debt Archives

College Costs Are Outpacing Most People’s Income Growth – by a Lot

by Emily Pfund | Sep 26, 2016 | Blog

College costs a lot. In fact, today’s college students are taking on unprecedented amounts of debt to pay for an education – they hope – will lead to better career prospects down the road.

Watching Millennials struggle under this load of student debt can be confusing for older generations who could put themselves through school by working summer jobs. But it’s not that today’s students are lazy or unwilling to work; they just have to pay more for college. A lot more.

A recent study by ProPublica took a state-by-state look at median income and yearly tuition at public four-year colleges and universities, including the District of Columbia. It found that while the national median income fell about 7 percent between 2000 and 2014, the cost of college tuition rose by 80 percent!

Every single state saw a bump in tuition costs. Median incomes increased in 19 states, but none of these increases came close to offsetting the college costs in those states.

Arizona had the highest tuition increase of any state, at 202 percent, with a 10 percent drop in the state’s median income. In contrast, Wyoming had the smallest tuition hike. The cost of higher education in that state rose just 12 percent from 2000 to 2014 and the state’s median income rose 2 percent.

With numbers like that, it’s no wonder students turn to loans to fund their education and struggle to pay off their hefty tuition bills for years afterward.

Luckily, there are some things parents and students can do now to help pay for education and reduce stress in the future:

Save early. In an ideal world, you would start saving for your kids’ education as soon as they’re born. This is difficult to do in the real world, especially with the increased expenses that come with a new child. Still, as early as you can start putting money into a 529 account. Those funds will grow tax free in the plan as long as you use the funds for approved college expenses.
Search out scholarships and grants. While your child’s school of choice may offer them some scholarships to defray their attendance costs, look for outside sources as well. There are innumerable organizations offering scholarships to students fitting their criteria. There are scholarships for kids who attended a certain high school, children of people in certain professions (like the military, law enforcement and others) and children whose parents have certain illnesses or disabilities. A little bit of online digging could uncover a wealth of resources to help pay for school.
Start your degree at a community college. Most states have a community college program that feeds into top state universities. Investigate the community college system near your home. It’s possible you’ll be able to spend your first two years of college paying a few hundred dollars per semester and then transfer your credits and collect your degree from the big name university. That play would allow you to get your degree for roughly half price.
If you get offered a scholarship, take it. You’d think that with college costs as high as they are, students would jump at the chance for a scholarship. But the “brand name” college experience has been, well, branded into our brains as being something so much better that it’s worth taking on piles of debt over essentially a free or half-price education at a smaller college or university. Balderdash! It’s a far smarter move to take the scholarship and get out of college with little or no debt than it is to get that Ivy League degree. Ten years after graduation, you’ll be really happy not to have an extra $100,000 of student debt weighing you down.

Why 50% of Americans Can’t Understand Their Credit Cards

by Ilyce Glink | Sep 14, 2016 | Blog

Remember life before credit cards?

Best Money Moves Founder/CEO Ilyce Glink remembers her grandfather carrying around a wad of fresh $20 bills, peeling them off one by one to pay for dinner.

Credit cards changed the way we pay for everything. Credit card companies made them easy to use – too easy. That’s why so many of us are carrying around so much credit card debt.

To responsibly use a credit card you have to understand its terms. Unfortunately, many credit cards don’t make their terms and conditions easy for customers to read.

According to a recent study by Creditcards.com, the average credit card agreement is written at an 11th grade reading level and would take 20 minutes to decipher. That might seem okay (after all, most people have graduated from the 11th grade), but 50 percent of Americans read at a 9th grade level or lower, making it difficult for most people to fully understand their rights as a cardholder.

This helps explain why employees repeatedly rank paying off debt as a top source of financial stress: if they can’t understand their credit cards, they can’t use them responsibly. This results in issues with debt, late payments and confusion about how they can pay off their debt quickly.

Missed information

If you don’t read your credit card agreement, you might wind up in trouble: You won’t know the terms and details unique to this card and your usage will be driven by your general credit card knowledge, rather than the habits that work best for this specific card and financial situation.

We learn by observation: If you grow up with parents who regularly carried balances on their cards, you might think this is a perfectly normal way to manage your financial life. It’s not until you read the fine print and see how fast the interest rate charges will rack up and how long it will take you to pay off that debt that you might change how you manage your credit card relationships. This isn’t just about missing out on reward points because of a misunderstanding about how they’re earned, it’s about consumers never learning their rights and responsibilities when it comes to credit card usage, and exposing themselves to unnecessary financial risks.

According to the study, only 26 percent of those surveyed said they regularly read their credit card agreements. If you or your employees or colleagues only read one quarter of the contracts used in your office, your company would pretty quickly find itself in a load of trouble.

Financial stress at work

The study also claims that the less familiar card users are with their credit card’s terms and rules, the more they’ll end up paying to use that card over time in interest charges and fees. The more debt employees carry, the more financial stress they’re going to feel. This stress doesn’t stay confined to their finances – it also spills over into their work and their day-to-day lives. If you want to help, you have to provide your employees with assistance they can use. You can’t change how credit card companies write their contracts, but you can help boost the knowledge your workers have.

Here’s your Best Money Move: The more you know about financial stress and your options when dealing with money, credit cards and debt, the better prepared you’ll be to deal with these issues when they arise.

What’s the Biggest Source of Financial Stress in Your State?

by Ilyce Glink | Sep 9, 2016 | Blog

Are you financially stressed? Do you know what’s causing it?

A recent study by GoBankingRates.com asked Americans to identify their biggest financial stressor and then broke down the results by state. Check out the map above to see which financial issues are keeping your neighbors awake at night.

The most common stressor cited was paying off debts (including credit cards), with 20.6 percent of respondents saying this was their biggest financial concern. It topped the list in 30 states and tied with other issues as the most common stressor in another three states.

The stress of paying off debts, as we’ve discussed in earlier blog posts, can negatively impact many different aspects of your life, from your personal relationships to your job performance.

What can you do to reduce this stress? Clearly, paying down (or off) your debt will help. There are two big steps you can take to start whittling away at your debts.

Build a budget: Track all of your income and spending for one or two months straight – every single dollar that comes in and (even more importantly) everything you spend. You can use a spreadsheet, pen and paper or our Best Money Moves Budget Tool, whichever is easiest for you. Look at your expenses and decide where you can cut some of your spending, whether it’s making your coffee at home instead of paying for it at Starbucks every day or finding something to watch on Netflix instead of going to the movie theater every weekend. The more you cut, the more progress you’ll see.
Pick your payoff strategy: If you have a lot of different debts, it probably feels like you’re just throwing your money at them with no real idea of how long it will take to pay them off. Choose a strategy for making your payments, continuing to pay the minimum on each but focusing any extra you have on one of the following methods:
1. High-interest first: Concentrate on paying off the debt with the highest interest first, then moving to the next highest; or
2. The snowball strategy: Tackle the smallest debt first, then “snowball” the money you were putting toward paying off that debt into the next-smallest debt after you pay off the first, continuing upwards until you’ve paid off all of your debts.

Want to learn more about how to tackle your debts and reduce financial stress? Email us at info@bestmoneymoves.com to be included in a free trial!

Why There Isn’t Enough Money To Pay Bills and Save?

by Ilyce Glink | Aug 24, 2016 | Blog

Ever wonder why there often isn’t enough money at the end of the month to get all of your bills paid and save money?

You’re not alone. According to a new survey published this week by the Certified Financial Planner Board of Standards (CFP Board), nearly half (48 percent) of all Americans “don’t always have enough money left over to save after paying their bills.”

“Our economy has come a long way since the depths of the recession, but most Americans up and down the socioeconomic scale are still facing significant pressures in saving for today and tomorrow,” said CFP Board Consumer Advocate Eleanor Blayney, CFP®, in a press release. “An inability to start saving early, debt and stagnant incomes are just a few of the factors driving Americans’ financial anxiety.”

The survey found:

More than a third (35 percent) of Americans surveyed have seen a significant decrease in household income;
A little over a third (34 percent) say that the amount of debt they have prevents them from saving;
Only half (51 percent) save money regularly on a monthly basis;
Roughly 1-in-3 Americans (30 percent) has experienced a job change in the past three years;
About 1-in-5 (20 percent) of those polled has experienced a major medical expenditure in the past three years;
Half of Americans (51 percent) believe credit card debt is the most important debt to pay off, followed by mortgages (36 percent) and student loan debt (19 percent);
More than one-third (36 percent) of Americans anticipate working in retirement.

(While the survey found that some Americans are feeling more positive about the economy as a whole, it’s typically those with a higher net worth who have the most positive economic views. Which isn’t that surprising.)

If you look at the list, it’s clear that a third of Americans have seen a significant decrease in household income, are trying to pay down a mountain of debt, and have experienced a job change in the past three years. Debt, including medical debts or expenses, can eat a huge hold in anyone’s budget.

What can you do? At Best Money Moves, we believe in getting your debt paid down as quickly a possible, and we have tools that help you do that (without trying to trick you into buying something or reselling your information to a credit card company). But here’s the big secret: Throw as much cash as you have at your debt that carries the highest interest rate. And, keep doing that as often as possible, while always being sure to make your minimum payment.

That’s it. There’s nothing more magical about debt repayment than that. Once you pay down a debt, use all the extra cash you’re “saving” each month to pay down the next debt, and so on. What you’ll see is that paying down debts is possible and can be done fairly quickly. You just have to make the commitment to put it first in your financial life.

I will add this: Every time you pay down a debt, you’re saving the interest you would have paid. That interest equals the net interest rate you’re paying. So if your credit card has an interest rate of 15.9 percent, every dollar you prepay will effectively “earn” 15.9 percent. And these days, it’s hard to get that much of a return anywhere, let alone in a savings account.

So, get your debts paid off and start saving for your goals and dreams, whatever they may be.

Ilyce Glink is the Founder/CEO of Best Money Moves, and a nationally-syndicated, award-winning personal finance columnist, best-selling author and radio talk show host. Contact her today to get a free trial and start lowering your employees’ financial stress levels.

Making Americans’ Financial Lives Great Again

by Ilyce Glink | Jul 22, 2016 | Blog

In the wake of the Republican National Convention, it seems appropriate to lay out some steps ordinary Americans can take to make their financial lives great again – or, if yours has never been particularly strong, then at least make it better.

Stop spending. In my books on personal finance, I’ve often recommended a Go To Zero strategy for managing your money. Here’s how it works: Imagine all of your expenses on a table. Now, take your arm and wipe them all off. You’ve now got a clean slate, and you can put expenses back on the table in the order of importance: Shelter, utilities, food, transportation, etc. When you run out of cash in your budget, you simply stop spending.
Start saving. Another strategy is to stop spending well before you run out of take home pay and use that extra cash to start saving. Or, if you are carrying debt, simply use the extra cash each month to pay down your debt faster. Remember, every dollar of debt you prepay effectively earns you that interest rate. So, if you prepay $1 of debt at an interest rate of 14%, you’ve effectively earned 14% interest on that dollar.
Make paying off non-deductible debt your top priority. If you’re paying to service your debt, you’re not going to get rich. You’re not going to have a great financial life. And, you’re not going to get rid of the anxiety that comes along with having crushing debt. So, start prepaying your non-deductible debt as fast as possible. In addition to feeling more in control of your financial life, you might just notice that you’re sleeping betterl.
Practice “deferred gratification.” One thing about today’s world, everything happens instantaneously, almost miraculously. But when it comes to money, nothing good happens instantly. That why practicing deferred gratification can have such a positive effect. By simply pushing off a purchase (even one you think you must have), you’ll quickly see you can live without it. And if not, then at least you know you’re making a truly “can’t live without” purchase decision.

I’ve noticed that if I just say “no, for now” I generally don’t miss whatever it is I’ve done without. And, 9 times out of 10, I never get around to purchasing the item. Even if it’s on sale. I just figure out a workaround or do without. If you make all of your purchases thoughtfully, instead of gratuitously, that’s how you’ll make your financial life great again.

And, as Americans, living the financially great life should be an inalienable right.

Ilyce Glink is the Founder and CEO of Best Money Moves. She is also the author of 13 books on personal finance and real estate and the CEO of Think Glink Media, a digital content agency.