Provide your own debt help program by directing money you’re investing in non-retirement portfolios toward paying off credit card debt. In general, financial advisers do not recommend accessing or terminating retirement investments for paying off credit card debt.
Paying off credit card debt is a good “investment”
Eliminate the high cost of credit card debt: Creditors are required by law to post the annual percentage rate of your credit card debt on each monthly statement. The APR includes the card’s interest rate, membership fee, and penalty fees calculated as an annual percentage of your account balance. Let’s say that your APR is 15 percent, and you owe $2,000. If your balance and APR don’t change over one year, you’ll pay $300 in finance charges.
No commissions: Stock brokerages charge commissions for buying and selling stocks. Paying off credit card debt is commission free, and eliminates the cost of carrying credit card debt.
Reduce financial risk: Paying off credit card debt saves money and reduces the risk or ruining your credit should you become unable to pay your debt. Investing in the financial markets can involve losing the amounts you’ve invested when markets decline. If you’re carrying high APR credit card debt, paying it off is a risk-free “investment” in financial security.
Improve your credit: Paying off credit card debt improves your credit scores and suggests to credit bureaus that you are in control of your finances and can responsible handle credit card debt. Don’t close accounts you’ve paid off as this reduces your total available credit and can reduce your credit scores.
If you’re struggling with credit card debt, please contact a consumer credit counseling and debt consolidation service for debt help.
If you owe a lot of tax debt you may be tempted to put off filing your return, but that is a huge mistake that can result in some serious repercussions, including tax liens.
Are you facing jail time?
While the Internal Revenue Service (IRS) doesn’t throw people in jail for not paying their taxes, you could end up in the slammer for not filing your tax return. (Actor Wesley Snipes is currently serving three years in prison for failing to file tax returns.) So even if your tax debt seem insurmountable, you need to prepare your return and get it filed by the appropriate deadline. Then, take steps to get the debt help you need to clean up your situation.
What if you can’t pay?
Keep in mind that the IRS isn’t trying to lock up everybody who can’t pay tax debt. Not filing a past due return usually results in one of the following actions:
Penalties and interest are assessed, which increases the amount of tax owed
The IRS may file a substitute return for you that may not accurately represent your situation. If this occurs, you should file a return anyway to make sure the information is correct.
Once a tax is assessed, the IRS may place a levy on wages or bank accounts, or file tax liens against your property.
Ultimately, you can’t avoid the IRS. Even if you choose to file for bankruptcy, any tax debt owed to the IRS takes priority over other debts you may owe. It’s better to contact the IRS to get help with debt than to keep avoiding your problems.
You may be able to set up a payment plan that takes into account your current income and other factors. There is a solution to your tax woes if you’re willing to face up to the problem.
Student loan debt in America has ballooned by more than 511 percent since 1999 to about $930 billion, and that has many people sounding alarms about that debt potentially causing another bubble. During that same period, all other household debt rose 100 percent; that includes credit card debt, autos and mortgages.
Debt affects economy
A Fox News article quoted Mark Kantrowitz, publisher of financial aid Web site Finaid, as saying, “Student loan debt has become a macroeconomic factor; it affects the economy. Students who graduate with excessive debt are more likely to delay buying a car, buying a house, getting married, having children, saving for their retirement….They’re spending less because they first have to tackle their student loan debt.”
Because so many students are graduating with limited job prospects, there is a growing fear that even more people won’t be able to repay student loan debt if the economy continues to stumble. Because more people are defaulting on loans, some schools are even offering debt counseling and budgeting sessions before students can begin attending, like the program at Tidewater Community College.
Debt reduction plan
It’s a good idea to have a student loan debt reduction plan in place before even enrolling in college. While many students and parents choose schools based strictly upon the prestige of an institution, it isn’t necessary to attend the most elite or expensive colleges to get a good education. There are many successful people who attended less expensive state schools and community colleges without running up unmanageable student loan tabs.
When applying to colleges, do research on what people in your intended major do after graduation. You can get a good idea of how much income you might earn upon graduating by looking at career and salary Web sites. If you major in a field such computers or engineering, it’s likely that you will earn a higher salary upon graduating than someone majoring in the fine arts or humanities. Equip yourself with as much information as possible before even leaving college so you’ll have realistic expectations about dealing with student loan debt.
Record low mortgage rates are making mortgage loans more affordable than ever. Evaluate your current financial situation along with your goals for future relocation and retirement. A fifteen year mortgage provides debt help with meeting your goal of retiring debt free.
Mortgage benefits from a 15 year plan
Use a free online mortgage calculator for estimating savings associated with a 15 year mortgage. Estimate and deduct closing costs from potential savings on interest. With this calculated figure in mind, consider these benefits:
- Pay off your mortgage faster: Refinancing might mean making higher payments with a 15 year mortgage, but the benefit of paying it off sooner is a great plus if you’re concerned about retirement assets and rising expenses.
- Lower mortgage rates: 15 year mortgage rates are typically lower than 30 year fixed rate mortgages. A shorter repayment term translates to less risk for mortgage lenders, and your ability to qualify for the higher monthly payment required of a 15 year mortgage suggests financial stability.
- Potential savings on interest: Estimate interest savings using an online mortgage calculator. Enter your current mortgage balance, interest rate, and repayment term for each loan. Subtract the lower amount from the higher amount; the result represents potential interest savings.
Drawbacks to a 15 year loan
- Higher monthly payments: Your monthly mortgage payments will likely increase. For example, a 30 year mortgage for $200,000 at 4.25 percent has a monthly principle and interest (P&I) payment of $983.88. A 15 year mortgage of the same amount and interest rate has a monthly P&I payment of $1504.56, a difference of $520.68. Meeting the higher payments for a 15 year mortgage might mean less money for other essentials and savings.
- Higher risk of financial hardship: Substantially higher mortgage payments can increase the risk of foreclosure or bankruptcy in the event of long term hardship.
Consult a financial advisor for recommendations based on individual circumstances and financial goals.