Should Income Matter When Choosing a Partner?

Factoring in a potential partner’s income might feel shallow, but it’s one of many financial factors you should be taking into consideration—even if it’s not the most important one.

When it comes to dating, everybody has their dealbreakers, like people who chew too loud or folks who are rude to waitstaff. But what about income? Is that something you factor in when deciding whether or not someone can be a long-term romantic partner—or maybe even the fabled “one?”

There are lots of folks who would balk at the idea of factoring in income when determining a partner. And not without good reason. It would mean they’re shallow, right? Well, not necessarily.

While we’re not saying that you should set a hard line on how much a potential partner has to earn, income is certainly one factor out of many that are fine for a person to consider. But even more important than income is what a person does with the money they earn—whether it’s a little or a lot.


Love, marriage, and money are all complicated. 

If the idea of taking money into account at all when deciding on a future partner makes your teeth itch, we’ve got some news for you: Money is going to be an issue in your relationship whether you want it to be or not.

“Figuring out who you want to spend your life with is a multi-faceted decision,” said marriage and family therapist Jill Whitney. “Despite what you see in Disney movies and romcoms, it takes more than love to make a solid, long-term relationship.

“Love, caring, and attraction definitely matter, but they’re not enough. You also need common values and life goals—and compatibility about money.”

Even if you don’t want to factor in a person’s income, you should definitely think about whether you two are money-compatible. After all, spending your life together means making all kinds of financial decisions, both large and small, together as well.

“Marriage is as much a business relationship as it is a romantic relationship. Far too many people don’t realize this, or they forget about it in the thrill of romantic attraction,” said writer and sociologist BJ Gallagher (@BJ_Gallagher). She went on to provide numerous examples of the kinds of money decisions that you and your partner will have to make:

“Marriage involves paying for living expenses, saving for retirement, the huge expense of raising children if the couple plans to have them, home ownership, insurance, inheritances, and handling financial emergencies when they occur. Student loans are often involved. Eldercare responsibilities later in life. There are dozens of financial aspects to a marriage or long-term living together arrangement.”

“You absolutely want to have some sense of your partner’s earning potential, based on his or her career,” she cautioned. “Your own financial future is going to be intertwined with this other person so if you’re smart, you’ll pay attention not just to their current income but the likelihood of their future income as well. Your own financial well-being depends on it.”

Planning for the future means being able to factor in future earnings. If your plans and your partner’s income don’t match, that’s something you’ll have to discuss. It’s not a dealbreaker, but some deal amendments might certainly be in order.

Everyone has a relationship with money.

Unless you’re a hermit who lives in the woods (which you probably aren’t because then how would be reading this), money plays a big role in your life. You have a relationship with it, the same way that you have a relationship with your partner—and the same holds true for them.

These relationships will impact each other. And if you choose to ignore them, the odds are good that the impact will be negative.

“Sadly, income and finances are the biggest reasons couples fight or even break up, so discussing finances is such an important conversation,” said Denise Nostrom ChFC, CLU; Founder and Owner of Diversified Financial Solutions (@diversifiedfinancialsolutions) in Medford, NY. “It happens to be one of those taboo topics that we tend to not talk about, but not talking about it before committing to someone for the long term is a big mistake.”

“Take some time to think about your own financial style and your partner’s,” Whitney counseled. “What does money mean to each of you? To what extent is money for security, fun, status, or indulgence? What’s worth spending money on and what’s less important? How much of a financial cushion would make each of you feel comfortable?

“How would each of you prioritize spending options—say, having money for nice vacations versus having a larger house? How would you dial back expenses if one of you lost a job or if your investments took a hit?”

Earnings aside, how much do they spend

“As I like to tell clients who are considering getting married, this person could ruin your credit rating,” said Whitney. “A spouse who spends more than the two of you can afford can undermine an otherwise strong relationship. Even if the two of you are high earners, it’s possible to spend more than you make.

“At best that’s stressful, and at worst it can lead to financial ruin. If you earn more ordinary incomes, overspending is likely to lead to lots of conflict and heartache. On the other hand, a partner who never wants to spend at all might make you feel constricted and resentful.

The one thing you shouldn’t do is look at income as the only factor to consider—or even the most important financial factor. As Whitney cautioned, even people with high incomes can run their finances into the ground if they spend beyond their means.

“I don’t think income matters as much as having compatible habits and goals,” said certified financial educator Maggie Germano (@MaggieGermano). “Even folks who make lots of money can have conflicts if the money isn’t going towards things that they agree on. It’s important to be aligned with your partner about what you will be spending money on or saving for.”

Whitney offered a similar perspective: “A potential partner’s financial style is more important than their earnings. High earnings are great, but what’s more important is how the person balances spending and saving.”

You can’t act without solid information. 

Neither you nor your partner is psychic. This means that you’re going to have to talk to them about money stuff. And it’s going to mean spilling some cold, hard numbers as well.

“As early as you can, see what this person’s relationship is to money,” advised Nathalie Noisette, owner of Credit Conversion (@credconversion). “Find out what their credit score is, how much debt they have, what are their spending habits, and how much they know about managing money. Once you get married you are now assuming this as your own.”

Once you’ve got a good sense of how your partner handles money, you can set about determining your next steps. Maybe they’re great with money and you don’t have to do much else! Maybe they’re … not.

“If habit or credit is less than great, are they willing to do something about it?” said Noisette. “Get real with yourself. Are you willing to pay higher interest rates till death do you part if your partner’s credit is not good?

“Having financial struggles can largely impact your life. Sure, there are things that are outside of your control (natural disasters and declining health), but the factors that are within your power should be known before you say ‘I do.’”

According to the Noisette, the bottom line here is to “get in the know.”

Do they have a budget? What about financial goals? 

Two great ways to figure out a person’s relationship with money beyond just their income is to answer these two questions: Do they have a budget, and what are their long-term financial goals?

“You really need to know how your partner feels about money and if they have a budget,” said Nostrom. Her recommended follow-up questions include:

  • “Do they know what they spend each month or do they just spend everything they earn and yearn for their next paycheck?
  • “Do they have any money in savings or do they live paycheck to paycheck?
  • “Are they ‘paying themselves first’ and putting money away each month into a savings account or into some type of investment vehicle?
  • “Do they participate in their company retirement plan like a 401K plan?”

“You may also want to talk to them about their financial goals to see if they are similar to your own financial goals,” she added. If your goals are very different, this may not be a good sign for future success as a couple.”

If this sounds like a lot, well, that’s because it is. This conversation isn’t worth having even though it’s hard; it’s worth having because it’s hard.

“For many people, this is an overwhelming conversation, so you may want to consider meeting with an objective third party, like a financial advisor,” said Nostrom. “This may be a good first step and definitely worth your time to make sure that you know the finances of the person you may be spending the rest of your life with.

“It is better to know the situation, good or bad, to make sure you are going into a long term commitment with your eyes wide open.”

Consider dividing up your living expenses.

Florida attorney Miguel A. Suro, who also blogs about lifestyle and personal finance topics at RichMiser.com (@therichmiser), had some great advice to help partners with different incomes levels decide whether to bridge the gap or go their separate ways:

“If you are accustomed to or expect an expensive lifestyle. If your partner’s lower income will make that lifestyle unattainable, be very sure that you are fine with that,” he said.

“If there is a large income disparity between partners (and you are the higher-income partner), be sure that you will be happy making the biggest contribution to your household’s finances. Financially supporting a partner against your wishes can be a major source of tension and resentment in a relationship.

“Conversely,” added Suro, “if you are the lower-income partner, be sure that you can accept that you will contribute less to household finances.”

“Talk to your partner about how you’d divide living expenses. Early in a relationship, it’s reasonable for each person to pay half. But in a long-term relationship, especially a marriage, you’re in this together and you need to be equal partners, even if your incomes are different.

“In sum,” he concluded, “running a household is very hard, and fighting over money can lead to an unraveling relationship. So, talk it over extensively before marriage or cohabitation, and make very sure that you’re both on the same page before making a deeper commitment”

Using joint and separate accounts could help.

Whitney recommended using joint and separate bank accounts to help couples navigate between shared financial responsibilities and their own financial independence:

“I often suggest that couples have a joint account for most expenses, like mortgage and utilities, and also smaller, separate accounts for personal expenses like clothes, gifts for each other, and hobbies,” she said.

“Each partner should have the same monthly amount in their personal account regardless of earnings because you’re equal partners. This approach lets you work as a team for most things but also gives you the ability to make individual spending choices.”

Don’t forget to factor in their debt.

Don’t let a focus on your partner’s income blind you to other important financial factors: Namely, how much debt they owe. Bringing home a larger income while carrying an even larger debt load is something you’ll need to figure out

“Another thing to be aware of is the debt that your partner has, and you should be honest about your own,” said Germano. “Debt can significantly impact the decisions you’re able to make in your life, so you’ll want to be fully informed.”

“If a partner will bring debt into a marriage, I think it’s ‘cleaner’ if that partner’s income is sufficient to repay that debt,” recommended Suro. “Although it’s possible for one partner to pay the other’s debt, make sure that both of you are fine with that and that it will not cause resentments.”

Make sure you two talk about the future.

If you and your partner plan on spending the rest of your life together, you two would do well to talk about the kinds of financial decisions that will occur further on down the line—especially potential scenarios that might take you by surprise.

“It’s essential to talk about possible future scenarios that would affect your financial life,” said Whitney. “If you plan to have children, would one of you quit your outside job, switch to part-time, or move to a more flexible but less lucrative career?”

“Which of you would make the change? How would you adjust to the decreased income? Do you plan to retire early, on time, or late? What if one person wanted to retire early but that meant a significant change in lifestyle?”

Suro also noted that deciding whether or not to have kids can have huge financial ramifications, the kinds that are best discussed ahead of time:

“Having children oftentimes will mean that one partner will have to switch to part-time work, or that you may need to hire paid help. Therefore, consider if that will be your situation, and whether your combined incomes would allow for it.”

Remember, this is just the beginning.

Talking to your partner about money issues and your mutual incomes is great. But it’s not like a single conversation is going to solve this issue forever. You two have a lifetime of communicating with one another to look forward too.

“Have money conversations early on in your relationship to make sure your visions align. But having the conversation once doesn’t mean you are done,” said Germano. “It’s something that should be discussed regularly, especially if your financial situation is changing in any way. Schedule a weekly ‘money date’ with your partner to make sure both people are informed and feeling good about your money.”

“Ascertaining your future partner’s earning potential is a good start, but it’s just a start,” advised Gallagher. “You want to have conversations with the other person about their attitudes about money, about their views on consumer debt, about their spending habits and their savings habits, about their level of generosity and sharing with others, and so much more.”

To learn more about managing your finances, check out these related posts and articles from OppLoans:

How do you handle money issues with your partner? We want to hear from you! You can find us on Facebook and Twitter.

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Contributors

BJ Gallagher (@BJ_Gallagher) is a sociologist and the author of numerous business books, women’s books, self-help, and inspirational gift books. Her titles include: “Why Don’t I Do the Things I Know Are Good for Me?” (Berkley), “The Power of Positive Doing” (Simple Truths), and “It’s Never Too Late To Be What You Might Have Been” (Viva Editions). Her newest book, “Your Life Is Your Prayer” (Mango Publishing) will be out in April 2019.
Maggie GermanoMaggie Germano (@MaggieGermano) is a Certified Financial Education Instructor and financial coach for women. Her mission is to give women the support and tools that they need to take control of their money, break the taboo of discussing debt and income, and achieve their goals and dreams. She does this through one-on-one financial coaching, monthly Money Circle gatherings, her weekly Money Monday newsletter, and speaking engagements. To learn more, or to schedule a free discovery call, visit MaggieGermano.com.
Nathalie Noisette is the Founder of Credit Conversion (@credconversion), a credit counseling, and repair company located in Avon, MA. Credit Conversion uses principles of behavioral change to not only allow clients to improve their score but understand the habits that lend to poor credit. “Through our repair and training, it is our vision to see all of our clients repair and maintain near perfect credit scores.”
Denise Nostrom ChF CLU is Founder and Owner of Diversified Financial Solutions (@diversifiedfinancialsolutions) in Medford, NY.  Denise’s philosophy is that with time, discipline, and determination you can reach your financial goals and dreams. She is also the Founder and President of a not-for-profit organization, POWER of Women Exchanging Resources, Inc. Denise’s goal with her organization is to raise women up to become more successful in their lives, in and out of the business world.
Miguel A. Suro is a Florida attorney and personal finance and lifestyle blogger at The Rich Miser (@therichmiser), which he runs with his wife Lily Rodriguez. With a tone that is both realistic and aspirational, The Rich Miser is aimed at those who want to elevate their lifestyle while building wealth and spending far less than they thought possible. The Rich Miser has been featured on major outlets such as MarketWatch, Consumer Reports, and NBC.
Jill Whitney is a licensed marriage and family therapist based in Connecticut. She does therapy with couples and individuals and writes about relationships, parenting, and sexuality at KeepTheTalkGoing.com.

Do Cash Advances Have an Interest-Free Grace Period?

If you pay off your credit card regularly, you can avoid paying any interest on your balances. Unless that is, you take out a credit card cash advance …

Using a credit card can be tricky. One the one hand, they’re a great way to rack up awesome points and rewards, and they can also help smooth over those “two days till payday” blues. On the other hand, they’re also a great way to rack up excess debt on your card, which will hurt your credit score and leave you stuck with lots of interest.

The key to using credit cards responsibly is to make sure you pay them off within the 30-day interest-free grace period. That way, you’re basically getting those points or miles for free! But if you think the same thing applies to credit card cash advances, think again.


How do credit cards work?

When you take out a credit card, you’re basically opening a revolving line of credit. You’re given a maximum amount that you can borrow on the card—known as your “credit limit”—and you can borrow as much or as little against that limit as you like.

Any time you make a transaction on the card, the amount that you paid is added to your balance. That balance then accrues interest as determined by the card’s Annual Percentage Rate, or APR. The higher the balance, the more money will accrue in interest.

Every month, you will be required to make a minimum payment on the amount you owe. The formula for that minimum payment varies from card to card, but it’s often something like “$15 plus 2 percent.” Because the monthly minimum amount is so small, it can take several years—or often much longer—to pay off a credit card if you are only making your minimum payment.

Almost all credit cards do, however, come with a 30-day interest-free grace period before interest starts to accrue on a given transaction. Pay off that balance within 30 days and you won’t be charged any interest!

What about credit card cash advances?

When you make a transaction on your credit card, no cash changes hands. You simply swipe the card at the grocery store or enter the card’s information online and the funds are all transferred electronically.

However, you can use a credit card to get cash if you really need it. Simply visit an ATM or a bank teller and you can charge a cash withdrawal to your card. The amount you charge is added to your total balance—just like any other credit card transaction—while you receive that same dollar amount in physical cash.

Do cash advances have a grace period?

No, they do not. When you take out a cash advance on your credit card, interest begins to accrue on that transaction amount immediately. The sooner you pay off that balance, the less interest will accrue, but this does mean that you can’t take out a credit card cash advance without paying at least some amount of interest.

And that’s not the only way that a credit card cash advance will prove more expensive. First, you will usually be charged an additional fee simply for making the transaction. Second, most cash advances have a separate, higher APR from regular credit card purchases. Not only will interest start accruing immediately, but more interest will accrue overall.

Unless you absolutely need cash and need it now, it’s best to avoid taking out a cash advance on your credit card.

What about other types of cash advances?

There’s another type of cash advance besides the kind you can take out on your credit card. These cash advances are a kind of short-term no credit check loan that you could get from a storefront lender or check-cashing establishment—or even take one out as an online loan.

Basically, they’re the same thing as payday loans.

These cash advance loans definitely don’t come with an interest-free grace period. In fact, that’s not even how they accrue interest. Finance charges for these types of personal loans are generally calculated as a flat rate and don’t accrue over time.

Let’s say you take out a $300 two-week cash advance loan with a 15 percent interest rate; your interest charge of $45 will be immediately added to the amount you owe. This means that paying off the loan early won’t save you any money at all.

The rates on these loans are much higher than the rates for credit card cash advances. The APR for a credit cash advance might be something like 23 percent, while that 15 percent charge on a two-week cash advance works out to an APR of almost 400 percent!

Furthermore, the lump-sum repayment terms for these short-term loans make them very difficult for many people to repay. That’s how they end up reborrowing the loan rolling it over, paying only the interest owed and extending the due date complete with a new interest charge. It can be all too easy for these borrowers to become trapped in a dangerous cycle of debt.

Save up cash for a rainy day.

While a cash advance might be a marginally safer bad credit loan option than, say, a predatory title loan or an overdraft free, that doesn’t mean it’s actually a good option.

You might do better with a bad credit installment loan, but the best thing you can do is save up a cash emergency fund. That way, you won’t have to take out any debt at all to cover emergency expenses!

To learn more about how you can build up your savings, check out these related posts and articles from OppLoans:

Do you have a personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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How to Budget When You Have Irregular Income

Budgeting is difficult enough when you have the same income every month, but folks with irregular or seasonal income might as well be budgeting on hard mode.

Budgeting can be a real pain. It not only means spending less money on things, but it also means taking time out of your busy day to craft and track your budget—time you’d probably rather spend doing almost anything else.

But while it can be annoying to spend an hour or two elbows-deep in spreadsheets, budgeting can be downright infuriating if you don’t have a regular income.

At a basic level, making a budget means writing down all your income and expenses each month, and then figuring out what you can cut down on. That’s a lot more difficult to do if you don’t have the same income every month.

Do you average your income out across the year? What about the months where you’ll inevitably come up short? On the other hand, if you base your budget off the month in which you get the least amount of income in any given year, you might not be getting an accurate picture either.

So how can you budget if you have different income month to month? We spoke to the experts to find out!


Use a big sample size.

While just averaging out multiple months of income isn’t a silver bullet of budgeting, it is a good place to start. Just make sure you have a big enough sample size.

“The most important aspect to budgeting on an irregular income is forecasting and projecting as closely as possible,” Kelan Kline of The Savvy Couple (@TheSavvyCouple  )told us. “Whether you are a business owner, car salesman, or work a job with flexible hours, you should be able to calculate your projected earnings.

“As you go it will get easier because you have a larger sample size to pull data from. You can start tracking your ‘six-month earnings’ which will help better project your future earnings.”

This is especially important if your job is seasonal in nature.

Here’s an example from business consultant Ken “Mr. Biz” Wentworth (@MrBizTweets):

“The key to overcoming seasonal/cyclical income is to develop your budget based on history. For example, if your business is seasonal, you can determine the average of your total annual revenue that occurs for each month of the year.

“Too often, people get lazy and straight-line their budget. That produces an almost useless budget. You can’t make informed decisions if you don’t accurately know how you’re trending vs. your annual target.

“If you ignore seasonality with a $1.2 million annual goal, you will project a monthly revenue goal of $100k. However, what if you run a northern business that is dependent upon the weather? Something such as a lawn care company. Most northern climate lawn care companies make the bulk of their revenues in the April through September timeframe. So, January through March are SLOW months.

“Without including cyclicality in your budget, at the end of March you would expect to have $300K in revenue ($1.2 million / 12 months = 100k per month). However, you have $0 in revenue! You would be ready to jump off the nearest tall building because you are $300K behind! That scenario does not account for the seasonality in your business.

“On the flip side, what if your business made the majority of its revenue in the winter months?

Let’s say through the end of March you have accumulated $450K of revenue. If you just use the straight-line method, you will be popping champagne bottles because you will think you are 50 percent ahead of budget:

Straight-line budget through March = $300K of revenue

Actual revenue = $450K

$150K above a $300K budget = 50 percent on the plus side!

“In this scenario, you are about to head into several months with no revenue. Let’s say April through October don’t amount to any revenue. Put another way—you need to earn all of your $1.2 million in annual revenue during November-March. That’s just five months!

“While this is a bit of an extreme example, these types of cyclical scenarios do exist. Depending on your industry, it may even be prevalent.”

Figure out what you can cut.

Once you have a good picture of your budget, it’s time to figure out where you can make cuts.

“When budgeting from paycheck to paycheck, you need to establish exactly what outgoing expenditure you cannot cut from your budget,” advised Kraig Martin, commercial director at Storage Vault (@storagevault). “This includes basics like rent, utilities, travel, and food.

“Next, make a separate list of regular expenditures that aren’t classed as essential, whether this is meeting up for coffee with friends or your Netflix subscription. When you get paid, you will clearly be able to prioritize expenditures.”

Emergency fund, emergency fund, emergency fund.

Having an emergency fund is important no matter your financial situation. We’ve mentioned it a few times before. But it’s all the more important if you aren’t certain of what your next paycheck will bring, or if this month will even have a paycheck.

“You need to establish a larger emergency savings fund,” explained CPA Riley Adams (@TheRiles89). “Ideally, you’d have a six-month cushion to cover your bare necessities. However, because of the unpredictability of your income, you might wish to budget for 9-12 months of expenses to add some cushion.”

Kline echoed the emergency fund advice: “As always it’s important to have a little buffer in your budget and even more important to have an emergency fund set up when your income dips from time to time.”

Even if you have a regular income, you should be putting money into an emergency fund as often as you can. Otherwise, you could end up relying on predatory payday loans or cash advances when faced with an unforeseen expense. That’s definitely something you want to avoid!

Whatever you do, stay disciplined.

It can be easy to get a few good months in a row and think you can loosen up your budget a little. But that’s not a great path to go down.

“Another trick is to fight lifestyle inflation if you get a few good months of income in a row,” warned Adams. “It can be deceiving and make you think this newfound income level is here to stay.

“A best practice would be to average your previous 12 months of expenses and use that as your baseline spend. This fights the urge to spend more when you’re making more.”

Having an irregular income is like playing the budget game on hard mode. But with practice, you too can get the high score!

Don’t let poor budgeting be the reason you have to turn to no credit check loans and bad credit loans when times get tough. To learn more about budgeting, check out these related posts and articles from OppLoans:

Do you have a question about budgeting you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Contributors

Riley Adams (@TheRiles89) is a licensed CPA in the state of Louisiana working as a Senior Financial Analyst for a Fortune 500 company in New Orleans. He has a personal finance blog dedicated to helping young professionals find financial independence at YoungAndTheInvested.com.
Kelan and Brittany Kline aka The Savvy Couple are two thriving millennials that are daring to live differently. They started their personal finance blog in September 2016 to help others get money $avvy so they can live a frugal and free lifestyle. Brittany is a full-time 4th-grade teacher and Kelan runs The Savvy Couple full-time and works as a digital marketer. You can follow them here: FacebookTwitterPinterest, and Instagram.
Kraig Martin is the Commercial Director at Storage Vault (@storagevault), one of Scotland’s largest self-storage companies. He is passionate about being money-smart, and, through this role, he has developed and refined his financial management skills, monitoring the company’s turnover, profit, and budgeting.
Ken “Mr. Biz” Wentworth (@MrBizTweets) is a strategic business partner who works with small business owners to help them operate more profitably and more efficiently. You can learn more at MrBizSolutions.com.

The Debt Avalanche Will Help You Pay off Debt for Less

When you use the Debt Avalanche to pay off your debt, you’ll need a little bit more patience, but you’ll be rewarded with big savings on interest.

The amount of debt that you currently owe is often referred to as your “debt load.” What a fitting description! Ask anyone who owes a lot of money in high-interest consumer debt—like credit cards and personal installment loans—and they’ll tell you that their “debt load” really does feel like an anchor that’s weighing them down.

The answer to this problem is simple: It’s time to pay down all those debts!

What? We said it was going to be simple, we didn’t say it was going to be easy. Still, there are ways to make it easier by giving yourself an easy-to-follow blueprint for success.

We recently wrote a blog post about the Debt Snowball repayment method, which prioritizes early victories to help you maintain your momentum. In this post, we’re going to cover the Debt Avalanche method, which will save you more money overall.


You pay off your highest interest rates first.

Similar to the Debt Snowball method, you start by putting all of your debts (including credit cards, personal loans, auto loans, online loans, etc.) in a certain order. However, unlike the Debt Snowball, you don’t order them from smallest balance to largest. With the Debt Avalanche, you put them in order from the highest interest rate to the lowest.

This is the methodology at the core of the Debt Avalanche. By paying off your debt with the highest interest rate first and the debt with the lowest interest rate last, you save yourself a whole bunch of money in interest overall. Sometimes, you’ll even get out of debt earlier than you would with the Debt Snowball.

Once you’ve got your debts in order, you’ll need to take a look at your budget and start slashing. The goal is to free up as much extra cash as you can to put towards debt repayment. The more money you can dedicate to paying down debt, the faster you’ll be debt-free and the more money you’ll save.

You take all those extra funds and you pay them towards the debt with the highest interest rate. With all your other debts, you continue paying only the minimum amount due. (For the sake of your credit score, you always want to make the minimum payments on all your debts.) Every month, You pay these extra funds towards this debt, and you do so until the debt is paid off entirely.

Pay close attention to this next part: Once that first debt is done, you take the money that you were paying towards its monthly minimum and you add it to your debt repayment funds. You then take that money and you put it towards the debt with the next highest interest rate.

Every time a debt is paid off with the Debt Avalanche you take its monthly minimum and you add it to your debt repayment funds. This way, every subsequent debt has more and more money going towards paying it off. You repeat this process until you’re debt-free entirely!

Let’s look at an example:

If you read our post on the Debt Snowball, then you know Dave. He’s a guy with $36,00 in high-interest consumer debt who’s looking to take control of his financial future.

In the other post, Dave chose the Debt Snowball repayment method, which meant that he took all of his debts and put them into a spreadsheet, ordering them from smallest balance to largest. It looked like this:

DebtBalanceAPRMonthly Minimum
Credit Card A$2,00017 percent$80
Personal Loan$4,0008 percent$125
Credit Card B$8,00023 percent$320
Auto Loan$10,0005 percent$189
Credit Card C$12,00020 percent$360

However, if Dave were to choose the Debt Avalanche Method, instead, he would order those debts from the highest interest rate to the lowest. His spreadsheet would look more like this:

DebtBalanceAPRMonthly Minimum
Credit Card B$8,00023 percent$320
Credit Card C$12,00020 percent$360
Credit Card A$2,00017 percent$80
Personal Loan$4,0008 percent$125
Auto Loan$10,0005 percent$189

Just like before, Dave was able to squeeze his budget and come up with an extra $750 to put towards debt repayment. Under the Debt Avalanche, he would add that $750 to the $320 monthly minimum that’s he’s paying on Credit Card B. He would pay that extra $750 towards Credit Card B every month until the debt was paid off in full.

All in all, it would take him nine months to pay off his first debt. This is very different from the Debt Snowball, where it would take Dave only three months to get that first sweet taste of victory. On the other hand, he would only end up paying $715 in interest on Credit Card B, versus $1,378 with the Debt Snowball, a difference of $663.

Once Dave had paid off Credit Card B, he would take its $320 minimum payment and add it to the $750 that he was already putting towards debt repayment. When he starts paying down his next debt, Credit Card C, he’s able to put a whopping $1,070 per month towards it on top of the normal $360 monthly minimum. It would take him another eight months to pay off that card in full.

In the end, it would take Dave the same amount of time to pay off his $36,000 in consumer debt with the Debt Avalanche as it would with the Debt Snowball: 23 months. However, over that time, it would save him roughly an additional $1,100 in interest versus the Snowball method. Those are some serious savings!

First, you’re going to need a better budget.

The hardest part of debt repayment isn’t choosing between the Debt Avalanche or the Debt Snowball; it’s finding the extra money to actually pay off that debt in the first place. You’re going to need to find a lot of additional savings in your budget in order to make it work.

But you know what? Getting out of debt is totally worth all that hard work! Once you’re not paying hundreds (or maybe thousands) of dollars towards interest every month, you can put that money towards much better things.

One of your top financial priorities should be building up an emergency fund. This is money that you can easily access when an unexpected expense arises. A well-stocked emergency fund will help protect you against predatory no credit check loans and short-term bad credit loans like payday loans, title loans, and cash advances.

But first, you’re going to need that better, trimmer budget! Don’t worry, we’re here to help. To learn more about building a better budget to supersize your debt repayment, check out these related posts and articles from OppLoans:

Which do you think is better, the Debt Avalanche or the Debt Snowball? Let us know! You can find us on Facebook and Twitter.

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The Debt Snowball Method Can Help You Get out of Debt

With the Debt Snowball method, early victories will help you maintain crucial momentum on your journey to becoming debt-free.

Living under a pile of expensive consumer debt is no one’s idea of a good time—especially when it’s from credit cards. Sure, only paying the monthly minimum amount due will leave you with extra money in your budget to put towards other living expenses, but it also means that it’s going to take you a looooooong time to get out of debt altogether—and will cost you thousands and thousands of dollars in interest in the meantime.

Paying off all that debt would mean completing a major leg on your journey to financial wellness. But it’s not something that you can just jump into willy-nilly. You’re going to need a plan, a specific debt repayment strategy, and one of the most popular strategies out there is the Debt Snowball. Here’s what you need to know …


Pay off your smallest debts first.

Step one with the Debt Snowball involves taking all your debts like credit cards, personal installment loans, and auto loans—or even your mortgage and student loans, if you’re being very ambitious—and putting them in order from the smallest balance to the largest.

Step two involves cutting back on your monthly expenses in order to free up extra funds. This is the money that you’ll be using to pay off your debts ahead of schedule. We’ll cover this in a little more detail at the end of the post.

Steps three and four go hand in hand. First, you’re going to keep paying the monthly minimum payments on all of your debts. Why? Because skipping even one payment on any of your debt obligations could seriously hurt your credit score.

Next, you’re going to take all of your extra debt repayment funds and you’re going to pay them all towards the debt with the lowest balance. You keep doing this every month until that debt is paid off in full.

Here’s where things get interesting. Once you’ve paid off that first debt, you take the amount you were paying towards its monthly minimum and you add it to your extra debt repayment funds. This is where the Debt Snowball gets its name: The amount you pay towards each subsequent debt keeps getting larger and larger, like a snowball rolling down a hill.

Back to the process: You take that new amount and you pay it all towards the debt with the next largest balance. Once that debt is paid off, you repeat the process, adding its monthly minimum to your extra funds and putting it all towards the next debt. You repeat this process until you’re out of debt entirely!

The debt snowball prioritizes early victories.

All the math whizzes out there might have noticed something slightly odd about the Debt Snowball: It will actually cost you a little bit more money in the long-run than a method that prioritizes paying off debts with higher interest rates.

That’s not a bug, it’s a feature. Paying off debt is hard, and it’s fairly easy to fall off the wagon. After a few months of scraping extra dollars together or working a second job to earn extra funds, who wouldn’t be tempted to just give up and start living a little bit larger once again.

This is why the Debt Snowball prioritizes early wins to help you maintain momentum. Cutting your budget to the bone in order to aggressively pay down debt can really suck. But actually paying off your first debt? That feels great! With the Debt Snowball, you’ll hopefully get the encouragement you need to keep going.

Here’s an example:

Okay, let’s say there’s a guy named Dav, who has $36,000 in high-cost consumer debt that he wants to pay off. After trimming quite a bit of fat out of his budget, he was able to scrounge up $750 extra dollars every month to put towards debt repayment. He’s ready to try the Debt Snowball.

Dave took all his debts—three credit cards, one personal loan, and one auto loan—and placed them in a spreadsheet from smallest to largest. Here’s what it looked like:

DebtBalanceAPRMonthly Minimum
Credit Card A$2,00017 percent$80
Personal Loan$4,0008 percent$125
Credit Card B$8,00023 percent$320
Auto Loan$10,0005 percent$189
Credit Card C$12,00020 percent$360

Right now, Dave is paying a total of $1,074 a month towards his debts—and that’s only covering his minimums! With the extra $750 that he’s allocated for the Debt Snowball, he’ll be paying $1,824 a month.

Dave begins by paying a grand total of $830 per month ($80 + $750) towards Credit Card A. He does this for two months. During the third month, he pays Credit Card A off entirely, which means that he starts putting funds towards his Personal Loan.

With the Debt Snowball method, Dave takes the $80 that he was paying towards the monthly minimum for Credit Card A and he adds it to the $750. Now, he has an extra $830 that he is paying every month towards his Personal Loan in addition to its $125 monthly minimum. After four months, he’s paid the loan off entirely.

Dave repeats the process, taking the $125 monthly minimum on his Personal Loan and adding it to the $830 in extra debt repayment funds. Now he has an extra $955 to pay off  Credit Card B on top of its $320 monthly minimum.

All in all, it will take Dave 23 months (almost two years) to pay off all his debts, saving him approximately $5,300 in interest. To learn about more about the Debt Avalanche repayment method, which will save you even more money in interest overall, check out this post.

It all starts with a better budget.

Paying down your debts is a great way to take control of your financial future. It’ll help your credit score and will leave you with extra money in your monthly budget that you can use to build up an emergency fund or save for retirement.

Building up your savings is no small thing. The more money you have at your disposal via savings or an emergency fund, the less likely you’ll be to turn to predatory no credit check loans and short-term bad credit loans like payday loans, cash advances, and title loans during a financial emergency. Heck, if you aren’t paying down debt every month, you might not even need to dip into your savings in order to pay a surprise medical or car repair bill!

But let’s not get ahead of ourselves. First, you’ll have to start paying off those debts. Once you’ve got started on the Debt Snowball and you’ve experienced the rush of paying off that first online loan or credit card, the process should get pretty smooth. It’s getting started that’ll be the hard part.

Namely, the hard part is going to be scrounging up those extra debt repayment funds. That means either building your first-ever budget or severely tightening the one you’re using right now. Either way, it’s going to be a difficult task—one that will require hard work and perseverance.

Here’s the good news: You don’t have to do this alone! To read more about how you can build a better budget—or build your first budget ever—check out these related posts and articles from OppLoans:

Have you ever used the Debt Snowball to pay down your debt? Let us know! You can find us on Facebook and Twitter.

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12 Money Resolutions for 2019

Start the new year off right with a calendar of financial goals.

Heading into 2019, many people are taking the opportunity to reflect on the highs and lows of the previous year. They might be asking themselves “What have I accomplished?” or “What can I improve upon?”

Akin to goal-setting, making a New Year’s resolution is a formalized declaration of your intentions for the coming year. If you’re someone who firmly believes in making an annual resolution in the hope that speaking your goal will give you the momentum to see it through, you’re not alone.

But what are people most interested in changing this year? While some opt for career, health, or romance-centered resolutions, nearly one out of three Americans is considering ones that are financially focused, according to a new survey. The most popular money resolutions among respondents were saving more (48 percent), paying down debt (29 percent), and spending less (15 percent).

Ready to make a change? Here are 12 resolutions—one for each month—to whip your finances into shape.

January: Financial Health Checkup

The first step to financial wellness is taking stock of your financial health.

Start by reviewing your spending habits. To do this, focus on the past month. List your sources of income and the total amount you made. Then, think back to what you purchased and write down all of your expenses. Compare the amount you made to the amount you spent.

If you need to cut down on expenses, separate needs from wants. This will help you spend less without cutting out essentials. Then, create a budget that reduces costs and keeps you in the black.

February: Pay Off Debt

One of your first financial goals should be reducing debt. Consider a strategy like the “avalanche” or “snowball” method. The faster you pay off your debt, the more money you’ll save in interest.

One of the most common forms of debt is credit card debt. If you have more than you’d like, write down a detailed payment plan and work toward getting those credit card balances back to $0. It’s not wise to carry a balance from month to month—you get charged interest for it. If nothing else, focus on getting the amount you owe below 30 percent of your total available credit. (For instance, if your credit card has a limit of $1,000, 30 percent would be $300.) This is called your credit card utilization ratio, and it’s one of the factors that are used to determine your credit score.

March: Tax Season

Tax season officially began January 1 and lasts until mid-April, when personal and business taxes are due.

With the upcoming deadline, now is the time to learn how to file your federal income taxes by yourself or to review what you already know. Especially if you haven’t filed yet!

First, figure out your filing status. Next, sort out the documentation you’ll need to file. Then, get it done!

April: Financial Education

It’s National Financial Literacy Month! This initiative is recognized in the U.S. during April in an effort to highlight the importance of financial literacy and teaching Americans how to establish and maintain healthy financial habits. It’s the perfect time to get involved in financial education programming.

Take advantage of free events and outreach done by local colleges, universities, nonprofit organizations, businesses, and financial institutions in your community. Don’t see any local events? Sign up for an online course to focus on the financial area you’re least comfortable with.

May: Emergency Fund

Building an emergency fund is the best way to make sure that unexpected emergencies, like a job loss or health care bills, don’t throw you off track. Already have one? Challenge yourself to bulk it up by saving three to six months’ worth of expenses. This will create a comfortable cushion to fall back on, making your present and future a little more secure.

June: Check Your Credit Report

Did you know that you can request a free copy of your credit report? Well, you can. So do it!

Your credit report will give you an in-depth, accurate picture of your financial health. It will list your account information and payment history, telling you exactly whom you owe money to and how much you owe them. It will also show any payments that entered delinquency or default.

When you request it, the credit bureaus may also provide an estimate of your credit score, which is what lenders look at when considering a loan or credit card application. Essentially, it represents your ability to pay back debts, and the higher your score is, the more likely you are to be approved and receive a good interest rate.

July: Improve Your Credit

After checking your credit report and credit score, make a commitment to strengthen your creditworthiness. Watch our video on how to improve your credit, or take any of the following steps:

  • Keep credit card utilization under 30 percent
  • Pay off credit cards entirely each month
  • Make on-time payments
  • Keep accounts open and in good standing to lengthen your credit history
  • Keep hard inquiries down by not applying for credit unnecessarily
  • Dispute any errors on your credit report

August: Set a Saving Goal

You’re more than halfway through the year! Now is a good time to check in on how you’ve been doing. Have you been able to stick to a budget? Are there certain spending temptations that you’ve been missing? Well, you’re in luck!

This month, commit to learning how to save, but do it in a fun way. Create a saving goal by choosing something to save for. Maybe start with something practical, like putting aside money for a downpayment. But then choose something that you’re excited about. Is there a trip you want to make? Begin saving and make it happen.

September: Get Wise About Student Loan Debt

September is when colleges welcome students back to campus and classes kick into full swing. Are you currently a student? Do you have any debt remaining from when you were? This is the month to take care of it.

Determine if consolidating your student loan debt for the sake of a better interest rate is the right choice for you. Once you know your total loan amount and projected interest, plan an aggressive payment schedule. Celebrate each payment as incremental progress.

October: Face Your Financial Fears

Money can be an intimidating topic. For the spooky month of October, face your financial fears.

Are your finances too scary to even look at? Are taxes your boogeyman? Maybe you’ve always wanted to invest but feel nervous about putting money in the stock market. Whatever it is that keeps you up at night, muster your bravery and show it who’s boss.

November: Make a Charitable Donation

In November, many people choose to make charitable donations. (Giving Tuesday is the Tuesday that follows Thanksgiving.) If you’d like to join in the spirit, ask yourself a couple important questions.

  • Where will you donate? Find the right organization by using a site like Charity Navigator, which is a trustworthy resource for assessing the quality of charitable organizations. For those without extra money to give, consider Kiva which allows you to invest with reimbursable loans as opposed to donating. It’s a great alternative for those without enough extra income set aside for donations.
  • Is your charitable contribution tax-deductible? Check the IRS’s tax information for contributors to search eligible organizations, learn how to report contributions, and read useful tax tips. Also, ask if your employer offers matching donations to make the most of your giving.

December: Review Your Financial Goals

Congrats on making it through the year!

December is the time to review your financial goals. Did you complete everything you wanted to? What areas were challenging? Maybe you didn’t pay off all of your debt or you splurged outside of your budget. And that’s okay! Remember that your personal finance journey is just that: an imperfect journey with plenty of room to learn and grow.


What are your money resolutions for the new year? Let us know on Twitter at @OppUniversity!

College Financial Wellness Programs

These pioneering personal finance programs take a holistic approach to student money management.

What is financial wellness? Well, essentially, it’s an approach to financial education that emphasizes overall financial health in addition to providing a traditional working knowledge of money management. It promotes good financial habits to address both current and future financial challenges.

Around the country, colleges and universities have incorporated financial wellness initiatives into the services they offer students. And the need for it is clear: average student loan debt has increased $20,000 in the past 13 years, and 70 percent of college students report feeling stressed about their finances.

We spoke to some of the nation’s top financial wellness programs about the unique services they offer their students. Their answers reveal a broad range of innovative strategies and creative solutions, as well as the hard work and dedication necessary to make them happen. All four of these institutions are represented in the Higher Education Financial Wellness Summit (HEFWA) advisory and student experience committees, making them thought leaders on the topic and experts at the forefront of financial wellness.

“Financial Wellness for College Students” Program, University of Illinois Extension

Kathy Sweedler, a consumer economics educator, runs the Financial Wellness for College Students program at the University of Illinois Extension. She works with students to relieve financial stress in the present and lay the groundwork for financial success in the future. Her role is to “take research-based information and translate it into information that people can use in their daily life,” she said.

The history of the program began in 2008, when an opportunity presented itself on the University of Illinois Urbana-Champaign campus to create a peer-educator financial wellness initiative through a partnership with the school’s division of campus recreation. The goal of the program is to provide free services to University of Illinois students on how to manage their money and make informed financial decisions. Financial Wellness for College Students targets a mix of undergraduate and graduate students, with unique programming catering to each group.

Kathy SweedlerKathy Sweedler heads the Financial Wellness for College Students program at the University of Illinois Extension.
Services

The University of Illinois Extension provides a number of services to promote financial wellness:

  • One-on-one financial wellness counseling
  • Group presentations to campus clubs and organizations as well as campus staff
  • A resource center with helpful financial education materials
  • Referral to related financial community and university services

Financial wellness peer educators are trained by Sweedler to work one-on-one with students on a number of personal money management topics that include managing and organizing expenses, building credit history, paying down debts, and understanding loans.

Digital outreach

The financial wellness program has a current annual reach of 2,000 students. According to Sweedler, a lot of the program’s outreach to encourage participation is done online, which she says is a great way to find and generate interest among young people. The program currently has dedicated social media accounts, e-newsletters, and a monthly webinar series called “Get Savvy—Grow Your Green Stuff.” To produce the webinar, the program partners with several campuses in Illinois in addition to their main partner, the Student Money Management Center for the University of Illinois (SMMC). Sweedler says they aim to encourage active learning through their webinars by using chats and links. Get $avvy webinars are archived on the Financial Wellness for College Students website to be accessed and used at any time.

Partnerships

The Student Money Management Center, a division of University Student Financial Services and Cashier Operations, houses other critical financial services that aim to empower students through financial literacy programming and education. One result of the financial wellness program’s partnership with SMMC was the development of a financial wellness survey made specifically for international students. The purpose of the survey is to identify these populations’ unique financial struggles and habits.

“Live Like a Student” Program, University of Minnesota Twin Cities

The financial wellness program at the University of Minnesota Twin Cities has existed for over 15 years in some capacity, whether online or through classroom presentations. Nate Peterson, the associate director of One Stop Students Services, which houses the Live Like a Student program, spoke with us about treating financial wellness as one component of student well-being to be integrated into mental, social, spiritual, and other wellness identities.

Currently, Live Like a Student is part of One Stop Student Services, where students go to find information regarding registration, records, financial aid, billing, payment, and veterans’ benefits. Since students already trusted One Stop as the authority on all things money—financial aid, student accounts, and bills—it made sense for the university’s financial wellness department to live there as well.

When the program was created, a dedicated financial wellness committee was created. The committee is made up of approximately half a dozen staff members who retain other full-time positions but contribute to financial wellness initiatives. This is one way that University of Minnesota Twin Cities differs from other schools, Peterson said. They don’t have a center focused exclusively on financial wellness. Rather, they have staff members who work with students on different financial wellness avenues.

When Peterson took charge of the financial wellness program six years ago, he changed the department’s direction by putting greater emphasis on connecting with students at their level and providing relevant and timely financial information. The department also made the decision to require all full-time staff to become certified in personal financial management. This meant that all 30 counselors who are available to students—whether in-person, on the phone, or via email—would learn about core areas including retirement, risk management, and investment planning. Not only did these certifications add necessary financial tools to the program’s collective toolbox, but it allowed staff to better connect with students on all topics, from student loans to creating a budget.

“Empowering those individuals to work with students on financial wellness was a gradual next step for our office,” explained Peterson.

Nate PetersonAs the associate director of One Stop Student Services, Nate Peterson oversees the Live Like a Student program at the University of Minnesota.
Digital outreach

Live Like a Student has a number of digital areas, including the website, social media, and online education. The quick 15-minute Effective U education modules were created in partnership with Student Academic Success Services. Using the modules, students are able to identify their income and expenses, create a budget, develop financial goals, and more.

Finding creative partnerships “is one of the most important parts of financial wellness at any institution,” Peterson said. Working with not only financial professionals, but also those in academic advising, orientation committees, and housing and residential life, helps to ensure that students are having conversations about finances and feeling supported in them from all different perspectives, he explained.

In-person presentations

The first time that the financial wellness team interacts with students is during orientation and Welcome Week, when they produce presentations for all incoming first-year or transfer students. Presentations, which consist of three 25-minute topics geared toward undergraduate students, make up a large portion of Live Like a Student’s overall outreach campaign.

For graduate students, the financial wellness program has unique partnerships with graduate and professional programs across the institution, including the medical, veterinary, and law schools. Professional students, who are often older, typically have questions related to their careers, mortgages, and car payments.

Workshops

This year, the program piloted a new workshop series for freshmen students. Participating students were automatically entered into a drawing for a $1,000 scholarship, with funds secured from the central budget office. Students were able to take workshops on eight topics that included budgeting, credit and credit scores, living within one’s means, and others. The series was successful, with nearly 400 students attending sessions. Almost 100 percent of participating students self-reported that they gained new information to implement in their financial decisions. Regarding this, Peterson said that “[m]aybe they didn’t learn everything they needed to know—and they probably didn’t and that’s okay—but the fact that they have one tangible thing that they can walk away and make a change, I think that’s extremely important.”

Financial wellness appointments

One of the standout features that the Live Like a Student program offers is free one-on-one financial wellness appointments available to all University of Minnesota Twin Cities students. The certified counselors shine in these tailored 30- to 40-minute sit-down conversations and tackle everything from how to create a budget to the status of student loans.

“I think the majority of students do like talking about budgeting—it’s just what an 18-to-22-year-old for the most part is talking with us about,” said Peterson. However there are plenty of personal and situational topics that students need help with “and just the fact that they have this on campus as an option for them is a really great thing.”

Partnerships

Integrating student feedback is a key determinant in the effectiveness of reaching students. As such, the financial wellness program employs a college intern, who is in charge of liasing with student groups and maintaining an online presence. For example, one such student group is run through the Family Social Science department and contributes valuable insights on the college student experience.

“InSight” Program, Champlain College

The Insight program at Champlain College is another financial wellness program that’s taking a holistic approach to student financial health.

“At Champlain we take a pragmatic approach with our personal finance education by requiring every student to participate in our InSight program,” said Jimena Huaco, the assistant director of Talent Education Management at Champlain College. “Through this program, we empower our students with a practical, hands-on education that addresses different topics through an intentional timeline that aligns with the progression of a college student.”

The InSight program has two tracks: “Career Positioning” and “Personal Finance.” All students complete a series of track-specific milestones each year that are designed to help them assess their personal value proposition and develop essential financial skills. Upon graduation, students are well-prepared to transition successfully from college to their chosen careers. The best part? The InSight program promises all of this at no additional cost to a student’s academic education.

Jimena HuacoAt Champlain College, Jimena Huaco empowers students with hands-on education to prepare them for life after graduation.
Career Positioning track

For this track, students create a career marketing plan to highlight their unique skills and strengths. By graduation, they produce the following materials to aid them in their job hunt:

  • Career profile with a competency-based statement of skills
  • Resume and cover letter tailored to potential job positions with defined career goals
  • Professional LinkedIn profile
  • 30-second elevator pitch that answers the question “Why should we hire you?”
Personal Finance track

In this track, students learn how to negotiate a salary, compare compensation and benefits packages, and acquire general money management skills. By graduation, they produce the following:

  • Personal financial assessment report tracking progress from freshman to senior year
  • Budget allocation report based on the projected earnings of their major
  • Cost of living analysis based on the location of their prospective job
  • Credit plan identifying the steps needed to improve their credit report and score
  • Loan repayment plan, if they took out student loans

According to Huaco, “[t]hese two tracks ensure students are understanding the interconnectedness of career choices and financial wellbeing as they prepare to become independent professionals.”

The program intentionally takes a pragmatic approach and focuses on helping students develop the materials they’ll need once they enter the job market and begin living independently.

“We maximize our time with our students and make our education deliverables-oriented. Most of our sessions prepare students to produce their own deliverables such as budget allocation reports, student loan repayment plans, credit action plans, cost of living analysis, etc.”

Partnerships

Delivered and managed through Career Collaborative in order to ensure aligned standards, the two InSight education tracks rely on campus partnerships. This includes student leaders who make up the peer-to-peer education portion of the program, Huaco said. The peer educators are responsible for a number of tasks.

“[They] facilitate small workshop-style events, large events (such as Game of Life), one-on-one sessions and help us come up with new programming,” Huaco said.

The Game of Life is a flagship program milestone that calls on student volunteers to teach freshmen about budgeting and expenses. Participating first-year students receive a starting salary based on their major and then visit booths set up to replicate real-world expenses, including housing, transportation, grocery, and pet costs. Students then balance their expenses and take a counseling session to review their financial decisions and the resulting outcomes. This is a great way for students to prepare to make financial decisions while taking into consideration cost of living, salary, employee benefits, and taxes.

Student Money Management Office, Austin Community College

The Student Money Management office at Austin Community College (ACC) supports the school’s students by providing an accessible and informative financial education that enables students to make wise money choices. Karen Serna, the director of the office, explained that the program “conducts financial literacy workshops covering such topics as budgeting, credit, understanding and managing financial aid, and searching and applying for scholarships.”

Karen SernaKaren Serna directs the Student Money Management office at Austin Community College.
Workshops

During the 2017-18 academic year, the Student Money Management office conducted 227 workshops, reaching 4,244 students. One of the workshops, “Taking Control of Your Money,” covered general financial topics including budgeting and credit cards. The other, “Finding the Money,” provided information on how to search and apply for student scholarships.

Students who participated received a follow-up survey three months after the workshop. The responses showed a 13 percent increase in the number of students accessing credit reports and a 5 percent increase in students using budgets.

Rainy Day Savings

Freeing yourself from financial stress is one component of financial wellness. (Serna stressed the importance of having money set aside for emergency situations in order to “not [lose] sleep at night wondering how you’re going to cover the latest financial hiccup.”) To achieve this, the Student Money Management office created a Rainy Day Savings Program that challenges students to save $500 for financial emergencies with cash incentives.

The program was launched in September 2018 and has 46 students enrolled. Incentives are doled out in $25 increments for completing the following financial tasks:

  • Meet with a financial coach
  • Set up direct deposit or direct a portion of your tax refund into the account
  • Complete your Free Application for Federal Student Aid (FAFSA)
  • Maintain a balance of at least $475 for more than one month—this can include funds and previous incentives

To complete the program, students must satisfy the following requirements:

  • Open a new savings account at University Federal Credit Union (UFCU)
  • Make a first deposit within one month of opening the account
  • Complete an online financial literacy course within three months of opening the account
  • Meet eligibility requirements
  • Make deposits into the savings account
Text message notifications

ACC’s Student Money Management program also boasts a text message notification system with over 4,000 subscribed students. The program keeps student up to date on money-related deadlines such as tuition payments and financial aid disbursements. In collaboration with the financial aid office, a financial education scavenger hunt was conducted through the text message program. The texts are also used to provide money management tips.

Financial counseling appointments

There are three options for financial coaching available to ACC students: on-campus sessions with ACC staff, virtual (phone and webcam) appointments with the program’s partner Adventures in Education, and in-person meetings with coaches from Foundation Communities, a local nonprofit organization. The one-on-one financial coaching is available free to students and their lower-income households.

Further, the Student Money Management office invests in ACC’s staff, providing individuals with financial counseling training. “Talking to Students About Money” teaches ACC staff how to integrate financial conversations—including budgeting, student loans, and credit—into everyday student interactions.

Partnerships

ACC also offers a peer mentor program that connects mentors with students interested in learning about personal finance.


Do you know a financial wellness program that deserves a mention? Email us and let us know!

Virginia Senator Pledges to Combat Predatory Payday Loans

Inside Subprime: Dec 20, 2018

By Nikolas Wright

Do payday loans affect mortgages? The short answer: maybe.

Payday loans alone won’t inherently prevent you from getting a mortgage. However, payday loans can indirectly affect your chances of qualifying for a mortgage, depending on your circumstances. Of course, situations will vary among lenders and borrowers.

Here’s what to take into consideration if you’re dealing with payday loans and a mortgage.

These are two of the most important factors to get a mortgage, among others:

  • Your credit history
  • Your debt-to-income ratio

Generally, payday loans aren’t reported to the three major credit bureaus, so they’re unlikely to impact your credit score, according to the Consumer Financial Protection Bureau. Payday loans are marketed toward people with low or poor credit histories, which makes them easy to get.

Likewise, payday loans don’t improve credit scores for borrowers, even if they manage to pay them back on time.

But if you’ve defaulted on payday loans in the past, or had them go to a debt collection agency, your credit could take a hit.

Debt-to-income ratio (DTI) is usually the biggest factor a lender uses to determine whether a borrower can pay for a mortgage. That’s because the lenders needs to know whether a borrower can afford to pay back a loan. A mortgage is the biggest debt that most people will ever take on.>

Here’s an example: Say you have a monthly income of $3,000, and you pay $800 in rent, and $400 in monthly credit card bills. That means $1,200 (or 40%) of your income goes toward debt. If your ratio is too high, lenders can deny you a loan or mortgage. A healthy DTI is 30% or below.

In contrast, payday lenders make loans without much regard for the borrower’s ability to pay. That’s how payday loans works: Lenders are first in line for repayment, either by cashing the borrower’s postdated check or directly accessing the borrower’s checking account.

If you have existing payday loans (or other debt like personal loans or title loans) that affect your debt-to-income ratio, you might have trouble qualifying for a mortgage.

In general, it’s best to avoid taking on new debt if you’re preparing to take out a mortgage. Even though payday loans generally don’t move the needle on your credit score, it doesn’t mean you should take one out.

Credit checks, called “inquiries,” tell creditors that you are considering taking on new debt. Such credit checks slightly impact your credit score, but they’re a necessary part of applying for a mortgage. You should only apply for credit when you need it. Avoid applying for a credit card, car loan, or any other type of loan before or during the mortgage application process.

Ideally, if you’re financially able to pay for a mortgage, you shouldn’t be in a position to need a payday loan. But emergencies do happen, and sometimes you need quick cash.

Learn more about alternatives to payday loans, more about getting a mortgage, and how to pay for emergencies

For more information on payday loans, scams, and cash advances and check out our state financial guides including CaliforniaIllinoisTexasFlorida and more.

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Second Chance Bank Accounts: Could They Be For You?

If your Chexsystems report makes opening a traditional bank account impossible, then a second chance bank account could, well, give you a second chance!

Access to traditional banking makes a huge difference when it comes to your financial health. But you can also lose access to it relatively easily. If you have made some mistakes with a previous bank account—the same kinds of financial misbehavior that leads to a low credit score—you might have a lot of difficulty opening a new one.

That’s because many banks will run a credit check or look you up in ChexSystems. Among other functions, ChexSystems monitors the bank activity of American consumers. If you’ve previously had overdrafts or negative balances, that will show up when the bank runs your information through ChexSystems.

However, even if you aren’t able to get a traditional bank account, you may still be able to get a second chance bank account. What is a second chance bank account? We’ll answer that, as well as some other questions in this very article! Read on and find out!


Why a bank account is important.

In case you aren’t yet convinced that you need a bank account in the first place, we’re here to convince you that you should probably have one.

One major benefit of a bank account is the obvious one: It’s a great place to keep your money. Not only will you have more room under your mattress, but traditional banks are FDIC insured which means your money will be protected. The Federal Deposit Insurance Corporation (FDIC) is a government insurance company that takes fees from banks so that, even if those banks screw up or get in some sort of trouble, you’ll still be able to access the money you deposited.

Another common benefit is the ability to pay via debit card or withdraw cash from ATMs. If you can choose a bank that has enough ATMs near your personal stomping grounds, you shouldn’t even have to pay a fee to make withdrawals.

It’s also much more expensive to try to get through life without a bank account. Aside from ATM fees, wiring money or cashing checks through your bank account is free, while check cashing establishments will charge you to access your own money. Those fees can be up to 12 percent of the check, which can easily mean losing hundreds of dollars from your paycheck every month.

And if that’s not enough, banks can provide you to access to credit which can be vital to getting a home, a car, or a loan for nearly any other purpose. So if you’re barred from opening up a traditional bank account, it’s a good idea to explore your other options.

Second chance for romance—umm—banking.

If you were caught by ChexSystems, you might still have the chance to open a second chance bank account. It’ll have some significant disadvantages compared to regular bank accounts, but it’s probably better than no bank account at all.

“Simply stated, second chance bank accounts are checking accounts for people who had minor problems with previous checking accounts—for instance, small overdrafts or a history of bounced checks,” explained RJ Mansfield (@DebtAssassin1), consumer’s rights advocate and author of Debt Assassin: A Black Ops Guide to Cleaning Up Your Credit. “Checking accounts with a negative history will be reported to a data repository like Chexsystems.

“These second chance accounts have higher monthly fees, higher bounced check charges, usually require a direct deposit, and can’t be opened online. Because of the consumer’s past history with checking, these accounts are closely monitored and closed quickly if they are mishandled.”

You’ll have to look at the specific second chance bank account being offered and see if it’s a good choice for your situation. If you do decide to get a second chance bank account and maintain it diligently, you may get the chance to graduate to a regular bank account after a year or two of good banking behavior. It’s one of the best features that second chance bank accounts can offer!

There are other possibilities.

If you decide a second chance bank account isn’t for you, there are still some possibilities. You can look at your rights under ChexSystems and see if it’s worth contacting them. If they’ve made a mistake, you should make them aware of it so they can remove it.

You could also try and get around ChexSystems entirely.

“If you have had a previous problem with a checking account, you can avoid being required to open a second chance account by simply Googling, ‘Non-Chexsystems banks’ and opening an account with one of those institutions,” advised Mansfield.

The penalties you face for not having a bank account are yet another example of how the system is often weighted against those who are already struggling. But there are still ways to overcome these hardships. It won’t necessarily be easy or fair, but it is possible.

If you can take advantage of the options available to you, work out a plan, and stick to it, you can build yourself a better financial future.

The worse shape you’re in financially the more likely you are to fall prey to predatory no credit check loans and short-term bad credit loans like payday loans and cash advances. That’s not great! To learn more about how you can improve your long-term financial outlook, check out these related posts and articles from OppLoans:

What other questions do you have bank accounts? Let us know! You can find us on Facebook and Twitter.

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Contributors

RJ Mansfield (@DebtAssassin1) is a consumer’s rights advocate and author of Debt Assassin: A Black Ops Guide to Cleaning Up Your Credit.

It’s a Wonderful Life Is a Perfect Primer on Predatory Lending

The Frank Capra classic is not only a heart-warming tale of community and common decency, but it’s also an incisive portrait of predatory business practices.

Frank Capra’s 1946 film It’s a Wonderful Life has a reputation for being cheesy as heck. And that’s because it is. But as the movie’s legacy has grown over the ensuing decades since its release, that fame has become more like a shadow, blotting out some of the film’s more complex sections.

With Christmas rapidly approaching, we decided to revisit one particular aspect of the film. Namely, its villain: the greedy embittered Henry F. Potter. Because if you want to understand predatory lending—and hoping that you do is kind of our whole thing around here—all you have to do is check out how Mr. Potter goes about his business.


It’s a Wonderful Life is DARK.

Audiences unfamiliar with It’s a Wonderful Life as a family holiday staple would be forgiven if they spent the first 90 minutes of the movie thinking it was actually some sort of sick, black-hearted joke. Because George Bailey’s life up until that point is anything but wonderful.

Let’s list the evidence: He loses his hearing as a boy saving his brother from drowning, has to skip college to run the family Building & Loan when his dad dies of a stroke (only to have his brother back out of running the business as promised once he graduates), misses out on a business deal that would have made him a millionaire, is forced to skip his honeymoon and use his life savings to save his business during the 1929 stock market crash, and finally manages to pull everything together … only for his Uncle Billy to lose $8,000 freaking dollars: A loss equivalent to $102,000 in modern-day money that basically ensures both personal bankruptcy and a lengthy jail sentence for ol’ George.

Until the angel-in-training Clarence (Henry Travers) arrives to show Jimmy Stewart’s distraught George how much good he’s done in the world just by being alive, the movie is a ticker-tape parade of one good deed after another getting severely, brutally punished. The only thing that saves it is Capra’s characteristic light touch and Jimmy Stewart’s humble but overwhelming charm.

Nowhere is the movie’s bleakness more evident than in the continued success of Mr. Potter, the money-gluttonous slumlord that Lionel Barrymore plays with nefarious relish. Positioned as George’s nemesis from the very beginning, Mr. Potter’s only goal in life is to accrue more wealth for himself at the expense of everyone else.

If he were visited by three Christmas ghosts like Ebenezer Scrooge, Henry Potter would emerge the next morning entirely unchanged. If anything, he’d probably be meaner and greedier than ever.

Community need versus personal greed. 

George Bailey is a do-gooder, and most of the good he does comes via his family business, Bailey Building & Loan, a small community bank serving the people of Bedford Falls. Townsfolk keep their money in the bank, which allows the bank to loan that money out for other townspeople to buy (and build) a home.

Because the Baileys aren’t in it for the profit, they make loans at a very affordable price. It doesn’t mean a lot of money for them, of course, but it does a great deal of good for the community.

Contrast this with Mr. Potter, a slumlord who charges exorbitant rents for rundown shacks, squeezing his tenants for every penny they’ve got. And while Potter maintains that he is encouraging “thrift” among members of the community—that they just have to save the $5,000 they need in order to buy a home outright—George knows that’s bunkum.

Here’s what he says to Mr. Potter after George’s father has passed and Mr. Potter wants to buy the Building & Loan out from under him:

(via Screenplays for You)

You . . . you said . . . What’d you say just a minute ago? . . . They had to wait and save their money before they even ought to think of a decent home. Wait! Wait for what? Until their children grow up and leave them? Until they’re so old and broken-down that they . . . Do you know how long it takes a working man to save five thousand dollars? Just remember this, Mr. Potter, that this rabble you’re talking about . . . they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn’t think so. People were human beings to him, but to you, a  warped, frustrated old man, they’re cattle.

Hear, hear Mr. Bailey!

Predators strike when their prey are vulnerable. 

Even though it means missing out on a college education and the chance to see the world, George doesn’t sell the Building & Loan. Instead, he takes his father’s place at the head of the business and continues making affordable loans to people who need them.

While this doesn’t make George a rich man, he does alright for himself. That is until he’s literally on his way out of town with his bride Mary to go on an expensive honeymoon at the exact moment that the stock market crash of 1929 causes a bank run on the Building and Loan.

(It’s moments like this when you wonder if some unseen forces are working to torture poor George. And actually, there are: They’re called screenwriters.)

Faced with all his customers pulling out their money—plus Mr. Potter’s offer to buy people’s shares for fifty cents on the dollar looming over his head—George offers the clearest contrast to his approach versus Potter’s:

Tom! Tom! Randall! Now wait . . . now listen . . . now listen to me. I beg of you not to do this thing. If Potter gets hold of this Building and Loan there’ll never be another decent house built in this town. He’s already got charge of the bank. He’s got the bus line. He’s got the department stores. And now he’s after us. Why? Well, it’s very simple. Because we’re cutting in on his business, that’s why. And because he wants to keep you living in his slums and paying the kind of rent he decides.

When the market crashes and the Building & Loan looks like it’s going to go under, Mr. Potter strikes. People are desperate. They’re worried about losing their savings and are willing to take a guaranteed fifty percent loss in order to protect against the possibility of losing it all.

If they stick together and keep their money with George, they’ll be fine—which is exactly why Mr. Potter tries to get them to take their money out. He’s taking advantage of their desperation to bury them even deeper.

George Bailey offers a way out from Potter’s traps.

Luckily, George’s level head prevails. By offering his own money to tide people over until the bank reopens the following week, he is able to stave off the run and stay in business. In fact, he goes on to have an entire neighborhood filled with his homes. It’s called Bailey Place, and it not only offers a stark contrast to Mr. Potter’s squalid offerings, it actually poses a threat to his business interests at large!

As one of Mr. Potter’s employees describe it to him, Bailey Place is, “Dozens of the
prettiest little homes you ever saw. Ninety percent owned by suckers who used to pay rent to you.” Because George Bailey isn’t making a lot of money from his loans, he’s able to offer people a much better deal than Mr. Potter, one that doesn’t trap them in a cycle of high rents and meager savings.

Potter isn’t so crazy about all this. That’s why when he later discovers an envelope filled with $8,000 in Building & Loan deposits that George’s Uncle Billy accidentally misplaces inside Mr. Potter’s bank, the old man doesn’t hesitate to strike.

By positioning himself as a socially responsible alternative to Mr. Potter’s predatory business model, George Bailey is more than a nuisance to Mr. Potter: He’s a genuine threat. One that needs to be neutralized.

Henry Potter is the patron saint of predatory lenders.

So let’s take a look at Mr. Potter’s business model: He uses high rents and poor conditions to trap his vulnerable tenants into a cycle of poverty. The only way that they can escape from him is to save up enough money to buy a house, but the cost of their shoddy accommodations means that saving that much money is virtually impossible!

This is exactly how a predatory business works. First, target vulnerable, low-income populations who don’t have many better options. Second, charge them really high prices that make it difficult for them to keep up. Third, make them reliant on your product or service, creating a feedback loop of financial dependence. Lather, rinse, repeat.

Now let’s compare Mr. Potter to modern-day predatory lenders, the kind that offers short-term no credit check loans like payday loans, title loans, and cash advances. Lo and behold, these lenders also offer products with incredibly high costs to vulnerable, low-income populations that lack decent credit scores and so can’t qualify for regular personal loans.

With average Annual Percentage Rates (APRs) just shy of 400 percent and balloon payments that cover the entire cost of the loan, is it any surprise that only 14 percent of payday loan customers can afford to pay their loans back on time? Or that many of them are forced to roll over and reborrow their loans in order to get, spending almost 200 days per year in debt? Sound familiar?

(If you’re looking for an alternative to predatory short-term bad credit loans, by the way, you should look into the kinds of bad credit installment loans we offer here at OppLoans. Check out this post to learn more.)

Saved by the sound of an angel getting his wings. 

When Clarence shows George a world in which he was never born, Bedford Falls has turned into Pottersville, a scummy hive of gin joints, slums, and misery. (Mary’s terrible fate is … being a single librarian, which is just rude.) If you want to know what a world where predatory lenders and slumlords were allowed to run amok would look like, look no further than this miserable place.

But luckily, that town never existed! By offering his friends and neighbors a reasonable, affordable alternative to Potter, George Bailey has managed to save the town of Bedford Falls. And while it might take an actual act of divine intervention for him to realize this, everyone that he’s helped knows exactly how much good he’s done.

In the movie’s climactic scene—cue the very famous cheesy part—the entire town pays him back for that kindness twentyfold. What a wonderful life, indeed. The only thing that could make it any more wonderful is if Capra had kept in that infamous lost ending. Happy holidays everyone!

If you enjoyed this post, check out these related posts and articles from OppLoans:

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