAST! You will get to those, but doing so prematurely is way too risky.

Stop, take a deep breath and use that cash flow to build up your emergency fund so you will indeed be ready for emergencies. This fund needs to be liquid (in a top savings account or money market account).

If you skipped the step and started any of the ensuing steps, how would you handle emergencies? Pull money from your retirement account? Rob the kid’s college savings? Borrow money against your house? All bad ideas.

Step 3 is therefore always ahead of the following steps

Steps 4, 5, and 6: Saving for Retirement, College Funding, Pay Off Home

dave ramsey baby steps

You may be asking,

“Why is retirement ahead of college funding? Wouldn’t a good parent put his children ahead of himself?”

Good question. But what if you end up without sufficient retirement income because you made college funding a higher priority? Who will you be depending on in your later years? Your kids!

The thing about retirement planning is that you only get one shot at it. The years go by and you will someday be retirement age. You don’t have a choice. On the other hand, college funding is full of choices: kids can get scholarship, they can work, they can attend community colleges, they can find work/co-op programs, etc, etc.

Step 4 is therefore ahead of step 5. But notice that Step 4 is 15% of your income. If you have cash flow greater than 15% you can apply that to college funding immediately, and if you have more than enough cash flow to accomplish both steps 4 and 5, you can use all of the extra to pay off your house early (step 6).

Note that Step 6 comes behind retirement and college funding because reversing the order could possibly give you a paid for house at the expense of a dignified retirement or helping your kids through college. Most of us wouldn’t want that.

Not sure where to start investing for retirement? Here are some tips:

  • Best Places to Open a Roth IRA – Figuring out where to start investing your 15% of income can be confusing. A great place to start is a Roth IRA, but deciding a broker is confusing. This list will help you pick the best broker for your Roth IRA.
  • Best Online Stock Broker Sign Up Bonuses – You can get hundreds of dollars or thousands of airline miles just for opening up a brokerage account.
  • Beginner Investing Strategies – If you’ve never invested before it can be overwhelming. This list breaks down getting started into manageable pieces.

Step 7: Build wealth and give.

Life is now very good! You have no debt, a great emergency fund, and a paid for house. All of the cash flow that used to go toward debt reduction and house payments is now at your disposal.

This, by the way, is the step Mandy and I are on. Being semi-retired, we don’t have a huge income, but it is very sufficient because we also don’t have any debt. We continue to invest every month and we are able to give more than we have ever given before.

Once we got our house paid off, we started to budget “bless” money, which we put into an envelope every month just to have available so we can bless others as we see the needs. We are also able to help our grown daughter and daughter-in-law cash flow their college.

As I said, life is good. Mandy and I are experiencing great financial peace and we are very grateful for Dave Ramsey’s Baby Steps.

I wish the same for you.

This article is a general overview of what Dave Ramsey has to offer and is not intended to replace his course, nor is this sponsored or endorsed by Dave Ramsey or the Lampo Group.

The post Dave Ramsey’s Baby Steps Explained appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

3 Ways to Beat Debt Burnout

3 Ways to Beat Debt Burnout

Paying off debt with “gazelle intensity” is a great way to get rid of debt quickly. Cutting your budget to a nearly bare-bones level and working hard to increase your income, speed up debt payments and save up for retirement will help you make great progress on your financial goals, but most people can only live on a strict budget for so long before they begin experiencing debt burnout.

Find out now: How much do you need to save for retirement?

What is Debt Burnout?

Burnout is feeling exhausted with your day-to-day routine or the lack of flexibility in your budget. Some people get tired of not having extra money in their food budget to go out to eat occasionally or buy a wider variety of foods at the grocery store. Others grow tired of having little to no budget for entertainment and fun. Burnout leaves you feeling fatigued, frustrated and ready to give up on your debt-free dreams.

Beating Debt Burnout

After you’ve diagnosed yourself with debt burnout, it’s important to take immediate steps to correct it so you don’t end up un-doing all the progress you’ve made toward paying off your debt. The steps to beating burnout don’t have to be drastic. It’s possible to do it by making a few simple adjustments.

1. Reassess Your Budget

After you’ve paid down some of your debt, it’s common to start feeling some burnout from the lack of flexibility in your budget. This may be a good time to reassess your budget and perhaps give yourself a little more money for things you enjoy, like increasing how much you spend on entertainment or giving yourself a little more money for going out to eat with friends and family. This may decrease the amount of money going to debt payments, but that’s better than getting burnt out and going on a crazy credit card shopping spree down the road.

2. Plan a Fun Trip or Event

While your family is paying off debt, it’s common to give up all vacations, trips and fun events. But when you start experiencing debt burnout, planning for one of these events is a great way to stay motivated and give your family something to look forward to. The trip or event doesn’t have to be a huge and expensive ordeal. Even a short day or weekend trip is something to look forward to when you are living on such a tight budget. Try planning for when you hit a milestone – paying off half of your debt or even for when the whole thing is paid off.

3. Find Some Support

When you start to feel burnt out and unmotivated to continue your debt payoff journey, seeking out an accountability partner is a great way to help you stay on track. Single people can especially benefit from having someone to confide in and bounce ideas off of. But even couples and families can use the outside perspective of an accountability partner to help them keep focused on their financial goals and beat debt burnout.

Debt burnout is a real thing that many people struggle with as they work their way out of debt. The more debt you have to begin with and the longer the time frame for paying it off, the more likely it is that you’ll face burnout at some point.

Find out now: Should I get a fixed or adjustable rate mortgage? 

What other ways can you think of to help beat debt burnout?

Photo credit: flickr

The post 3 Ways to Beat Debt Burnout appeared first on SmartAsset Blog.

Source: smartasset.com

Should you get a corporate credit card?

Whether your employees fly a lot and need a card to reserve plane tickets or they purchase lumber or office supplies for the company at the store, getting them a company credit card is often a great way to keep track of expenses and make it easy for them to purchase what’s needed.

For many entrepreneurs, a small business credit card is the best solution. Many are designed to reward the types of purchases that employees typically make in a small firm.

However, for larger small businesses, getting a corporate credit card, like the ones big corporations issue to employees, often makes sense.

See related: How to get a business credit card

What is a corporate credit card?

Corporate cards are generally available only to larger small businesses, meaning those with at least several million dollars in annual revenue. A company may have to submit a federal tax ID and undergo an audit of its financials to qualify.

For example, the One Card from Capital One requires its users to have a minimum annual card spend over $1 million. Cards are issued to the company itself (rather than any individual) and require that you submit your tax ID and require an audit of company financials before approval.

Similarly, the One Card from J.P. Morgan is available to businesses that spend between $1 million and $9.9 million per year. The bank can also match companies that spend $20 million or more on travel with corporate credit cards.

Once an account has been opened, the company is responsible for paying the balance in full each billing cycle and managing spending of each cardholder. However, it is also the company that reaps any rewards the card may include, including statement credits or travel perks. In the case of the One Card from Capital One, businesses earn competitive rewards up to 1.5X net purchases.

Corporate credit card pros and cons

The biggest perk attached to corporate cards is the ease of tracking employee spending. Rather than having employees make personal charges and submit expense reports or receipts for reimbursement, the company can easily manage spend limits, track budget needs and manage fraud risk. Most corporate cards offer detailed analytics all in one system about where and how company money is being spent.

Since these cards are sometimes more complex, corporate cards often come with their own designated customer service representative who can help resolve any issues quickly. These representatives are usually on-call 24/7 and have an intricate knowledge of each company’s individual needs.

Pros

  • Simplified tracking and analysis of work-related purchases
  • Benefits and rewards help the company directly
  • Dedicated or on-call customer service representative
  • Prevents employees from trying to make personal charges on a company card with clearer visibility and better spending controls than most business cards

Cons

  • Additional cardholder fees can add up quickly
  • Not an option for smaller companies
  • Tough application process
  • Employees can’t earn their own rewards by using a personal card and getting reimbursed

See related: Managing employee cards on your credit card account

How corporate cards differ from small business credit cards

Both corporate and small business cards offer conveniences such as the ability to set limits on employees’ spending and to restrict spending to certain categories. Most also offer features that make it possible to track expenses easily.

However, corporate cards come with certain benefits that small business cards don’t offer – and vice versa.

Availability

Unlike corporate credit cards, business cards are available to any-sized business – even entrepreneurs just getting started on their own. The application process is much less intensive and usually doesn’t require an audit of company finances.

Responsibility for the debt

Business cards are issued to an individual and the company (unless it is a sole proprietor), and even if additional cards are added for employees, the business owner is responsible for managing payments.

Typically, a small business owner must personally guarantee a small business card, though some small business cards come with joint and several liability, where the owner shares liability with the business. With joint and several liability, a creditor can pursue either the business or the owner for a debt.

With most corporate cards, the company is generally liable for the debt on employees’ cards, which is a big advantage in many owners’ eyes. When the company guarantees the debt, the owner is not held responsible if, for instance, the company fails without paying its bills.

Some corporate cards also offer what’s known as individual liability. That means the employee must stay current on paying the bill in the short term and request reimbursement upon filing an expense report. This is less common than it used to be. It’s not necessarily ideal for employees, who may not have the cash available to pay for large charges until their expense report is processed.

Credit CARD Act doesn’t apply to business or corporate accounts. But many card issuers grant those CARD Act protections anyway, as a matter of practice. Nevertheless, don’t take anything for granted. Before using your corporate or business card, familiarize yourself with its rules.

Credit impact

While corporate cards are typically used for work-related travel and accommodation, business cards can be used to make all sorts of work purchases, including supplies or merchandise. This allows even small businesses to build a great credit profile. By using a business card to make larger payments, business owners can avoid racking up charges on their personal credit cards while steadily building their business credit.

With small business cards, employees are considered authorized users. As a result, their card activity may be reported to credit bureaus.

For some employees, this is a drawback. For instance, if they have put expenses from a costly business trip on their card, they may find their credit utilization is high enough to affect their personal credit. That could be a problem if, for instance, they are applying for a mortgage.

In contrast, with a corporate card, card usage does not affect employees’ personal credit. That is a big plus from an employee’s point of view.

See related: Should I wait until my business is more established to get a credit card?

Cost

Small business credit cards tend to have fewer fees, including no additional charge for employee cards with cards such as Capital One Spark Cash for Business the Ink Business Unlimited® Credit Card from Chase.

Corporate cards generally charge for this and may charge as much as $100 a year or more. This is because they often offer more robust features, like access to a specific sales rep or access to enterprise software for filing expense reports.

Of course, if you run a larger small business, the extra benefits may be worth it. It all depends on the needs of your business.

Should you get a corporate card for your business?

While corporate cards offer a wide range of great benefits such as easy expense tracking, dedicated customer service representatives and no liability for individual employees, they are typically only available to large corporations with millions in annual revenue.

If you own a small business, a business credit card can help steadily build a credit history for your company. Business cards can also help you make large purchases to pay off over time.

Source: creditcards.com