How to Pay Off Debt

December 12, 2019 by  
Filed under Debt


If you’re in debt, you’re not alone, the average American struggles with debt. From student loans to multiple credit cards, debt is a huge part of most lives. Knowing you’re not alone in debt might make you feel a little better, but it doesn’t make it okay. Debt can keep you from doing and accomplishing all you want in life, but it doesn’t have to be that way. To help you feel less overwhelmed with your debt, we’ve got the details on how to pay off debt right here.

Debt can be so overwhelming, and it can hold you back from moving, getting a car, starting a family, experiencing travel, or even just maintaining your necessary living expenses. If you’re already in debt, beating yourself up over it is useless. Instead, it’s time to understand debt and learn what to avoid and what to incorporate in your life so you can master how to pay off debt. A debt-free future is closer than you think.

What Is Debt?

Debt is any money you owe to someone else, but when you take a deeper look at it, it’s a little more complex than that. For example, even though electricity or utility bills are amounts of money you owe to someone else, they’re considered as monthly expenses, not debt. Other examples of monthly expenses are water bills, insurance, taxes, groceries, rent, childcare costs, and mortgages payments. While these expenses aren't considered debt, if you pay these bills with credit cards, then they become debt.

To make tackling debt as easy as possible, here’s what can be considered as a debt:

EXAMPLES OF DEBT

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  • Car loans
  • Student/school loans
  • Home equity loans
  • Medical debt
  • Credit cards
  • Payday loans
  • Personal loans
  • IRS and government debt 

Debt can be a huge burden that holds you back from succeeding in life, and while it's easy to develop debt, tackling it is a lot more challenging—especially if you don’t know how to pay off debt. But, with the right information, the challenge of tackling debt becomes a lot easier to handle.

Common Mistakes to Avoid

While it’s best to avoid getting stuck in a hole of debt from the start, sometimes that’s just not possible. Once you already have a debt to deal with, understanding how to pay off debt means avoiding certain mistakes.

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DEBT SETTLEMENT

DEBT CONSOLIDATION

NOT KEEPING A BACKUP FUND 

HOME EQUITY LOANS

401K LOANS 

How to Pay Off Debt the Smart Way

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While it can be discouraging to hear that so many quick solutions to debt aren’t actually solutions at all, don’t worry! Paying off debt is completely possible. Here's how:

CREATE A BUDGET

If you’re dealing with debt, chances are you’re spending more money than you make, or you have in the recent past. To keep this from continuing and getting worse, it’s essential to create a budget. List your monthly income and expenses. Then, take a hard look at the expenses and cut costs wherever you can.

For example, If you’ve got a monthly expense of drinks from your local coffee shops, switch to making coffee at home. While this might just be a minor change in your lifestyle, it can have a big impact. Small expenses add up! Without creating a budget and sticking to it, you’ll only end up further in debt.

ORGANIZE YOUR DEBT

Before you can really get into learning how to pay off debt, you need to understand what you’re working with. Take all the debts you owe, and list them out in order from smallest to largest. Once you know all the debt you have to pay off and the different amounts, it’s much easier to prioritize payments.

PAY OFF YOUR BIGGEST DEBTS FIRST

Once you’ve got all your debt organized from smallest to largest, pay off the largest debt with the largest interest first. Doing this will take a huge burden off of your shoulders while saving you on interest and allowing you to maintain monthly minimums on other debts.

PAY MORE THAN THE MINIMUM

While you have to pay the minimum monthly balance on credit cards and other debt, when it comes to how to pay off debt, aim to pay more than the monthly balance every time you can. Paying off more than your monthly minimum is how you really tackle debt.

STICK TO ONE CREDIT CARD

Credit cards can dig you deep in debt, but keeping one credit card around for use is on the list of debt reduction methods. If you have multiple credit cards, you should take them out of your wallet or purse and leave them at home--all except for one. If you have a credit card with good rewards or cash-back options, you should still use it for your purchases, because essentially that’s a way to get free money.

Remember, while you’re paying off debt, if you use a credit card for the perks, make sure to only use your card for purchases you have the cash for. When you use a credit card the smart way, it can help you save money, earn money, and keep your charges safe from fraud.

BRING IN MORE INCOME 

One of the most important concepts of paying off debt is making more money you can put towards debt payment. If you have the time, find a part-time second job and use all your wages from that job strictly for debt payment.

If your schedule is too constrictive to allow for another conventional job, turn to the many ways you can make money from your own home. From the comfort of your own home, you can get paid to take online surveys, write, do random tasks, and even work as a virtual assistant. These jobs won’t always be the highest paying, but they’ll give you the opportunity to make more money on a flexible schedule without ever leaving your home.

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FIND THE RIGHT CHECKING ACCOUNT

The last tip for paying off debt is one that can easily be forgotten. When it comes to paying off debt, having the right checking account can be a big deal. If you’re facing debt problems and struggle with monthly bank maintenance fees or consistent overdraft fees, find a bank that better meets your needs. Doing research and picking the right bank for your checking account can save you more money than you might think.

Conclusion

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No one wants to be in debt, and while the solution to debt isn’t instant and requires work, you now know how doable it is to pay off debt. By avoiding the common mistakes and following the success tips in this post, you’ll be well on your way to reducing your debt and feeling free as you make your way towards financial security.

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How Do Student Loans Work

October 31, 2019 by  
Filed under Debt, Student Loan

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student loans

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Paying for higher education can be challenging. In fact, most of the colleges (about 70%) in the US are unaffordable for most Americans unless they get student loans. It is a common method of financing a college education, and you might ask yourself “how do student loans work?” Most learners will have to borrow one or more student loans prior to graduation, partly because there are no government grants that can cover all college costs.

When students are considering student loan options, the question “how do student loans work?” is common. We have researched student loans and have come up with the answers you might need. This article highlights all that you need to know about student loans as it reveals what student loans are, the different types of student loans, and how they work.

An Introduction To Student Loans

For you to answer the question, “how do student loans work?” you must first understand what student loans are. Student loans are so common these days as higher education is a necessity. Essentially, if you get a degree, you have a better chance of getting a job. The right degree is an avenue to follow your passion and make yourself marketable in the job force. But, if you don’t have the capital to finance your college education, you might be interested in applying for student loans.

A loan is typically borrowed money that is repaid over time. In addition to repaying the total amount you borrow, most of the borrowers will have to pay for a fee known as the interest.

Interest, which is the fee associated with a loan, is charged for the use of someone else’s money. It is charged on a monthly basis based on the loan balance that you have not repaid. This means that it isn’t a onetime fee and is typically expressed as a percentage of the loan balance. In most instances, the student loans will come with a fixed interest rate, which doesn’t change over the loan’s life. However, a variable interest rate will change periodically such as on a monthly or quarterly basis.

Who Provides Student Loans?

To adequately answer the question, “how do student loans work?” you should know who provides the student loans. You can get a student loan from many sources. However, most of them come from the federal government through the US Department of Education’s Federal Direct Loan program. Other student loans may come from private lenders, such as banks, among other financial institutions, colleges, and state governments. In most cases, students borrow from the federal government primarily because federal student loans are cheaper, more available, and have better repayment terms.

Amount You Can Borrow

The student loans come with a loan limit that specifies the maximum amount a student can borrow. Some loans may allow students to borrow the full college cost, but other loans have lower fixed annual and accumulative loan limits. Student loans are generally considered good debts simply because you are investing in your future. However, you should not borrow excessively since too much can be strenuous to pay in the future. We recommend that you borrow as little as you need, not as much as you can.

For subsidized and unsubsidized loans, undergraduate students can borrow between $5,500 and $12,500 per year. Graduate students can borrow up to $20,500 each year on the direct unsubsidized loans. Direct PLUS loans are borrowed for the remainder of the college costs not covered by other financial aids.

Different Types Of Student Loans

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To adequately answer the question of how do student loans work, you need to know the different types of student loans. There are two types of student loans: federal and private.

Federal Loans

These are the most common as they are offered by the federal government. They include direct subsidized, direct unsubsidized loans, Direct PLUS loans, and direct consolidation loans. Direct subsidized and unsubsidized loans are also referred to as Stafford loans.

For a direct subsidized loan, the government pays the interest as you study and during the deferment periods. As such, these types of loans subsidize your education by offsetting the college cost. Subsidized loans are mainly available only to undergraduates who demonstrate that they need financial aid. The amount of the subsidized loan is typically capped to only cover the student’s financial need as determined by the Free Application for Federal Student Aid (FAFSA).

For an unsubsidized loan, students are responsible for any interest that accrues when in school or after graduating. These loans are available to both undergraduate and graduate students. The loan amount is determined by the cost of attendance at your college or university and any other financial aid you might be receiving. You qualify for this loan even if you have no demonstration of financial need.

Direct PLUS loans are available to graduate, professional students, and parents of dependent undergraduates. They are given by the US Department of Education. For you to get this loan, you should have a decent credit history and a credit check. The loan amount is typically intended to cover any expense not covered by other financial aids.

Direct consolidation loans apply if you have multiple federal loans, which are combined into a single loan from a single servicer. The loans are available to students who want to combine multiple federal loans into one.

The following are the facts of federal loans:

  • Interest is tax-deductible
  • Interest is tax-deductible
  • Interest rates are typically fixed
  • Unless you are taking the PLUS loan, you will not need a credit check

Private Loans

Federal loans are the best, but you can also opt for private loans. However, private loans offer much less flexibility. Private loans usually come from lenders not affiliated to the government, for example, a school, credit union, a bank, or a state organization. The amount and the repayments options are decided by the lender.

Some of the facts about private loans include:

  • The loans may require a cosigner and a credit check
  • There is a possibility that you will begin repaying the loan while still in school
  • The interest rate is not tax deductible
  • Interest rates fluctuate with the financial market, meaning that they will be variable
  • Some interest rates are very high and can reach up to 18%
  • Most lenders will only quote you an interest rate after applying, so you will have to compare the best lenders

How Do Student Loans Work?

HOW TO APPLY

You must first apply for a student loan for you to be awarded the loan amount. To apply for federal loans, you should file the FAFSA. The loans will be available through the college’s financial aid office. To apply for the private student loans, you need to contact the lender.

The eligibility for most private student loans is based on the credit of the borrower. Since most students do not have good enough credit histories, they will need a creditworthy cosigner. The cosigner acts as a co-borrower and is equally responsible for repaying the loan amount. Once the loan is approved, the borrower has to sign a promissory note that describes the terms and conditions of the loan, including the repayment options and interest rates. For federal loans, there is a Master Promissory Note (MPN) that lasts for up to 10 years of continuous enrolment at a single university or college.

How You Receive the Loan Amount

Federal student loans are sent to the college financial aid office. For private loans, the funds are sent either to the borrower or to the college financial aid office. If the funds are received by the college financial aid office, they are applied to tuition and college fees, as well as housing. Money left is refunded to the student to pay for supplies, books, and other college needs.

How to Repay

For you to address the question, “how do student loans work?” you must know how to repay the student loan. After graduating or when you drop below half-time enrolment, you should start repaying the loan. For federal loans, you will be offered a 6-month grace period after which you should start repaying. Federal loans involve a standard 10-year repayment term with equal monthly installments. You can get 30 years for a direct consolidation loan. Other repayment options include graduate repayment, extended repayment, income-based repayment, income-contingent repayment, and income-sensitive repayment plans.

For private loans, ensure that you know the repayment options before applying. Some lenders have more flexible repayment options than others. Some may even allow forbearance and deferment or renegotiating a high variable interest rate. We recommend that you go for a lender with the best terms.

Conclusion

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Student loans are a viable method of funding your college education. However, you should not default the repayment (120 days from the due date for private loans and 360 days for federal loans). To minimize the potential damage, only borrow as much as you need, ensure that you have chosen the right repayment plan, pay on time (every month), pay extra often, take advantage of saving opportunities such as interest rate deductions, tax deductions, and refinancing at a lower rate. As such, instead of asking, “how do student loans work?” you should be asking. “how can student loans work best for me?” We hope this article has adequately addressed the various types of student loans and how student loans work.

How to File Taxes: Complete Guide

September 17, 2019 by  
Filed under Debt, Resources

Filing Taxes

Knowing how the tax process works can help to reduce any stress that a person may be under to get their taxes filed. Learning more about this process also provides more information for the user during the process. What they once did not know, they may know after gathering this information. Your first or even second time doing anything can seem like a challenge. This is especially true if you’re worried about not filing something right. Learning how to file taxes is not as complicated as it seems.

You want to know what information and documents you need, how long it will take if you’re filing the right forms, and if there are ramifications should you forget to add or do something on the forms. All of these concerns will come piling up during the tax filing process. It is important that you take it step by step. Each question will be answered, and you will feel more confident as time moves forward. Learn what makes up a tax return and then use that to your advantage when going through each part and filling in the information.

What Does It Mean to File Taxes?

Time For Taxes

You are not alone. Many people do not know how to file taxes. They either hire someone to do this job for them, or they have to learn just like you are now. Filing taxes means you have to submit papers to the government letting them know how much you have made throughout the year. Everyone that is a resident and a citizen of the United States that works must file their taxes every year. Taxes are then paid to the government to help with specific expenses that the government sees fit during that year.

Is There a Need to File Taxes?

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Some individuals may not have to file taxes for that year. There is a specialized tool from the IRS that can figure out if you are required to pay taxes depending on your status, how much you have made, and other factors. Almost everyone must file taxes within the United States though as long as they are making money. Some citizens that are living in other countries may have to still pay taxes to the United States if they are still listed as a citizen with this country. However, this is something that has to be worked out with the IRS offices.

How to File Taxes the Right Way

How to File Taxes the Right Way

There is a process that a person has to undergo to file their taxes. Every tax form, regardless of which you have to fill out, has specific steps and instructions that have to be followed. Know the steps ahead of time so you are prepared when tax time comes, and you need to fill out the form and provide the necessary documentation requested of you. Here are the steps required to fill out a simple tax form.

KEY TIPS FOR FILING YOUR TAXES – BEFORE YOU START

Tips for filing taxes

It is important to know what to have on hand before you start filing your tax returns. Knowing things like life changes, such as a marriage, birth, or change in a job, is also ideal. It can make the process go faster. You will also need to have access to these key specific items:

  • Your social security number
  • The social security number of your dependents 
  • W-2’s or 1099 income 
  • 1095 which is used for health insurance verification 
  • Consider all of your sources of income – through a job, retirement, savings, pension, investments, etc. 
  • Any donation forms 
  • Child care expense receipts 
  • Education expenses 
  • Information regarding taxes paid on your mortgage

KNOW HOW YOU’RE GOING TO FILE

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There are a few different ways to file your taxes depending on how you feel the most comfortable. Filing your taxes online can be done through an online e-filing program. These programs will walk you through the entire process and have areas where you can look up your questions to get answers. This is very helpful for those learning how to file taxes on their own.

Another option is to file the taxes through the mail. While this takes longer to have them reach the IRS, it also provides them with a way to fill out everything on paper. Those that like to leave a paper trail and want to submit all of their paper documentation would use this option. It is not the most popular, but it is definitely an option.

Those that do not know how to file taxes sometimes use the help of a tax professional. These professionals walk the person through what they are doing on their taxes, ask questions, and do the process for them. They can find hidden deductions, look for ways to save on taxes, and even try to get the person money back for that tax year. They are knowledgeable about the tax process, the laws, procedures, and other specifics so that those looking for some help when learning how to file taxes can speak with these professionals for more information about the process.

Filing the Tax Return

Filing the Tax Return

Follow these steps to file your tax return once you know how to file taxes. You have gathered the above, chose the right method, and are ready to file. Now is the time to do so with the help of the specific method you went with.

  1. 1
    Gather all of your paperwork, documentation, and other information you need. These are stated above. Any forms regarding taxes, as well as income, should be brought over when doing your taxes.
  2. 2
    Determine your filing status. Are you filing head of household, single, married? You also want to determine how much you made this past year as it determines which form you will fill out to file your taxes. Those that make under $66,000 per year are put into one bracket, while those over this amount are in another. Self-employed individuals have to pay a specific tax bracket. E-filing services will automatically decide which filing bracket you need when you answer simple questions for them at the beginning of the process.
  3. 3
    Calculate all of your taxes and credits by filling in the information requested on the forms. This is usually regarding the dependants you have, the amount you made, any extra income, etc. There are credits given to those that have given to charity, have children, education expenses, and other related deductions.
  4. 4
    Claim all of your dependents and exemptions on the form. It is important to know who qualifies as a dependent on your tax return. Children that you are legally responsible for and provide over half of their support are generally thought of as your dependents.
  5. 5
    Find out if you pay in taxes quarterly, have to pay one lump sum, or if you will get money back. This is all determined based on several factors. Going through the entire process will give you more information. Mailing in your payments, paying online or through the phone are all options for those that owe money to the IRS. For payments coming back to the person that filed, checks and direct deposits into bank accounts can be made.
  6. 6
    File your taxes by submitting them electronically or through the mail. This is usually done electronically if you have hired someone to go through your taxes for you.

The process is generally easy with the number of resources available to those learning how to file taxes. Working with a professional also has helped many people file their taxes. It is important that the taxes are filed within the time limit that the government sets. Those that file and owe money have to pay by April 15 while others have to submit their applications and extensions by the same day. This date may change if the 15th falls on a holiday or a weekend, which means it can be the 16th,17th, or even 18th on some years. It is important to think about filing taxes as soon as possible. Gathering information on how to file taxes can help you get prepared for the tax time to come.

Conclusion

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Alternatively, those that wish to save time and hassle can hire a tax service. This service prepares the taxes for you when you give them your financial documentation. They go over all the specifics so you can easily submit the information while also providing the necessary tax payments for being a citizen with the country. If there are further questions regarding filing, if you are filing yourself, it is important to speak with either the IRS or a tax professional that can provide the help required. Knowing how to file taxes the right way can allow you to feel more confident in the years to come when you have to continue to file taxes.

Please keep in mind that if you have further questions regarding the process, look into the IRS website for FAQs and other commonly featured articles. They use this as a guide to help those learning how to file their own taxes have all the information they need.