How You Can DIY Your Way to Cheaper Home Maintenance

You’d be surprised how some very easy tasks can end up saving you tons of money in home repair costs over the long run.

Our house, in the middle of the street. Our house, we should have built it somewhere else.

Cars won’t stop hitting our house. It’s what happens, when that house is in the street.

That’s right, folks. Whether your house is in the middle of the street or in one of the thousands of better locations to have a house, it’s going to need regular maintenance and repairs. And that can get very expensive—like “taking out an installment loan” expensive.

But what if … you could do that maintenance on your own? You’d be able to save a lot of money! So is it time to grab your tools and start hitting various parts of your home with a hammer?

Not so fast! Certain tasks should be left up to a professional. We spoke to the experts to find out what tasks you can handle on your own—plus how to pull off the job—and which should be left to the pros.

Making a list, checking it (probably more than) twice.

Before you decide which tasks you can handle on your own and which you’ll need to bring a professional in for, you should make a list of all of the tasks that need to be done.

“I rehab houses and spend a lot of my time making expensive repairs for items that could have been avoided by homeowners with simple scheduled maintenance,” advised home flipper Robert Taylor.

“Every homeowner needs a schedule to remind them of when to do their maintenance items and then to make sure that they actually do them. Putting maintenance tasks on a calendar or scheduling them for specific times during the year can help to make sure they don’t get forgotten.”

John Bodrozic, co-founder of HomeZada (@HomeZada), echoed the need to make a list and schedule:

“The first thing to know about performing your own maintenance is itemizing all the preventative maintenance tasks your home requires in a recurring schedule, as many items are seasonal or have a recommended frequency for how many times to perform the tasks over the course of the year.

“This is important because what is required for your home oftentimes depend on where your home is located, the seasonal weather where you live, and the age of your home and its equipment and building materials.

“Once you have this schedule, then you can determine whether you are able to do these yourself. Most consumers can perform a majority of the preventative maintenance tasks their home requires themselves, even with perhaps searching for a quick video on how to do something.”

So what are some of those tasks you can perform on your own?

Join the winterization nation.

When it comes to the seasonal maintenance to get your home ready for winter, there are quite a few tasks you can do on your own. And that’s good because if you live in a place with winter, winterizing has to be done every year.

Here are some tasks you can do on your own before the fall ends, from Zach Hendrix, co-founder of GreenPal (@YourGreenPal):

“Aerate and overseed turf to make sure you’ll have a great looking lawn next year. Clear those gutters on the roof to avoid all kinds of problems like wood rotting along the roof line. Winterize your irrigation system and pool if you have one. Failing to get this done before your first frost could cost you thousands. Remove any dead annuals from your landscape beds.”

“Performing these home maintenance tips in the winter time will save you thousands of dollars in preventative maintenance repair costs.” You can read more about home winterization in our blog post, Winterizing Your Home: How To Prep for Winter on the Cheap.

Prevent an HVAC attack.

Managing your heating, ventilation, and air conditioning is probably not the first home maintenance task you think about, but it is a vital one. And it’s one you probably don’t need a professional to manage!

“Changing your HVAC filter is not only a very important task, but most homeowners can outsource it to their child, it’s that easy,” Jonathan Faccone, founder of Halo Homebuyers L.L.C., told us, “It’s a must if you want to keep your furnace operating efficiently and preserve its overall life-span. Many people tend to forget or overlook this important maintenance item which can actually invalidate your system’s warranty if not kept up.”

But that’s not all. Faccone gave us two other suggestions of home maintenance tasks you can do on your own:

“Painting is a task that I believe most homeowners are comfortable doing. If you screw up with a wrong color or a shaky hand, the consequences are certainly not disastrous. There is certainly an art to successfully completing a professional looking paint job. However, after watching a few good Youtube videos on technique and a little practice, you’ll get the hang of it.

“Another overlooked maintenance item is making sure all the hinges and metal on metal contact points of your garage doors are well lubricated. This item is recommended every 6 months to keep your garage door operating efficiently and prevent any serious repairs in the future. Home Depot carries garage door-specific lubrication products which you can choose from, and it takes only about five minutes to complete.”

Know when to call in the pros.

Even if you see yourself as a DIY Dragon, some tasks should really be left to the professionals. What are some of those tasks? Oh, you know we asked the experts about that!

“Most basements in homes over 50 years old have some form of asbestos, whether it’s insulation on air-ducts or asbestos tiles on the floor,” warned Jeff Miller, real estate agent and owner of AE Home Group (@aehomegroup) in Maryland.

“While it is legal in many states for homeowners to personally conduct abatement in their own homes, it is something that is best left to the professionals. These professionals have expensive equipment like negative pressure air units to ensure that every asbestos particle is removed from the home. By conducting a DIY abatement, you open yourself up to potential health risks in the future.”

But asbestos isn’t the only thing you shouldn’t be inhaling.

“Mold is a common issue that should be left to the professionals,” recommended Evan Roberts, real estate agent and renovation expert with Dependable Homebuyers in Baltimore, MD. “While a DIY homeowner can address the symptoms of mold by scrubbing with bleach, replacing drywall, and setting up a dehumidifier, these solutions are only temporary and do not get to the root of the problem.

“Professional mold remediation experts understand the extensive ways that moisture can enter a home and apply their professional experience to determine a permanent solution.”

“We were renovating a house with mold and couldn’t figure out how water was entering the house. We extended downspouts and sealed the basement walls but water was still finding its way into the basement.

“We called out an expert who went out front and pointed at a tree stump in the yard. Over time the roots had decayed and rabbits had extended these voids to create tunnels to the home. Rainwater would store up and have a direct path into the basement. After removing the stump and compacting the ground we no longer had any water or mold issues.”

Finally, here are some more tasks that Faccone advises against handling on your own:

“Home items that the homeowner should leave to the professionals are ones that pose a safety risk or can cause major damage to the house if not done the proper way. These items include plumbing, carpentry, and electrical related tasks. If you are not comfortable using certain tools and have never had any experience with these items, it’s best to leave it to those who do.”

Go forth and make those repairs.

Now you should have a sense of what you can and can’t tackle on your own. Grab your hammer and go! Just make sure you don’t bite off more than you can chew (Also don’t, um, chew your house.)

Getting stuck in costly repairs is how people end up running through their savings and being forced take out short-term bad credit loans and no credit check loans—like cash advances, title loans, and payday loans—during times of financial emergency.

Saving money through DIY home repairs is great, so long as you know your limits. In the meantime, want to find out some other ways you can save money? Check out these related posts from OppLoans:

What are your best tips for DIY home maintenance? We want to hear from you! You can find us on Facebook and Twitter.

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John Bodrozic is a co-founder of HomeZada (@HomeZada), an online and mobile home management solution. HomeZada strives to educate and provide resources for homeowners in all areas of home management, including home inventory, home maintenance, home finances, and home improvement projects.
Jonathan Faccone is the managing member and founder of Halo Homebuyers L.L.C., a New Jersey and Eastern PA real estate development and investment company with a team of experts with collectively over 30 years of experience. He is also a referral agent through Keller Williams Realty.
Zach Hendrix is a Ruby on Rails developer and UX professional. He is Co-Founder of GreenPal (@YourGreenPal), an online marketplace connecting homeowners with local landscape maintenance professionals.
Jeff Miller is a real estate agent and owner of AE Home Group (@aehomegroup) in Maryland.
Evan Roberts grew up in Towson and now lives in Upper Fells with his girlfriend Michelle and their lovable dog, Mia. He has a proven track record as a homebuyer and loves helping educate homeowners on the current real estate climate. If you’re looking for a trustworthy professional who can answer all your toughest questions, then Evan is your man!
Robert Taylor rehabs and flips homes in the greater Sacramento area.  During the past 12 years, he has bought, remodeled and flipped scores of houses with code enforcement issues, houses needing repair, unwanted inherited houses, and difficult rental properties.

Your Guide to Escaping a Debt Trap

Being deep in debt can feel like you’re sinking in quicksand. But hope is not lost! Here are some tips to help you plan your debt trap escape.

Life comes at you fast. It seems like only yesterday you received that great new credit card in the mail, and yet here you now sit, suffering the embarrassment of that very same card being declined because you maxed it out. How did this happen?

Well, it’s no coincidence that people talk about debt like it’s a trap. When you’re in debt up to your eyeballs, you might as well be sinking into quicksand in the middle of the jungle.

Still, that doesn’t mean that you should give up. Just like there’s always a way out of quicksand (probably like a sturdy vine? Or something?) there’s also a way to escape from your debt, no matter how firmly it has you in its grasp.

So grab your safari hats, keep your comically oversized butterfly nets at the ready, and check out these ten steps for escaping a dastardly debt trap.

Ask for help.

This is a good lesson for any situation, not just getting out of debt. Don’t convince yourself that you have to do this all on your own. Seek help from a local nonprofit or a credit counselor. Talk to your friends and family members who are good with money.

Heck, you can even to talk to them about helping you directly, either by lending you money or by cosigning for a low-interest loan or credit card.

Granted, you should only do this if you are confident you can hold up your end of the bargain. The last thing you want to do is end up with even more debt plus a ruined relationship.

Still, the first thing you should do when escaping a debt trap is to ask for help. Trust us.

Stop spending money you don’t have.

Asking for help might be step one, but it only beats out this step by a razor-thin margin. Before you can start getting out of debt, you first need to stop digging yourself even deeper.

Take a look at where you’ve spent money over the past couple months and figure out why you are spending beyond your means.

For some, this step will be easy, as the debt they’re carrying will have been from a one-time financial or medical emergency.

For others, this will mean making serious adjustments to their lifestyle. If you need to change your spending habits, then go ahead make them, pronto.

The sooner you do this, the earlier you’ll get out of debt.

Build (and stick to) a budget.

Good news, the actions you took in step two have already gotten you started on step three.

With a budget, you are going to stop letting your spending rule your life. Instead, you’ll make a plan for where your money is going to go.

Take your last three months of expenses and put it into an Excel document—or use one of these handy budgeting apps.

Separate your needs from your wants, or things like rent and car payments that you must pay versus things like movie tickets and late-night rideshares that you can cut out.

Prioritizing your needs over your wants is the key to a good budget, especially when you need to pay down excess debt. The more you can put towards savings and debt repayment, the better off you’ll be.

Make a debt repayment plan.

If you try and pay down your debt without a plan, you are dooming yourself to failure. So don’t do that.

Instead, make a plan that is both reasonable and that leaves you some wiggle room in case an unexpected bill emerges. (For more on that, see the next entry.)

No matter what kind of plan you make, it can’t rely on you paying only the minimum payments. Your budget needs to carve out room for extra funds.

The two best debt repayment plans out there are the Debt Snowball and the Debt Avalanche methods. With both of them, you put all your extra debt repayment funds towards one debt at a time.

People will swear by the Debt Avalanche method because it means paying off your highest interest debts first, but that can take a while.

The Debt Snowball, on the other hand, focuses on paying off your smallest debt first, which will give you early victories. For many folks, that’s encouragement they’ll sorely need.

Build an emergency fund.

Throwing all of your money towards debt repayment is all well and good, but it does come with a big downside: If you don’t have any money in savings, you’ll have to take on more debt any time a surprise expense comes your way.

The way to avoid that is to simultaneously build an emergency fund. While this might slow down your debt repayments somewhat, the financial security it’ll provide is well worth it.

When you make a budget, set aside money from each paycheck that goes right into a savings account. Heck, you can even get money in cash and put it in an envelope under your mattress.

These funds are for emergency expenses, so they need be easy to access, but you’ll also have to avoid using them for unnecessary purchases and splurges.

Your initial goal with an emergency fund should be $1,000. But really, the ideal size for an emergency fund is six months worth of living expenses.

Pay yourself first.

This is a simple but powerful financial lesson. Paying yourself first means putting your long-term financial needs before everything else.

In this case, you should figure out how much you want to put into savings and towards debt repayment every month. Once you have those numbers in mind, only then do you turn your attention towards building the rest of your budget.

It might sound a little silly, but you’d be surprised what can happen when you change up your financial priorities.

You might call this the financial equivalent of the baseball diamond from Field of Dreams: build these savings into your budget, and the money will come.

Be careful with debt consolidation.

One way to pay down your debt is to consolidate all your different debts into one single loan or credit card with a lower interest rate—or maybe with no interest at all.

But debt consolidation comes with dangers all its own, especially with credit cards. Using a zero percent APR offer on a credit card to consolidate your debt can make your debt payments go farther, but what about all those old cards?

Closing those cards could actually hurt your credit score, but leaving them open invites a lot of temptation. If you’re not careful, you could end up racking up even more debt. That’s the last thing you need!

You need to be very, very careful, and keep those old credit cards in a place where you can’t access them very easily.

Increase your income.

The faster you can get out of debt, the more money you’ll save in interest and the sooner you’ll be able to put that extra money towards stuff that’s way more fun or productive or both.

But unless you want to start hunting local pigeons for food, there’s only so much room that you can carve out of your budget.

The only other option, then, is to increase your income! You can do this by taking on a second job or a fruitful side hustle.

The one thing you’ll want to watch out for is overwork and burnout, as that can lead you to make emotional splurge purchases.

If you aren’t able to swing a side gig, you can look for a better, higher-paying job, or ask your boss for a promotion!

Avoid predatory loans.

For folks with bad credit, tight budgets and meager savings, emergency expenses often mean taking out a bad credit loan or no credit check loan to make ends meet.

This is something you do your best to avoid in general, but especially if you’re trying to pay down your debt.

Predatory lenders offering short-term payday loans, cash advances, and title loans with ridiculously high annual interest rates will likely drive you even deeper into the hole.

Beyond a simple debt trap, they could leave stuck in a vicious cycle of debt, where you keep making payments without ever getting closer to paying your loan off!

If you must take out a bad credit loan, look into a long-term installment loan, as their amortizing interest and more reasonable payments can help keep you on track.

Fix your credit score.

If you’ve spent years trapped in debt, the odds are good that your credit score is in the tank. (For reference: A credit score under 630 is considered “bad credit,” but even scores below 670 can seem too dodgy for traditional lenders.)

The amount of debt you owe makes up 30 percent of your FICO score, so getting out of debt should help your score immensely. But don’t get overconfident!

A better score will help you borrow money with better terms and at lower rates, so order a free copy of your credit report and see where exactly your score can be improved.

Here’s a tip: If your years in debt caused any late or missed payments, make sure you make all your payments on time moving forward. The only credit score component more vital than your amounts owed is your payment history.

You can also follow these tips to AVOID debt traps altogether.

Guess what? It turns out that spending beneath your means, maintaining a budget, and building your savings are all great ways to stay out of debt in the first place! Just follow the advice we’ve laid out in this article, and your financial future should be debt-trap free!

If you want to read more about managing your finances responsibly, check out these related posts from OppLoans:

What are your best strategies for getting out of debt? We want to hear from you! You can find us on Facebook and Twitter.

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The Benefits (and Drawbacks) to No Credit Check Installment Loans

No credit check installment loans are far from perfect, but they have a leg up on short-term payday loans. Here’s everything you need to know.

When you have bad credit and you need to borrow money, your options don’t usually inspire a lot of confidence. What else can you do but settle for a short-term, high-interest payday loan or title loan?

Well, that’s where no credit check installment loans come in. Like short-term cash advance loans, applying for one won’t hurt your credit, but they also come with longer terms and more manageable payments.

Then again, it’s not like these installment loans are absolutely perfect. They’re not. They come with a long list of pros and cons, just like any other financial product.

With that in mind, here’s an overview of the benefits and drawbacks to borrowing a no credit check installment loan—with a special emphasis on how they stack up compared to payday loans.

Benefit: You can borrow more.

Many states have fairly strict limits as to how much a person can borrow with a short-term payday loan. Usually, the maximum loan amount won’t be more than several hundred dollars.

This means that payday loans won’t be helpful for larger financial needs. Sure, you could use one to stretch your budget over the last few days before a paycheck, but something like a car repair bill or surprise medical expense will probably require more money than a payday loan can provide.

This is where no credit check installment loans can come in handy, as they usually come with much larger average loan amounts. If the bill you need to cover is over $1,000, an installment loan is likely going to be a much better form of bridge financing than a two-week payday loan.

Of course, these loan amounts will vary from state to state, from lender to lender, and from customer to customer. The good thing about no credit check installment loans and payday loans is that you can apply for one and learn how much you’ll be approved for without having an inquiry show up on your credit report!

Benefit: Lower interest rates.

This is another benefit that will vary depending on your specific financial situation, your state of residence, and the particular lender that you’re working with. All that having been said, a bad credit installment loan is very likely to come with a lower annual percentage rate (APR) than your standard payday loan.

You’ll always want to check out the APR for any personal loan that you borrow, but you want to pay special attention to it when borrowing a payday loan. Due to their short repayment terms, the stated interest rates for these loans can vary wildly from their actual APRs.

For instance, a two-week payday loan with an interest rate of fifteen percent has an APR of 391 percent! What?! That’s because APR measures the cost of a loan over one full year. It’s a standardized metric that lets you make apples-to-apples comparisons between different types of loans.

Granted, no credit check installment loans are still going to have a much higher interest rate than regular personal loans. But even an installment loan with a 130 percent APR still comes at less than one-third the cost of a payday loan with an APR of 400 percent.

Drawback: More interest paid overall.

This is one area where comparing bad credit installment loans and payday loans can get a little tricky, so please bear with us. This seems like a truly major drawback on paper, but in reality, it’s a little more minor.

Because payday loans have such short repayment terms, paying one off on time means paying far less in actual interest than you would on an installment loan—even one with a much lower APR.

This is why payday loans seem so appealing. Sure, their APRs are high, but why would you worry about the cost of the loan over a full year? You’re going to pay it back in two weeks! $15 per $100 borrowed is a lot less than $120 per $100, right?! It’s so obvious!

Here’s where things go sideways. Because, yes, on paper, payday loans cost much less than installment loans. But in reality, many payday loan customers struggle to pay their loans back on time. And the longer they are in debt, the more relevant those high APRs become.

Here are some numbers that should give you pause: According to a study from the Consumer Financial Protection Bureau (CFPB), the average payday loan customer takes out 10 loans annually and spends almost 200 days every year in debt. That means paying an effective interest rate between 150 and 219 percent on a payday loan with a 391 percent APR.

So, yes, you’ll end up paying more with an installment loan than you will with a payday loan, even if the former has a much lower APR than the latter. But that’s not the whole story.

Benefit: More manageable payments.

Why do so many payday loan borrowers end up taking out so many loans? Well, the reasons go beyond the interest rate. They also have to do with the size of their payments.

Simply put, many people struggle to pay back several hundred dollars within two weeks. And even if they do make the payment, it oftentimes creates another budget shortfall, which then leads to them taking out another payday loan.

According to a study from The Pew Charitable Trusts, only 14 percent of payday loan borrowers have enough money in their monthly budgets to pay back their loans on time. That’s not a lot!

Borrowers who find themselves in situations like this are often faced with two options. They can roll over their loan, which means that they pay only the interest owed and then get a new repayment term, complete with more interest, or they can take out a new loan immediately after paying off their old one.

This is an area where installment loans have an advantage. Despite their larger loan amounts, their longer payment terms and lower APRs mean that the individual payment amounts are smaller and more manageable.

APRs and interest rates are always important factors when you’re considering a bad credit loan. But don’t forget to check the size of your payments as well. Even a great interest rate isn’t worth it if the individual payments are going to be more than you can afford.

Benefit: Amortizing interest.

While we’re on the subject of interest, let’s talk about amortization. You might not be familiar with that term, but it’s an area where installment loans have a big leg up on their short-term competition.

With an amortizing loan, your interest accrues over time, and every payment you make goes towards both the principal loan amount and the interest owed. Loans that aren’t amortizing, on the other hand, charge interest as a flat fee.

Most installment loans are amortizing, but you should always check to make sure—especially when borrowing from bad credit lenders. With an amortizing loan, paying the loan off early saves you money because less interest accrues—though you should also check to make sure your installment loan doesn’t come with any prepayment penalties.

Payday loans aren’t amortizing, which means that interest is charged as a flat rate right when the loan is issued. Paying back a two-week payday loan in only one week won’t save you anything.

But one of the primary ways that amortizing loans benefit borrowers is by ensuring that every payment gets the borrower closer towards paying the loan off altogether. It’s the opposite of loan rollover, where every payment only goes towards interest, never the principal.

If you’re borrowing a loan, make sure it’s amortizing. And in order to find an amortizing no credit check loan, an installment loan is by far your best best.

Drawback: No credit checks vs. soft credit checks

This is an issue with all no credit check loans, not just no credit check installment loans.

Lenders that don’t do any sort of check on your credit history or your ability to repay are probably not lenders you should be dealing with. No due diligence of any sort is a sign that they might be banking on their customers falling into a predatory debt cycle.

But not all bad credit lenders are like that. Some lenders, including OppLoans, care deeply about their customers’ ability to repay the loans they borrow. (Shocking, right?)

These lenders will not only check your ability to repay your loan, but they’ll also run what’s called a soft check on your credit. This is a check that returns less information than a full (or hard) credit check, but that doesn’t get recorded on your credit report or affect your score in any way.

The reason that people turn to no credit check loans is that they have no other options—and because there’s no use in having a credit check ding your score when you know that you’re going to get denied anyway.

But that doesn’t mean that you should stick with any old lender, no matter what kind of loan you’re taking out. Find a lender that offers amortizing interest and checks your ability to repay—especially if they perform a soft credit check. You won’t regret it.

To learn more about borrowing money when you have bad credit, check out these related posts from OppLoans:

What other questions do you have about bad credit borrowing? We want to hear from you! You can find us on Facebook and Twitter.

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Payday Loans vs Credit Cards: Let’s Break it Down

Inside Subprime: Nov 7, 2018

By Jessica Easto

More than 40 percent of American adults struggle to make ends meet each month, and when people are forced to make tough choices between material necessities like food, medication, and housing, they often turn to quick funding solutions, such as payday loans and credit cards.

Payday loans, also know as “cash advances,” are short-term, small dollar loans that come with very high interest rates. On average, payday loans terms are for two weeks, and they rarely exceed a month. Credit cards are essentially short-term, small-dollar loans, too. They allow you to borrow money from financial institutions such as banks and credit unions to make purchases and then you pay for them later.

Both payday loans and credit cards charge annual percentage rates, or APRs. APRs tell you how much a loan will cost—that includes its simple interest rate and any extra charges and fees—for one full year, allowing you to compare the cost of different loan and credit line products. However, payday loans tend to have extremely high APRs: 400 percent compared to below 20 percent for a credit card. Additionally, you don’t have to pay any interest on your credit card purchases as long as you pay them off in full by the end of your billing cycle, which is usually a month.

When used responsibly, credit cards can actually help you build credit and improve your credit score. In fact, you need fair credit in order to get a credit card—it’s usually difficult to get one if your credit score is below 550, and you have more options when it’s higher. Payday lenders often require no credit, making payday loans an alluring option when there aren’t many choices.

This is one reason why payday lenders are often considered predatory while the institutions that issue credit cards are generally not. A predatory lender uses deceptive practices and misleading terms to profit from borrowers—usually those in desperate situations. Many payday lenders require you to write a post-dated check when you sign the loan, and they cash it the day your payment is due. If you can’t pay at that time, you may forced to “roll over” your loan—for additional fees and interest of course. In this situation, a small $200 loan and quickly balloon out of control, creating a cycle of debt that is hard to escape.

Credit card debt is still a huge problem in this country, with almost 40 percent of households having revolving credit card debt, or a balance that is not paid off in full during the billing cycle. But most experts agree that payday loan debt is far worse than credit for several reasons:

  • Payday loans have much higher interest rates than credit cards, which means faster escalating debt if you are unable to repay the loan on time.
  • Even if you can’t pay your credit card off right away, you are allowed to make minimum payments, which are usually affordable. Although you will still accrue interest, credit card terms give you more flexibility while you get back on your feet.

The best way to minimize your exposure to the risks of payday loans and credit cards is to understand your finances and learn how to avoid predatory lending.

For more information on scams, payday loans and title loans, check out all of our state-by-state Financial Resource Guides.

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10 Good Money Habits to Make Your Friends Jealous

10-good-money-habits-to-make-your-friends-jealousThere are better reasons to save money than wanting to make your friends turn green with jealousy. But as motivating factors go, this one ain’t half bad.

We love our friends. After all, if we didn’t love them, they’d be our enemies. But that doesn’t mean that we can’t also love making them a little bit jealous of the fabulous life we’re leading. This is probably why someone invented the term “frenemies.”

Then again, there are tons of folks out there who would enjoy making their friends (or frenemies) jealous but are unfortunately stuck on the other side of that fence. You know, the one where the grass is definitely not greener.

That’s why we’re here. Forget trying to keep up with the Joneses; just follow these 10 pieces of financial advice and everyone else will be trying to keep up with you.

1. Pay yourself first.

Raise your hand if this is your approach to saving money: You take care of all your bills and living expenses and then you sock away anything you have left over. Are you raising your hand? We can’t see you, obviously, but we’re going to assume that you are.

Paying yourself first means turning this whole arrangement on its head. Instead of saving what’s left over, put money into savings first and then spend the rest. You probably think that’s nuts, that your budget is much too tight to prioritize saving money.

And you know what? We get it. But if you give this method a try, we think you’ll be surprised how flexible your budget can be. When you focus on paying yourself first, the rest of your budget will pretty much fall into place.

While your friends are scrambling to save up money for a vacation or to put away for a rainy day, you’ll be sitting on a sizeable nest egg. Try it!

2. Automate your saving.

Starting a new savings practice can be like starting a new exercise routine: The hardest part is instilling the disciple to just go out and do the dang thing. But what if you could outsource that part of your exercise routine, like a fitness tracker that would actually get you out of bed and to the gym at 6 am every day? Wouldn’t that be so much easier?

Well with saving money, this is something you can actually do! Let the robots be disciplined on your behalf through automatic deductions and transfers. As soon as your paycheck hits your account, money will be moved over to your savings account. Out of sight, out of mind. Your friends will wonder how you do it.

3. Set big goals.

Practicing good financial habits is rewarding, but it can also be pretty tedious at times. But you can both alleviate some of that tedium and achieve even bigger things by setting big, ambitious goals.

You want to build up $1,000 in savings? Great. But what about $10,000 in savings? Working towards a bigger goal will help you focus your mind, step up your efforts, and get creative with your money. The bigger your goals, the more you’ll do to achieve them.

Of course, there’s a flipside to this. Don’t set goals that are so ambitious that you have no hope of achieving them. Dream big, but dream realistically.

Saving is hard enough, and it’s much harder when you don’t know what you’re saving for. Whether it’s an emergency fund, your retirement, your kid’s education, a big vacation, or a new car, these goals will help you stay on track.

Oh, and speaking of emergency funds…

4. Start an emergency fund.

What’s an emergency fund? It’s really just another word for savings, but it’s money that’s being saved with a specific purpose in mind. Unlike money that you put into retirement accounts—which you aren’t planning on touching until decades from now—or money that you’re putting towards a major new purchase, your emergency fund is for, well, emergencies.

With your emergency fund, you’re not worried about that money earning interest or being locked away where you can’t touch it. Being able to access those funds in a time of crisis is the whole idea! You might even want to maintain your emergency fund in cash.

So what’s the best amount to keep in your emergency fund? Well, we recommend that you start with $1,000. But after that, you shouldn’t rest on your laurels. The ideal amount to have in your emergency fund is enough to cover six whole months worth of living expenses.

That may sound like a lot, but it could be a literal lifesaver. It’s hard to watch someone who loses a job or suffers an injury and has their finances spiral out of control. With a well-stocked emergency fund, you’ll be prepared for the worst.

5. Eliminate your debt.

The odds are good that both you and your friends have more debt than you want to admit. Whether it’s credit card debt, student debt, or mortgage debt, all that money you’re putting towards interest every month is money that could be much better spent working for you.

So if you really want to make your friends jealous, make paying down debt your number one priority. Start with consumer debt (also known as “bad” debt), like credit cards and personal loans. These usually come with much higher interest rates, and they make zero contributions to your total net worth.

In order to get out of debt, you’ll need a plan of action. We recommend either the Debt Snowball or the Debt Avalanche. In short, these methods involve putting all your extra debt repayment funds towards one debt at a time. And when you pay off that first debt, you then roll over its minimum payment towards the next debt down the line.

Here’s the difference: With the Debt Snowball, you pay off your smallest debt first; with the Debt Avalanche, you pay off your debt with the highest interest rate.

Debt can be a massive burden, tying you down to a job or a city that you would rather get out of—you just can’t afford to. Escaping from under that burden will give you the freedom to do things you always dreamed of. If that won’t make your friends jealous, we don’t know what will.

6. Live below your means.

This one might seem a little bit obvious, but there’s still a good chance that you’re not doing it. If you want to save more money, than living below your means is a must. If every dollar you make each month is only going towards bills and other living expenses, then you’re never getting ahead. When it comes to money, you’re only ever treading water.

Basically, living below your means involves living as though you make less money than you do. If your total post-tax income every month is $4,000 for example, then rearrange your lifestyle so that you’re only spending a total of $3,000 on everything.

That extra $1,000 can then be put towards your emergency fund, your retirement accounts, or any big purchase you’re saving up for. Living like you make less money now means that you’ll have more money to live on down the line. While your friends are treading water, you’ll be roaring by them on a custom jet ski.

7. Check your credit report.

Keeping an eye on your credit score is always a good idea, but this means going one step further. By regularly checking your credit reports, you’ll understand all the areas where you need to improve your credit and you’ll be able to keep an eye out for identity theft.

Your credit reports are documents that track your past seven years as a borrower and credit consumer. (Some information, like bankruptcies, stays on your report for a bit longer.) You actually have three credit reports, each compiled from the three major credit bureaus: Experian, TransUnion, and Equifax.

By law, each of the credit bureaus is required to provide you with one free copy of your report annually upon request. If you order one report every four months, you will be able to pretty consistently track your credit history—all without paying a dime!

Credit reports can also contain errors, which might be artificially deflating your score. To request a free copy of your credit report, just visit If you need to dispute an error on your report, you can follow the instructions in our blog post, How Do You Contest Errors On Your Credit Report?

8. Get a side hustle.

Saving more money isn’t just a matter of cutting down on your expenses. You can also boost your savings by earning extra income! You could do that by getting a better paying job or asking your boss for a promotion (and a raise), but picking up a side hustle is probably faster.

There are tons of ways you can go about this. For instance, you could start driving for a rideshare service or work for any other number of “Uber but for X” companies. You could also pick up a second job or start your own entrepreneurial venture.

Whatever you do, just make sure that you aren’t burning yourself out or letting all that extra income turn into extra spending. Oh, and really do that math on your expenses to make sure that the money you’re earning is worth the extra stress.

While a second job might not make your friends jealous in the short-term, all the great things you’ll be able to do later on with that extra money sure will.

9. Steer clear of payday loans.

This is another great reason to build up an emergency fund. When you have an unexpected bill or a financial gap that needs to be plugged, turning to payday loans is the last thing you should be doing. With their high interest rates and lump-sum repayments, they might just make your bad financial situation even worse.

The same holds true for other types of short-term no credit check loans like cash advances and title loans, which can come with APR’s upwards of 300 and 400 percent. Plus, you’ll have to pay the loan back all at once, which can create yet another shortfall. This is how people end taking out loan after loan after loan and becoming trapped in a predatory cycle of debt.

When life knocks you on your butt, building up your savings means having a financial cushion to soften the landing. And while you could always turn to a longer-term bad credit loan (like an installment loan) to bridge your financial gaps, the best solution here means skipping loans altogether.

10. Responsibly maximize your credit card rewards.

If you want to travel more or be able to splurge on holiday spending, then credit card rewards are a great way to make that financially feasible. You’ll need a good credit score to do so, but racking up points and miles can help you live a little bit larger than you otherwise would.

Here’s the thing: Credit card rewards can be great, but you absolutely cannot let them encourage you into overspending. Having to pay interest on excess credit card debt will pretty much wipe out all the good that rewards points can do. It’ll actually make them … pointless.

To get the most from your rewards, consider consolidating all your credit card transactions onto one or two cards. And if you really want to be responsible, you should look into transferring all cash-back rewards directly to your retirement accounts. It’ll be less fun, but your future self will thank you for thinking ahead.

We actually wrote a whole blog post on this subject recently, so we suggest you check that out. In the meantime, making your friends jealous probably isn’t the best reason to get your financial house in order, but if it works for you, then we wish you the best of luck.

To learn more about saving money, check out these related posts from OppLoans:

What are your best strategies for saving money? We want to hear from you! You can find us on Facebook and Twitter.

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4 Scary Financial Facts (And 4 Ways to Avoid Them)

Don’t become a victim of these frightening financial mistakes.

Every day we’re bombarded with negative statistics that make us frightened, anxious, and confused. When it comes to financial matters, this is even more true. What should we be doing with our money? What are other people doing with their money? Are we falling behind? Are we just another statistic?

Americans are preoccupied with anxiety and constant stress about their finances. Don’t let money be another worry in your life.

Here are four of the worst financial statistics—what constitutes them, but more importantly how to avoid them.

Statistic 1. 

61 percent of Americans don’t have enough savings to cover a $1,000 emergency.

Whether it’s a medical problem, an auto repair, or a job loss, unexpected emergencies can happen to anyone at any time.

Did you know that an ambulance ride for the uninsured can exceed $1,000 and even reach $2,000? Or that the average auto repair bill is between $500 to $600?

What’s even more frightful is that an overwhelming number of Americans don’t have the funds available to cover these unexpected costs.

According to a 2018 survey, 34 percent of American households experienced a major unexpected expense in the last year, with only 39 percent of respondents saying that they would be able to cover a $1,000 price tag using their savings.

In fact, here is how Americans pay for unexpected costs:

  • 39% pay the costs using savings
  • 19% finance with a credit card and pay off the amount over time
  • 13% reduce spending on other things
  • 12% borrow money from family or friends
  • 5% take out a personal loan

By having to rely on credit, loans, and borrowing money, it’s evident that a large portion of the population is budgeting for the short-term, if it all. While it’s difficult to plan for the future, especially when many Americans live paycheck-to-paycheck and focus on meeting basic survival needs, an emergency fund is a necessity that can provide financial security and reduce worry.

What you can do.

Create an emergency fund.

The purpose of an emergency fund is to improve one’s financial security by establishing a safety net that can be used in situations to meet unexpected expenses while reducing the need to withdraw from high-interest debt options, like credit cards and predatory loans. With an emergency fund, you are also less likely to go bankrupt or build unnecessary debt when an emergency cost arises.

While easier said than done, it’s still possible and necessary to put away some money while simultaneously paying monthly bills, reducing credit card or student loan debt, and working towards other financial goals. It’ll just take carefully executed planning and possibly some sacrifice. Say goodbye to take out food seven days a week.

The best solution is to start right now. Even if you have $0 saved, start by setting aside $1 a day. That’s $365 after an entire year. Up your savings to $5 a day and suddenly you have a fund of $1,825 after one year.

Divert a portion of your paycheck to a savings account through direct deposit or set a monthly reminder to “pay yourself first” by transferring funds from a primary account to your savings.

For beginning savers, financial experts recommend building a $1,000 emergency fund to get started. This will help you ease into understanding your monthly income versus expenses and allocating some money for savings. Once a well-funded cushion is established, earmark more money to create a solid $2,000 emergency fund. Keep upping your savings targets from there.

Ultimately, the goal should be to save at least three to six months of your salary, not only for unexpected costs, but in the worst case scenario of losing your job. Having this money will ensure that a couple months’ worth of living expenses are covered while you figure out another source of income.

Statistic 2.

40 percent of student loan borrowers are expected to go into default by 2023.

Education debt in the United States has tripled over the last decade, exceeding $1.5 trillion. And for student loan borrowers, future prospects are looking increasingly bleak.

When you borrow money from a lender, you agree to terms specified about repaying the loan. If you fail to make on-time payments, you may fall into loan delinquency. Extended delinquency then results in loan default, or the failure to repay a loan, with the loan amount being sent to a collection agency. Default may occur immediately or after several months of missed payments, depending on the timeline outlined in your loan terms and state or federal laws.

Within four years after leaving college, nearly one out of four student borrowers defaults—more than one million students annually. Within two years, 29 percent of students enter delinquency on their federal student loans and 19 percent enter delinquency on their private loans. By 2023, nearly 40 percent of borrowers are expected to default on student loans.

This isn’t surprising considering the uncertainty of job prospects and the instability associated with transitioning out of college. Borrowers may find themselves in financial distress and unable to manage student loan repayments.

To make matters worse, defaulters’ credit scores take a big hit. Those who have defaulted on student loans have an average credit score of 550—considered on the cusp of subprime credit. By comparison, borrowers in good standing have average scores in the high 600s.

Those with low credit scores typically pay higher interest rates, have difficulty renting, delay or are unable to buy homes, and may even be disqualified from certain jobs. Defaulting will even increase a student loan borrower’s balance because of collection fees and accumulated interest.

Other negative effects of student loan defaulting includes, but is not limited to, wage garnishments, tax offsets, suspension or revocation of state-issued professional licenses, and driver’s license suspension.

It’s important to note that people who default on their student loans are more likely to live in Hispanic and black neighborhoods. Further, people of color carry a disproportionate amount of student loan debt, due in part to less familial wealth and higher unemployment rates than their white counterparts.

What you can do.

It’s crucial to be proactive with student loans or any other kind of debt.

For current or future students, minimize the amount of student loan debt that you take out by exploring grants, scholarships, and part-time jobs.

Ideally, graduates have budgeted their repayment amount into expected monthly expenses. However, if you find yourself unable to repay your student loans, there are secondary options available outside of borrowing money from family or friends.

Contact your student loan servicer as soon as possible. If you’re hesitant, contact your college or university to see if the financial aid office offers services to help with this. You’d be surprised, but some staff are trained to assist students with everything from imparting student loan advice to acting as a liaison on the phone with service providers.

Exploring your repayment options typically means finding a repayment plan that is better suited for your situation, such as an income-based repayment plan or a temporary deferment or forbearance. Putting your student loans into forbearance is one relief option that allows you to temporarily stop making payments, without the accumulation of interest.

If your student loans are already in default, still call your loan servicer to ask about how to return to good standing. Solutions typically include loan rehabilitation, loan consolidation, or paying off the loan in full.

Use loan rehabilitation wisely, as it is a one-time opportunity to clear default and regain eligibility for federal student aid. This nine- to 10-month program is an agreement between the lender and borrower for affordable repayment amounts over the course of nine months that will rehabilitate a defaulted student loan. Once the borrower makes these on-time payments, the default status is removed from their account and credit history.

Loan consolidation is the combining of multiple federal education loans into one, thus allowing a single monthly payment.

Statistic 3.

38 percent of U.S. households have credit card debt.

Debt of all kinds is a major problem in the United States, with consumer debt set to reach $4 trillion by the end of 2018. Low wages and a high cost of living is the perfect storm pushing people to to spend outside of their means.

Looking at credit card debt, the Federal Reserve Bank of New York reported that credit card balances rose to $26 billion in the fourth quarter of 2017.

Want more frightening credit card statistics?

  • Total credit card debt increased to over $1 trillion last year in 2017.
  • 43 percent of Americans have been carrying a credit card balance for over two years.
  • The average household with credit card debt owes $16,883 and pays $1,292 annually in interest alone.
What you can do.

Credit is a double-edged sword. It can be used to finance wealth-building purchases, but it can also lead to excessive debt and snowballing interest.

Credit cards are the most common form of credit, and a simple rule for responsible use is to not buy anything you couldn’t pay for with cash. (There are, of course, rare exceptions, such as emergencies.) Think of credit cards as plastic cash and not as a gateway to revolving debt. If you can’t pay off your credit in a reasonable time frame, then don’t make that purchase!

Another rule is to maintain a low credit card balance. We’ve all heard of the 30 percent utilization rule—now, just stick to it. Maxing out a credit card or coming close to credit limits and then not paying it off in full each month almost guarantees a lowered credit score. Decrease unnecessary spending and in some cases consider temporarily diverting money from a retirement account or an emergency fund in order to pay down credit card debt as quickly as possible. The accrued interest could cost hundreds or thousands for those only making the minimum payments each month, so be sure to prioritize payments by higher interest balances.

Finally, make every payment on time. Delinquent accounts will be reported to the three major credit card bureaus—TransUnion, Experian, and Equifax. Severely delinquent accounts run the risk of being closed by the creditor and sent to a collections agency.

For those who are deep in debt, you’re not alone. Don’t be afraid to reach out to your creditor, a financial advisor, or another trusted source about your situation. Some creditors may be able to create a payment plan or reduce your card’s interest rate. With a plan and commitment, you can turn your situation around.

Statistic 4.

33 percent of American adults have $0 saved for retirement.

A recent survey revealed that a majority of Americans aren’t saving enough for retirement—33 percent of respondents said they had no retirement savings, and 23 percent said they had less than $10,000.

Women are even more vulnerable, due to the gender pay gap, longer life expectancies, and an investment gap. Sixty-three percent of women, or about two-thirds, say they have no savings or less than $10,000, compared to 52 percent of men. With women saving and investing significantly less than men for retirement, this could add up to $1 million over time.

Retirement savings are also closely correlated to age.

Millennials are the least likely to have a large retirement fund, since they are the most recent to join the workforce. Forty-two percent of millennials say they have no retirement savings. On the other hand, 30 percent have saved under $10,000, and 28 percent have saved over $10,000.

What does this mean for most Americans? Perhaps the barriers to starting a retirement fund prove a significant reason to simply opt out. A lack of retirement planning education, an increasingly grim outlook on the future, and the difficulties of rolling over funds after job hopping indicates that opening a retirement savings account may be viewed as a hassle.

However, the consequences of not saving for retirement can play out in a number of terrifying ways.

What you can do.

For young people just starting their careers, saving now and saving regularly will make all the difference.

Use the power of compounding interest, or the addition of accrued interest to the principal deposit, to your benefit. Even a small amount set aside early and contributed to regularly could provide a decent retirement.

Many financial planners recommend saving 10 to 15 percent of your income in a retirement account when starting your career. Saving as little as five percent could make a huge difference in the long term, especially if your employer matches. Always take advantage of employer matching since it could help you reach the target savings amount with a smaller individual contribution.

Younger people are in the best position to recover if they’ve fallen behind because they have more time to use compound interest to their advantage.

For those age 40 and over, however, the picture is much more bleak. Anyone nearing retirement age will want to have significant funds, otherwise they will have to play catch up with an aggressive savings plan. This means saving three to four times as much as younger people.

Procrastination is the root of the problem. With less time to save as the years pass, older age groups need to sit down, have an honest conversation about their financial priorities, and most likely adjust their expectations.

Let this be a lesson that saving money for a comfortable retirement nest egg is a wise investment, no matter what age you begin.

5 Tips for Turning Bad Credit into Good Credit

There’s no magic spell to turn a lousy credit score into a stellar one. But there are still plenty of steps you can take to fix bad credit.

Going from bad credit to good credit can feel impossible. It isn’t always obvious how certain choices will affect your score, and the things that will most obviously benefit your credit aren’t always easy to do.

And that’s unfortunate because your credit score is very important. Being stuck with a lousy score makes it way harder to take out personal loans and credit cards, or even find an apartment.

When an unexpected bill arises, you might even find yourself turning to predatory no credit check loans like payday loans, title loans, or cash advances just to get by!

But never fear! With a little bit of knowledge and a whole lot of dedication, you too can make your credit score increditable!

1. Learn what’s hurting your score.

As we said above, it might not always clear what will hurt your credit. So before you can start fixing your score, you need to figure out why it’s so low in the first place.

“There are many things that can hurt your credit score,” warned Mark Charnet, founder and CEO of American Prosperity Group. “Obviously, not paying on time is one of those things. Paying less than the minimum payment required or bouncing a check will also lower your score.

“There are also lesser known things that can hurt your credit just as badly. For example, canceling an inactive credit card can lower your score, even if you don’t have a balance on that card.

Being excessively obligated, meaning having too much credit, is also a negative. Frequent changes in your occupation or address can also result in a lowered score.

“Your spouse’s credit can affect you as well, so it’s important that both of you are on the same page financially.”

You shouldn’t avoid moving or getting married just because you’re trying to fix your credit score, but it’s important to be aware of these things. That way, you can be prepared for the possible credit hit and plan to counteract it accordingly.

2. Pay all your bills on time.

This is easily one of the most important and most known factors. It’s come up two times already in this very article.

“Pay your debt before due dates,” advised Jory McEachern, a credit specialist at ScoreShuttle (@scoreshuttle). “Make it a habit to pay off your credit debt once a week rather than once a month. That way, your available credit line stays the same.”

Charnet echoed the importance of paying your bills on time: “To help your credit, you should pay on time to demonstrate responsible use of your credit worthiness.

“Paying monthly bills on time like your mortgage, auto loan, or bills will raise your score over time. If possible, pay more than the minimum amount required each month.

“Long-term stability with your employment, home address, and marriage also helps keep your credit score at a good level. Regardless of their balance, you should have verifiable savings, investments and retirement accounts.”

In case it hasn’t been made clear, paying all of your bills in full and on time is one of the most important steps to fixing your credit.

3. Keep your credit lines open.

When it comes to improving your credit score, paying down your excess debt is usually a must. But don’t get too overzealous or it could come back to bite you. As Charnet mentioned, closing credit cards once they’re paid off can actually hurt your credit score.

Your credit utilization ratio—or how much of your available credit you’re using—is an important factor in your score. So long as you’re using credit responsibly, a higher amount available credit means a better ratio.

“Keep your credit card accounts open,” suggested McEachern. “Although you may have stopped using one or more of your older credit cards, don’t close them!

“Your payment history affects your credit. If you delete one or more credit cards that you’re not using, you’re also deleting your credit history and your available credit line decreases. No good!

“If you only have one credit card account, open more. You can improve your credit just by opening a variety of credit accounts, which shows that you can manage money if you pay all your credit card debt on time. Sometimes, more is more!

Of course, the temptation with having multiple open credit lines is to use them!  And the more credit you have available, the easier it will be to rack up debt. That’s not good!

If you have multiple credit cards, for instance, make sure you leave most of them at home. The less accessible you make your extra credit lines, the easier it will be to manage your finances responsibly.

“Ask for an increased credit line,” addsMcEachern. “The higher credit line you have, the more likely you are to keep a low credit card utilization which helps improve your credit.”

Having no credit lines doesn’t mean you have good credit. It means you have no credit. So generally the more credit you use, the better, as long as you (say it with us) actually pay your bills in full and on time.

4. Check your credit report for errors.

Your credit score is based on information on your credit reports, which are compiled and maintained by the three major credit bureaus: Experian, TransUnion, and Equifax.

And guess what? These reports can contain mistakes!

Here’s McEachern: “On your credit report, there are often one or many errors that you have the right to fight off on your report. By disputing these claims, your credit score can improve by more than 100+ within a few months. Everything from name spelling errors and old outdated information can be dragging down your score.”

To see if your credit is being docked due to errors on your report, all you need to do is order a free copy by visiting All three bureaus are required by law to provide you with one free copy of your credit report annually.

If you find an error, you’ll have to dispute it. To learn more, check out our blog post: How Do You Contest Errors On Your Credit Report?

5. Write a letter of explanation.

Even if there aren’t errors on your credit report, per se, that doesn’t mean that reading that you can’t take action.

“If there are any blemishes on your credit report from the reporting agencies, it is your right to write a statement that by law must be included in future requests of your profile by lenders and potential credit grantors,” Charnet told us.

The term for a document like this is a “letter of explanation.” While they’re most commonly associated with mortgage applications, letters of explanation can help overcome a bad credit score, too.

“This statement should be used to explain the reasons for the negative entries i.e. was temporarily unemployed due to the company shutting down and my inability to find employment for 6 months.

“Or an illness from you or your spouse caused a reduction in compensation leading up to the negative entries that have been rectified since returning to full-time employment. Or lastly, if there was a death in your immediate family that created a financial hardship.

“These are just examples of what may be added to your report and must be factual. In this way, potential credit grantors will not have to anticipate why there are negative entries, they will know the exact reasons and what was or is currently being done to rectify the situation to restore your credit.

“Remember the most important rule of seeking credit with a lower credit profile than you would prefer: Facts tell and stories sell. You cannot personally appear to the lending board, but you certainly write a story about yourself to let them see you through your words.”

Including a letter of explanation can have its downsides, however, especially if it means admitting a late payment has been correctly marked. Depending on the situation, it might be better to leave well enough alone.

Every credit situation is different, but these tips should apply to many different situations. Now go out, and pay those bills on time! To learn more about fixing your credit score, check out these related posts from OppLoans:

What else do you want to know about fixing bad credit? We want to hear from you! You can find us on Facebook and Twitter.

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Mark Charnet, founder and CEO of American Prosperity Group, has been in the retirement and financial estate planning field for over 35 years. Mark has numerous certifications and credentials, including Life and Health Insurance, Certified Annuity Specialist and FINRA Series 6, 63, and 65 Securities Licenses. APG’s unique approach to retirement and legacy planning allows clients to retire with confidence.
As a credit specialist at ScoreShuttle (@scoreshuttle), Jory McEachern helps individuals reach their ideal credit score so that they can qualify for all the important things in life. With ScoreShuttle’s online first-of-its-kind technology, members receive the most current updates and tips and advice on how to boost their score, fast.

How the Affordable Housing Shortage is Hurting Your Bank Account

There aren’t enough affordable home and apartments to go around, which means that rent and mortgage payments are taking a big bite out of people’s paychecks.

For millions of Americans, just trying to live an average life seems out of reach. Even with a roaring economy, they feel like they’re earning less than they should, and the cost of necessities like housing and a car eat up a huge portion of their budget.

And you know what? They’re right. Unless you’re a high earner, America can be a tough place to live right now. Incomes are stagnant and costs are up: the perfect recipe to squeeze the average bank account dry.

One thing that’s more expensive nowadays is housing, with a nationwide shortage of affordable housing making the pinch even more painful. And it’s not just affecting homeowners, either; it’s making life more difficult for renters, too.

Here’s what you need to know.

How bad is the affordable housing shortage?

Every year since 1988, the Joint Center for Housing Studies of Harvard University releases a report called State of the Nation’s Housing. According to their 2018 report, there is a real divide between the demand for affordable housing and the supply of housing that’s available, one that is driving price increases well beyond normal inflation.

From the report:

Homeownership rates among young adults today are even lower than in 1988, and the share of cost-burdened renters is significantly higher. Soaring housing costs are largely to blame, with the national median rent rising 20 percent faster than overall inflation in 1990–2016 and the median home price 41 percent faster.

In short: average housing costs take up a larger portion the average paycheck than they did 30 years ago. Money that once went towards food, household expenses, leisure, transportation, you name it, now goes towards simply keeping a roof over one’s heard.

As anyone who was around for the 2007 mortgage crisis will remember, sometimes the housing market goes a little wacky, with massive price increases being driven by easy credit and wild expectations of profit.

But the issue here appears to be a different one. While there are several factors driving this outsized rise in housing costs, one of the primary factors is simply a lack of lower cost units. The folks who are being squeezed the hardest by these higher prices are the ones who can least afford it.

What’s causing the affordable housing shortage?

The Station of the Nation’s Housing report is a fairly sober document, which means they avoid making sweeping conclusions, and they admit when they’re not sure about something. With the housing crisis, they point to several competing factors that are driving up costs.

  1. Stagnant incomes: The report found that the bottom 25 percent of the U.S. has seen only three percent median income growth since 1988, while adults aged 25-35 (the normal range for first-time home-buyers) saw increases of only 5 percent. For comparison, the country’s per capita GDP grew 52 percent over the same time period. As the authors put it, “If incomes had kept pace more broadly with the economy’s growth over the past 30 years, they would have easily matched the rise in housing costs—underscoring how income inequality has helped to fuel today’s housing affordability challenges.”
  2. Fewer new “entry-level” homes being built: According to the report, there were only 163,000 small single-family homes completed in 2016, representing  22 percent of all single-family construction. From 1999–2007, these types of homes represented 33 percent of new construction. “Entry-level” homes are generally smaller and more affordable, perfect for first-time home buyers. With less of these homes available, its harder for people to become homeowners.
  3. Less single-family construction leads to less supply overall: In fact, the problem isn’t just fewer entry-level homes being built, it’s that there are fewer single-family units on the market in general. The report states that “only 610,000 single-family homes were added to the stock annually in 2008–2017.” In order to keep up with demand, they would have needed to add 1.1 million. Fewer new homes mean fewer options for both new and existing homeowners. With supply unable to keep up with demand, prices have risen.
  4. Impediments to homebuilding:  The report makes clear that homes today are generally better made and with nicer amenities than the homes that were being built 30 years ago. Nicer homes with better materials can lead to higher prices all by itself. Still, the authors also cite four primary reasons why building a home is more expensive now than it used to be. The first is a shortage of skilled workers and a corresponding increase in labor costs. The second is an increase in the prices of both raw and manufactured materials. Third is an increasing scarcity of land, especially in booming metro areas. Last, they cite local regulations and fees that not only increase the cost of construction but often disincentive large-scale housing projects that would increase the population density. Less efficient land use causes price hikes.
  5. Fewer public subsidies: The authors of the report specifically mention that expanding the supply of affordable housing will not entirely solve this crisis. Without increased subsidies for very low-income households, issues will remain. “Between 1987 and 2015,” they write, “the number of very low-income renters grew by 6 million while the number assisted rose only 950,000, reducing the share with assistance from 29 percent to 25 percent.” They point to the housing choice vouchers administered by the Department of Housing and Urban Development and the Low-Income Housing Tax Credits (LIHTC) administered by the Treasury Department as two key programs that have not kept up and should be bolstered to provide additional support.

Less affordable housing means higher rents, too.

Earlier in this post, we cited a passage that mentioned “cost-burdened” renters. Being cost-burdened refers to people and families who pay more than 30 percent of their income towards housing. From the report:

The cost-burdened share of renters doubled from 23.8 percent in the 1960s to 47.5 percent in 2016 as housing costs and household incomes steadily diverged, with the largest increases occurring in the 2000s. Adjusting for inflation, the median rent payment rose 61 percent between 1960 and 2016 while the median renter income grew only 5 percent (Figure 6). The pattern for homeowners is similar, with the median home value increasing 112 percent and the median owner income rising only 50 percent.

You read that right, almost 40 percent of renters are overly burdened by the cost of their housing. Discussions around housing often circle around homeownership, but these issues don’t just affect those who own. A lack of affordable housing supply means all types of people are affected.

Think about it: stagnant incomes don’t differentiate between renters and homeowners, while higher building costs and labor, plus more expensive land, affects the cost of constructing apartment buildings, not just single homes. The same goes for insufficient public subsidies.

Unless you have owned your home for a really long time, this affordable housing shortage is almost certainly draining funds from your bank account. That’s money that you could be putting towards an emergency fund or to pay for your children’s education. This a crisis that pretty much affects us all, whether we like it or not.

So what can you do?

At a different type of personal finance blog, they might tell you to wait until the inevitable housing crash that’s coming courtesy of our overheated economy, swooping in when prices are at their absolute rock bottom.

Yeah, we’re definitely not that kind of finance blog. Instead, the advice we can offer you is pretty simple. If you’re looking to buy a home, become an ace at saving money and build up a large down payment.

First-time homebuyers can often get their mortgages approved with much lower down payments, but that will mean larger monthly payments, which could be a worse situation overall. Still, if you find something in your price range, certainly take advantage of the opportunity.

Aside from that, the best thing you can do is to consider moving to an area where the cost of living is more affordable. The State of the Nation’s Housing report makes clear that affordability varies wildly depending on location. Buying a home in Fargo, ND is much easier than buying one in San Francisco, CA. Just make sure there are plenty of jobs where you’re moving, as well.

This isn’t an issue that can be solved on a personal level. It’s a grand public policy debate that will need years to sort out—and even then, there aren’t any guarantees that the problem will be solved. In the meantime, the best you can do is take care of yourself by building up your savings and maximizing your income, either through a new career, a big promotion, or a successful side hustle.

One last thing: If you’re looking to get ahead financially, stay away from predatory no credit check loans like payday loans, title loans, and cash advances. Even if high rents are draining your bank account, these types of short-term bad credit loans won’t make things any better. In fact, they could trap you in a dangerous cycle of debt that could take you from paying too much to getting evicted altogether.

To learn more about saving money, check out these related posts from OppLoans:

What’s the cost of housing like in your area? We want to hear from you! You can find us on Facebook and Twitter.

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It’s Not Just You: Medical Costs Are Out of Control

There isn’t any single reason that medical costs have gone up, but that just means there aren’t any easy solutions either.

How often do you worry about your health? Do you have a plan for what would happen if you or a loved one ended up in the hospital? Because even if you have health insurance, the cost of your stay is likely to put you in a financial hole, one that it will be hard to climb out of.

In a country where the medical debt is the leading cause of bankruptcy, it can feel like medical costs are getting totally out of control. And you know what? There’s a reason for that: It’s because medical costs are getting totally of control.

While there isn’t any single primary factor—some of the reasons actually have less to do with medical costs than they do with the rest of the economy—it’s clear that the current status quo is unsustainable. Here are some of the reasons why medical costs are leading to crippling debt loads.

Costs steadily rise while incomes remain stagnant.

One way to capture rising health care costs is to look at total healthcare spending, specifically as it relates to spending overall. And wow, do people spend a lot more on healthcare than they used to.

Between 1970 and 2016, total national health expenditures rose from just over $370 billion to over $3.33 trillion. Those numbers, by the way, are in adjusted 2016 dollars via the Kaiser Family Foundation. That means that none of that growth is due to inflation.

But what about the growing U.S. population? Well, that same Kaiser study found that per capita health spending has risen at a similar rate, from $1,762 per year in 1970 to $10,348 in 2016. During that same period, health spending grew from 6.9 percent of the U.S. economy to 17.9 percent.

American incomes, meanwhile, have not grown at nearly the same rate. According to this data from the St. Louis Fed, the median American family income in 1970 was $55,743 in adjusted 2017 dollars. In 2017, that same income had only risen to $75,938.

The data says it all: people are spending more money on healthcare than ever before, and that money is taking up a larger percentage of each paycheck.

Why are costs so much higher?

The U.S. healthcare system is a weird beast. While there are public programs like Medicare and Medicaid, the rest of the system primarily relies on employers providing private health insurance to their employees—usually covering some of the cost. Why is our system like this? We won’t get into that here, but, basically, it’s an accident of history.

With a healthcare system that’s so complex, there isn’t one answer as to why healthcare costs have risen so dramatically. The Affordable Care Act (better known as “Obamacare”) made some changes to this system, introducing (amongst numerous other changes) marketplaces for private plans, tax penalties for people who went uninsured, and protections for people with pre-existing conditions. While the passage of the ACA didn’t stop healthcare spending from growing, it slowed its rate of growth to a number more in line with the general economy.

Still, the fundamental (and complex) structure of the U.S. healthcare system remains in place. (Plus, that growth rate for healthcare spending has picked up in recent years.) The issue of U.S. healthcare is a many-headed hydra of different factors.

Here are some of the main ones:

An aging population: As the baby boomers are entering their golden years, their medical care needs are increasing, which taxes the system. Granted, this is something that’s contributing to healthcare spending, but principally the part that’s covered by federal programs. Still, more patients who are expensive to care for are helping to drive costs up.

Rising prescription drug prices: According to 2017 report from the AARP, the average price for 528 different medications tripled on average between 2005 and 2015. One contributing factor here is the billions of dollars that the pharmaceutical industry spends on advertising (particularly on tv advertising) every year. While the math can be complicated, more money spent on advertising generally translates to higher prices.

Insurance can’t make up for rising prices: With health insurance, you only pay a fraction of the full bill for a service (or at least for a service that’s covered by your insurance plan). So if the total price tag is higher, you’ll end up paying more. 10 percent of a $1,000 bill is very different from 10 percent of a $10,000 bill. And the U.S. has higher prices for medical services than pretty much any other country on earth. To get into those specifics would require not just an entire blog post; it would take an entire blog series. Nevertheless, these sky-high prices mean larger medical bills for consumers. They can even impact insurance coverage, as insurers are charging more and more (through higher premiums) even while their plans are covering less and less (through narrower coverage and higher deductibles).

Fear, itself: There’s a vicious cycle that’s taken hold between rising medical costs and healthcare in general. Fear of a massive medical bill leads people to avoid going to the doctor or the hospital as much as possible. This means that when they do end up going to the doctor, it’s usually for a much more serious—and expensive—condition, the kind that probably could have been avoided or treated more affordably through regular visits and preventative care.

Don’t skip out on your doctor’s visit.

There are a lot of factors with higher medical costs that are out of your hands. But that doesn’t mean that all of them are beyond your control.

For starters, don’t let the fear of a high medical bill stop you from going to the doctor. Regular doctor’s visits are much less expensive than lengthy hospital stays, and the expenses are spread out over time. Preventative care will almost certainly save you thousands of dollars in medical costs. Even if the doctor does find something that costs a bit more to treat, catching it earlier will mean a lower price tag overall.

Also, do your absolute best to build up your savings—and especially your emergency fund. $1,000 is a great start, but it is by no means a stopping point. Save as much money as you can, and maybe pick up a handy side gig to help build those savings even faster! The more that you can pay up front, the lower the chances that medical debt will hound you into bankruptcy.

Another upside of a sizeable emergency fund is that you won’t end up needing outside financing to pay your bills. Zero savings and bad credit is pretty much a one-way ticket to a predatory debt cycle, courtesy of dangerous no credit check loans and/or short-term bad credit loans like payday loans, title loans, and cash advances.

If you do end up with a big medical bill, talk to your creditor about financing options. And if you have a lousy credit score, maybe a bad credit installment loan is the best option for you—so long as you do your research and find one that’s both safe and affordable.

When it comes to out-of-control medical costs, there isn’t a ton of advice we can offer. As we laid out in this piece, our country has found itself in this situation due to weird historical accidents and dozens of competing factors. It’s a lot, and it might not be getting much better any time soon. All you can do is take care of yourself the best you can, save money for a rainy day, and keep a clear head once issues arise.

If you want to learn more about saving money and dealing with debt, check out these related posts from OppLoans:

What other questions do you have about rising medical costs? We want to hear from you! You can find us on Facebook and Twitter.

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Financial Literacy: A Definition

What is financial literacy

We talk about the term ‘financial literacy’ a lot, but what does it actually mean?

What is financial literacy?

Financial literacy is defined as the possession of knowledge and skills that enable informed and effective money management.

That’s a broad definition, but the term can mean different things to different people.

To understand the nuances of what financial literacy is and how people understand it, we spoke to personal finance experts across a range of industries. They represent a wealth of different backgrounds and spaces in which financial literacy is taught and learned. We asked all of them a simple question with a not-so-simple answer: “What is financial literacy?”

Here’s what they had to say.

Expert perspectives: What’s the definition of financial literacy?

What is financial literacy?

Financial literacy is the end result of the financial education process. When students are financially literate they can make informed financial decisions that can aid in improving their well-being.”

Paul Goebel, Director, Student Money Management Center at the University of North Texas

What is financial literacy?

“It’s empowering people to have a successful life. My quote has always been ‘knowledge is power,’ the more you know the better off you’re going to be. And financial literacy, to me, is giving financial tools to financially empower individuals so that they can create a better financial life for themselves.”

Cherry Dale, Director of Financial Education, Virginia Credit Union

Phil Schuman, Director of the MoneySmarts Program at Indiana University

What is financial literacy?

Financial literacy to me is just the understanding of various financial concepts and how they can interplay with your life. So understanding what various terms are in the financial world and how they might apply to your life. The big thing for us has always been just taking this a step further and applying financial wellness to it. So understanding—once you know these concepts—how they can lead to different behavior changes on yourself and that’s where we start getting into the wellness territory.”

Phil Schuman, Director, MoneySmarts Program at Indiana University

Dameion Lovett, Campus Director and Overseer of the Financial Education Program at the University of South Florida

What is financial literacy?

“To me, financial literacy is having an in-depth knowledge of your own personal finances and the impact of your decisions on your financial stability. Because one of the things that we learn very quickly is students and even their parents have a basic financial literacy knowledge…one of the things that we work on is understanding how your behaviors impact that. Most people are financially literate, but they’re making decisions that are detrimental in the long-term by having short-term gratification.”

Dameion Lovett, Campus Director and Overseer, Financial Education Program at the University of South Florida

What is financial literacy?

“We empower students for financial success by providing financial literacy information, resources, and programs. We believe that financial literacy is an appreciation of the long-term benefits of financial literacy and economic education. It’s not something that should be taken lightly—it’s something that’s very real and transferrable for any socioeconomic background. We believe that it’s a tool that‘s necessary for success later in life. And it’s not just budgeting and saving—it’s life skills.”

Latoya Goree, Director, Office of Financial Literacy at UMKC

What is financial literacy?

“When working with adolescents, I usually focus on personal finance through the lens of behavioral economics and the overarching psychology of the human experience. Awareness and knowledge are critical, but transformative financial literacy requires skills developed through application, failure, experience, growth, and practice (lots of practice). In the end, to me, financial literacy is the ability to successfully navigate our predatory consumeristic society with sufficient financial resources to support our individual definitions of well-being.”

Travis Cook, Education Specialist, Utah State Board of Education

What is financial literacy?

Financial literacy, especially for students, includes knowing what your resources are, so if you don’t understand something, you know who to ask. Also, knowing that the decisions that you are making now—no matter what stage of your life you’re in or how small the decision—are going to affect you in some way financially in the future. Finally, understanding what the practical impacts of those decisions are is also a key component to financial literacy.”

Laura Zamborsky, Coordinator, $avvy $eawolf Program at the University of Alaska Anchorage

Components of financial literacy

Financial literacy breaks down into two parts: knowledge and skills.

For knowledge, financial literacy is defined by an understanding of the core concepts of personal finance—interest rates, credit scores, and the purpose of an emergency fund, for instance. When put into practice, this knowledge provides the foundation needed to make informed decisions that contribute to long-term financial health.

For skills, knowledge needs to be complemented by the ability to perform tasks that support robust personal finance. For instance, someone who is financially literate will know how to use online banking apps, request a credit report, and do something as simple as write a check.

The particular knowledge and skills that define financial literacy can be divided into six categories:

  1. Spending and saving
  2. Credit and debt
  3. Employment
  4. Investing
  5. Risk management
  6. Decision-making

These categories are reflected in the national financial literacy standards issued by Jump$tart Coalition and the Council for Economic Education.

Financial literacy: Knowledge

Spending and saving
  • Understand different payment methods. There are important differences between credit cards and debit cards and other forms of payment. Credit cards are essentially a form of borrowing, but debit cards draw directly from your bank account. Checks also draw directly from your bank account, so make sure there’s enough to cover the expense.
  • Understand how banking works. Banks provide a secure way to store money. Funds can be deposited or withdrawn in person, at ATMs, or by using the bank’s website or apps. Banks also offer useful services. A checking account is designed for everyday transactions. A savings account is better for accruing interest.
  • Saving provides money for future purchases. Saving means choosing to set aside money now for future needs, goals, and emergencies. This might include short- or long-term financial goals, recreational activities and purchases, or an emergency fund. An emergency fund is money that is saved for unexpected costs such as job loss, medical bills, or car repair.
  • Needs vs. wants. Expenses can be divided into two categories: needs and wants. “Needs” are essentials—food, housing, etc. “Wants” are luxuries—things that would be nice to have but can be done without. Some items can be both needs and wants. For instance, food is certainly a need. However, an expensive meal at a restaurant is a want.
Credit and debt
  • What’s credit? Credit is a financial tool that allows you to buy something now and pay for it later. Forms of credit include credit cards, personal loans, and mortgages. Using credit comes at a cost—interest is charged.
  • The difference between credit reports and credit scores. A credit report is a detailed account of a borrower’s credit history. It’s collected and maintained by the credit bureaus. Payment history and other factors contained in the report are used to generate a credit score (between 300 to 850) that reflects a borrower’s creditworthiness. The higher the score, the more confident a lender can be that a loan to the person will be repaid.
  • Financial missteps can hurt your credit score. Missed payments and loan defaults are reported to the credit bureaus and added to your credit report. They can stay on your report for up to seven years and negatively impact your credit score. Since lenders look at your score when considering whether to grant a loan or offer a credit card, any negative marks will impact your ability to receive credit, a loan, and even rent an apartment. A lower score will also increase the cost of using credit.
  • Credit has different costs. Credit isn’t free. You pay in the form of interest to borrow someone’s money. This is often expressed as an annual percentage rate, or APR. An APR is the annual amount owed in interest for borrowing money. The higher the APR, the more expensive the credit. Various types of fees—such as fees assessed for late or missed payments—also affect the cost of credit.
  • A lower credit score affects creditworthiness and your cost of borrowing. Creditworthiness is the determination made by lenders of the possibility that a borrower will default on debt obligations. It considers factors like repayment history and credit score. Consumers with a history of missed payments—and thus a lower credit score—are considered to be high-risk borrowers. As a result, these borrowers pay higher interest and fees in order to receive credit.
  • Choices about education and skills can affect income. Earning potential and job satisfaction can be affected by a worker’s education, skills, and supply and demand for their labor. Typically, workers with higher levels of education, training, and experience earn higher incomes.
  • Income is taxed. There are two types of income: earned and unearned. Earned income would include salary or commissions. Interest, dividends, and capital gains are examples of unearned income. There are many ways that income is earned, and each may be taxed at a different rate.
  • Understand worker benefits. In addition to pay, many workers receive benefits from their employer. These benefits might include health insurance or employer-sponsored retirement plans.
  • Understand investing. Investing means using money to earn more money. Many people invest in order to achieve future financial goals by building wealth. There are risks to some types of investing, however, such as selling stock investments for a loss.
  • Time value of money. The time value of money is an important concept for investors. It refers to the potential for money to grow in value over time. Because of interest earned, money that’s invested today has greater value than the same amount of money if it were to be acquired and invested at a later date. Thus, the sooner money is received, the greater benefit it offers.
  • Consequences of delaying investment. Because of the time value of money, delaying investment wastes the potential of money to earn interest and grow. Think of a retirement fund. Younger workers have the greatest potential for higher return on investments simply because they have a longer amount of time for their earnings to accrue interest before retirement.
  • Economic conditions affect the stock market and investments. There are many factors that affect the stock market. A low inflation rate may result in a surge of selling in the stock market, whereas deflation is caused by a decrease in spending and revenue. Rising interest rates mean higher borrowing costs causing consumer spending and business investments to slow and reduce economic growth. Conversely, falling interest rates can stimulate economic growth. Even economic trends in foreign markets may impact the U.S. stock market.
Risk management
  • The purpose of insurance. Insurance can protect you from significant financial costs related to things like medical emergencies or property damage. It allows you to pay a small cost now to avoid a large cost in the future that may be unaffordable. People manage the risk of monetary or physical loss through avoidance, acceptance, and reduction. Several types of insurance—such as insurance for homes, cars, or medical bills—allow people to minimize risk.
  • Financial responsibility requires active decision-making. Financial health requires active decision-making and planning. It requires the application of sound financial information to individual circumstances. Life events—like illness, job loss, or divorce—may change a person’s financial circumstances and require appropriate adjustments.
  • Know where to get financial advice. We all have questions. Part of financial literacy is knowing the right places to go for answers. Libraries, reputable online sources, and financial advisers are all sources of sound financial information.

Financial literacy: Skills

Spending and saving
  • Create a budget. Create a budget to balance your income and expenses. Use it to plan how to allocate income to meet financial obligations and work toward future goals. If your financial circumstances change, your budget, and how much you spend or save, will change too.
  • Schedule and manage bill payments. Know how and when to schedule bill payments. Will you pay online, via automatic payments, through an app, or by sending a check in the mail? The important thing isn’t which you choose but rather that you have a method that ensures your payments are consistently on time. Keep track of when bill payments are due each month and opt to receive payment reminders either by email, phone, or mail.
  • Comparison shop. Know how to research the best price for a product before making a purchase. This allows you to avoid overspending. When researching, find comparable alternatives. For example, when at the grocery store, compare the price per ounce (the total dollar amount divided by the number of ounces) of similar food products to get the most value for your money.
  • Build savings through the “pay yourself first” method. The “pay yourself first” method, also known as reverse budgeting, is building a spending plan around your savings goals. First, list your short- or long-term savings goals. Then, decide how much to contribute each month. Finally, put that money toward your savings account before allocating the rest of your budget to expenses.
Credit and debt
  • Request your credit report. All consumers are entitled to receive a free credit report once a year from each of the major credit bureaus—Equifax, TransUnion, and Experian. Review your credit report to catch problems early. To dispute an error, tell the credit bureau what information is inaccurate. After an investigation, corrections or deletions will appear in 30 to 90 days.
  • Monitor your credit score. Yearly credit reports aren’t the only way to check your credit score. You can also access and monitor changes to your score at any time with a free online credit check company. These sites don’t provide your official FICO, but they do provide a close estimation. Be conscious of financial decisions that raise or lower your score, such as utilization rate, timeliness of payments, credit length, and inquiries.
  • Determine the most cost-effective method of making a purchase with credit. When using credit, assess whether the purchase justifies the pitfalls. For example, ask if you will you be able to pay it off in the grace period or if you will have a balance carried into the next month. How about taking out a loan? Compare the costs of credit. This might include interest rates, compounding frequency, fees, and loan length. Calculate the total cost of repaying credit under various interest rates and over different lengths of time.
  • Develop a plan to manage excessive debt. If your debt becomes excessive and you’re missing payments, it’s important to develop a plan to effectively manage it so you can work to reduce it. Consider contacting lenders directly to regain control, renegotiate a payment plan, consolidate loans, or enter a debt-counseling program. Another option is to pay a third-party credit repair company to handle the matter. Use a budget to reduce spending and focus on repaying debt.
  • Use a career plan to determine income potential. Explore jobs related to a career that both interests you and draws on your strengths. Then, determine your potential earnings based on your desired job, educational attainment, and skills. Develop a strategy to minimize the costs of post-secondary education or job training by researching scholarships, federal subsidies, and part-time work. Finally, outline a career plan that takes all of these factors into consideration.
  • File taxes from employment. Do you know how to file your taxes? While most people who earn an income are required by law to file a return with the IRS, not everyone is. First, figure out your filing status. Then, gather all of your documentation, including a W-2 from employers or a 1099 for contract work. Hire an accountant to sort out your taxes or file yourself with an e-filing company.
  • Calculate the future income needed to maintain your lifestyle in retirement. How much money will you need in retirement to maintain your current or expected standard of living? Identify sources of income in retirement, such as a retirement-savings account like a 401(k) or IRA, pensions, annuities, investments, home equity, or part-time work. Make a savings goal based on your desired income and the length of time until you retire. Take advantage of compound interest since this is the most assured method of building wealth for the future.
  • Implement a diversified investment strategy. Consider starting a diversified investment portfolio. Typically, diversified portfolios have stocks, fixed income, and commodities. Keep a watchful eye on the market to know when to divest.
  • Identify warning signs of investment fraud. Investment fraud is the illegal sale of deceptive financial information. The government and independent agencies combat fraud and oversee the financial services industry. Be skeptical of unsolicited communications from strangers. Don’t trust anyone who promises a high return in a short period of time or no- or low-risk investments. Beware of a broker giving “inside” information.
Risk management
  • Compare costs to purchase insurance. Categorize and then determine the types of insurance you may need—renter’s insurance, auto insurance, homeowner’s insurance, and liability insurance, among others. List the factors that determine insurance premiums. Determine if there are any legal minimums in your state. Calculate your payment after accounting for exclusions and deductibles. Then, learn how to file an insurance claim, if needed.
  • Identify sources of sound financial information. Search for sources of information that are objective, accurate, and up-to-date. Financial advice is available from libraries, online, professional financial advisors, and friends and family members, but make sure to vet your sources. Understand the most important factors to consider before hiring a professional financial advisor, attorney, tax advisor, or financial planner.
  • Prepare a contingency plan. Use sound financial decision-making to prepare a contingency plan for an unexpected change in financial circumstances. A comprehensive financial plan includes financial goals, a budget, cash-flow management plan, investment plan, insurance plan, net worth statement, a will, and estate plan. Discuss financial plans or contractual obligations with any dependents or beneficiaries you may have.

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