Best Ways to Fund Spring Home Repairs

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Now that spring has blossomed into full-on allergy mode, the time we spend outside is even more appreciated — especially with the help of a good antihistamine. The next time you venture out, take a moment to do a walk-around inspection of the old homestead. See some room for improvements? Maintaining, repairing and upgrading a home can range in cost from a minor trickle to a major cash drain.

Now that spring has blossomed into full-on allergy mode, the time we spend outside is even more appreciated — especially with the help of a good antihistamine. The next time you venture out, take a moment to do a walk-around inspection of the old homestead. See some room for improvements? Maintaining, repairing and upgrading a home can range in cost from a minor trickle to a major cash drain.

Paying for minor repairs

If you see the need for only modest repairs, you might be able to tackle them within the bounds of your cash flow. But remember, your emergency fund is best left intact for unexpected cash needs, not for replacing a gutter or downspout.

If you have a bit of a cash cushion in your checking account or in a contingency savings account, small home projects can be covered with your close-at-hand liquidity, even if it means a temporary trim to discretionary spending, such as a couple of “family nights out” spent at home.

If the need exceeds the cash

If your home-repair needs are more costly, you might consider turning to your secondary tier of financial resources: a credit card. While average credit card interest rates are in the double digits, you can do a lot better, particularly with introductory rates that can last more than a year.

When it comes to minor improvements or repairs, having that extra spending power available will allow you to fix what’s needed now, while budgeting the repayment over a period of time. It’s best to keep that payback schedule from extending longer than three to six months.

If you need to spread the payments out beyond that, you might protect your credit score — and pay less interest — by considering our next funding alternative.

Raising the roof on expenses

Larger home upgrades or repairs are going to require bigger investments. A new roof, exterior painting, foundation repairs or other projects will protect your home’s value — and can end up costing more the longer you delay. Under these circumstances, a loan often can get you more than your credit card limit will allow, as well as save you money.

A secured loan will offer a better rate than an unsecured loan, while both likely will offer much better long-term interest rates than a credit card. Longer repayment terms will be favorable for these larger projects, too.

Covering the cost of major upgrades

Your strolling inspection — in, around and outside your home — might have revealed a need for a major upgrade. Perhaps the furnace has heaved its last gasp, or the air conditioning is already struggling with the warmer spring weather. Or it might be time to do a bit of renovation to a bath or kitchen that is well past its “best by” date.

In that case, it might be well worth tapping a home equity line of credit, or HELOC. Accessing the value of your home — up to 100% of your existing equity — will allow you even greater financial flexibility. Once approved for an open-ended revolving credit line, you can draw from it at any time, as needed. And you’ll pay interest only on the balance you’ve withdrawn.

Not only are the variable rates very favorable on HELOCs, but the interest paid may be tax-deductible. Your tax advisor can give you details on that. And repayment terms can stretch as long as 15 years, depending on the amount financed.

From a small repair to a major improvement, there are prudent ways to fund whatever spring home project you decide to undertake.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

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A Home Equity Line of Credit from F&M Bank is a smart and flexible way to reach your short and long-term goals.|fa-wrench|589|Special Rate HELOC|1

Building a Credit Score from Scratch

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Young adults starting out on their own often bump into a cold fact of financial life: Having no credit history can limit your options just as much as having bad credit does. Lenders, rental offices and insurance companies use your financial track record to judge how likely you are to pay debts and bills — and if you’re a blank slate, you’re generally considered a risk.

Young adults starting out on their own often bump into a cold fact of financial life: Having no credit history can limit your options just as much as having bad credit does. Lenders, rental offices and insurance companies use your financial track record to judge how likely you are to pay debts and bills — and if you’re a blank slate, you’re generally considered a risk.

Fortunately, there are some simple steps you can take to quickly establish your credit record.

Start with a credit card

One of the quickest ways to develop a positive credit history is with a credit card, which lets you show that you handle small amounts of debt responsibly month after month. Even if you can’t qualify for a card on your own, there are ways to take advantage of this credit-building tool:

• Recruit a co-signer. You might be able to get a card if someone with good credit — such as a parent — is willing to co-sign the application with you. You and your co-signer will be equally responsible for the charges you make, along with any late-payment fees or other penalties if you don’t make payments on time. Also, late or missed payments can damage your credit score and your co-signer’s, too. But every time you make a payment on time, it will shore up your credit history.

• Become an authorized user. Another option is to ask a family member or significant other to add you to their credit account. First, though, make sure their bank reports activity by authorized users to the major credit bureaus — otherwise, this won’t help your credit score. And remember that here, too, your activity with the card can affect someone other than yourself.

Next steps

Once you have a card, your behavior with it will determine how high, and quickly, your credit score rises. To keep moving in the right direction:

• Make on-time payments. The most common credit-scoring model is the FICO score, and it is based on a combination of factors. The biggest, making up 35% of your score, is your payment history. Pay all of your bills (not just your credit card) on time to keep your score rising.

• Keep balances low. Try not to use your card up to or near your credit limit; it looks bad to creditors if your cards are maxed out. A good rule of thumb is to keep your balances at or below 30% of your total credit limit.

• Don’t over-apply for cards. According to a recent NerdWallet study that included an analysis of millennials’ credit scores, many young adults are applying for the wrong credit cards and getting rejected — and that’s hurting their credit, since excessive inquiries can make someone look like a bad credit risk. Apply only for cards you really want, and space out those applications.

• Check your credit reports. You have the right to get a copy of your credit report from each of the three major reporting agencies — Experian, Equifax and TransUnion — once a year for free. Review yours and report any errors that might hurt your score.

It can be easier to build up good credit if you have a professional helping you. Consider consulting with a financial institution to help figure out the best way to establish credit and make other important financial decisions.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

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Ready to start establishing credit today?|fa-cc-visa|171|Visa Credit Cards|1

19 Ways to Save on a Wedding

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First comes love, then comes paying for the wedding. Weddings cost an average of $35,329 nationally — excluding the honeymoon — according to The Knot’s 2016 Real Weddings Study. That’s the highest reported average cost since the survey began in 2006.

First comes love, then comes paying for the wedding.

Weddings cost an average of $35,329 nationally — excluding the honeymoon — according to The Knot’s 2016 Real Weddings Study. That’s the highest reported average cost since the survey began in 2006.

But you’re not obligated to spend that much, and many couples don’t. We asked experts how you can set a reasonable budget and cut costs on some of the most expensive elements of your upcoming nuptials.

The Budget

1. Be realistic

Don’t start your marriage in debt, says Anne Chertoff, a trend expert for WeddingWire. “Most couples don’t anticipate how much a wedding is actually going to cost, so they end up underestimating what they’re going to spend and then going over their budget,” she says. Set realistic spending limits from the beginning that account for all areas of your wedding. If you overspend in one area, cut back in another.

2. Use a credit card —  responsibly

It can be smart to use a credit card for wedding-related purchases — as long as you’re not taking on more debt than you can afford to pay off. Chertoff recommends using accumulated points toward your honeymoon, particularly if you have a card with travel rewards.

The Date

3. Consider a winter wedding

Not all wedding dates are created equal. Find out which are most popular on WeddingWire’s wedding date calendar. If there’s more demand for a given date, you’ll usually pay a higher price for a venue. You could score a discount for choosing a less popular month, such as January or February, Chertoff says.

4. Book a Sunday

Saturday is a popular day for weddings, but it’s also generally the most expensive day to get married. You can likely reserve your venue at a lower price if you hold your wedding on a Sunday, or even a weeknight.

The Guests

5. Put a twist on ‘plus one’ etiquette

Instead of giving all guests older than 18 a “plus one,” limit them to couples you socialize with regularly, says Sharon Naylor, author of dozens of wedding books, including “1,001 Ways to Save Money … and Still Have a Dazzling Wedding.” To avoid awkward questions, explain how you’re determining the guest list.

6. Mix up your invitations

You’ll probably want to mail out traditional invitations, says Stephanie Cain, an editor at The Knot. But you can post wedding weekend itineraries on your wedding website and email save-the-date alerts. That’ll save you the cost of printing and postage.

The Dress

7. Check out a prom shop

Brides aren’t finding dresses at just the bridal shop these days, Naylor says. You can pick up a white dress in the prom or party dress section of any department store. The popularity of colored dresses makes formal gowns a nice substitute, too.

The national average spent on a wedding dress was $1,564 in 2016, according to The Knot’s latest Real Weddings study. A simple Google search for white prom dresses pulls up options that cost a fraction of that.

8. Budget for your accessories

There’s more to your dress budget than the dress. Cain suggests taking extras such as tailoring fees, shoes, jewelry and a clutch into account when setting a spending limit. To save on your veil, Chertoff recommends making it your “something borrowed” and wearing a family member’s.

The Venue

9. Negotiate

Lots of unexpected expenses can pop up during planning, including cake-cutting and corkage fees or power for your DJ and photo booth. Naylor says you don’t have to take them as they are. If a cost seems unreasonable, respectfully request to have it removed.

10. Use the venue’s resources

Some venues provide tables and linens, Cain says. If you opt for a backyard wedding, you’ll have to rent items like these. Always read a venue’s contract in its entirety before signing so you know what is and isn’t included.

And keep an eye out for requirements. You might not want to be obligated to use the venue’s caterer, for instance.

The Decor

11. Communicate with your vendors

Naylor says some floral designers have warehouses with excess inventory they’re willing to give away or lend out for free. Once you’ve placed an order, ask about expanding your options.

12. Borrow from other newlyweds

Ask friends who have recently gotten married if you can borrow centerpieces or other items that they have left over.

13. Scout out decorations at craft stores

Look for wedding decorations — especially light-up decor — in places like craft stores. They have “more than glue guns and glitter,” Naylor says.

The Flowers

14. Stick to in-season blooms

You might have your heart set on pink flowers to accent your bridesmaids’ bouquets, but consider settling for a different shade or variety. Local blooms that are in season at the time of your wedding are generally less expensive. Also, “local flowers tend to look fresher because they didn’t have to travel for days,” Cain says.

15. Get the most out of your flowers

A larger flower, such as a hydrangea, naturally looks fuller and takes up more space with fewer stems, Cain says. And you can repurpose ceremony flowers for the reception, instead of buying more. For instance, use a ceremony arch to adorn your sweetheart table at the reception.

The Menu

16. Go for a shorter cake

The more tiers on your cake, the more it’ll cost you. Cain suggests sticking to two tiers and having sheet cakes to serve. The cake you cut for your pictures doesn’t have to feed all of your guests.

17. Cut down on drink sizes

Arrange for the bartender to serve your signature drinks in smaller glasses. “Most people will go and try the signature drink, take a sip, put it down and go back to their regular drink,” Naylor says. Minimize the cost of your bar tab by opting for shooters.

The Rest

18. Choose a charitable favor

Don’t want to buy a favor for each wedding guest? Make a charitable donation on behalf of all your guests, Chertoff says. That way, you can set the amount you’re comfortable spending, donate to a cause you care about and write off the contribution on your taxes.

19. Limit your photographer’s hours

Save money by shaving off some of the time your photographer and videographer are present, Naylor and Cain suggest. You’ll likely want them there for the ceremony, but you might not need footage of the end-of-reception dancing.

Bottom line, these experts suggest keeping a close eye on your wedding spending. “Anybody — whether they have a $10,000 budget or a $500,000 budget — is still working on a budget,” Cain says.

Devote the biggest parts of your budget to the areas that are most important to you and be willing to compromise on the rest.

The article 19 Ways to Save on a Wedding originally appeared on NerdWallet.

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Do you really need toasters and sheets for wedding gifts? Why not encourage gifts to help you realize the dream of home ownership?|fa-heart|152|New Beginnings Saver|1

Short-Term Saving Tips for Summer Vacation

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With summer drawing closer, your vacation may arrive before you’ve got the money to pay for it. But there are some quick changes you can make now to save or raise money for your trip. Consider these tips:

With summer drawing closer, your vacation may arrive before you’ve financially prepared. But there are some quick changes you can make now to save or raise money for your trip. Consider these tips:

Open a designated savings account

After estimating the overall cost of your vacation, set up a savings account just for the trip. This will help separate that money from your regular savings and make it easier to track progress toward your goal.

Contribute weekly

Look at last month’s account statements from your financial institution to see what you spend in a given week. Then determine how much you can contribute to your vacation fund each week and make that part of your budget. Putting the money away weekly instead of monthly will make this more of a priority in your life.

Track spending with a budgeting app

To pinpoint what’s going out of your account, let a budgeting app be your guide. Many popular apps let you categorize transactions and see overviews of your daily spending in a few taps or clicks.

Create an automatic savings plan

If you still find it difficult to save regularly, set up an automatic transfer from your checking balance to a savings account. This way you can allocate a percentage of your income and remove the temptation to spend money that should be going into vacation savings.

Reduce leisure spending

If vacation is the time to splurge, make the weeks before you go more restrained in your lifestyle. Minimize your trips to coffee shops, restaurants and movie theaters. Instead, brew your own coffee, cook more meals and watch films in your living room.

Get a side job

If you find yourself with extra time in your week, consider taking on a part-time job. See if you can watch any neighbors’ pets or homes while they’re away, or baby-sit. If you’re an avid writer or an academic, look into freelance writing or tutoring. Even a few hours of paid work a week can add up.

Sell unwanted belongings

To raise money more quickly than through a job, go through your home and collect anything you don’t need, from old books to furniture. Then sell your stuff online or in a yard sale.

Preparing for your summer vacation with these seven tactics can help ease the stress of funding all your travel expenses. This way you can stay in control of your finances and have no financial baggage when you return.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

Ready to start saving for summer vacation?

Best Ways to Use a Tax Refund

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Over the past few years, the average federal tax refund has come to about $3,000. That’s not exactly chump change. With the filing deadline approaching, it’s not too early to begin thinking about how you’ll use a refund this year. Here are five pointers to keep in mind.

Over the past few years, the average federal tax refund has come to about $3,000. That's not exactly chump change. With the filing deadline approaching, it's not too early to begin thinking about how you'll use a refund this year. Here are five pointers to keep in mind.

1. Pay down debt

It's not as much fun as booking a trip to the Caribbean, but cutting down the amount of debt you owe is one of the best money moves you can make. Outstanding loan and credit card balances can hurt your credit score, making it more difficult to get the best rates on new borrowing. If you're saddled with credit card debt, consider paying off the balance with the highest interest rate first.

2. Save for retirement

Whether it's a 401(k) plan or an individual retirement account, you'll do yourself a huge favor by starting to save for retirement or ramping up your savings rate. Although putting away 10% of your pre-tax income is a good starting point, you'll eventually want to approach 20%. Compound interest and investment returns help the money in these accounts grow, so you'll thank yourself once you retire.

3. Home improvement

If you're a homeowner, taking care of repairs around the house can be a great long-term investment. Just remember to be strategic when it comes to deciding what to fix. Replacing a garage door or installing a new steel entry door can be among the least expensive improvements, at less than $2,000 each on average. But they can provide some of the best returns on the dollar in terms of the market value they add to your home, according to Remodeling Magazine.

4. Save for emergencies

Because it's best to leave money in retirement accounts alone so it can grow over the years, it's important to build a rainy day fund. This should consist of three to six months of living expenses, and the money should be readily accessible. You might be forced to use these funds when you least expect it, to handle medical emergencies or a broken down car that needs immediate repairs. A tax refund probably won't cover half a year's living expenses, so continuing to add to your emergency fund will help you hit your savings goal.

5. Focus on needs

As tempting as it may be to splurge on a new television, you'll probably end up regretting using your refund for anything that lacks long-term value. That includes vacations, shopping sprees and decadent nights out on the town.

If you consistently receive substantial refunds but never put them to good use, consider asking your employer to adjust what's withheld from your pay. That way, you'll avoid giving the government too much money and can use it to cover more pressing needs.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

Planning on using your tax return to save for retirement or emergencies?

Smart Money: Best Moves for 20-Something Investors

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When it comes to investing early in life, you likely have two things on your side: time and flexibility. Although a 2015 survey found that most millennials don’t think they’ll have enough money saved for retirement, investing is one way to help build wealth for the future. Here are some of the best investments you can make in your 20s.

When it comes to investing early in life, you likely have two things on your side: time and flexibility. Although a 2015 survey found that most millennials don't think they'll have enough money saved for retirement, investing is one way to help build wealth for the future. Here are some of the best investments you can make in your 20s.

Real estate

If you have enough money set aside for a down payment, consider buying a home with rentable space, so you can live in one section and rent out the rest. Any rent you receive can help cover the mortgage and other expenses; the tax benefits of homeownership are substantial, and the home's value will likely rise over time.

However, owning property comes with added costs, such as insurance, taxes and maintenance, while related income can drop if rental space goes unoccupied. There's also the risk that property values might decline or rise only slowly, and if you wind up with an unruly tenant, evictions can be time-consuming and expensive. Unlike selling stocks or investment funds, you might find it harder to sell a home, should that become necessary. Property ownership generally should be regarded as a long-term investment.

401(k) plans

If your employer offers a 401(k) plan, it's a good idea to participate and see whether a Roth option is available. If it is, you can designate some or all of your contributions for a Roth 401(k), which means you forgo an immediate tax benefit, but withdrawals, including any investment gains, are generally tax-free. Younger investors are often in a better position to invest in riskier vehicles such as stocks as part of their retirement accounts, because they have more time to recoup any losses they may suffer.

Index funds, or funds that track the index of a specific financial market, are typically an easy-to-manage way for investing in the stock market. From 2005 to 2015, for example, the Standard & Poor's 500 Index of U.S. stocks grew an average of roughly 8% per year. While past performance doesn't indicate future returns, $5,000 invested in an S&P 500 index fund that gains 8% annually, with $60 a month added to the investment, would produce a nest egg of about $200,000 in 35 years.

Of course, there are other alternatives such as investing in individual stocks or commodity funds. As you get closer to retirement, it's smarter to take a less-risky approach by shifting money to more conservative investments such as government bonds. (Some brokers offer mutual funds that will do the rebalancing for you, investing heavily in stocks when you're younger and moving the money more toward bonds as you approach retirement age.)

Roth IRA

If you don't have a Roth 401(k) option, then a Roth IRA can be another way to accumulate tax-free wealth. These come with a contribution limit of $5,500 annually, along with other income-based restrictions. These funds can be invested similarly to a 401(k).

Keep in mind that investing retirement funds can expose you to the risk of losses. If you prefer the lowest possible risk, certificates of deposit offered by banks and similar savings certificates available from credit unions are generally insured for up to $250,000 but deliver relatively low returns.

As you decide how to invest your money, remember that starting now can make a big difference in determining the amount of money you'll end up with later on, as a retirement calculator will indicate. Assess what investments make sense for you based on the money you have and the risk you're willing to take to give your financial future a good boost.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

It's never too early to start planning for the future!

7 Tips to Prevent Tax ID Fraud

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As Americans begin the process of filing tax returns, identity thieves are scheming to get their hands on that money. Tax identity theft has been the most common form of identity theft reported to the Federal Trade Commission for the past five years. Identity thieves look for every opportunity to steal your information, especially during tax season. Consumers should be on high alert and take every step they can to protect their personal and financial information.

Tax identity fraud takes place when a criminal files a false tax return using a stolen Social Security number in order to fraudulently claim the refund. Identity thieves generally file false claims early in the year and victims are unaware until they file a return and learn one has already been filed in their name.

To help consumers prevent tax ID fraud, F&M Bank is offering the following tips:

1) File early. File your tax return as soon as you’re able giving criminals less time to use your information to file a false return.

2) File on a protected wi-fi network. If you’re using an online service to file your return, be sure you’re connected to a password-protected personal network. Avoid using public networks like a wi-fi hotspot at a coffee shop.

3) Use a secure mailbox. If you’re filing by mail, drop your tax return at the post office or an official postal box instead of your mailbox at home. Some criminals look for completed tax return forms in home mailboxes during tax season.

4) Find a tax preparer you trust. If you’re planning to hire someone to do your taxes, get recommendations and research a tax preparer thoroughly before handing over all of your financial information.

5) Shred what you don’t need. Once you’ve completed your tax return, shred the sensitive documents that you no longer need and safely file away the ones you do.

6) Beware of phishing scams by email, text or phone. Scammers may try to solicit sensitive information by impersonating the IRS. Know that the IRS will not contact you by email, text or social media. If the IRS needs information, they will contact you by mail first.

7) Keep an eye out for missing mail. Fraudsters look for W-2s, tax refunds or other mail containing your financial information. If you don’t receive your W-2s, and your employer indicates they’ve been mailed, or it looks like it has been previously opened upon delivery, contact the IRS immediately.

If you believe you’re a victim of tax identity theft or if the IRS denies your tax return because one has previously been filed under your name, alert the IRS Identity Protection Specialized Unit at 1-800-908-4490. In addition, you should:

• Respond immediately to any IRS notice and complete IRS Form 14039, Identity Theft Affidavit.

• Contact your bank immediately, and close any accounts opened without your permission or tampered with.

• Contact the three major credit bureaus to place a ‘fraud alert’ on your credit records:

Equifax, www.Equifax.com, 1-800-525-6285

Experian, www.Experian.com, 1-888-397-3742

TransUnion, www.TransUnion.com, 1-800-680-7289

• Continue to pay your taxes and file your tax return, even if you must do so by paper.

More information about tax identity theft is available from the FTC at ftc.gov/taxidtheft and the IRS at irs.gov/identitytheft.

 

Protect Yourself Against a Sweetheart Scam

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As we prepare for Valentine’s Day, we would like to take the opportunity to share a new trend in fraud – the Sweetheart Scam. Unfortunately, this fraud is often not reported due to embarrassment by the victim. The persons perpetrating the fraud are professional cons and are very good at manipulating their victims, often receiving $10,000 plus before the scam is stopped. 

The bank has noticed an upswing in this type of fraud and would like to help educate our customers as to how this occurs, and what you can do to protect yourself or a loved one from such a scam. 

Definition:

Wikipedia describes this as “a Romance Scam – a confidence trick involving feigned romantic intentions towards a victim, gaining their affection, and then using that goodwill to commit fraud. Fraudulent acts may involve access to the victims' money, bank accounts, credit cards, passports, e-mail accounts, or national identification numbers or by getting the victims to commit financial fraud on their behalf”.

How it works: Stolen Images

Scammers post profiles, using stolen photographs of attractive people, asking for others to contact them. This is often known as catfishing.  Letters (& emails or instant messages) are exchanged between the scammer and victim until the scammer feels they have groomed the victim enough to ask for money. This might be requests for gas money, bus and airplane tickets to travel to visit the victim, medical expenses, education expenses, etc. There is usually the promise that the fictitious character will one day join the victim in the victim's country. The scam usually ends when the victim realizes they are being scammed or stops sending money. Victims can be highly traumatized by this and are often very embarrassed and ashamed when they learn they have become a victim of a scam and that the romance was a farce.

Steps to take to protect yourself:

Run image searches of profile photos at images.google.com or TinEye.com to see if the image of the person that you are connecting with belongs to multiple profiles across the internet. Keep in mind that in an effort to entice women, scammers often use photos of men in the military, while attractive young women, particularly models and adult-film personalities, are used to attract men.

Never share your online banking credentials, including passwords. Especially beware of scammers who want to send you money by making a deposit through mobile banking – often submitting a fraudulent check and then asking you to forward the funds via wire transfer or through a purchased gift card to assist with medical bills. By the time the check is returned as fraud and deducted from your account, the funds that have been sent are unable to be retrieved.

If you encounter a scammer, immediately report the user to the dating service that you may be using and the FBI's Internet Crime Complaint Center.

Sources – Wikipedia, AARP and FBI Internet Crime Complaint Center

9 Tips for Paying Off Your Credit Card Debt

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Buried in credit card debt? You’re not alone. According to NerdWallet, in 2015 the average U.S. household with debt had $15,762 in credit card debt at an average 18% interest rate. Here are nine tips on how to climb out.

Buried in credit card debt? You’re not alone. According to NerdWallet, in 2015 the average U.S. household with debt had $15,762 in credit card debt at an average 18% interest rate. Annual interest alone was $2,630, or more than $50 a week.

Here are nine tips on how to climb out. Remember, though, there are no magical solutions.

Stop spending more than you make

Tell yourself the truth. Analyze your bills to see where your money is going. Car payments, rent or mortgage, groceries and utilities are essentials; nearly everything else is subject to elimination or reduction. And don’t forget those $100 withdrawals from the ATM. Create a realistic budget and declare allegiance to it. Concentrate on the little things; just knocking off a $4 latte on the way to work can save $80 a month.

Keep paying on the cards

Failing to pay every month on every card just makes matters worse: The interest goes up and the debt goes up.  Always pay at least the minimum listed on the bill.  Not doing so may ruin your credit rating, making it harder to borrow money for essentials, such as a car, in the future.

Concentrate on paying off your smallest debt

The typical American has about four credit cards, so try pounding away at the one with the least debt. After you pay it in full, stop using it and apply the monthly payment to the next smallest bill. This “snowball effect” is a slow cure but leaves you with a feeling of accomplishment. This method, however, may cost you more in the long run, so read on.

Pay off the card with the highest interest

Pretty basic math here. Eliminating debt that costs you 28% is better than killing debt that costs you 18%. Try throwing your entire income tax refund or last month’s overtime pay at this bill. Then move on to the account with the next-highest interest rate.

Consolidate onto a lower-interest card

This can save you a ton in interest, especially if you eliminate all your other cards. Cards are available that will charge you 0% interest on the debt you have transferred.  However, this rate goes up after a specified time, usually 12 to 18 months. In addition, the issuer usually charges a fee — 3% is typical — on the transferred debt. Still, this can be a great deal if you can substantially reduce your debt in a relatively short time.

Take out a personal loan

Many lenders, including credit unions and banks, offer unsecured personal loans, meaning you don’t have to use your home or car as collateral. However, everything depends on your credit score. Below 620, interest rates will be high, although perhaps still below the rates on the credit cards it will be replacing. It’s worth shopping for.

Try a home equity loan

This loan, tapping the difference between the sale value of your home and money you still owe on it, also is based on your credit rating, as are home equity lines of credit. In addition, you could lose your home if you default. Consider with caution.

Cut a deal with the credit card company

This might be a long shot, but if you have a good credit history with the company and clearly have just fallen on hard times, it might negotiate with you on a lower interest rate. Like any other company, it wants to retain good customers.

Declare bankruptcy

This is the nuclear option. Yes, Chapter 7 bankruptcy will eliminate all your credit card debt and leave your home protected from repossession. However, it will be nearly impossible to get a mortgage for five years, and the filing will haunt you for up to a decade if you hope to finance anything at a reasonable rate.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved.

Ready to start eliminating credit card debt?

 

How to Get out of Debt in the New Year

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A brand new year often inspires positive life changes such as breaking free of debt. If collections calls have been interrupting your dinner or you’re just stressed out from heavy-duty debt, here’s how to eliminate the burden.

Determine where you stand

In order to solve a problem, you need to fully understand it. Assess your situation by listing all your debts, including balance owed, interest rate and minimum payment required for each. Next, order your free credit reports to make sure you haven’t forgotten any debt or overlooked errors. Finally, compare your income and expenses and calculate how much you can realistically use toward debt reduction each month.

Don’t make things worse

The last thing you need is anything that increases your debt. Commit to not taking out any new loans or credit lines and, if possible, avoid incurring and charging additional expenses on existing accounts.

Take time for triage

You’ll save more in the long run by paying off debts with the highest interest rates first. This category usually includes consumer debt such as credit cards, personal or payday loans, and medical bills. Other types of debt, such as mortgages, car loans and student loans, typically have lower rates, making it more affordable to pay them off over a longer period. Throw as much money as you can each month at your highest-interest debt while still making timely, smaller payments on everything else. Then focus on paying down the next higher-interest loan.

Consider consolidation

When multiple debts are out of control, debt consolidation can be a lifeline. This refinancing process streamlines debts into a single monthly bill, often with lower interest and a smaller overall monthly outlay. This may help eliminate debt faster and less expensively. Home equity financing, personal loans and zero-interest balance transfer credit cards may provide effective options.

Improve cash flow

Even the best debt-reduction plans are useless without having enough money. Do the following to improve your cash flow:

• Bring bag lunches to work and eat fewer restaurant meals.
• Try free and inexpensive entertainment including parks, beaches and hiking trails, as well as local theater, concerts and sporting events.
• Sell unwanted items online or at yard sales.
• Take on additional part-time employment, ask for extra hours at work or turn hobbies into income.
• Make sure you’re getting the lowest prices for phone, internet, insurance and other consumer goods/services.

Set the odds in your favor

Why work hard to pay off debt just to end up in the same boat next year? These approaches can help ensure lasting success in curbing expenses and avoid building up debt:

• Create a budget to keep future spending within your means.
• Continue to reduce unnecessary expenses.
• Commit to saving regularly, even if you can spare only a small amount each month, to protect against being thrown back into debt by unexpected events.
• Once credit cards are paid off, keep future balances low and try to pay them in full each month.
• Treat yourself to inexpensive rewards such as a new CD or ice cream to celebrate each important debt-reduction milestone.

Eliminating debt can bring dramatic changes over the coming year. In return, you’ll enjoy improved financial health, stress relief and the freedom to spend your paycheck on what really matters instead of having it siphoned away by past obligations.

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