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January 2021 E-Newsletter

How To Manage All the Extra Debt You Piled Up in 2020


debt
1. Create a list of all your debt.
It’s important to have a clear picture of exactly how much debt you have

“The first thing you need to do is create a budgeting spreadsheet,” said Drew Cheneler, founder of the personal finance blog SimpleMoneyLyfe.com. “Find out who you owe debt to and how much. Separate it by categories: credit cards, student loans, [other] loans, etc.”

You should also include due dates so you don’t miss any payment deadlines, added Patrina Dixon of It’s My Money.
 
2. Research Financial Assistance Programs that may be available
You may be able to have some of your debt forgiven. “It’s a good idea to start to look at what financial assistance is available to forgive some of that debt, especially if it relates to some of the government programs offered this year,” said Chalmers Brown, CTO at Due.

3. Reach out to your lenders
If it seems like you have more debt than you can manage, ask for help.

“Due to the extraordinary situation that the pandemic has caused, many lenders are more flexible than they might have been in the past,” said Marc Andre, personal finance blogger at VitalDollar.com. “They may have a hardship program or a way to accommodate people who are in difficult situations, but you probably won’t know about this unless you ask. Call the lender to explain your situation and ask if there is anything they can do to help. They might be willing to delay payments or adjust the terms in some way that makes it possible for you to pay.”

“It’s important that you’re proactive about this and reach out to the lender as soon as possible,” he added. “You’ll be more likely to get help if you reach out before you’ve already fallen behind on the payment.”

4. Consider Consolidating or Refinancing Your Debts
Interest rates are low, which means you may be able to benefit from refinancing any loans you have.

“See if you can consolidate or refinance your debt to make sure your repayment terms are as favorable as possible from the start,” said Anna Barker, personal finance expert and founder of LogicalDollar. “In particular, reducing the interest rate — including taking advantage of any interest-free periods — could save you thousands of dollars over the life of your loan.”

If you are a homeowner, refinancing your home could help you get out of the hole.

“Refinance and take some equity out to consolidate all the debt at a much lower rate,” serial entrepreneur John Rampton said. “Now that home values are on the rise and interest rates are at near historic lows, this could be a good way to save money on interest charges and accelerate pay-down.”

5. Consider a balance transfer credit card
Opening a balance transfer credit card is another option to reduce your payments, especially if you’re specifically dealing with credit card debt — like many other Americans are this year. The Clever survey found that 52% of Americans carry a balance on their credit card, and 79% of them carry more than $1,000 in credit card debt month-over-month.

However, if you do opt to open a balance transfer card, make sure you understand repayment terms.

“For someone who has one or more credit card accounts carrying high interest rates, transferring the balance(s) to a card with a low- or zero-interest rate can help get that debt paid off,” said Sean Fox, president of Freedom Debt Relief. “They are generally available only to people with good credit, fees can be high and the promotional rates that make them work will expire. Someone in financial hardship must be sure that they can pay off the balance before then.”

6. Delay any government backed loans if you need to
“Keep in mind that the CARES Act allows borrowers with government-backed loans to delay payments for up to one year,” personal finance blogger Cara Palmer said.

While you will have to pay these debts back eventually, delaying repayment can help you focus on paying down more pressing debts.

7. Track your spending
“Closely track your spending so that you know exactly where each dollar is going,” Barker said. “Following this strategy makes sure that you’re not accidentally wasting any money that should be funneled towards paying off your debt. Your budget should have the aim of allowing you to make more than your minimum debt repayments, which will likely involve you having to strictly control your spending.”

“Look at what you spent and where so you can determine which categories you can immediately lower spending in to allocate more to debt repayment,” added Yenn Lei, head of engineering at Calendar.

You may have to cut out some unnecessary costs during this debt repayment period.

“Try eliminating any monthly subscriptions that aren’t necessary and cook from home instead of getting takeout,” said Sam Hawrylack, co-owner of the personal finance blog How To FIRE. “Be very careful to actually understand wants versus needs.”

“Cutting out cable or not going out to eat as often might not be fun, but short-term sacrifice for long-term financial freedom can be well worth it,” added Misty Larkins, president of Relevance.

You may also try to renegotiate some of your monthly bills that fit into the “needs” category.

“Will your utility companies defer or discount your monthly payment for a few months?” said Jason Hennessey, founder of Hennessey Digital. “Many people can probably save between $250 to $500 per month just by making a few phone calls and asking for some flexibility or removing services that are more of a luxury.”

8. Use a budgeting app to get a clear picture of your finances
“Consider downloading a mobile budgeting app that will help you track your finances and debt,” Cheneler said. “Sometimes a holistic view is all you need to kickstart paying off debt.”

9. Utilize community programs to cut down on expenses
“Take advantage of free community services, whether it’s grocery giveaways, community meals, or goods and services being offered through your network,” said Julie Rains, founder of Investing to Thrive. “For example, some folks are reaching out via the NextDoor app to both get and give help. When you’re able, you can give back.”

Every dollar saved is another dollar you can put toward debt repayment, so don’t feel shy about accepting help right now.

10. Remove saved credit card data from apps and websites
Keeping your credit card information saved on shopping websites and apps “makes it too easy to spend,” said Lawrence Gonzalez, founder of The Neighborhood Finance Guy. Those dollars you are mindlessly spending are better off going toward debt repayment.

11. Ditch your credit card all together
“As you pay debt off, do everything in your power not to create new debt in the process,” said Stephen Dalby, founder and CEO of Gabb Wireless.

Every time you swipe your credit card, you’re potentially piling on more debt.

“Commit to not taking on more debt by using cash instead of credit,” said Ashley Lee, millennial money coach, personal finance enthusiast and host of “The Financial Key” podcast.

12. Find ways to increase your income
Making more money will enable you to pay off your debt faster.

“You should look into increasing your income, such as through a side hustle, so that any extra money you’re able to generate can also be used to destroy your debt,” Barker said. “This is a particularly good strategy for paying off debt that’s built up in 2020, as there are so many online-based side hustles at the moment that are very lucrative, especially with a lot of people being at home. Online tutoring, for example, is a great opportunity to make some extra cash, no matter what your area of expertise is.”

Other examples of side hustles you may take on include delivering groceries with Instacart or making yourself available for odd jobs on TaskRabbit, Kate Braun of DollarSanity suggested.

“Getting a second job will help you tremendously,” added Peter Koch, a personal finance expert, also at DollarSanity. “Consider that money as ‘debt money’ so you don’t have to use the money you earn at your full-time job.”

13. Increase your earning potential
In addition to getting a side hustle, work on acquiring new skills that can help you land a better-paying job.

“Learn high-income producing skills: think sales, marketing and copywriting to name a few,” said Jercori Freeman, founder of Wealthchild.com. “Learn and apply these skills, and you‘ll be able to eliminate your debt.”

14. Sell off any unused items around your house
You can also bring in extra money for debt repayment by selling items you are no longer using.

“See if you have items lying around that you can sell on eBay, OfferUp or Facebook Marketplace,” said Anthony Kirlew, financial coach at Fiscally Sound. “Just make sure to use the money to knock out that debt!”

15. Pay Yourself First
Dedicate a portion of every paycheck to paying down your debt.

“One of the best tips for meeting any financial goal is to always pay yourself first,” Barker said. “This means that you should commit a certain amount of your income to paying off your debt as soon as the money hits your account rather than waiting to see what’s left at the end of the month. Otherwise, there’s a risk that there won’t be enough left over for you to meet your financial goals.”

16. Start by paying down high-interest debt
There are several debt repayment methods, but Cheneler recommends focusing on paying high-interest debt first.
“This will most likely be credit card debt,” he said.

April Lewis-Parks, director of education and corporate communications at Consolidated Credit, also recommends this debt repayment method.

“Always payoff the highest APR debt first to make the most of your money,” she said.

17. Or start by paying down your smallest debt first
“List your debts smallest to largest, regardless of the interest rate,” said Rachel Cruze, author, financial expert and host of “The Rachel Cruze Show.” “Throw everything you can at the smallest one and make minimum payments on the rest. Once you pay off your smallest debt, attack the next one. Repeat this process until you’re debt-free. We call this the debt snowball at Ramsey Solutions, and we see people pay off their debt in an average of 18 to 24 months.”

This repayment method is effective for people who have many different debts and want to feel like they’re making a dent in it right away.

“This works because it gives you confidence,” said Deacon Hayes, founder of WellKeptWallet.com. “You are able to pay off a small debt quickly and you feel like you are getting somewhere. This is important because it can help you stay motivated to keep going to tackle all of the rest of your debt.”

Derek Sall, owner of the blog Life And My Finances, also recommends the snowball method of debt repayment, noting that you may be surprised by how quickly you can pay off debts this way: “You can do this!”

18. Make all of your monthly payments
As you focus on paying off high-interest debt or your smallest debt, be sure to continue making at least the minimum monthly payments on any other debt you have.

“This is key,” Cheneler said. “Missing a payment could cost you your credit score and set you back even more.”

19. Pay more than minimum whenever possible
Although you should absolutely aim to pay the minimum monthly payment, ideally, you’ll be paying more.

“If you only pay the minimum each month, it can feel that it will take forever to get out of debt,” said Ricardo Pina, founder of the personal finance blog The Modest Wallet. “If you pay a bit more — even if it’s $25 or $50 more — it will help you pay your balance faster and it can boost your morale.”

20. Remember it's ok to treat yourself from time to time
Even if you’re serious about paying off debt, that doesn’t mean you need to live off ramen noodles and never leave the house.

“Don’t forget to budget at least a small amount for ‘fun stuff,'” Barker said. “It’s going to take a while to pay off your debt, so letting you use even some of your budget to have a bit of fun makes it far more likely you’ll stick with it.”

The article, How to Manage All the Extra Debt You Piled Up in 2020originally appeared on msn.com

15 Hacks to Get Financial Control in 2021

Piggy Bank
Like the rest of us, you work extremely hard for your money.

Also, like the rest of us, you have some pretty important financial goals you want to achieve, whether that’s increasing your savings rate, building an adequate emergency fund, buying your first home, or retiring by the age of 60

Your financial goals are why it’s important to find ways to keep as much of your hard-earned money in your hands as possible.

But knowing what to do next when it comes to finding ways to save money isn’t always as straightforward as it should be. Fortunately for you, we’ve compiled 15 effective and proven money hacks that you can start using almost immediately to help you save thousands of dollars.

1. Create a plan for your money
First and foremost, you’ll want to create a game plan and overall strategy for your money. Doing this is arguably, or maybe inarguably, one of the best things you can do right now to make sure you’re setting yourself up for a successful financial future. In fact, few things can make a difference in your financial outcome more than having a financial plan.

Let’s consider it in the context of things most of us are familiar with. There’s a good chance you wouldn’t play a new board game without reading the instructions or even trying to solve a puzzle without seeing the picture on the front. 

There’s also a good chance that you wouldn’t travel to a completely new destination without a map or a basic set of instructions. And there’s an even better chance that you wouldn’t build a new house without having detailed blueprints.

Yet most of us have continued to navigate our financial lives without even the most basic plan in place. That means we're blindly navigating the most important financial decisions of our lives, including our path to retirement.

The stark reality is that Americans struggle with their financial lives, including the decisions they’re making. Having a plan can and will change that.

Make a promise to yourself for 2021 to start taking control of your financial life. Put a game plan in place to help you set goals, provide motivation and gain insight into all the major areas of your financial life.

2. Use free financial tools and calculators
With the sheer abundance of financial tools, apps and calculators that exist, there's no excuse for not having some basic financial understanding and insight into how you’re doing.

You can literally find a financial tool and calculator for just about anything. What’s even better is that several of the best online resources and tools are either completely free to use or offer some free version you can get started with.

These tools can help you quickly and accurately assess your financial situation or certain parts of it so that you can gain insight into how you’re doing and where you should be focusing your attention.

For example, if you’re looking to determine the impact of compound interest on your retirement savings, you can quickly search for the best of those calculators. 

If you’re looking to draft a monthly budget quickly, you’ll want to use a monthly budget calculator. If you’re looking for insight into your retirement outlook and current trajectory, consider using an online retirement calculator.

Coulee Bank has several free online calculators for retirement, savings, mortgage, budgeting and more.

3. Find yourself an accountability partner
An accountability partner can be the extra motivation you need to help keep you focused and stay the course.

If you’re unsure exactly what an accountability partner is, it’s exactly what it sounds like: someone who is there to help you stay accountable and on top of your financial progress.

This person can be a spouse or a partner you’re living with, or it can be a friend, colleague or relative that you trust. The key here is that this person needs to be someone that you can trust, rely on and have open conversations with about money. Additionally, this person should be someone that can keep you accountable and vice versa.

I would highly recommend having regular “check-ins” and conversations about money the same way you would have a regular phone call with a friend or a scheduled one-on-one meeting with an employer.

4. Use a Cash-Only Budget
If you’re anything like me, you might find yourself being constantly tempted to overspend using your credit cards. Don’t feel bad about that, but rather take control of the situation and consider temporarily switching to a cash-only budget.

Sure, this might not be very convenient in certain situations, but this method is a great way to reduce a lot of impulse spending and prevent yourself from overspending. 

You'll quickly learn how to consciously consider your purchasing choices and stay on track with your savings goals. You’ll instantly gain a better understanding of how much you’re actually spending as opposed to the tap and go temptation with credit cards.

Alright, so it sounds like a good idea, but how exactly do you move forward with it and put it to practice? One of the simplest ways to implement this is to use what’s known as the envelope system. At the beginning of each period (typically monthly or bi-weekly), stash your budgeted amount of cash into envelopes with labels for each spending category. 

The amount for each category is the maximum amount you’re able to spend within that given time period. Once you’ve run out of cash for a specific envelope, you've spent your budgeted amount.

It’s certainly not easy, but it will definitely keep you accountable and more aware of how you’ve been spending your money.

5. Automate what you can (your savings and expenses)
Automating your monthly savings is still a hugely underrated mechanism that can help you save more while spending less. You'll also feel instant relief knowing that your money is being put to good use immediately.

What’s even better is that it’s straightforward to implement and use almost immediately. I’d recommend setting up an automatic transfer or split a direct deposit to correspond with every payday.

That way, each time you’re getting paid, you’re investing in yourself first the way it should be. Regardless of the amount, the real trick here is getting started. Start with a small amount like $20 or $50 from every paycheck and then work your way up from there.

In addition to automating your savings, consider automating your monthly recurring expenses as well. Rather than leaving it up to email reminders and notifications, it’s in your best interest to make sure you’re paying your bills on time for several reasons.

First, late payments, especially on credit accounts, can put a dent in your credit score. Second, the interest from these expenses compounds, which means you’ll end up paying more than you should ever have to.

6. Challenge your friends to a no-spend challenge
One of the best ways to save money is by not spending it at all. This is where a no-spend challenge can be a serious game-changer.

If you’re unfamiliar with the concept, it’s exactly as it sounds. Pick a dedicated period of time, usually one week or one month, where you challenge your friends or an accountability partner not to spend money on anything other than the necessities.

To improve your results, you’ll want to keep any cards or cash out of sight and out of reach. Deposit any cash you have lying around, and hide or even freeze your credit cards right before the challenge. It sounds strange, but believe me, it works.

7. Put additional funds in a savings account
Found an extra $5, $10 or even $20 in your jean pocket or on your car floor? At times that can feel like the jackpot when you least expect it.

But hold up! Instead of resorting to the usual bad habit of spending that extra money you just found, do something a little different (and better) this time. Put that money away and use it as a way to continue investing in yourself.

Sure, it might be a minimal amount of money, but just like everything else, it adds up over time. Soon that $5 becomes $50, and eventually, that $50 becomes $500. That’s money you would have likely otherwise spent on meaningless items that you would have forgotten about already.

By funneling additional funds into a savings account, you can grow your nest egg or even vacation fund faster.

8. Stop trying to keep up with the Joneses
Seriously, this one you need to stop. Keeping up with the Joneses can be dangerous to not only your financial well-being, but it can also take a toll on your overall well-being when you’re trying to please others.

This is one sure way to spend money that you don’t have in your accounts yet. If you’re looking for ways to stack on debt, then, by all means, go for it. But that’s not something I would recommend to anyone.

Rather than worrying about what others around you are spending their money on, it’s in your best interest to remain clear on your goals and stay committed to your values. In these situations, this is exactly where your financial plan that we talked about earlier comes into play to help you stay grounded and focused on the long-term.

9. Use the 72-hour rule before purchasing something
The 72-hour rule is a complete game-changer. If you haven’t heard of this “rule” before, it’s not only easy to implement, but it’s extremely effective. However, I’ll have to warn you that it does take an incredible amount of discipline when first putting it to use.

So, here’s how it works. The next time you're considering making any impulsive purchase, stop and give yourself 72 hours to sleep on it. After those 72 hours have come and gone, there’s a good chance that you’ve forgotten entirely about the purchase, saving yourself anywhere from a few dollars to a few hundred dollars, maybe even more.

I’ve seen this before put to use but with 24 hours instead. While that also works, I’ve personally found that giving yourself three days rather than just one is three-times more effective.

10. Get rid of your high interest debts right away
Those high-interest, revolving debts like your credit cards can easily get in the way of your financial plan and hinder your financial future. Instead of saving more every month, the money you work so hard for is going toward interest payments.

That’s why it’s important to have a gameplan for your debts and make sure that you’re focused on the accounts that have the highest interest. These are the ones that you’ll want to start paying down first. To make it easier and more effective, focus on one at a time. Once you’ve finished paying one-off, you’ll then want to work on the account with the second-highest interest, then keep going.

By focusing on paying off the high-interest debts right away, you’ll be saving yourself well over hundreds of dollars in interest payments alone.

11. Take it easy on take-out
This is one that I’ve had to re-learn myself recently. In light of everything going on with the current lockdowns and social settings, I found myself getting back into the bad financial habit of ordering takeout one too many times per week.

While this one can be a huge ask for a lot of people, it’s also one that has a very significant and immediate impact on your overall financial health. By simply cutting out just one day a week from ordering takeout, you save yourself anywhere.

That’s money that could easily be re-invested into your savings account, used to pay down your already existent credit card debt, or even used to pay for groceries for a few days.

12. Stop buying *new* things-seriously
Here’s where individuals and households, in general, have a huge opportunity to save thousands of dollars. Rather than purchasing goods and clothing brand new, look for opportunities to make second-hand purchases and even rentals where it can apply.

For everyday items, household goods and clothing, shopping second hand is one of the best ways to save money easily. By doing just a small amount of upfront research, you can find second-hand items in just as good condition as new. If you’re unsure where to look or how to get started, I’d recommend exploring places like garage sales, thrift stores, eBay, Facebook Marketplace, and even Craigslist for items you might need.

When it comes to larger items, such as tools or specific equipment types, there’s a better than good chance that you can either rent these items affordably or even borrow them from a friend, family member or neighborhood resource. You’d be surprised by the types of tools and equipment you might have access to at libraries.

It’s a small example, but did you know that there are plenty of libraries that will have access to technological resources, including things like laptops, tablets and even microphones if you’re recording anything with audio?

13. Do your research and compare prices
By taking anywhere from a few minutes to a few hours of doing research, you could easily be saving yourself a few hundred dollars or more.

For example, when it comes to online shopping, before you rush down to the store or click checkout when you’re looking to buy something, spend some time looking for alternatives and different stores that carry the same or similar types of products.

Additionally, don’t forget to check for coupon codes if you’re shopping online. I almost always do a quick online search that looks something like: [product/company name] available discount codes.

Don’t get me wrong: Not every search result is successful, but I’ll earn myself an additional 15% to 50% off just by browsing for online coupons every once and a while.

When it comes to your finances, notably financial services such as insurance and mortgages, you’d be silly not to do research ahead of time.

One of my colleagues searches and compares new auto insurance quotes every year to make sure he’s always getting the best possible deal he can find. There were years where he could save himself several hundred dollars, and some years, he made sure that his premiums didn’t increase.

Consider this: Is it worth spending a few minutes, maybe even a few hours, knowing you could save yourself anywhere from a few hundred to what could quite possibly be significantly more than that? My answer will always be yes.

14. Reevaluate your memberships and subscriptions
Right now might be the best time to evaluate and then re-evaluate any recurring memberships or subscriptions in your name. These include things such as memberships to golf courses, events or networking groups, the gym, video streaming services like Netflix or Disney+, and more.

When you’re evaluating them, you’ll want to consider whether you’re getting your money's worth. If it’s something that brings value and you are getting your money’s worth, then keep it. But if it’s something that you’ve been questioning and hardly use, then you’ll likely want to cancel it.

Before you do so, make sure that you’re fully aware of any applicable cancellation fees and what those look like if you “break” out of a contract earlier than what was initially agreed upon.

15. Improve your banking situation
There are two banking areas that you should pay attention to and look to “fix” right away.

The first is with the fees that you’re subject to paying at your current bank. I know all too well that it can be easy to avoid paying attention to the fees you’re paying. But that’s the problem — it might just be one of the easiest things you can easily keep tabs on and control, yet it’s often overlooked and neglected.

If you’re unsure of the fees you’re currently paying, I’d highly recommend checking in with your bank to understand them better and only see if there are better options for your current needs. If not, you might want to consider an alternative bank.

The best time to take action was yesterday. The second best time is right now. Rather than letting your financial goals slip from your hands, consider using these money hacks mentioned above to help you take control of your financial picture and work toward conquering your finances in 2021.

Coulee Bank offers a variety of Totally Free Checking Accounts with no hidden fees.

The article,15 Hacks to Get Financial Control in 2021originally appeared on msn.com


Coulee Bank Mortgage: Using Gift Money Towards a Down Payment

HouseDown payments can be a big hurdle when buying a home. In fact, nearly a third of first-time buyers received money from friends or relatives to source their down payment.

Are you considering a similar move? If so, proceed with caution. Though getting gift money is quite common, it also comes with some unique challenges.
 

Here’s what you should do to make sure your down payment gift goes off without a hitch:

  • Know the rules and regulations around your loan. Different mortgage products have different rules for gift money. The allowed amount may be limited, or the funds may need to be deposited in a certain time frame in order to qualify. We can discuss these specifics together.
     
  • Make it clear that you’re not expected to repay the money. If you’re taking on more debt, it will impact your home loan finances. To prove that it’s a gift instead of a loan, you’ll need to ask whoever is giving you the money to write a gift letter, asserting that it does not need to be repaid.
     
  • Keep it in your account for a few months beforehand. Ideally, you should get the gift money a few months before you apply for your mortgage. Anything beyond 60 days out should work, and you’ll avoid an unusual deposit during the loan process.
     
  • Understand the tax rules around gift money. You won’t have to pay taxes on the money, but depending on how much you’re given, the gift-giver might have to. Make sure they’re aware of these implications before moving forward.

Do you have more questions about financing your home? Get in touch to learn about refinancing, home equity loans and other options. Reach out to a Coulee Bank mortgage lender today for a personalized recommendation.
 

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