The Dark Truth About Payday Loans

pablo-11Payday loans, also known as cash advance loans or check advance loans, are loans that are given based on proof of income, some personal information, and government issued identification. These loans generally are targeted towards low-income earners who may not qualify for a loan from a bank or credit union due to poor credit history.

Payday loans may seem like a good resource when in a bind, but should not be used if they cannot be immediately repaid or if there is a high likelihood that you will need another one in the near future. If your debt is not repaid by the specified loan term, you face additional fees for failure to repay.

According to Pew Charitable Trusts, over twelve million Americans take out a payday loan each year. They also found that most of these borrowers earn less than $40,000/year and are not married. This same report also shows that the average borrower takes eight loans at $375 and end up paying $520 in interest only before the initial loan is repaid.

Beware of their tricky loan practices

Instead of advertising the interest rates, a monthly or weekly fee is advertised. For example: Just $50/week until the payment is made in full. This may sound great, until you realize that your loan term is 6-12 months and that this means you will be paying $200/month in interest alone. Once you realize that you aren’t actually able to make these payments, you are charged late payment fees. In most cases, you can end up paying over 200% back on the amount you initially borrowed. These payday lenders use these tactics to keep you in debt, but there are other ways to get the funds you need.

Before applying for a payday loan, you should consider other options:

Ask your employer for a check advance

While this may not be an option for everyone, it never hurts to ask your Human Resources department for an early wage payout or even a paid-time-off payout in advance. This may keep you from hefty repayment fees from the payday loan.

Withdraw from your savings or investment account

If you have an investment account that you cannot withdraw from without penalty, this may be a time to reach out to your accountant or a tax advisor to see if the penalty is worth paying. If you have a savings account that you are trying not to use, it is the best option when you need money in a pinch.

Auto refinance

This option may not help you today, but if you are noticing that you are short on a monthly basis, a payday loan is definitely not for you. Refinancing may allow you to skip your next payment and then also provide a lower payment going forward. This may help with the ongoing struggle of living paycheck-to-paycheck.

Mortgage refinance

If you have a mortgage and your credit or the market has improved since your purchase, it may be worth discussing with your bank or credit union. Again, this may provide a way to ease the burden of your monthly bills.

Reputable personal loans

FDIC or NCUA-insured banks and credit unions offer different types of personal loans. Speaking to your bank is a great option to ensure you are not being taken advantage of with ridiculous interest rates.

Lower insurance premiums

Lowering your home, life, auto, and health insurance are all ways to make sure you are getting the best deal on your monthly payments. Shop around for rates here.

Request an extension from your creditor

Some creditors are willing to work with you if you have a plan to pay them back. A simple phone call explaining your situation may keep your accounts out of collections and buy you some time to come up with a plan to repay.

Ask family for help

While most people are not interested in asking for help, this may the be best option in most cases as you can potentially have access to the money you need immediately. If you take out a payday loan instead and have issues repaying, you may end up asking for help later to get out of a worse situation. Weigh your options and talk to your family.

If you have ever used a payday loan, we would love to hear about your experience.

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5 Reasons To Start Planning Your Retirement Now

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Many people ask when they should start saving for retirement, and the simple answer is: When you get a job. It is absolutely never too early to start putting away a little at a time.

Whenever you start saving, be sure to avoid withdrawals unless absolutely necessary. You can choose to self-fund your retirement or you can contribute to your employer’s retirement plan. Research investment options and choose the one that makes the most sense for your situation.

Inflation

Simply put, if you are preparing for retirement, you cannot forget to factor inflation into the mix. Inflation is the rise of prices for goods and services over time. Therefore, you can save $100,000 and inflation will not affect the amount you have saved; however, it will affect your purchasing power—meaning the amount you can buy with that amount of money. Inflation can deplete your budget and saving accounts fast. Speak with a financial advisor to see how much inflation you should add to your plan.

Medical bills

While no one hopes to have a medical emergency late in life, it is best to prepare for the what-ifs. Even with health insurance, there may still be a need to pay out of pocket. Saving in advance can help you prepare for these possibilities without the added stress.

Unplanned early retirement

There are many reasons why someone would retire unexpectedly; including career layoffs, failed businesses, and disabilities. Since life is full of unknowns, saving for retirement early can help you to avoid a personal finance crisis late in life.

Bad investments

Maybe you started planning for retirement and make some investments that you thought would pay out in the long term. Perhaps you put most of your money into investing in a company or property that did not yield the ROI (return-on-investment) that you anticipated. This is why it is important to not only start saving early on, but also to make sure you have a well balanced investment portfolio.

Earn higher dividends

Preparing for retirement early can lead to higher dividends, or interest, accrued over time. Make your money work for you by speaking with an investment advisor to see what investment accounts work for you. If you start saving early, you could double the amount you have at the time of retirement.

What are you doing to prepare for retirement? Do you think retirement will look differently in the next 20 years? Let us know your thoughts.

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A Millennial’s Guide to Finances

pablo-12Millennials are hard at work making a name for themselves in business, fashion, and lifestyle. Their financial futures look bright due to endless opportunities and their zest for innovation, but are they making the right financial decisions? There are a few topics that are important, but do not get the attention they deserve.

Make your student loan debt a priority

Most millennials are either heading into college or have completed their degrees in the past few years. Kudos if you have completed your degree, way to stay focused and take charge of your future! What you may realize now, is that student loan debt follows you around long after you walk the stage. Looking for ways to lower your student loan debt? Start by evaluating all of your debt, lower your car payment, negotiate for lower insurance premiums, and focus on paying off one bill at a time.

Stop using your credit card

Credit cards can be tempting to use when you want to make a large purchase, but don’t quite have the funds in your account to cover it in cash. Avoid the temptation to buy something outside of your means and you could be well on your way to a debt- and stress-free life.

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Talk about money before marriage

Finding the right person to spend your life with is a process that can take some people years to accomplish. With divorce rates increasing a little each year, it is recommended to discuss finances before heading to the altar. Discussing finances can lead to a healthier relationship and clear expectations for the newlyweds.

Wondering which questions to ask your beau? Here are a few conversation starters:

  • Do you have debt?
  • How much debt do you have?
  • Do you have a savings account?
  • How do you feel about spending money on leisure, entertainment, and unnecessary items?
  • Do you follow a budget?
  • What are your financial goals?

Contribute to your 401k

Maybe you don’t plan on retiring anytime soon or perhaps you own your own business. Whether it is a 401k, mutual fund, or a savings account, millennials must start saving money now in order to prepare for the inflation that is sure to shake our financial market before they reach retirement ages. To get an idea of how much you will need to have a relaxing retirement, check out this calculator.

You aren’t too young to invest

Investing early allows time for your money to earn significant interest by the time you are ready for retirement. If you aren’t interested in the stock market, consider investing in a business or real estate. You are never too young to make your money work harder for you. By 50, you will appreciate the effort you put in at this age.

If you’re a millennial, tell us how you are taking control of your finances!

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7 Tricks To Help You Travel More this Year

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If you have never had a travel savings account before, it can seem a little off. However, this account will ensure that you are taking at least one trip every year. You can contribute as much as possible, starting with $50/month, you should be able to plan a long weekend getaway by the end of the year.

Plan ahead

Do you have a certain destination in mind? Calculate and monitor flight and hotel prices so that you know how much money you need to save. Planning your trip 6–12 months in advance can help to establish potential flight and hotel costs and will give you time to make final decisions.

Travel in groups

Plan a trip with 2–3 of your closest friends and their families if you are looking for a family getaway. Many times you can rent a condo or a large space for much lower than the price of a hotel. The perk of having people with you? Simple, the price is split between all of you, making the trip more affordable.

Research peak seasons

Peak seasons are times when a destination is most popular for travel. As you can imagine, peak seasons lead to higher rates for flights and hotels. Once you decide on a destination, look up the peak seasons for that location and plan your trip around it if possible. Generally speaking, summer, holidays, and Spring Break are peak travel times. If your days are flexible, you are more likely to find a great deal on flights.

Join a loyalty program

Joining loyalty program is a great way to earn points towards your travel. There are many programs out there, from travel credit cards to hotel rewards programs. The common denominator is that you are rewarded for being a loyal member or for using your credit card for purchases. If you decide on a rewards credit card, be sure to still pay the balance off in full each month to avoid accumulating additional debt.

Cut your monthly bills

Review your monthly expenses and find ways to add more to your travel savings account. In order to plan a trip overseas that you may have always dreamed about, would you be willing to trade in your expensive cable bill for something like Netflix or Hulu? Making that simple switch could save up to $100/month. This would also be a great time to consider refinancing your car if your credit has increased. Average savings for customers who refinance with rateGenius save an average of $89/month. These two small changes could add $200+ to your savings account every month.

Visit a friend

Many of us have a friend that lives in a place we have never visited. Perhaps they just moved there, or you just haven’t been able to make the trip. These vacations are the easiest to plan since you only have to focus on airfare if you are able to spend a few nights with your friend. Also, having a city insider makes planning activities a breeze. They will know the hot spots and be able to tell you which tourist traps aren’t worth the money.

Which destinations are on your travel hot list this year? Let us know, and we can try to help you get there!

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5 Tips to Nail Your Yearly Budget

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When it comes to budgeting, planning ahead is the best way to guarantee success. If you have struggled with sticking to a budget in the past, these 5 tips may help you stay on top of it this year.

Write down every bill and expense

The easiest way to fail at budgeting is to forget an expense. When you forget to account for a bill and then try to make up for it by moving around other payments, you may end up far off your budget. Write everything down with the due dates before creating your budget.

Here are some things to remember:

  • Mortgage/Rent
  • Car Payment
  • Insurance
  • Electricity
  • Gas
  • Water
  • Toll or parking charges
  • Pet expenses
  • Gym memberships

Prepare in advance

Have you noticed that you are less likely to spend a lot of money on food if you prepare your lunch in advance? Meal prepping can save a lot of money over a year and minimizing eating out for dinner can also help save over the year. Think about better ways to use that money and plan your meals out for the week.

Also, set aside money for entertainment. If you know you will want to attend a party, concert, or movie, just plan the amount of money you will need and allocate your money towards that event. Denying yourself can lead to splurging later, and splurging leads to a failed budget.

Give yourself an allowance

Don’t deprive yourself. You are less likely to stick to your budget if you feel like you aren’t able to do anything you enjoy because of your budget. Therefore, you should give yourself an allowance every week to spend towards things you may want or need. How much should you give yourself? That depends on how much money you have left after all of your bills are paid, groceries are purchased, and your gas tank is full. For some people, $15-25/wk is sufficient, while others can afford to spend a little more.

Treat yourself for a job well done

After a few months of staying on track with your budget, allow yourself to purchase something nice. You can do this by saving your allowance over time, or gifting yourself with something after a bonus or successful month. It’s important to remember that you only have one life, and you should be enjoying it without constantly crunching numbers.

Set reasonable goals

There’s nothing wrong with trying to push yourself to save or payoff a debt as quickly as possible. However, there is something wrong when not meeting that goal causes you to lose hope and fall off the wagon. If you make a mistake and miss something on your budget, fix what you can and keep going. One missed payment should not mean that you stop trying. If you are not acclimated to budgeting, there may be a time or two where you miss something, prepare as much as you can, be also cut yourself a little slack. You are on the right track and that is all that matters.

What are your financial goals for this year? Share them with us!

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