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        • A detailed look into my January 2019 budget. Don't just blindly follow a budget. Understand the reasons behind your financial choices, and look at what your budget is telling you.

          January 2019 Budget Recap

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          When thinking about your WHY, it should be something so important that it lights a fire under you. Your level of passion and dedication to your WHY should leave you feeling emotional.

          How to Close Out Your Budget Every Month

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        • My hope through this blog post, I can show you that MLM can be a legitimate source of supplemental income that has its perks over a more “traditional” career or your average side hustle.

          How MLM Has Changed My Life for the Better & How It Could for You Too

          Living on a budget is great. Unless, of course, it’s not. Because sometimes even living within your budget calls for more money than you’re bringing in.

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          12 Months = 12 Savings Challenges

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        • Does it feel like you just can’t get ahead when it comes to money? Even now that you’re earning more, there still seems to be nothing left over to help you get out of debt or save for the future? Your finances may be the victim of lifestyle inflation.

          Lifestyle Inflation: Getting What You Deserve

          A realistic view into my $400 per month meal plan! Get every recipe that I used in my January meal plan, my grocery lists, costs, and so much more! Read about how I am utilizing my Instant Pot to save time and money!

          January 2019 Budget Monthly Meal Plan

          Are you looking for ways to save money on your grocery budget? Try completing the Freezer Challenge, and start eating what you already have at home.

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          Should You Consolidate Your Debt?

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        • When thinking about your WHY, it should be something so important that it lights a fire under you. Your level of passion and dedication to your WHY should leave you feeling emotional.

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          Being in debt while you are still working can be a nagging problem and even prevent you from saving for retirement. But carrying that debt into retirement can also be dangerous, and in some cases, even more so. When you are in retirement, you are working with a fixed income. The simple truth is, you can't afford to have a majority of your income eaten up by debt payments. To get the most out of your retirement, you need to make sure you have as much money as possible to fund the lifestyle you desire. Here are three types of debt you should work on eliminating before you retire. Read: How To Save For Retirement When You Are Self-Employed UNSECURED DEBT If you are living with a fixed retirement income, you might not be able to afford to make the extra payments on the money owed. If you are spending years in repayment, much of your fixed-income ends up going to high interest payments. Credit card debt can not only wreck your credit score, but it's also costly to pay off. For example, if you have a credit card with a $5,000 balance with 18% interest, it will take you roughly 84 months to pay it off. Not only that, but you will pay close to $4,320 in interest over that period. HOW TO PAY IT OFF It's best to come up with a plan to eliminate unsecured debt during your working years. An easy approach to paying off credit card debt is to list out your present debts, figure out which cards charge the most interest and pay those off first before moving on to the ones with less interest. Here is a list of articles that will help you come up with a plan to pay off credit card debt: Pay off Debt With the Debt Snowball Method How to Pay Down Debt Using the Avalanche Method How to Create a Plan to Pay Off Debt Taking advantage of balance transfers to eliminate debt faster might also be an option. You can transfer your total balance to a card with a lower interest rate than what you are currently paying to save time and money on interest payments. Read: Saving Money When You Have Debt – What You Need to Know STUDENT LOAN DEBT Student loans are often viewed as a "younger-aged" problem, but the truth is, more and more older Americans are finding themselves on the hook for educational loans. Not only is this debt they took out for themselves, but the major problem is when parents take out loans for their children's education. The process of being accepted for a Parent PLUS loan is minimal. There is only a basic credit check and no underwriting to determine whether the borrower has the income or ability to repay the loans. With emotions involved, it's easy to take on more than you can handle. You may not realize it, but in retirement, even a small amount can prove difficult to repay. Funding your child's education can be an emotional topic. I would love to help my son attend college without feeling financially stressed, but I won't sacrifice my own retirement to do so. Instead, I took another approach and started planning and saving early for his educational costs. Two weeks after my son was born, I opened a UTMA account. Throughout the year, I save my leftover change from my cash spending and invest it in his UTMA at the end of the year. I will save what I can during my working years, and I will help him as much as I can financially, but only to a limit that I can honestly afford. The truth is, helping my son pay for his education is important to me, but he also has more time than me to pay off his student loans. When I am a senior living on a fixed income, I will not be able to generate more money to repay these debts, and I can't replace the retirement savings that I take out for repayment. HOW TO PAY IT OFF When you are in a financial bind, there are different ways to you can repay your student loan debts that make it a little easier on your budget. For example, if you only have Direct Loans, there are Income-Driven repayment plans that allow you to make a monthly payments that is based on your income and family size. If you decide to use one of these options, you have to keep in mind that it will extend the period of time for your loan repayment. I recommend using these options if you are in a financial hard spot, but to make your time on these plan limited. If you can, I recommend sticking to the Standard Repayment Plan, which will pay of your student loans in the shortest amount of time while saving you the most money on interest. Read: Should You Consolidate Your Student Loans? MORTGAGE DEBT Many people who own homes or property take out 30-year mortgages in their early 30s and manage to pay off their loans by the time they retire. But what happens when you buy a home or property later in life? If you end up carrying mortgage debt into retirement, that will make what's already your greatest monthly expenses even more burdensome. Just like with people, the older a home becomes, the more money it costs to keep them "healthy." Dealing with a mortgage payment and the upkeeping costs of owning an older home during retirement can cause substantial income restrictions. If you work on getting rid of your mortgage payment before retirement, that's one significant bill you don't have to worry about. If you can pay off your mortgage before retirement, you can significantly decrease your housing costs, eliminate your biggest expense, and you can make your savings last much longer. If you can, try buying a home on the low-end of what you can afford and avoid refinancing your home, which usually extends your repayment period. HOW TO PAY IT OFF One way to tackle your mortgage debt is by making extra payments to your loan. Think of it this way, the more extra payments you make on your mortgage, the more each one of your regular payments goes straight to the principal balance. Try making an extra house payment every quarter or dividing your mortgage payment by 12 and add that amount to each monthly mortgage payment that you make. Just a word of caution. If you are thinking about making extra mortgage payments, make sure you talk to your mortgage company because they might charge prepayment penalties. When completing an extra mortgage payment, make sure it's getting applied to the principal balance of your loan and not next month's payment. It's critical to take steps to ensure you have an effective debt management strategy in place and to take early action steps to eliminate debt before you retire.

          3 Debts You Should Eliminate Before Retirement

8 Simple Steps to Avoid Credit Card Problems

June 11, 2018
Credit Cards

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Here are eight things you need to know about credit cards to keep yourself protected. Credit card debt can become a problem, make sure you make the best decisions by following these simple tips!

This is article one of Part Two of the “Conquering Debt Series.” Read Part One here.

As a rule of thumb, credit card should be considered low-priority debt. However, you may find that credit card obligations are your biggest worry due to collection calls, high interest rates, or unmanageable minimum payments.

You are not alone. The average credit card debt of all American households in 2017 was $15,983 according to Nerwallet.
Contrary to what people might believe, massive credit card bills are not mostly due to irresponsible overspending. Many people end up using credit cards to meet pressing family needs after losing a job or due to emergencies. Others find themselves in credit card debt due to snowballing finance charges, late payment penalties, or other high fees.

I know just how enticing credit cards can be. In 2011, I racked up over $21,000 in credit card debt and spent the next four years paying them off. Some credit cards may promise you exclusive benefits, such as a low rate or no annual fee. In some cases, the lender will lure you with frequent flyer miles, cash back, reward points, or freebies.

In today’s society, it can be hard to get by without a credit card. You may need one to travel, for buying things over the internet or to purchase items over the phone. There are times where I think using credit cards can be beneficial, but if you are concerned about getting into too much debt, there are other types of payment for these purposes, such as debit cards or prepaid cards. Just make sure to watch out for overdraft and additional fees.

Shopping around for credit cards can also be hard. Lenders hype low introductory or “teaser” rates, but then downplay the expensive fees, high post-teaser rates, and other traps that come with the card.

Here are some steps you can use to make sure you don’t get into trouble with credit cards.

  • Read: Want a Rewards Credit Card? Here’s What to Look For.

DON’T ACCEPT TOO MANY OFFERS

There is never a good reason to carry more than one or two credit cards. You should be very selective about which credit card(s) you choose based on what’s right for you.

Owning too many credit cards can lead to bad money decisions and unmanageable debts. Save yourself from the temptation of spending, and don’t accept more offers than you need to.

Having too many credit cards can lower your credit score.Click To Tweet

BEWARE OF SUBPRIME CREDIT CARDS

If you have bad credit, most lenders will turn you down. But some lenders will offer you subprime credit cards. These cards usually come with extraordinarily high interest rates, expensive fees, and low credit limits.
They sometimes throw in unnecessary products such as “credit protection.”

It’s best to avoid any credit cards that advertise as helping with “bad credit.” Not only do they cost you a fortune, but they could end up making your credit history even worse. An example of this type of card is called the “Fee-harvester” credit card, which comes with extremely high fees and low credit limits when the account is opened.

The Credit CARD Act (Credit Card Accountability, Responsibility, and Disclosures) bans abuse by credit card companies. It restricts fees to 25% of the credit limit (which is still really high), but creditors are trying to open a loophole by charging fees BEFORE the account is opened.

Word of Advice. Avoid these credit cards.

  • Read: Balance Transfers – How I Paid Off $7,500 In Credit Card Debt

LOOK CAREFULLY AT THE INTEREST RATE AND KNOW THAT IT CAN CHANGE

It’s critical to know the interest rate on the credit card you want and try to find the lowest rate possible. Did you know that credit card lenders usually have several interest rates for a credit card? They also regularly change their rates, but the Credit CARD Act limits these rate increases (with a few exceptions) to new transactions.

Here are some important terms you should know!

  • APR: This is the interest rate expressed as the annual figure. Most credit cards have different rates for purchases versus cash advances versus balance transfers and other types of transactions.
  • Variable Rates: This is the rate that most credit cards use. I won’t go into the boring details of how the rate is calculated. I want you to know that if the credit card has a variable rate, it means that it can change at any time. Just because you signed up for a low interest rate, doesn’t mean it will stay that way.
  • “Teaser” Rates: These interest rates are an artificially low interest rate that only lasts for a certain amount of time. Federal law requires that these rates last six months. After that, it goes up. That means if you end up charging up a balance while the teaser rate is still in effect, you’ll be repaying the debt at a much higher post-teaser rate.
  • Penalty Rate: In the excellent print of your credit card contract you will see that your interest rate increases if you make a late payment or go over your credit limit. The Credit CARD Act doesn’t allow lenders from imposing the rate on your existing balance unless you are over sixty days late. The new higher rate will still apply to new purchases and cash advances.

FEES, FEES, FEES

There are a ton of fees that may be associated with a credit card. Some of these fees include late fees, over-the-limit fees, annual fees, membership fees, cash advance fees, balance transfer fees, foreign currency fees, and many more.

These fees make the cost of your credit card substantially higher so that the card that appears cheaper with a low APR could end up being much more costly than you thought.

Don’t just look at the interest rate.

  • Read: 4 Things You Need to Do Immediately If You Want to Pay off Debt

UNDERSTAND THE GRACE PERIOD

There is usually a certain amount of time in which you can pay off purchases without incurring finance charges, which is known as the grace period. If there is no grace period, finance charges start accruing immediately, and a low rate may be higher than it looks.

You need to be paying off the balance in full every month, which means having a grace period is essential. Lenders have to mail your credit card statement at least twenty-one days before the end of the grace period. The more extended the grace period, the better!

DON’T FALL VICTIM TO BAIT OR SWITCH OFFERS

I bet you have received at least one credit card offer in the mail before. Some credit card lenders will send you a desirable offer ( a low-interest card with a high limit) but include in the fine print that they can substitute a less attractive, more expensive card if you don’t qualify for the advertised one.

COMPARE THE DISCLOSURE BOX IN THE CREDIT CARD OFFER TO WHEN YOUR ACCOUNT IS OPENED

You can find disclosures about the terms of a credit card offer in a little box, usually on the reverse side of (or accompanying) the credit application. Inspect this carefully. You should always make a copy if you can.

When you get your new credit card, you will receive a second disclosure in the form of a box. Take this box and compare it with the first box in the credit card offer. You might find that the terms of the offer have changed, usually the APR.

  • Read: 7 Steps to Coping With a Bad Credit Report

IF YOU ACCEPT & RECEIVE A NEW CREDIT CARD & DISCOVER TERMS YOU DON’T LIKE: CANCEL IT!

You don’t need to keep a credit card if you don’t like the terms they sent you. If the lender changes the terms for your card, you have the right under the Credit CARD Act to reject the changes and to close your account. If you have used the card, you will need to pay off the balance before closing or canceling.

When it comes to credit cards, the interest rate is not the only important factor to consider. There is a lot to investigate and learn before accepting a new card.

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kumiko Ehrmantraut

kumiko Ehrmantraut

A little about me: I love helping women take charge of their financial lives. As an Accredited Financial Counselor, I love teaching about money management and realistic budgeting. Away from the computer, you can usually find me behind a camera lens or coloring with my 4-year-old son.Want to share your financial journey with me? Tag @thebudgetmom on Instagram or give me a shout-out on Facebook. I WANNA SEE IT!
kumiko Ehrmantraut
kumiko Ehrmantraut

kumiko Ehrmantraut

kumiko Ehrmantraut

Latest posts by kumiko Ehrmantraut (see all)

  • Lifestyle Inflation: Getting What You Deserve - February 15, 2019

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Here are eight things you need to know about credit cards to keep yourself protected. Credit card debt can become a problem, make sure you make the best decisions by following these simple tips! DEBT | CREDIT CARDS | #credit #personalfinance #creditcard #money #budget
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Filed Under: Credit Cards, DEBT & CREDIT Tagged With: CONQUERING DEBT SERIES, CREDIT CARDS, GET OUT OF DEBT

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  1. 6 Types of Credit Cards You Need to Avoid | The Budget Mom says:
    June 20, 2018 at 5:22 am

    […] 8 Simple Steps to Avoid Credit Card Problems […]

About Kumiko Ehrmantraut

Hello, I'm Kumiko, but everyone just calls me Miko. Welcome to my blog, The Budget Mom. I am an Accredited Financial Counselor® , and mom to a rambunctious 5-year-old boy. Come along with me as I strive to live a life I love on a budget that I can afford. Read more about me.

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