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Tips You Can Use to Recover From Debt

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When it comes to debt, finding out where to start can be one of your biggest hurdles. Your debt recovery time depends on how much debt you’ve incurred, how long that debt has been building, and the type of debt. There are many different types of debt. Some are easier to manage, while others can drown you. The good news is that recovering from debt doesn’t need to be a scary process. All it takes is some dedicated money management and budgeting.

Balancing Repayments With Living Costs

While it’s tempting to repay as much debt as you can monthly, there may be one area that can be forgotten. According to the Office of Efficiency and Renewable Energy, the average household spends $1,945 a year on heating, cooling, appliances, electronics, and lighting. This number can vary depending on home size and area of residence.

These are costs that can not be left out of your budget. When creating a budget for your debt, all potential costs need to be included. This way you can budget out living expenses, including food, along with your debts. This process will let you know if there are any months where you have more funds that can be set aside for savings or that can go towards a higher-than-normal debt payment. Getting out of debt shouldn’t come with the thought process that you can’t spend any money on yourself. Finding some way to treat yourself and saving towards that goal is a good way to reward yourself for knocking down significant amounts of debt.

Don’t Make Minimum Payments

While making minimum payments can seem like an attractive tactic to balance out your living expenses, in the long run, you’re hurting yourself. Making the minimum payment means that by the end of paying off your loan or line of credit, you will have paid significantly more than the initial money that you spent. Interest rates are stacked each month. Depending on your interest rate, these percentages can be excessively high.

If you have multiple sources of debt, create a spreadsheet. This way, you can easily see the full balances, interest rates, and payment dates. This is an easy way for you to look at it and make decisions about how much of your monthly budget will be put toward that particular debt. While you may have to tighten your belts in other areas for a little while, getting rid of high-interest-rate debts is in your best interest.

Pay on Time

This should go without saying, but making your debt payments when they are due is a must. While not all forms of debt come with late payments, many of them do. You also run the risk of being taken to a collection. All of this will damage your credit score and can prevent you from getting a home or a car in the future.

Know Your Options

If you’re struggling with debt, there are ways to help you repay it. For example, if you are left paying large amounts of money for an injury, you can take the other party to court. Typically, these amounts aren’t worth the effort that it takes to go to trial and 95% are settled outside of court. If you’ve wracked up a significant amount of medical bills, many hospitals offer reduced rates and payment plans for those who qualify.

Debt can also be consolidated. When you consolidate your debt, all debts are combined usually at a lower interest rate. This can make it easier to pay down significant amounts of debt with less penalty for yourself.

Overall, you have a few different options when you are facing debt. It’s important to do research to see how you can make savings in your everyday life. For example, a new asphalt shingle roof can give you a 62% ROI. Follow these tips if you’re facing debt.

What Is Indebtedness And How Do I Avoid It?

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What Is Indebtedness And How Do I Avoid It

Many people have heard that indebtedness can lead to financial troubles. But what exactly is indebtedness, and how do you avoid it? Fortunately, the concept of indebtedness is pretty easy to understand. Additionally, it’s possible to prevent indebtedness – or keep it manageable – with some planning. If you’re wondering what indebtedness is and how to avoid excessive debt, here’s everything you need to know.

What Is Indebtedness?

In the simplest sense, indebtedness is the state of owing something to someone else. Traditionally, people use indebtedness to describe financial debts, such as credit cards, loans, or mortgage balances. However, it can also apply to the sense of owing someone for doing you a favor, leading you to feel obligated to return that favor in kind at a future date.

For the purposes of this article, the focus is on traditional financial indebtedness, primarily involving owing a lender based on previously borrowing money. Often, that form of indebtedness creates the biggest challenges for households, so it’s wise to have a plan for avoiding it specifically.

How to Avoid Indebtedness

Have a Dedicated Emergency Fund

When it comes to avoiding monetary debt, your best starting point is to build an emergency fund. This allows you to have some cash set aside to deal with the unexpected, ensuring you don’t have to turn to credit cards or loans to cover a cost that catches you off guard.

If you don’t have anything set aside for emergencies, make $1,000 your first target. Usually, that’s enough to cover a vehicle, renter’s, or homeowner’s insurance deductible, ensuring you aren’t struggling should an accident, fire, or similar incident occur. Plus, it can cover a wide array of other emergencies, such as an unplanned medical bill, car repair, or appliance breakdown.

Once you have $1,000 set aside, work on increasing the balance of that savings account. Build up to one month of household expenses, then shift up to three months. That can help you weather larger emergencies or a short period of unemployment.

When you gather up three months of expenses, you can choose a new target. Some people feel most comfortable with six or 12 months of household costs, as that can cover major emergencies or an extended period of unemployment.

Whenever you tap into your emergency fund, focus on building it back up once the situation resolves. That allows you to restore this critical cushion, making it easier to avoid indebtedness long-term.

Create a Reliable Budget

In some cases, debt is generated because households don’t plan for their spending needs. As a result, they overspend during the month, having little choice but to turn to credit cards or loans to cover any remaining expenses until their next payday.

By having a reliable, formal budget, you have a spending roadmap. You know how much it takes to cover your bills and debt payments, as well as handle costs relating to food, gas, utilities, and more.

Often, the easiest way to start is to review your spending habits over the past several months. That allows you to determine how much you’re spending in various categories. Then, create a simple list – ordering debts and other costs by their due date – and outline how much of your income needs to go to that expense.

If you have money left over, commit some of it to savings. Additionally, it’s wise to include “fun money” in your budget, giving yourself a small amount that you can use as you please for entertainment, items that are wants instead of needs, and similar purchases.

Make Saving Automatic

Since having money in savings can help you deal with emergencies or plan for larger upcoming expenses – such as home repairs, vehicle down payments, future appliance replacements, and more – making your savings routine automatically works in your favor. By automating your savings, you ensure that you don’t accidentally forget to move that money into the proper account.

Designate a specific amount from each paycheck that needs to go to savings. Then, set up a recurring, automatic transfer for the day your pay arrives (or the following business day if payment delays may occur). That ensures your money is moved in accordance with your plan without you having to physically manage the transfer every single payday.

In most cases, you can set up several transfers to different accounts every month. As a result, you can move cash into several accounts, allowing you to divide up the money based on individual savings goals.

Adopt a Cash-First Mindset

In some cases, using credit cards or loans to pay for various items feels like a quick, convenient option. However, the more debts you acquire, the harder they typically are to manage. Even if the monthly payments are reasonable, you’ll have more due dates to juggle. Plus, if you experience financial hardship or underestimate what you’re currently paying, you could quickly find yourself in over your head.

Additionally, debts typically come with interest payments. As a result, you’re spending far more by financing a purchase than if you used cash. If you rely on cash instead, you’ll have more money to direct to other goals or needs, including saving for retirement, a college education, a home, and more.

Instead of relying on debt, adopt a cash-first mindset. Make it a goal to use as little borrowed money as possible. For example, instead of financing an entire vehicle purchase, at least prepare a sizeable down payment in advance. That ensures you can keep the loan as small as possible.

Similarly, resist the urge to use a credit card to cover the cost of want if you can’t pay off the balance in full right away. While it could mean delaying a purchase, it saves you a significant sum in the long run.

Use the 72-Hour Rule

With the 72-hour rule, you don’t purchase any spur-of-the-moment wants right away. Instead, you wait for 72 hours after learning about the item before deciding if you’ll ultimately buy it.

The delay allows any immediate emotional reaction that can come from initially seeing a product to dissipate, allowing you to look at the purchase more realistically. In many cases, you’ll determine that moving forward with buying the item isn’t actually a smart move, allowing you to walk away. However, if you still want it, it can make you more confident about your decision.

This strategy isn’t just helpful when it comes to items you’re thinking about financing; it can apply to cash purchases, too. By using it at all times, you avoid spending money in a way you might regret later, allowing you to focus your spending on items that are more likely to be beneficial.

Pay More Than the Minimum

If you can’t pay the debt off in full right away, it’s wise to put forth an extra effort to knock down the balance quickly. Unless there is a stiff penalty for paying off a debt early, work to pay more than the minimum payment on at least one debt. Ideally, you want to focus on the debt that has the highest interest rate. By doing so, you can reduce the amount of interest you’ll need to pay over the life of that debt dramatically, resulting in financial gain.

Once you tackle the highest interest debt, you can move on to the one that now has the highest interest rate. Continue working through your obligations in this manner, and you can tackle what you owe in less time.

Increase Your Credit Score

Having an excellent credit score can actually help you avoid certain trappings that can come with borrowing money. Generally speaking, the higher your credit score, the better the borrowing terms. You’ll have an easier time securing low-interest rates on credit cards and loans when you do need them, which can make managing – and paying them off – easier.

Usually, the foundation of an excellent credit score is sound borrowing habits. Make your monthly payments on time, keep your credit utilization ratio low, and avoid opening unnecessary accounts. Maintaining a good credit mix – featuring a small selection of loans and credit cards in your history – can work in your favor, too, as it shows that you can handle different types of debt effectively.

Ultimately, while using credit cards and loans result in debt, when used responsibly, you won’t be overwhelmed by it. As a result, indebtedness won’t necessarily become an issue, allowing you to maintain a favorable financial picture while keeping your credit score up.

Do you have any other tips that can help someone avoid indebtedness? Have you used any of the strategies above and want to tell others about your results? Have you found your way back from indebtedness and want to share your experience? Share your thoughts in the comments below.

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Retirement Bill in Congress

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Congress has a new retirement bill in the works. They’re calling it Secure 2.0 and it has a few transformational pieces to it that will change retirement saving and retirement income planning. Before we get too far into what this new bill looks like, let’s take a look at what the original Secure Act did.

Secure Act 1.0

The Secure Act was enacted on January 1, 2020, and was the largest retirement reform bill since the Pension Protection Act of 2006. The full title is Setting Every Community Up For Retirement Enhancement (SECURE). And it passed through Congress with a 417-3 vote.

The beginning age to which to start taking required minimum distributions (RMD) from retirement accounts (excluding Roth accounts) was moved from 70 ½ to 72.

People can make retirement contributions no matter what age, as long as they have earned income. The previous limit was 70 ½ when RMDs would begin.

Inherited IRAs (non-spouse beneficiaries) have to have the entire account withdrawn within 10 years of receiving it. This means that if someone passes away and their beneficiary is someone other than their spouse, that beneficiary needs to have the entire account withdrawn and closed within 10 years of receiving the inherited IRA. However, there are exceptions, including a surviving spouse, a minor child (the 10-year rule starts when a child reaches the age of majority), a disabled individual, a chronically ill individual, an individual who is not more than 10 years younger than the IRA owner.

Employees who work part-time, at least 500 hours per year, are now eligible to contribute to their employer-sponsored retirement plan.

Secure 2.0

What’s different with this new law?

For one, the vote passed 414-5. Not as lopsided as the previous one, but still an incredibly convincing tally. “Secure 2.0 is fundamentally designed to make it easier for people to save” – Susan Neely, American Council of Life Insurers President and CEO.

The catch-up contribution provision got a facelift. 401k account owners that are 50 and over are eligible to contribute up to $10,000 more than the maximum for those under 50.

The beginning age for required minimum distributions (RMD) also went up, from 72 to 75. The Yahoo Finance article noted that some reps took it a step further. “ My goal is to get rid of it completely.” – Representative Kevin Brady (R-TX).

The bill would also push employers to automatically enroll new employees into the company-sponsored retirement plan.

Small businesses that stare down the, sometimes, daunting expense of establishing and maintaining a company-sponsored retirement plan can receive assistance. They can receive credits for matching contributions.

One very progressive part of the bill that is sure to garner a lot of attention is the ability of people paying down student loans to save for retirement. The bill would allow employers to “match” a students’ loan payment as a retirement contribution. For example, if the student made a $100 student loan payment, the employer would contribute $100 to their retirement account on their behalf.

The bill introduces a SAVERS credit, which would give lower-income individuals a tax break if they save for retirement.

This is another transformative retirement bill. I’m very pleased society is taking steps to encourage individuals to plan and save for the future.

Related reading:

Ensuring Financial Security Throughout Retirement

5 Solutions for Managing Your Money After Retirement

401k Withdrawal Taxes and Penalties

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Finance Lessons Learned from the Pandemic

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The Covid-19 pandemic changed life for two years and there are definitely still elements of what life was in the world today. No doubt there were some terrible things that happened. People lost their lives and their jobs. But there were also positives that came out of it. We’re going to highlight the lesson we can learn from this pandemic, particularly some personal finance lessons we can learn.

Working from home

This new type of work does not apply to everyone and I don’t like leaving people out, but this needs to be talked about. Working from home and articles about it took over during the pandemic and continue to be discussed.

Working from home, at least from some of those articles and studies, appears to be a net positive for employees and employers. Let time commuting, less overhead costs, more productivity thanks to no commute, increased job satisfaction, and improved work-life balance.

Thanks to the work-from-home setup, people who were able to do that moved out of the city or rented an Airbnb for an extended amount of time. In either case, those people were, likely, able to reduce their housing costs by moving to the suburbs or giving themself a little vacation/change of scenery.

Savings rate

A lot of people saved money during the pandemic thanks to stimulus payments. In April of 2020, the personal savings rate for Americans was 33%. In March of 2021, the personal savings rate for Americans was 26.6%.

The savings rate has fallen since then but is still above 12% which is higher than it was before the pandemic (less than 10%).

Stimulus payments

According to the National Bureau of Economic Research (NBER), most Americans either saved or paid down debt with the majority of their stimulus payments. 40% of the stimulus payment was spent, 30% was saved and another 30% was used to pay down debt.

Personal finance lessons

I think there were a lot of personal finance lessons that can be learned from the pandemic. Here’s a list of them below:

People saved more money

The future was very uncertain so people were more conservative with their spending and less conservative with their savings. That mindset shouldn’t change. The future, in principle, is uncertain. We do not know what tomorrow holds, so saving for a rainy day/goals/retirement is very important.

You don’t need to spend money to have fun

At the very beginning of the pandemic, you couldn’t go anywhere. Quarantine and lockdown orders came in right away. Instead of getting together in person, people utilized Facetime, phone calls, and Zoom. I, personally, had group Zooms with family members where we played and had conversations like we would if we were in person.

Diversification is important

Early in the pandemic, the market tanked. We lost over 30% in six weeks. Granted, it came right back up not long after, but that might not always be the case. If you don’t have time to ride out the ebbs and flows of the market, it’s important you get your asset allocation right. Talk with your adviser to make sure your investment matches your time horizon and risk tolerance.

Get rid of debt

You never know when your job and your ability to earn can be taken from you. Some people lost their jobs, some people were furloughed, and some people just weren’t able to go to work. If you don’t have an income, the only other part of the balance sheet you can affect is your expenses. Get rid of your debt. That’ll help you reduce your expenses in case that happens (you can also save more).

Protect your loved ones

Get life insurance. A lot of people passed away during the pandemic. If you contribute income to your household, you need to make sure you financially protect the people that rely on your income.

Related reading:

5 Personal Finance Tips from the Pandemic

How to Regain Control of Your Finances Amid the Pandemic

How to Save Money on Your Post Pandemic Vacation

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

How to Increase Your Net Worth

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Your net worth is a benchmark for your financial success. Notice that I said financial success and not just success. That was intentional because money doesn’t define your success. Money can afford you freedom, but I believe real success doesn’t involve money. That was free of charge, now let’s talk about how to increase your net worth.

What is net worth?

Net worth is assets minus liabilities. How much wealth do you have after you subtract what you owe versus what you have? It’s typically used to gauge your progress in your financial life. If you have debt, then when you pay it down, your net worth goes up. The same happens when you increase your savings.

How to increase your assets

Honestly, the only way to increase your assets is to save money. At least, that’s where it all starts. The more you save, the more you have to work with.

How do you save money? Decrease your expenses and/or make more money. That’s what it comes down to. Figure out what’s important – in terms of your budget and spending. Everything else that doesn’t fit on that list needs to either be removed or reduced.

Once you have money saved, then you can put it to work. Invest it in securities or assets that have a chance to increase in value. What kinds of things have a chance to increase in value? Stocks, bonds, mutual funds, ETFs, precious metals, real estate, certificates of deposit (CDs), and cryptocurrency/NFTs (though I would tread carefully here).

Growing your assets will help you increase your net worth.

How to decrease your liabilities

Pay down your debts. That’s it. Obviously, it’s more challenging than that. Ideally, what you’d want to do is pay down your debts before you focus on the saving aspect of it. If you have debts with high-interest rates, like credit cards, those should be your first priority.

We’ve gone into detail about the repayment methods before so we’ll only touch on them briefly, but what’s important is decreasing your expenses so you can make larger, more regular payments towards your debts.

The next step is developing a repayment strategy. The two we’ve talked about before are the debt avalanche and the debt snowball. The debt avalanche – you pay the debt with the highest interest rate off first before moving to the next one. The debt snowball – you pay the debt with the smallest balance off before moving on to the next one.

Paying down your debts will really help you increase your net worth.

Is there a net worth number you should hit?

At the end of the day, your net worth number is really a reflection of what you’ve saved for retirement. Ideally, you will not have any debts, including your mortgage. So there’s no math that needs to be done. What are your assets? Primary home, any rental properties, and then your retirement savings, with primary home and retirement savings being the two most common for everyone.

So the question becomes, how much should you save for retirement? Thankfully, we’ve created a guide for you to help answer that question (see below).

Related reading:

How much do I need to save for retirement?

Diving Deep Into Debt

3 ways to responsibly save money

Gig economy financial security

Johnny Depp Net Worth

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Applying for a Mortgage

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There’s always talk about home-buying and mortgages, but with interest rates being at all-time lows over the past few years, I feel like the talk about those things have picked up. Not only that, interest rates are likely going up this year so people are trying to get in before it’s too late. In this post, I want to talk about mortgages, how they work, and what happens when applying for a mortgage.

What’s a mortgage?

A mortgage is a loan you get from the bank or another lender to buy a house. When you submit an offer to buy a house, you’ll apply for a mortgage, and it’s a very involved process. More on that later.

In a mortgage, you’ll have options for what your term is. Your typical options are 15-year, 20-year, and 30-year.

You’ll also have to make a down payment. Current trends show that a lower down payment is pretty common. Depending on the type of loan, you can put down 3+%. And how much you put down matters. If you put down less than 20%, you’ll have to pay Primary Mortgage Insurance (PMI).

Here are the pieces of your typical mortgage payment – principal, interest, taxes and insurance, and PMI (if applicable). Taxes and insurance are commonly put in an escrow account and paid when they’re due by the lender.

Mortgage application process

From application to closing, it’s about 45-60 days. During that period, you’ll go through underwriting. In underwriting, they’ll have you submit documentation to confirm your credit report, annual income, current assets and liabilities, employment information, prior tax returns, among other things.

After you’ve cleared underwriting and they’ve confirmed everything, you’ll head to closing. At closing, you’ll sign a lot of papers. You’ll likely need to bring your checkbook with you as well.

There are closing costs associated with your mortgage. Some of these can be added to your total mortgage and some of them need to be paid. Closing costs are normally 3%-6% of the total mortgage and can include real estate commissions, taxes, insurance premiums, title fees, and record filing fees.

And if you’re buying, you’ll also need to write a check for the down payment.

Who gets a mortgage?

There is a slough of factors you need to meet when applying for a mortgage. Credit score matters. Usually, you’ll need at least a 620 credit score (all else being equal) to get a mortgage. Though the better the credit score, the better interest rate you’ll get.

The debt to income ratio needs to be under 50%. The lower the debt to income ratio (all else being equal) the more you can afford. If you have a 45% debt to income ratio and can afford a $250,000 mortgage, you’d probably be able to afford a $300,000 if your debt to income ratio is 25% (this is just an example, I didn’t do the math on this).

Condition of the home. With an FHA mortgage, they are a little pickier on the condition of your home. Usually, it’s just the outside of the home they’re picky with. Chipped paint is a typical thing they take issue with, so just be aware of that.

Applying for a mortgage is necessary for most people so it’s important you understand how they work.

Related reading:

Understanding 15-Year vs. 30-Year Mortgages in the USA

What to do when you’re one month behind on your mortgage

Why Financial Literacy is Important

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

End of Year Money Moves

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We’re getting close to the end of the year so I think it’s a good time to review how to set yourself up for success for next year. Here are some end-of-year money moves you should make.

Year in review

I think it’s important to reflect on the year that has been – financially, emotionally, physically, and spiritually. If you’re not evaluating your progress as a human, I think you are doing yourself a disservice.

We’ll stick with the finance side of things in this article. Did you achieve the goals you set out to reach when the year started? If you had a goal to pay off debt, did you? If you had a goal to increase your savings rate for retirement, did you?

I think that’s important for two reasons. One, you review your progress to see if you were successful or not. Two, you use this year’s progress to help set your target for next year. If you achieved your goal, you can set a higher target for next year. If you didn’t, maybe keep the same goal and try to hit it next year.

It’s also a good idea to review your investment/retirement portfolio at the end of the year. If you’re investing your retirement savings, there are some sectors or asset classes that performed better than others throughout the year. If that’s the case with your portfolio, the percentage you’re at now is probably different from where you started.

Typically, I like to leave it be, but if you’re in a stage of life where you have to be more selective, then being overweight in a risky asset is probably not a good idea. When you review your investment portfolio make sure that you’re still in good shape with regard to your risk tolerance and time horizon, and you’re pleased with your account’s performance.

Set goals for next year

After you review your progress from this year, set your goals for next year. If you saved more than you set out to at the beginning of the year, use the ACTUAL savings as your goal for next year. If you paid off some debt, redirect toward another one.

What happens if you don’t have any more debt? Congratulations! Then make sure your emergency savings are adequate. If it’s sufficient, beef up your retirement savings or something else you’re saving for.

When you’re making your money moves for next year, make sure you’re designating time to assess your progress throughout the year.

Related reading:

How to Set Investing Goals

Worthy Goals to Set and Crush

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Divorcing and Drowning In Debt? Take These Steps Now!

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divorcing and drowning in debt

Whether you’re preparing for an upcoming divorce or the proceedings are already underway, ending a marriage when you’re also overrun with financial woes isn’t easy. However, that doesn’t mean you can’t come out of the other side in one piece; you just need to use the right approach. If you’re divorcing and drowning in debt, here are some steps that you should take immediately.

Assess Your Financial Situation and Start Planning

Before you do anything else, you need to take a close look at your financial situation. You’ll want to review all of your current income sources, expenses, and debts. That way, you can create a functional budget that will serve you as well as possible until your divorce finalizes.

Until that day arrives, your goal should be to simply remain afloat, particularly if it isn’t clear who will assume responsibility for specific debts. Concentrate on making minimum payments on the debts only, ensuring you can keep your credit intact.

If you have extra money that you’d like to put toward debts that may be your responsibility after your divorce, you may want to open a new savings account in just your name and set it there instead. However, you might need to review local divorce rules and regulations in your area first to make sure such action isn’t barred or viewed poorly during proceedings.

Additionally, you may want to estimate how your situation will change once your divorce is final. In some cases, this is fairly straightforward if you know what debts you’ll be taking over alone. However, if you don’t, then you might want to explore several scenarios. That way, you can get a general idea of how your financial life may change once everything is finalized.

Avoid Adding to Your Debt

If your debt situation is already challenging, don’t make it worse by adding more to the equation if it isn’t absolutely necessary. Ideally, you want to use cash for all of your necessary expenses. That way, you aren’t increasing balances before your divorce is finalized.

If you can’t avoid using credit cards to handle necessities, then limit your spending as much as possible. Superfluous spending could backfire when it’s discussed in court, so you want to make sure you’re only using credit when you had no other choice, and the charge is easy to justify.

Review Your Credit Report and Score

One step many people in the middle of a divorce overlook is reviewing their credit report and score. However, it’s a vital task, especially if you may soon be exploring options for dealing with a significant amount of debt. It lets you know your general standing, making it easier for you to estimate whether you’d qualify for certain financial products, like a low-interest debt consolidation loan.

You can see each of your credit reports for free by heading to AnnualCreditReport.com. When it comes to your credit score, you may have options for checking that for free, too. Some credit card accounts or banks let customers review their scores for no additional cost. There are also a few apps that give you access to scores.

Just keep in mind that you’ll want to review your FICO score if you may be looking for credit soon, as that is the one that lenders typically use. Many free credit score options show you a VantageScore instead, which doesn’t match your FICO score. If you aren’t sure where to get your FICO score, you can get your Experian FICO score for free through Experian. While that only covers one of the bureaus, it can work well as a starting point.

Redirect Your Income to a New Account

If you’re concerned about your soon-to-be-ex having access to all of your income, you may want to open a new checking account and have your direct deposit shifted there. That way, they won’t have access to your pay, giving you more control.

However, you may want to consult with a lawyer as you take this step. Completely cutting off your spouse could come with consequences, particularly if they don’t have their own income, are providing care for your child during the divorce, or certain other conditions apply. An attorney can help you determine how you should ultimately proceed, ensuring you act appropriately as the situation unfolds.

Prepare to Update Your Credit Accounts

Usually, there are two moments when you may need to update some of your accounts. First, as soon as you separate, taking your spouse’s name off of certain accounts could be wise. For example, if they are an authorized user on a credit card that is in your name, you may need to remove that authorization. That way, your soon-to-be-ex can’t run up a bill that may ultimately become your responsibility.

However, you may want to speak with a lawyer before you being removing their access to the accounts. Rules regarding debt ownership during a marriage vary by location, and an attorney can give you insights into that. Additionally, they can help you see how taking them off certain accounts could be perceived in court, ensuring any action on your part isn’t viewed as malicious.

When you have your divorce decree, you’ll have a roadmap outlining which debts are whose responsibility. As soon as your divorce finalizes, it’s critical to take action immediately if any particular obligation is no longer yours to handle.

If your name is on a debt that is assigned to your now ex-spouse, don’t assume that your ex-spouse will manage the update with the lender. Instead, reach out to the lender to find out what needs to happen to remove you. You may need to send in a copy of the divorce decree or take other steps to ensure you’re pulled off of the account, and some of them can take time to process. As a result, the sooner you act is good and better have splitting bank accounts.

Come Up with a Plan

Once you know which debts are yours, it’s time for formal planning. Review the obligations and your income first. Then, see if you can create a budget that lets you pay down the debts while also handling your living expenses.

If it’s tight but doable, and you already have a decent emergency fund, you may want to simply push forward. If it’s unmanageable, then you’ll want to start exploring other options immediately.

How you need to proceed may depend on your broader financial picture. If you have solid credit and a reliable source of income, exploring a debt consolidation loan could be worthwhile. Essentially, it’s a type of personal loan that lets you pay off your existing debts and replace them with a single monthly payment, at times with a lower interest rate. Just make sure you focus on loans from reputable lenders, as there are many scams in this category that you’ll need to avoid.

If your credit isn’t great or your income is limited, then you may want to connect with a credit counseling agency for help. You can find reputable counselors by using the right resources, such as the National Foundation of Credit Counseling. Then, you can get assistance with creating a new budget or may be able to debt management plan set up, allowing you to tackle your debt more affordably.

Not All Counselors Are Legit

Like with debt consolidation products, not all counselors are legit. Reputable organizations won’t push debt management plans as the first and only solution, so keep that in mind when speaking with counselors. Additionally, they’ll be upfront about their fee structures and won’t upsell unnecessary services. Traditionally, they also don’t pay counselors using a commission-based approach either.

In most cases, you want to avoid agencies that advertise the ability to “repair your credit” or that promise significant score increases in a short time. Similarly, any place that focuses on debt settlement, using phrases like “handle your debt for pennies on the dollar” should often be avoided.

You may find that a debt management plan is enough to get you back on track. If so, you’ll simply need to follow the program’s rules, allowing you to handle your obligations with greater ease.

Consider Bankruptcy

If repaying your debt just isn’t possible, then you may need to explore bankruptcy. However, this should be treated as a last resort, as the harm to your credit is significant and pretty long-lasting. Plus, you may need to hire a bankruptcy attorney, and that can be costly.

Still, if you’re drowning in debt and no other option is manageable, bankruptcy could be the right choice. Just make sure that you wait until your divorce is finalized, ensuring you’re focusing just on what you owe.

Do you have any tips that can help someone who is divorcing and drowning in debt? Have you been there yourself and want to tell others how you got through it? Share your thoughts in the comments below.

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Financial Resolutions: Debt, Savings, Investing, Real Estate, and Crypto

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The new year is right around the corner so I thought it fitting to layout some resolutions for a few different financial topics. Here are financial resolutions for crypto, investing, real estate, savings, and debt.

Debt

Pay down or pay off your debt. If you have credit card debt, make it a goal for next year to pay it off completely. The interest rates that credit card companies charge are so brutal. Getting rid of credit card debt would relieve a lot of stress and save you a lot of money that you’re wasting on interest. Not to mention, whatever you’re currently paying towards your credit card can be used for something way more productive.

If all you have is a mortgage, make extra payments. If you have no debt, congratulations! Try and save more so there’s no chance of you going into debt again.

Savings

Would you like to buy a house next year? Save for your down payment. The bigger your down payment is the smaller your responsibility will be; in terms of monthly payments and in terms of total money owed. Especially if your down payment is 20% or more. If that’s the case, you don’t have to pay mortgage insurance (AKA PMI).

If a down payment isn’t something you need to save for, increase your savings rate for retirement. Or set yourself up to cover some unexpected expenses by creating an emergency fund. Do some math, establish a goal number (emergencies, down payment, retirement savings), and then create a plan to save and hit that number.

Investing

For the most part, investing will take place in your retirement account. And for most people, the amount of time you have until retirement is a couple of decades. With that said, you can be a little more aggressive with your investments.

If this description doesn’t fit you, then figure out what works for you. Determine your time horizon, risk tolerance, and what you’d be able to tolerate in terms of short-term losses. If you’d like to get a good idea about what your preference is, take our risk tolerance quiz.

Real Estate

This one is a little challenging because it’s not like you’re going to move once per year. Also, investing in real estate isn’t for everyone. So I’m going to try and hit a few groups with this one.

Buy a new home. If you need more space for your growing family, you got a new job that requires relocation, you want to be closer to your church or family members, then make a move.

Make improvements to your current home to increase the value of your home or to make better use of the space. It can also improve tax credits especially if you use sustainable materials like solar panels. Either way, the improvement has a positive effect on your living situation.

Most people can invest in real estate, they just do it differently. Some people are going to invest in physical properties and some can invest in Real Estate Investment Trusts (REIT). Either way, you need to be picky (like all investments) so you get a good return on your money.

Crypto

This applies to everything in this post, but especially here…do your homework. I like crypto. I think there are investment opportunities, but I also think there’s a possibility it all collapses. I like the technology it’s created on, but I don’t know how it’ll transform and what the adoptability will be. Invest only what you can afford to lose is my best advice. With all that said, make financial resolutions to get more educated about cryptocurrencies and the blockchain.

Related reading:

8 Ways to Improve Your Retirement Savings in 2018

Diving Deep into Debt

Worthy Goals to Set and Crush

How to Invest in Cryptocurrency: A Guide for Beginners

Relocating Without A Job? Here Are 10 Tips

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

How to Prep your Finances Before you Quit your Job

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There are a lot of jobs open right now. Maybe you’re not particularly happy in your current role so you’re looking for other opportunities. Before you leave, you need to make sure you have your affairs in order. Here’s how to prep your finances before you quit your job.

Some things to make note of first.

Plan Ahead

If you want to quit, but don’t have anything lined up yet, get that process started ASAP. There may be a plethora of jobs available right now, but that doesn’t mean you’re going to get one right away.

Ideally, you’ll have an accepted job offer before you quit your current job, but that won’t apply to everyone.

You could be leaving a hostile work environment, you could have a bad work/life balance, or you’d like to explore different opportunities.

That’s why you must do your best to always be prepared because you never know what is going to happen. You can’t predict the future.

Before you quit your job, here’s what you have to do.

Have Money Saved

Make sure you have money saved. You truly don’t know how long it’s going to take to find another job. That’s why I say you should have one lined up before you quit your current job. That’s also why the common advice is to have 3-6 months of living expenses saved in case you lose your job.

It’s also important to see what’s out there. As I mentioned in the beginning, there are a lot of jobs available, but that doesn’t mean you’re going to find a better one. Do your research.

Prep Your Finances

If you want to be able to have less liquid money available, work on your expenses. Cut down where you can. If you’re servicing debt, get it paid off so you don’t have that liability sitting out there. If you don’t have any liabilities, you remove the chance that you’ll miss a payment (which is bad for your credit score). Your credit score is important in today’s economy, especially when looking for a job.

Back-Up Plan

Whether you are exploring a different field entirely or looking for a better role in your current industry, it’s a good idea to have something to fall back on. Even with a record number of job offerings, the job market is still unpredictable. Make sure you have a contingency job picked out that matches your skillset and expertise just in case the role you’re pursuing doesn’t work out.

Make Money in the Meantime

Learn how to make money…quickly. If the job hunt is taking longer than you expected, find a way to supplement the income you lost. There are several ways to hustle your way into a wage nowadays. Uber, Lyft, Instacart, UpWork, Fiverr, and more. There are plenty of companies that’ll hire you as a contractor. If you’re making money, that could enable you to be very picky on the job you take.

Health Insurance

Last thing. Don’t forget about healthcare costs. If you get benefits from your current job, figure out how/if you’re going to get health insurance while you are out of work. Short-term plans might meet a need if you’re just looking for disaster coverage, but if you’re someone that requires ongoing medical care, there’s probably something else that’ll meet your needs better.

Prep your finances BEFORE you make a move.

Related reading:

Can an Employer Charge you Fees to Turn Over your 401(k) After you Quit your Job?

Why Financial Literacy is Important

Everything you Need to Know to Set Up Your Emergency Fund

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com