Beating the cycle of DebtThursday, 10 April 2008 | AdministratorGas prices rising, talk of a recession, mortgage crisis, layoffs, cut backs and americans in debt. Sounds bad doesn't it, well it is worse than you think.Recent statistics show that americans are... + Full Story
Creating a Family BudgetThursday, 17 April 2008 | AdministratorFor some, the idea of a budget is often a blur. It is frustrating to see how hard it is to do a budget and realizing that with one wrong purchase, you can actually ruin the entire thing. And... + Full Story
If you receive a windfall of cash (such as a tax refund or collection of a debt from a friend), you may face a common dilemma: Invest, pay off debt, or spend. (Spending is not considered as an option here.) If better personal budgeting has helped you save an additional amount every month, a debt repayment plan may be preferable to saving until most of the debt is gone.
Generally, paying off or paying down a debt that has a higher interest rate is preferable to making an investment that earns a lower interest rate or rate of return. To make a fair comparison, you need to calculate the after-tax interest rate on your debt and investments. If your investment is not held in an interest-earning account (such as a money market or savings account, CD, or money market mutual fund), calculate the investment's after-tax return.
If you are paying off a credit card or auto loan, you can use the APR as the effective interest rate if available, or use the stated interest rate for sake of simplicity. If you are paying off a mortgage, home equity loan, or student loan, start by subtracting your income tax bracket from 1.0.
For example, if you are in the 25% tax bracket for 2004, you would have 0.75 (1.0-0.25). Then, multiply 0.75 by the loan interest rate. The result is your after-tax interest rate on tax-deductible debt. If you have a mortgage loan of 8% and are in the 25% tax bracket, your after-tax interest rate is 6%.
If you plan to invest in a stock, bond, or mutual fund that invests in any of these types of securities, you should have an idea of the investment's expected return. For example, if you invest in a mutual fund that earns an annual rate of return of 10%, you may decide to use that return as your expected return. Use the same calculation rule to calculate the after-tax return on investment (which is based on expected return).
You should calculate the after-tax interest rate or return for investments held in taxable accounts. For example, if a taxable investment earns a 10% return and you are in the 25% tax bracket, your after-tax return is 7.5% [(1.0-0.25)*.10]. (Investments in tax-advantaged accounts are not taxed until you begin to take money out, which generally occurs after you retire. If using a tax-advantaged account, the interest rate earned on the account is equal to the after-tax rate to keep things simpler.) In most cases, the APR on your credit card debt or an auto loan is higher than the after-tax interest rate or after-tax return on an investment. These types of consumer debt—particularly credit card debt, since it is unsecured credit are among the most expensive. As a result, paying off a credit card is almost always a better deal than investing. While some investors use their credit cards to raise funds for speculative investing, this kind of leveraging is an extremely risky practice and should be avoided.
Paying off debt is sometimes a painful experience. Not only do you miss a chance to spend, you also pass opportunities to save or invest. However, if you've improved your budgeting efforts and have been able to save extra money, you will improve your personal cash flow further by paying off high-interest debt. The basic relationship pay off debt that has a higher interest rate than what you earn on your investments is a practical step in the right direction.
The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.
Knowing the foreclosure process could be the deciding factor in keeping your home. Here we outline the basic foreclosure process, but knowing your local and state foreclosure laws are very important for homeowners facing foreclosure.
Recent studies have shown that people sink into emotional and mental health problems in times of recession. When a person is about to lose his or her home, foreclosure depression, migraines, stomach pains, and stress are sure to follow. In fact, the number of people who are committing suicide has steadily risen over the past few months after the housing market went bust.
Negotiating new mortgage terms when faced with foreclosure is called loan modification. Loan modification allows homeowners one shot at getting a mortgage that fits their current financial situation.
When facing foreclosure you have a few options, from short sale to loan modification. If you choose loan modification then it is best you seek help from a qualified loan modification company or attorney.
Nationwide news channels are filled with reports on the Obama stimulus plan and focused mostly on the 75 billion allocated by Obama's administration for Mortgage Relief. Obama's plan focuses on keeping up to 9 million people from foreclosure. Helping these homeowners avoid foreclosure is vital to stabilizing home prices and ultimately the economy.
It is not the end of the world when you receive a notice of foreclosure from your lender. Although it would have been a lot better if you already contacted your bank or applied for loan modification even before you were served such a notice, there are still things you can do, such as apply for foreclosure refinance, in order to avert losing your property or home.
Facing home foreclosure does not have to end in losing your home. Loan modification by a loan modification can stop foreclosure and arm you with the tools to fight foreclosure.
Loan modification can save your home from being foreclosed by the bank or lender. Here, you can request that the interest rate on your loan be changed into one that is more affordable to you or you can also petition to extend the term of your mortgage. In some loan modification programs, you can even apply for a change in the balance of your loan's principal.
Due to the financial crisis that is gripping the country, millions of families have already lost their homes to foreclosures. Even if you are struggling to keep your home loan payments, you do not have to be one of the people whose homes have been foreclosed. With mortgage modification, there is still a way for you to save your property and spare your children and family from experiencing eviction and being rooted out of the neighborhood that they have grown to love and care.
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