What to do with your tax refund this year
February 13, 2012
Will this be the year you save your tax refund for a rainy day or will you spend every last penny like the majority of people? The Internal Revenue Service will let you directly deposit your refund money into four different types of accounts. You can have part of the refund sent to your checking account, another amount directed to your savings account, a third chunk of cash sent straight into your IRA and use up to $5,000 of the refund to purchase savings bonds.
This is a really simple way to help you save that money this year instead of spending it. You can still choose to have your entire refund sent into just one account, if you’d like. Even if this is your first year to have your refund sent electronically to a bank account, the directions are easy and clear. The Form 8888 includes a blank check diagram showing you exactly what to look for and enter.
Here are some ideas on what you could put that money towards:
- Emergency fund – If you already have an emergency fund, you could always add to it. If you don’t have one then it’s a good idea to take your refund and start one. You never know when something will come up and you’ll need a nice bit of cash to take care of it. Consider opening a high-yield savings account and depositing your refund for an unforeseen future expense.
- Retirement fund – Direct deposit your refund into your Roth, Traditional, or SEP-IRA. With the price of everything going up recently, you may need more money than you think to retire comfortably. Start now but adding that refund to your Retirement Fund, so you can live well when it’s time to stop working.
- Pay down your debt – If you have medical bills, credit cards, an auto loan, or student loans, you need to get that debt monkey off of your back. Add the refund to either your high-interest accounts or payoff a smaller account. Either way, being able to make more than the minimum payment will help you to pay off your debt more quickly.
- Invest in stocks, bonds or an ESA – While investing can sometimes be risky and not many people want to take those risks, there are some stable and beneficial things to invest in. Start a college fund for your children. Look into opening an Education Savings Account (ESA) or a 529 College Savings Plan. It’s never too early to start thinking about their future.
- Support a charity – Find a charity that speaks to you. Are you an animal advocate, environmentally friendly person or all about helping kids? Not only does making a charitable contribution help a worthy cause, it’s also tax deductible. Score!
Whether you choose to save, spend, invest or donate; it’s your hard earned money so make the most of it. If you choose to just spend the money, try to spend it wisely. Do you need a new water heater or a new furnace? Is your car on its last leg and about to give out? It’s a good idea to take a look at things that need replaced or fixed now, so they don’t end up costing you more money later on down the road.
If you would like more information about paying down your debt, contact us today. Our certified credit counselors can help you with your budget and with setting up a debt management plan. It’s a smart choice to use that refund to help you get rid of that debt monkey once and for all.
Which debt to pay off first? Debt Snowball Method vs. Highest Interest Method
February 8, 2012
There is much debate on this issue in the financial world. Some experts say to pay off the smaller balances first to get instant gratification. Others say it’s better to pay off the high interest rate ones first regardless of the balances. The first method (smaller balances) is called the “Debt Snowball Method”. The second method is called the “Highest Interest Method” and both have benefits.
We’ll go into detail and discuss each method in length to help you decide which method is right for you. Are you the type of person who needs to see instant results to know something is happening? If so, then you might prefer the snowball method. If you are more interested in saving money in the long run and are not worried about seeing a result right away, then the highest interest method is for you.
Debt Snowball Method:
Using the debt snowball method, you would focus on paying off the smallest debt first while just making minimum payments on the rest. Start by listing all of your credit card debts in order from the smallest balance to the largest balance. Next, total up the minimum payments you are making on all of your cards to see how much you are paying each month. Continue paying the minimum on all of your cards except the card with the lowest balance. If possible, try to add more money to that monthly payment. Paying more than the minimum will help you pay off the balance faster. For example, if your smallest debt is $100 with a $10 minimum payment, by increasing your monthly payment to $20, you will pay off the balance in about 6 months versus 10 months.
Once you have eliminated the balance on your lowest card, the debt repayment snowball effect begins. Apply that $20 you were paying on your lowest card to the next lowest balance in line. If you were paying $30 a month minimum payment, you will now be paying $50 a month. Once that balance is eventually paid off, apply that $50 you were paying per month to your next lowest balance, and so on and so forth.
Highest Interest Method:
Using the highest interest method, you would focus on paying off the highest interest debt first while just making minimum payments on the rest. First, list your credit card debits in order from highest interest rate to the lowest interest rate, disregarding the balances. Continue paying the minimum on all of your cards except the card with the highest interest rate. You need to add more money to that monthly payment to pay it down quickly. Any extra money should go directly to that debt first. Paying more than the minimum will help you pay off the balance faster and it will save you money in the end because of the high interest rates. Continue this method using the next highest interest rate and descending in that order.
It can be frustrating at first because it’s hard to see any improvement or “dent” when using this method. That doesn’t mean it’s not working, it really is, you just have to give it more time to see the results. The benefit to this method is the amount of money you can save when all is said and done because you paid the highest interest rates off first.
Which Method Wins?
The “highest interest” method usually means that you would pay less in overall interest by going that route. However, with that method, the “successes” don’t start happening for quite some time. With the “debt snowball” method, the successes occur more regularly throughout the process, meaning it’s better for keeping your encouragement up as you repay, even though you will pay more in the end because of the interest rates.
It’s really up to your personality when choosing one of these methods. If you think you will get frustrated and give up with not seeing instant results, then you might want to go with the “debt snowball” method. That is actually the more preferred method among people in debt.
Just remember that it’s always easier to get into debt than it is to get out of debt. Hang in there and have some faith. You can do this and we are always here to help. Give us a call if you have any questions or would like more information.
Introduction – Taking Over Our Financial Blog
February 6, 2012
Hi there! My name is Lauralynn Schueckler and I’m the Online Marketing Specialist here at AdvantageCCS. I’m taking over our Blog and I’m looking for some great ideas for topics to write about. Please let us know what’s on your mind and what you’d like to see on our Blog. I’ll do my best to provide you with the correct information and to answer any questions you may have.
I’ll tell you a little bit about myself. I have an Associate’s Degree in Multimedia Technologies and Graphic Design from Pittsburgh Technical Institute and I have been with the agency for a few months now. Before that I was the Social Media Manager at a Pittsburgh based Internet Marketing Firm. I’ve always had a passion for Social Media and Search Engine Optimization.
I’ve actually gone through the AdvantageCCS Debt Management Program personally myself almost 2 years ago. I’m completely debt free today and my credit score is very good now. I know all about what it’s like to be in debt. I was in over my head and I almost gave up. I had student loans, a car loan, and massive credit card debt. I heard about Advantage Credit Counseling Service from a friend and I’m so happy that I checked them out. They truly are the reason I’m out of debt today. I have been there and done that when it comes to debt, so if you can name a financial issue, I probably have experience with it.
In conclusion, if there are any financial topics that you would like to see discussed here, please feel free to suggest them. You can also contact me directly at lschueckler@advantageccs.org with any questions or ideas. Don’t forget to friend us on Facebook, and follow us on Twitter. We are also on Google+, LinkedIn and YouTube. Thank you and I look forward to hearing from you!
Valentine’s Day overspending can happen
January 30, 2012
Valentine’s Day is fast approaching. This day is all about undying love and showing that special someone how much you care. Show your sweetie you love them while keeping your bank account in check. That is easier said than done, right? Total holiday spending is expected to reach $15.7 billion this year according to the NRF (National Retail Federation).
We all seem to be expecting more this year. You can’t walk down the street, ride on a bus or catch a taxi cab without advertisements enticing you every second of the day. It’s so easy to put aside your financial woes when love is in the air. Nevertheless, you don’t have to spend a fortune to make your true love happy.
Here are some helpful tips to stay frugal while expressing your feelings:
- Do a chore or task that your significant other doesn’t like doing. Vacuum the house, do the dishes, take out the garbage. Anything that you know they don’t like to do, do it for them. Make sure you do a thorough job as well. This little gesture goes a long way to touching their heart.
- Create your own one-of-a-kind Valentine’s Day card. Instead of going to your local convenience store and just picking out any old card, make one yourself. This can be done on the computer or by hand. Be creative and let the love flow into creating that special card.
- Have an intimate dinner made by you. It can be hard to find a restaurant on Valentine’s Day that isn’t over crowded with a really long wait. Why not make dinner yourself at home? If you can’t cook, order out from a favorite restaurant. Create the mood by lighting candles. This is a wonderful way to show how much you care.
- Find your favorite picture as a couple and put that picture on an item for them. You can add pictures to just about anything these days. Whether it’s a coffee mug, mouse pad, calendar, t-shirt, ornament, etc. It’s really easy to create and order it online. It’s such a personal and thoughtful gift that they will cherish for a long time.
- Make a burned CD or create a Playlist on their MP3 player of favorite songs. Be sure to include the song that you both think of as “our song”. Use your computer or drawing skills to make a custom cover for the CD case.
- Design your own flower arrangement. When you buy pre-arranged flower bouquets, you could be paying double what you’d normally pay. Save money by buying individual flowers, a lovely vase, and do the arranging yourself. Remember to cut the stems at an angle and the flowers will last longer. Another tip is to put a penny in the bottom of the vase. The penny acts as a natural fungicide and will help the flowers stay vibrant.
- Bake a cake or favorite dessert. Make something by hand or use your talents to create something unique for him or her. If you like to write, maybe write them a poem. If you are a musician, write or sing a song. If you work with wood or metal try creating a memory box. Whatever skills or talents you have, use them to make something truly special for them.
If you put a lot of thought or time into a gift, it means so much more to that person. You don’t have to buy expensive jewelry or 12 dozen long-stem roses to show that someone you really care. This day is about expressing your love and feelings. Just being with that person on this special day could be enough for them. There’s no reason to break your budget and overspend on this holiday.
What are your Valentine’s Day Plans? Do you think you might have gone a little overboard on the planning and spending? We’d like to hear your thoughts and ideas!
Dealing with student loan debt
January 25, 2012
Student loans can seem like a nightmare. Many Americans struggle everyday to pay back their loans and many can’t make it. In 2010 two-thirds of college seniors carried an average of $25,250 in debt according to the Project on Student Debt. These kids also had the highest unemployment rate in recent history at 9.1%. Overcoming student loan debt may seem impossible with those odds.
However, there is a light at the end of the tunnel. We’ll show you some ways to manage your debt and get your life back on track. You’ll have to decide what the best choice for your current situation is. Here are some suggestions to help you get started:
Loan forgiveness - There are some programs out there that will forgive all or some of your federal student loans if you work in certain fields. Jobs such as public safety, teachers, nurses, and a few others fall into this category. This program discharges any remaining debt after 10 years of full-time employment in public service.
Loan deferment – If you are having trouble paying loans back due to economic hardship, unemployment, military deployment, health problems, or enrollment in school, there are ways to postpone your federal loans. This process is called loan deferment. Deferment lets you temporarily suspend making your student loan payments.
Types of loans & grace periods – It’s imperative that you keep track of the lender, balance, and repayment status of each of your student loans. Different loans have different grace periods, or how long after leaving school before you have to start paying it back. Pay schedules or due dates should also be closely monitored. This will help you avoid any late fees or charges.
Tackle the most expensive loan first – Check to see which loan has the highest interest rate and pay that one off first. The highest-interest method usually gets the debts paid slightly quicker than the debt-snowball method (paying debts with the smallest amount first regardless of interest rates). Compare the interest rates and start on the highest one first. That will leave more money in your pocket when all is said and done.
Extended Payment Plan – Try to request the extended payment option, if possible. This will lengthen the repayment time and could help decrease the amount due each month. Though extended payment plans will cause more interest to accumulate, the interest is tax-deductible within limits. Call your loan provider to see if this is an option.
Income-based Repayment Plan – Some loan providers may have this as an option. You’re monthly payment would be based on the amount of income you are making each month. This plan limits the amount to a specific percentage (depending on the lender). It could help you keep current on your payments. Ask your lender if they provide this type of plan.
Whatever your situation may be, hopefully you’re lender is willing to work with you to repay your student loan debt. Don’t ignore the problems and think they’ll just go away. There can be major consequences with defaulting on a loan. Be advised that student loans are now generally not dischargeable through bankruptcy.
If you or someone you know is having trouble with debt, give us a call. We have certified Credit Counselors available to help get that debt monkey off of your back. If you have any questions about student loans or debt, please leave a comment.
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