Five Reasons to Start Saving Before Paying Off Your Debt

Pop quiz: If someone has gotten themselves into $20,000 worth of debt over a 3 year period and all of the sudden receive an $30,000 inheritance, should they pay off their debt?

Answer: No. If they do, they will be back into $20,000 worth of debt in just a few years. It was the habits that got them into debt in the first place. They should focus on paying back their debt by saving from their income. Working their way out of debt will give them the discipline and habits to stay out of debt long term.

In general, it is counter intuitive to think that one should start to save before getting out of debt. After all, if you are saving with an interest rate of 9% and have debts with an interest rate of 15%, aren't you falling behind?

Perhaps, but people make decisions based on emotion and then justify their actions using logic. Here are the five reasons you should start saving while paying off debt:

1. Many people tell themselves they will start saving once they have paid off all their debts. In the end, they never pay off their debts and they never start saving. If you have reasons why you can't save money today, in your current situation, what makes you think you won't have plenty of excuses of why you can't save in the future?
2. If you aren't saving money for emergencies, the emergencies that come up will leave you in a bind. Any progress towards debt you made will be undone. You may even end up using high interest rate credit cards to pay for an emergency which will cause you to fall further behind.
3. Saving is a habit. If you don't start to develop the life long habit today, even if you happen to be one of the few who do become debt free, you will not have developed the habits necessary to continue to increase your net worth.
4. Debt is like weight. Most people have a certain level that they are comfortable with, even if it is unhealthy. While some people try to diet, years later, they find themselves at the same weight level. This is true with debt as well. Imagine saving only after you have hit your weight goal! Don't wait to start saving until after you have hit your debt goal.
5. Saving is one of the building blocks in your financial house. If you don't put the foundation in place, you will not be able to build on it later. Dave Ramsey's debt stacking strategy (see www.daveramsey.com) can be extended to continue the snowball into savings. If the building blocks are not set in place, however, months of savings will be found spent before they reach a savings account.

Thank you so much for visiting the site and taking an interest in your own personal finances. This means a lot to us. Please do browse the site and leave comments or questions.

This post was reposted from http://finlit.biz/debt/five-reasons-to-start-saving-before-paying-off-your-debt/, originally written on June 3rd, 2014.

Should You Pay Off Your Home?

Recently, I have heard several people advocate that they should not pay off their home mortgage in order to live a debt free lifestyle because mortgage rates are at an all time low. For instance, the article at business.time.com, states that "You might be better off keeping the mortgage and investing the money elsewhere, which amounts to borrowing at a tax-deductible 3.5% in order to start a business, invest in stocks, or purchase an income property."

My advice.  Payoff the mortgage as quickly as possible.  Before I add some caveats to think about, I will discuss why this can be advantageous.  First of all, when it comes to success, there is no time like the present.  Taking action today, even if these are baby steps can mean a big difference twenty years from now.  In addition, unfortunately, you never know when your family might be hit with one of the four Ds.  I have never met anyone who has regretted paying off their mortgage, but I have met people who have lost their home because they didn't pay off their mortgage.  About 95% of people fit into the category where they should just pay off their debt.

Now, for the caveats.  First of all, when it comes to business and leveraging, I would say an experienced investor, may purchase a home with 0% down.  This is how a 22 million dollar real estate empire can be created. I've seen it happen.  The concept introduced by the article above assumes that the person will have the staying power to not lose their current home.  It also assumes that the savy investor will be wise in where they invest their money.  For many Americans, a guaranteed match with inflation is much better off than the risks of investing.

All this said, I typically tell people that they should do both. That is, rather than put all their eggs in one basket, they should have a plan in place for their current retirement as well as a plan in place to pay off their debt.

This post was reposted from http://finlit.biz/debt/should-you-pay-off-your-home/, originally written on June 4th, 2013.

From Hannah

I agree that we should pay off our mortgages as quickly as possible. We should, I think, strive to be debt-free as far as possible. One path toward this goal is to give sustained, serious thought as to what we truly need.

The US (among other countries) has become toxically focused on material goods as measures of happiness and success. Would your car or your clothing or your furniture truly impress someone with your worth? If so, you need new friends, not new goods.

Paradoxically, the US economy might collapse if it stopped being able to sell a false dream of prosperity via items that no one really needs. A roof, some good (healthy, fresh, home-cooked) food, and people who love you…there’s not much else that matters.

So, I absolutely agree that you should pay your mortgage off. And then maybe look toward what good you can do in the world with any extra money, instead of focusing on another trip to the mall.

From Scott Izu

Well stated!!! Thank you for your feedback. :)

From Hannah

So is there something you would recommend we put our extra money toward? Any particular charity or investment? I think of this kind of thing often, and am not sure what to do. I want to be mindful, as an investor in the future, and as a person who wants to leave the world a better place than I found it. You might be surprised how many people (some you might know) who feel this way.

From Scott Izu

Hannah, the best thing for you to do would be to go to http://finlit.biz and click on the Contact Us button and enter your contact information. Someone can give you a call and assess your particular situation and what is best for you.

From Hannah

I would have gotten in touch, but I am very disappointed by further reading on this site. The actual literacy is lacking (Berenstain Bears level). Worse, there is a heavy Christian tone that is off-putting to non-Christians. I want financial information, not a sermon from an anti-scientific “book” that was invented in the Stone Age. I want a financial advisor who has current, informed, world market information, not fantasies about how a tiny, ancient tribe who stoned adulterers (among other heinous acts) has some secret insight into my investments. No doubt you will not publish this comment, and that is fine. But you might want to reconsider your presentation, and how off-putting it will be to many people, and that the current receptive audience is particularly uneducated, poor, and ill-informed. If you want to be an evangelist, go for it. But don’t confuse it with your other (“financial literacy”) goal.

From Scott Izu

Thank you for your honest feedback. I appreciate the thought and time put into your comments. I am not big on censorship and believe you have some valid points. Here are some additional insights that you might find useful.

On a macro scale our nation went from having one trillion dollars in circulation in 2007 to having four trillion in circulation in 2013. This effect of printing money has the potential to decrease our standard of living to 25% of what it is today. We have seen cities such as Stockton and Vallejo go bankrupt. Our government is a reflection of individuals.

So to address the issue, I focus on the individual families at the micro level. There, we see cable, cell phones, electricity, taxes. and credit cards eating away subtlety, since people essentially work for thirty years and then spend twenty years in retirement. On top of that, the family is being broken up by divorces and other issues, corroding our nation at the micro level. How do we save families, thus improving our micro level finances, and in turn making a global impact on a macro level?!?

From Hannah

Okay, I got schooled. I would probably not normally reply further, but I am very impressed by your anti-censorship attitude and thick skin. You are a better person than I am. You deserve respect, and I thank you for your open-mindedness.

I agree that we have enormous macro-level economic issues in this country. The system is gamed, I think, against the economically disadvantaged — as well as women, minorities, etc. So how do we fight back and improve our lives? I am a woman; I’m paid less than men in my field. I find that my partner is better off, and he knows it, and uses it, albeit subconsciously. I try to make good financial decisions, and I’m generally successful, but it’s still difficult to find a balance between smart decisions and wanting to be a good human being (charitable donations, etc.).

It’s a complicated world. I couldn’t maneuver it without friends, personally. Thank you for your open mind and ears.

Isn't it Time You Joined the Debt Freedom Movement?

Over the years, you have mentioned to your friends and family how your life has been a struggle to make ends meat.  You have talked about how you dream of one day being able to live the life that you want to live.  How great it would be to own that car and the house of your dreams.  At the end of the day, you just want to raise your kids to the best of your ability.

The first thing you say when the conversation comes up regarding debt is, "Oh, we are doing well.  The only debt we have is ..."  After a little digging, sometimes the numbers discussed are not quite as accurate as originally thought.  Of course the response is, "Well, we just don't like to focus on that because worrying about it doesn't make me happy."

I want you to know that it is okay to need help in this area.  Many people share the same struggle.  I understand your pain and I am here to help.  I'm here to get you starting to think a little bit more about debt and how it is taking control of your life.  Do you want to live a life full of stress?  Do you like to carry this burden or would you rather just be free of it?

Do you want to teach your kids the power of teamwork?  Do you want your kids to live paycheck to paycheck?  Then, why not work together with someone to live debt free and show them there is a better way.

Its called the Debt Freedom Movement.  Here are 9 posts which can help you think a little differently about debt:

• How Do We Fix the Debt Epidemic in America?
• 3 Debts Which Will Kill Your Finances
• Have You Ever Implemented a Debt Snowball?
• Can Donating 10% of Your Income to Charity Keep You Out of Debt?
• 2 Problems Students Have and The Solution
• How Can You Monitor Your Credit Card Spending?
• 3 Advantages to Purchasing Your Car With Cash
• Mortgage, the New Age Slavery
• Is the Chinese Way of Spending Better than the American Way?

Thank you for reading and I hope you decide to take baby steps towards a new and improved financial life.  Good luck!

This post was reposted from http://finlit.biz/debt/isnt-it-time-you-joined-the-debt-freedom-movement/, originally written on February 20th, 2013.

25 Reasons Financial Literacy is Important

Have you ever wondered why someone might change careers all of a sudden?  Have you ever seen someone do something and you thought it would be great if you had the talent to do something like that?  Do you feel that your talents are being utilized to the best of your ability?

Today, we will explore the importance of financial literacy.  Perhaps, you will feel an area that you can relate to and possibly have the desire to jump in and make a career change or pitch in enough to make a difference.  Here are 25 reasons why you might help promote financial literacy in your community:

1. The number one related cause of health issues is stress, often caused by finances.
2. Divorces occur in today's society at an extremely high rate, most often due to financial struggles.
3. People are thousands of dollars in debt which affects their health and relationships.
4. Students are accumulating large amounts of debt before graduating college.
5. Young couples and families are starting their lives together in debt bondage.
6. People are suffering in the shackles of debt, lost without a plan.
7. People are losing their homes, with foreclosures happening on every street corner in the US.
8. Middle class families continue to be left out in the cold.
9. People do not have enough money saved for retirement.
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10. People are losing their hard earned retirement money on real estate investments.
11. The banks and brokerages continue to grow as families continue to suffer.
12. People are gambling away thousands of dollars on stock investments.
13. People are allowed to invest with the click of a button and without a solid investment strategy.
14. Families haven't spent enough time thinking about their future and communicating their goals.
15. The middle class is being taxed to death and slowly shrinking.
16. Loop holes in the system allow people making double the salary to have one third the taxes.
17. People are being ripped off left and right by unethical business contracts.
18. People are typically overinsured or underinsured when it comes to life insurance.
19. Despite lawsuits and years of lobbying, predatory practices continue to be affluent in our society.
20. Families and siblings are left to fight and clean up the mess after their parents pass away.
21. Without adequate estate planning, children are at risk to become lost in the system.
22. Small businesses continue to fail at alarming rates.
23. Business schools continue to be taught by amateurs rather than successful leaders.
24. The lack of mentorship for young people and people in mentorship programs is dwindling.
25. The ability of our communities to negotiate deals fundamentally affects our global economies.

Thank you for visiting!  Remember to spread the word through social media sites such as facebook, twitter and linked in!

This post was reposted from http://finlit.biz/business/25-reasons-financial-literacy-is-important/, originally written on February 13th, 2013.

2 Problems Students Have and The Solution

Students nowadays are graduating with an all time high of student loan debt.  How bad is it?

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According to business.time.com, "Credit bureau TransUnion says that in the past five years, the average student loan debt each borrower carries has risen 30% to $23,829. More than half of student loan accounts, which add up to more than 40% of the total dollars owed, are in deferral status."

As noted at www1.whdh.com, "A graduate student at the University of Southern California, 22-year-old Astrid  Solorzano - will be $160,000 in debt before she lands her first job."

According to sizusfinlit.blogspot.com and www.forbes.com, "60% of college graduates can't find a job in their field."

The 2 problems we have are:

1. Students are graduating college with thousands of dollars in debt to start their life
2. Students are graduating college with no experience, uncapable of finding or creating jobs

We have students graduating with $100,000 in student loan debt and no experience, lacking the skills necessary to land or create good jobs.  What if we required two years of military or the peace corp before entering college?  What if we implemented a work study program, rather than just allowing students to rack up large amounts of debt?  Isn't it possible to solve both of these problems at the same time.

A lending industry that focuses on the uneducated is really considered predatory, isn't it?

This post was reposted from http://finlit.biz/debt/2-problems-students-have-and-the-solution/, originally written on February 13th, 2013.

Have You Ever Implemented a Debt Snowball?

Dave Ramsey's Debt Snowball is a popular method for attacking debt. You can check out the 7 steps at www.daveramsey.com. At www.bloggingawaydebt.com, the author actually lists out debts as they are attacked. Talk about a great accountability partner. The online community!

The overview:

• Current: $44,564
• Paid: $53,537
• Original: $98,101
• Emergency Fund: $1000
• IRS Savings: $3000

Broken down:

• CC #1: $0 ($64)
• CC #2: $0 ($240)
• CC #3: $0 ($650)
• CC #4: $0 ($785)
• CC #5: $0 ($1,500)
• CC #6: $0 ($1,886)
• CC #7: $0 ($1,984)
• CC #8: $0 ($2,135)
• CC #9: $0 ($7,145)
• CC #10: $13,060 ($14,561)
• CC #11: $7,554 ($24,388)
• Credit Line #1: $0 ($182)
• Credit Line #2: $0 ($182)
• Auto #1: $0 ($16,579)
• Auto #2: $0 ($25,819)
• Cons. Loan: $20,000 ($20,000)
• IRS Due March 28, 2013: $3,950 ($3,950)

That is awesome!  Here, it is just nice to highlight someone else's accomplishments.  What have you accomplished with your debt?  We'd love to hear from you.

This post was reposted from http://finlit.biz/debt/have-you-ever-implemented-a-debt-snowball/, originally written on February 13th, 2013.

4 Tips to Stay Out of Debt

In today's society, it seems keeping up with the Jones family, is a necessity.  But does this really simplify our life and bring us more happiness?

Sure, we want to feel like we are growing but how much more stuff do we need?  According to www.thenation.com, "More than 16 million children in the United States, 22 percent of the country’s kids, live in poverty, the highest total since 1962 and the highest percentage since Bill Clinton took office in 1993."

This statistic puts into light where we really need to place our emphasis from day to day.  An article from blog.womenandco.com gives us some ideas on how to live within your means.  Here are 4 tips that can help you aggresively attack and stay out of debt:

1. Live within your means
2. If you don't have the cash to pay for it, don't buy it
3. Spend money on what you need rather than what you want
4. Stockpile some cash for an emergency

Do you follow these tips?  Do you have any other suggestions?

This post was reposted from http://finlit.biz/debt/what-is-the-number-one-cause-of-debt/, originally written on February 12th, 2013.

Mortgage, the New Age Slavery

Before you purchase a home, you may want to check out homebuying.about.com.  This will talk about all the items you may need before purchasing your first home.

However, you may want to consider a few different concepts.  Does a house count as a liability or an asset?  Which are you trying to accumulate to create wealth, assets or liabilities?

Did you know that the word mortage is composed of "mort" which means dead and "gage" which means pledge (see www.thefreedictionary.com)?  In other words, you have pledged to pay something until you die.  Do you really want that responsibility?  What does it really cost?

According to en.wikipedia.org, "Debt bondage is a person's pledge of their labor or services as repayment for a loan or other debt" and "Debt bondage has been defined by the United Nations as a form of modern day slavery."  You may want to think about this before you pick up some additional debt.

Have you ever heard of a slave that could purchase their own freedom after working long enough to pay of their debts?

This post was reposted from http://finlit.biz/debt/mortgage-the-new-age-slavery/, originally written on February 7th, 2013.

How Do We Fix the Debt Epidemic in America?

Have you heard of the debt epidemic sweeping across America?  With the 34 hours of TV being watched per week, how do we stop the consumption and stop the debt accumulation?  Please, add to the conversation and share your thoughts below!

According to business.time.com, "The Great Recession has pushed student debt to historic levels, and for the first time ever, almost 20% of U.S. households have outstanding educational loans."

According to 101financiallessons.com, "If you’re anxious about the credit card becoming a curse for your child’s future, you could always go the special Credit Cards for Students that provide a maximum limit". Can you believe that we are now targeting unaware students?

According to www.epidemicfun.com, the average consumer debt profile is $149,782 in mortgage debt, $34,703 in student loan debt and $15,328 in credit card debt.

Do we have any hope? What are your thoughts? Would you like to be a part of the debt freedom movement?

This post was reposted from http://finlit.biz/debt/how-do-we-fix-the-debt-epidemic-in-america/, originally written on February 1st, 2013.

Can Donating 10% of Your Income to Charity Keep You Out of Debt?

The natural inclination is that donating money to charity will leave you with less money in your pocket.  Is this how you feel?  Let's explore this concept for a little bit, shall we?

From www.heritage.org, "Giving also increases personal and well as national prosperity. Pointing to a survey conducted in 2000 that controlled for education, age, race and all the other outside explanations for giving and income increases, Brooks reports that a dollar donated to charity was associated with $4.35 in extra income.

Of this additional income, $3.75 was due to the dollar given to charity. At the national level, a 1 percent increase in national giving appeared to increase real GDP by about $36 billion."

There are so many reasons that giving to charity can keep you out of debt.  First of all, when you give to charity, your happiness is based on building up others around you.  Naturally, this outlook on life will drive your income up and give you a happier, healthier life.  The opposite take is that your base your happiness on stuff like IPods, cars and furniture which naturally lead to an unfulfilled life.

In addition, budgeting 10% of your income towards charity causes you to live a frugal life and become accustomed to purchasing only that which is necessary to live.  In general, I would say people who donate 10% towards charity live a more simple life.

Finally, a great reason to donate 10% towards charity is because for those of you who spend everything you make anyways, you are sowing seeds into your community that will naturally sprout greatly over 20 to 30 years.

Isn't it time you made the decision to donate to charity, reign in your spending and allow yourself to grow your income?

This post was reposted from http://finlit.biz/debt/can-donating-10-of-your-income-to-charity-keep-you-out-of-debt/, originally written on January 31st, 2013.

5 Items to Track When You Purchase Your Home

If you are investing in a real estate property, what are the items you should track?  By the way, since you never know whether you will move and convert your home into a rental property, you may want to pay attention to this as well.

Typically, when you buy and sell a home, you will pay about 2.5%-3.5% on the front end and 7.5%-8.5% on the back end.  This equates to about 11%.

In order to track your purchase and determine whether it was eventually worth the investment, here are a list of things you will need to keep track of:

• Loan fees and points to purchase the home
• Title fees to purchase the home
• Abstract and legal fees to purchase the home
• Inspection costs
• Buyer Commissions

These items are also helpful to track when you sell your home.  Keeping track of expenses and income are critical to become a good investor.  Most likely, you will lose money on your first real estate investment.  Those who become successful, learn and alter their strategies.  The numbers are the numbers are the numbers.

Good luck!

Related articles:

• www.letstalkpm.com
• raincityguide.com
• www.landlord-success.com

This post was reposted from http://finlit.biz/debt/5-items-to-track-when-you-purchase-your-home/, originally written on January 31st, 2013.

7 Places You Should Rent Instead of Buy

This article from finance.yahoo.com, talks about 7 places where you should rent instead of buy.  The analysis is done based on looking at rent amounts and purchase prices.  When it comes to making a good decision financially, the numbers are the numbers are the numbers.

Each of the cities dicussed displays the break even horizon, price to rent ration, median home price and median rent price.

These four factors are all you need to determine whether you should rent or buy!  Doesn't it make sense that as far as a financial decision, all you need to evaluate is the current rent price and the current cost of the house?  What happens when an investor tries to purchase an investment property in an area where people should rent rather than buy?  Does it matter whether people think the value of the property will go up?

The areas listed in the article have these seven cities:

• San Diego, California
• Seattle, Washington
• Boston, Massachusetts
• Los Angeles, California
• New York, New York
• San Francisco, California
• San Jose, California

Looks like you shouldn't be investing in properties in California, doesn't it?  Read on at sizusfinlit.blogspot.com.

This post was reposted from http://finlit.biz/debt/7-places-you-should-rent-instead-of-buy/, originally written on January 29th, 2013.

Do You Think Because You Make Over $250,000 That You Are Well Off?

Awareness is key.  Here are a few stories that I have seen in the past year that might help encourage you to get your act together.

Do you convince yourself that you are doing well financially or do you admit that you may have some areas of improvement?  Do you keep your mind open to explore areas of improvement while maintaining focus on your goals?  Do you read, share and discuss to keep the creative juices flowing in areas of finances?

A business man ran a profitable business, making a decent living with his spouse.  Together they raised a small family and were in the $100,000 to $200,000 range.  They even had some real estate investments that were cash flowing and profitable.  Suddenly, the wife unexpectedly discovered that she had cancer.  Unfortunately, after her death, everything came crashing down forcing the business man into bankruptcy.

One doctor made about $200,000 and his wife made about $175,000 per year.  Yet they were close to 1 million in debt.  When they divorced, the whole financial house came crumbling down and the realization that their situation had always been fragile became apparent.

One Vice President had been responsible for running a large company.  In fact, it was the 4th company for which he made his $200,000 income.  Money was flowing in and everything was fine.  Then, one day he got sick.  After simply one year of medical bills and no work, he ended up having close to $400,000 in debt.

A prominent engineer made a great six figure income.  After 20 years in the industry, he was unexpectedly laid off.  Naturally, he transitioned as an entreprenuer.  After just a few years and business running dry, he hit an all time low of becoming 1.2 million in debt.

Are you too proud to seek advice and counsel?  A good friend of mine gave me some great advice.  If you want to be strong, first humble yourself and then you will be strong.  Confess your sin and you will be healed.

This post was reposted from http://finlit.biz/debt/do-you-think-because-you-make-over-250000-that-you-are-well-off/, originally written on January 28th, 2013.

5 Things Your Life Insurance Should Cover

When considering life insurance, it is important to know how much life insurance coverage you need. The answer to this question is not the same as the answer to the question, "How much can you afford?" When purchasing life insurance needs, you may want to consider all the pieces of the puzzle. Factors such as financial impact if you were to die prematurely, shared burdens of financial debts and current retirement savings all have an affect on the amount of coverage you need.  You should sit down with an expert in the field and discuss your particular needs and desires.

At a minimum, here is a list of 5 things your life insurance should cover:

• funeral costs
• student loans
• credit card debt
• mortgage
• income replacement

If you owned a business and you purchased a machine that was to generate an income stream over the next 25 to 30 years, would you purchase insurance in case the machine broke in the first few years? Or would you put all your eggs into one basket and gamble on the fact that everything would turn out okay?

In a later post, we will discuss why these particular items should be covered. Check out this life insurance calculator.

This post was reposted from http://finlit.biz/life-insurance/5-things-your-life-insurance-should-cover/, originally written on January 26th, 2013.

How Can Latinos Get Ahead in the World of Finances?

If someone was not raised in wealth, is it possible for them to learn how to become wealthy? The article found at www.voxxi.com starts our discussion today. According to this article, "Due to lack of financial literacy, they get caught in a spider web of fees, high interest rates and predatory practices that drain their already meager incomes."

This is a very difficult issue to solve and it does not just apply to immigrants.  With all of the companies out there, how do people know who to trust?  When a company seemingly is there to help, how can a consumer distinguish the good from the bad?

Like any issue in our society, I believe the key to solving the problem is education.  I would not suggest that people trust any one source.  In fact, most people would decide to not listen to others, being fearful that they might be misled.  My advice is the opposite.  Listen to what everyone has to say.  Listen to your parents.  Listen to your friends.  However, more importantly, listen to the advice given by multiple organizations out there.  Let GU be your friend.  If you haven't registered as a student of Google University, now is the time to start.

Thanks for visiting and we will see you soon! Be sure to leave comments or questions. Feedback is great and discussion is key.

This post was reposted from http://finlit.biz/debt/how-can-latinos-get-ahead-in-the-world-of-finances/, originally written on January 25th, 2013.

Is the Bank a Business?

How does the bank makes its money? Should the bank charge us for keeping our money safe from robbers and thieves? Should we charge the bank for giving them basically an interest free loan? Isn't it funny how your position on any given viewpoint might just depend on your vantage point?

A great post about how the bank makes money can be found at www.startrungrow.com.  Now, how far are we going to get in retirement if we spent our lives giving out interest free loans?  Do people need money as much now as they always have?

So the banks might do two basic things for you:

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• Lend you money
• Borrow your money

That's right.  When you deposit money into a bank, they are borrowing your money.  If they tell you that you will benefit because they will keep your money safe or they can conveniently transfer your money to various places, they might convince you that they should be allowed to borrow that money for free.

They might lend you money.  They might charge you a high interest rate and give you a loan that lasts up to 30 years, with no intention to teach you how to pay off the debt faster.  They might convince you that borrowing from the bank is better than going to your father, mother, uncle, aunt, cousin, because you wouldn't want to ruin a good relationship.  Who wants to do business with family and friends?  Don't worry, the bank can take care of that for you, for a price.

This post was reposted from http://finlit.biz/business/is-the-bank-a-business/, originally written on January 25, 2013.

3 Advantages to Purchasing Your Car With Cash

In the post sizusfinlit.blogspot.com, the author discusses the differences between people who choose to purchase items using credit versus people who use cash. Being an advocate of living debt free, my suggestion is to pay cash when you purchase a car.

You will have these three main advantages which will help to solidify your financial future:

1. Immediate savings on depreciation
2. Savings on interest
3. Gain on opportunity cost

To elaborate, we will use the National Automobile Dealers Association average price of a new car sold, which is $28,400 in the United States.

Purchasing a car in good condition, which is 3 years old with low mileage, might save you an immediate $9,940.  This 35% discount comes from the fact that cars may lose as much as 20% value the first year and as much as 65% value in the first five years due to depreciation.

In addition, using the national average interest rate of 5.73% (see www.subprimenews.com), and assuming a five year loan on the car, you would save another $4,329 in interest.

Finally, those who pay cash could use the $9,940 savings and in a conservative investment such as a municipal bond, earn 5% which would put $2,746 more money in your pocket over the five year period.

These savings add up to $17,015.  What other costs are you adding on that aren't mentioned here?

This post was reposted from http://finlit.biz/debt/3-advantages-to-purchasing-your-car-with-cash/, originally written on January 24th, 2013.

3 Debts Which Will Kill Your Finances

Debt is a cancer.  Debt is a disease.  It destroys life, health and relationships.  This burden, this epidemic is destroying American families and American lives.  When are we going to stop the madness, wake up and save our fellow man.  What do you think?  Is this being to dramatic or do you agree with the problems bubbling up?

This post will give you an insight to three major debts to watch out for.  Debt is something that will destroy your personal financial house. What are the top three debts which you have to worry about? Why are these particular debts so deadly and how do they sneak up on people?

These three debts are:

• Student Loan Debt
• Credit Card Debt
• Home Mortgage

The sad part is that student loan debt sneaks up on students before they even have a chance to get a decent education to protect themselves.  According to www.cnn.com, the federal government issued 93% of student loans.  I take this as our government putting the burden of education costs on our future generation.

Credit card debt allows emotions to run our finances by allowing us to spend effortlessly.  Several days may pass and amounts may quickly accumulate before we even know what hit us.  On top of that tricky and manipulative payment plans can leave us digging ourselves out of a deep hole.

Finally, the home mortgage, the American dream of owning a home, often leaves us maxed out.  On top of that the complexity and misplaced trust allows us to get involved in contracts which may not be in our best interest.

Read more on these topics:

• Credit Card Debt
• Mortgage Debt

This post was reposted from http://finlit.biz/debt/3-debts-which-will-kill-your-finances/, originally written on January 23rd, 2013.

6 Things to do Before Purchasing a Home

Inspired by money.cnn.com, I have several additional todos before purchasing a home.  These all open your eyes to how expensive owning a home really is.  If you are about to make a decision that will affect your financial situation for 30 years, isn't it smart to spend a few minutes looking at some numbers?  How many people really do this?

These are my suggestions:

1. Get out of debt and decide when you can be debt free, including the new mortgage
2. Find out rental prices in the area
3. Calculate closing costs for your loan as a percentage of purchase price
4. Shop around for your home, loan, inspectors and title company
5. Estimate property taxes, home insurance and other ownership expenses
6. Write down and summarize the costs in various areas of the HUD-1 statement

Can most people do these simple tasks?  With all the stress involved in purchasing a home, is this easy to do emotionally?

With a few simple changes to how we do things, we can really make a difference out there.  No more foreclosures!  Lets take a little time and do things right!  Together we can do it!

For more guidelines, read 3 Easy Guidelines to Purchasing Your First Home.

This post was reposted from http://finlit.biz/debt/6-things-to-do-before-purchasing-a-home/, originally written on January 23rd, 2013.

How Can You Monitor Your Credit Card Spending?

If you are in debt, there is something that you are doing that is out of whack. How would it feel to be debt free? The only debt you should carry is your mortgage. Everything else is just extra weight that is being pulled around. Do you really want that stress?

One helpful article from www.indexcreditcards.com shows how to track credit card spending. In fact, if you pay for a product or service to help you with this, it is probably well worth it, since obviously something you are doing isn't working. However, this is much like a gym membership. If you purchase it and then only go once a month, you are wasting your money. Oh, wait, that might actually be good for monitoring your credit card spending.

How often do you check the balances on your credit card?

I guess being completely debt free should be a precursor to purchasing a home. For other guidelines check out: 3 Easy Guidelines to Purchasing Your First Home.

This post was reposted from http://finlit.biz/debt/how-can-you-monitor-your-credit-card-spending/, originally written on January 23rd, 2013.