Money Management Tips

This blog recently passed over a 1000 views after four months.  Several of these readers apparently are other bloggers writing about similar topics from different angles and also would like to cross-promote their blog.  I get it as long as it shares knowledge, experience and guides people to make plans and execute.  Dave Chen identifies several pain points around debt.  The perspective around debt for me is very simple. All debt is bad,  Ya, sure, they talk about good debt,  like a mortgage, and make the assumption that you have a steady robust job with continuous cash flow.  Tell me how good that debt is when suddenly find yourself between jobs?
Dave Chen  from offers some of his insights on taking steps to eliminate debt.

Post-Grad Money Management Tips
By Dave Chen, founder of Millennial Personal Finance

Everyone, no matter how much money they make, feels money-insecure at times. And the truth is, no matter how much you make, if you don’t have a plan for managing it you’ll never feel ahead of the game. Statistically, college graduates earn more money than high school graduates, but the majority of college graduates also carry a higher debt load on average. This has a lot to do with rising student loan balances. And of course, the farther away from graduation you get the more likely you are to have incurred other significant debt, such as credit card balances and a mortgage. While there are plenty of helpful tools out there, this article will cover tips and strategies for managing your post-graduation finances.

My credit card balances are out of control. Help!
There are enough tips on credit card debt to write entire articles, and even book chapters, on managing your balances. Here, we’ll stick to a few of the most important basic strategies. The best strategy, of course, is to pay off your cards each month and avoid paying interest on the balances. If you find that you’ve accumulated a high balance, then you’ll want to consider various ways to minimize the interest you’re paying until you’re able to pay your balance off completely. All of these strategies are meant to put you on the path towards an excellent credit score.

The easiest first step is to simply call your credit card company and ask them to lower your rate. Tell them you’re thinking of moving your balance to a different card if they don’t lower it. You’d be surprised at how much money you can save as the result of a ten-minute phone call. Companies don’t want to lose your business, and credit card companies know they’re making most of their money off of the customers with high balances. They would rather make a little less money than none at all. However, if they cannot lower your balance, you should strongly consider doing a balance transfer to a card with a lower interest rate. If you don’t have another card you can transfer to, it is worthwhile to shop around for a new card with a special interest rate for balance transfers. Many cards offer special introductory pricing for the first several months following a balance transfer – sometimes as low as 0% APR. Just be aware of what the rate will be after that time, and try to pay off as much as you can during that introductory period. Don’t switch to a card with a higher post-introductory rate unless you’re absolutely sure you can pay off your balance before the rate rises.

Another strategy to deal with credit card debt is to pay it off using a personal loan with a lower interest rate. Or, if you have sufficient equity in your home and quite a lot of credit card debt, you could look into a home equity loan to pay down your cards. Both of these options are a good way to pay down credit card debt, as long as the interest rate you get will be less than what you are currently paying your credit card companies. However, a personal loan might leave you with higher monthly payments because the loan term is likely to be shorter, so make sure you know what your payment will be and that you’ll be able to comfortably afford it.

My student loans are due – now what?
You’ve got a shiny new diploma – and now it’s finally time to start paying for it. Or, perhaps you’re a few years into paying for it, but would like to be paying a little less. There are many ways to manage student loan debt. First, look for options that won’t cost you anything to take advantage of, such as student loan repayment assistance. Some companies now offer tuition reimbursement for their employees. While your company isn’t likely to completely pay your monthly payment, any little bit will help. And if you’re considering a lateral job move in the near future, ask any potential employers whether they offer student loan benefits, and factor that into your consideration of their job offer.

There are other ways to lower your monthly payments and/or pay off your debt faster. Consider the benefits of refinancing and consolidating your student loans. Refinancing can allow you to take advantage of lower interest rates and save you money. And if your monthly payment drops because of a lower interest rate, but if you can afford to pay what you used to pay, then the extra money will go directly toward your principal balance and you’ll be out of debt that much faster.

If your primary goal with your student loans is to lower your monthly payments, look into income-based repayment plans if you’ve got federal loans. Unfortunately, income-based repayment isn’t available for private loans. But for federal borrowers, these programs can cap your monthly payments at either 10% or 15% of your disposable monthly income. Inquire with the servicer of your federal loans to see what programs are available to you.

I’m stuck in a mortgage with a high or variable APR!
Interest rates are good right now, which means if you bought a home when rates were higher it’s a great time to refinance. And if you bought a home with a variable APR, refinancing right now could lock you in at a favorable interest rate for the rest of your loan term. The more lenders you can inquire with the better your chances of finding a great rate, but lender inquiries usually lead to hard hits on your credit report, which can bring your credit score down. The credit bureaus’ algorithms have a mechanism for coping with this. When they see multiple hard inquiries within the span of just a few weeks, they usually realize you’re shopping for a mortgage or other significant loan and treat it as just one hard inquiry.

So the trick to saving your credit score in this situation is to commit to doing your mortgage refinance shopping in a short span of time. Don’t casually shop with different lenders over the course of months. Concentrate your efforts into a couple of weeks’ time-span if possible, and take advantage of services online that will check your score just once and then help you compare multiple lenders.

With a little research and planning, you too will maximize your post-graduation debt – no matter the type or amount!