Hello! Today, I have a great debt payoff story from Heather O’Donnell of HappyHumbleHome.com. Enjoy!
These days, I’m a frugal living blogger at Happy Humble Home and I provide money saving advice and encouragement to others.
But there was a point in my life, not that long ago, when I thought I would be in debt forever.
When my husband and I got married in August of 2015, we had $105,000 of debt. Since then, we have worked very hard towards our goal becoming debt free and we have crushed $95,000 of our debt.
Along the way, we’ve used 2 different debt payoff strategies and we’ve learned 3 essential habits that have helped us be successful along the way. In this post, I’m going to give you an inside look at how I overcame my giant mountain of debt because I know without a doubt that if I can do this, you absolutely can too.
More debt payoff stories:
I brought most of the debt into my marriage
My husband was debt-free except for his car payment. I had a giant student loan and a car payment of my own. Here’s a breakdown of exactly what our debt looked like:
Student Loan – $68,000
My Car Loan – $20,000
His Car Loan – $17,000
If you’re wondering about those numbers, let me give you a quick backstory.
My giant student loan was consolidated from my undergraduate and masters degrees. I went to school to be a elementary school teacher and was working as a kindergarten teacher in an inner city when we got married. Obviously, this was not a very high paying career choice.
It was just pure bad luck that my husband and I had to buy cars at the same time.
A few months before our wedding, his old car was starting to have problems and it would have been expensive to fix. We decided together that instead of fixing his old car, it would make more sense to trade it in and get a new one. So, he did.
We expected the little Honda Civic that I was driving at the time to last us at least another 5 years and we didn’t think his one car payment would be that bad.
But just a few weeks after my husband bought his new car, my car was totaled in a hit and run accident. Thankfully, I wasn’t injured. On the other hand, my poor little car was destroyed.
Clearly, I was going to need a new one. And of course, I could have bought something used and affordable. But instead I did a rushed month of research and decided to invest in a new car that would last us 10 years, barring another horrible accident.
So, that’s how we ended up with 2 car payments at the same time on top of my student loan.
We paid for our wedding in full with cash that we had saved up during our 18 month engagement. But this also meant that we were only paying the minimums on our debt during this time.
It was right after we were married that we decided to get serious about paying off our debt.
Emotionally, it was hard to be the one to bringing so much debt into my marriage. I felt really guilty about it and it took several long conversations with my husband before I was ready to tackle or debt together.
We started by learning everything we could about debt payoff strategies.
We decided that because we were already highly motivated, we should use the debt avalanche and focus on paying off my student loan first since it had a much higher interest rate.
For the next 18 months we devoted every spare dollar that we could to paying my student loan. We paid off $38,000 of the $68,000 total during that time.
The debt avalanche was serving us well. We’d paid off more than half of our biggest and highest interest rate debt. But our life situation was changing. I was pregnant and planning to leave my job to stay home with our baby. We knew this would drastically decrease our income and affect our debt payoff.
So, we decided to reevaluate our strategy.
After looking at our debts, we decided the best thing for us would be to eliminate our highest monthly payment. That would free up more money each month and would make life easier when I wasn’t working.
My husband’s car loan was our smallest debt, with our smallest interest rate, but it was our highest monthly payment at $505.
We set our sights on that small car loan and started devoting all the extra money that had been going to my student loan each month to the car loan instead.
We had his car paid off in 6 months.
This put a lot more breathing room in our monthly budget.
Then, we turned our attention to my car payment. The minimum monthly payment for my car was only $297, but it was a much smaller total amount than my student loan and we wanted to remove that monthly payment too.
We put everything we could toward paying off my car, including our 2017 tax return, and we had it paid off 7 months later.
By this time, our son was here and I had left my job. Our income was much less than when we were both working and our expenses were a little higher since we had another person in our family.
So, our debt payoff slowed.
There were several months that we could only pay the minimum monthly payment towards the student loan.
Whenever we had a little extra, we would pay more.
Even though our progress had slowed, our motivation was still high. We had built so much momentum when we were paying off our debts quickly and that carried us through those harder months.
Since I left my job in August of 2017, we have paid off $21,000 of my student loan on one income.
So at the time that I’m writing this we still have about $10,000 of debt left. I have this new, life changing ability to see the light at the end of the tunnel. I know we will be debt-free soon, and once we are, we’re never going back.
I want to share with you 3 essential habits that we used to pay off our $95,000 of debt so far.
These strategies worked for me even as someone who was horrible with money in the beginning. And they’ve kept me motivated through the hard times when I felt like giving up. I know these strategies can work for you too.
1. Monthly Debt Check-In
Every month during the last weekend of the month, my husband and I spend an hour planning out our budget for the month ahead and checking in on our debt payoff progress.
We talk about how much debt we’ve paid off and how much further we have left to go.
Sometimes we play with an online debt calculator on Unbury.us. The calculator tells us when our debt will be paid off based on how much extra we can pay each month. For example, if we pay an extra $600 a month, we’ll have our debt paid off my February 2020. It just gives us a rough idea of how close we’re getting.
Talking about it is powerful gets us excited and motivates us to continue.
2. Cutting Expenses for Extra Debt Payments
We did everything we could think of to lowering our expenses so we would have more money to devote to paying off our debts. This wasn’t fun to think about at first, but it was fun to see all that extra money going toward paying off debt.
Here are some of the expenses we cut to free up money for extra debt payments.
Food
We completely stopped going out to eat at restaurants. During the 3.5 years that we’ve been married and working on our debt, my husband and I have only been in a restaurant on our anniversary or birthdays.
We also stopped getting take-out food on the busy (or lazy) nights that we didn’t feel like cooking. Instead we had some supplies on hand for super simples meals that we both liked and that would be easy to prepare when we didn’t want to cook. These were mostly things like tuna, cartons of soup, or frozen chicken fried rice.
I made an effort to meal plan and once I learned a system that worked for me, I worked on stretching the same ingredients out for several different dinners in a week. For example, shredded beef would work for beef and broccoli, beef tacos, and stew.
Then, I started getting serious about saving money on groceries. I started looking for sales, comparing prices, using some coupons, and shopping with a grocery budget. I was able to lower our grocery costs by $40 a week with just a little bit of work and thinking ahead.
Household Costs
After we got our food costs under control, we focused our attention on our household costs.
We seriously cut down on our electric bill just by unplugging things and intentionally turning off what we weren’t using.
We negotiated our cell phone bill and saved $15 a month.
We made an effort to use a little less of everything – less paper towels, less detergent, less shampoo.
We’ve even tried to do some simple home repairs ourselves without calling (and paying) a professional. My husband was able to fix the ice maker in our freezer, replace our doorbell, and even do a simple repair on our toilet.
It was easier than I thought it would be.
I expected cutting our expenses to be a grueling process but it was so much easier than I ever expected. We would just try something, and if it worked we’d get really excited about the money we saved.
My success with cutting our expenses is one of the main reasons I wanted to start my blog, Happy Humble Home. I was excited to share simple, actionable ideas that other people could use in their own lives, with their own families, to save money.
3. Keeping the Future Front of Mind
The biggest change that helped me while paying off debt was actually a mindset shift.
I stopped thinking about what I wanted right now, and instead started focusing on what I want in the long run.
I knew that I didn’t want to still be paying off my student loan when my kids were in college. And during the times that I was struggling, that’s what I would remind myself.
And my husband and I are always talking about how much more money we will have once we don’t have to make any debt payments. We’ll actually be able to save money for things that we really want, like remodeling our bathrooms.
This isn’t an easy mindset shift to make.
There were so many times that I wanted the instant gratification that came from take-out food or going out with friends or buying a cute new outfit.
I had to keep reminding myself that 5 years from now I wouldn’t remember that meal, or event, or outfit. But if I made the right choices, in 5 years I could be debt free. And that would have a profound impact on my family forever.
With practice, those hard choices became easier to make.
And now that I’m so close to being debt-free, it’s very easy to turn down temptation.
$93,000 in 3.5 Years
It’s a little scary to put all my real life numbers out there into the world. But It’s pretty amazing to take a step back and think about how far I’ve come. And It’s even more amazing to think about how close I am to the finish line.
My husband and I expect to be 100% debt free by the end of 2019. And once we are, we are never going back. Also, there will be a party.
In the meantime, I’m going to keep sharing my money saving tips and debt insights over on my blog, Happy Humble Home. I’m doing my best to empower everyone I can reach to fix their financial situation, just like I have. I’d be honored to be a part of your financial journey. You can join me here to get access to all of my best money saving tips and tools (including a printable debt payoff tracker!)
If your debt feels overwhelming like mine once did, I want you to know that this is not impossible. With a little intentionality, some smart choices, and healthy money habits you can pay off your debt and change your future. I know that if I can do this, you can too.
Do you have debt? What are you doing to pay off your debt?
My father had smoked for much of his adult life until he was 40.
That is until he had me. He told me that seeing the burn holes from his ashes on his white undershirt was the reason he was determined to quit because he didn’t want those ashes falling on his newborn son.
To quit smoking is one of the hardest challenges that many people addicted have to face but the benefits are huge.
Most people understand the health benefits that go along with quitting smoking but many might not know or appreciate the financial savings that goes along with breaking the habit.
One of those savings that you can experience is with your life insurance policy. We have shared in the past the cost of life insurance for smokers. The cost can be anywhere from two to three times what a typical nonsmoker would pay.
Even rates for people that chew tobacco can be expensive, but what happens if you are finally able to kick the habit? Are you still going to have to pay rates as if you are a smoker?
The good news is that if you kick the habit, you also have the potential to save a lot of money in your life insurance but if you are not working with an independent life insurance agent that knows what they are doing, that might not be the case. Let me explain….
Life Insurance For Someone Who Recently Quit Smoking
We recently took a call from a gentleman that had quit smoking 13 months prior. When he initially applied for life insurance, he was able to get with a company that would give him a standard rating even though he hadn’t quit smoking for one year. Many carriers will give you the benefit of the doubt so as long as you actually kicked the habit.
Since he had reached a year of quitting smoking, he was hopeful that he could reduce his rates even more. By the time he came to us, he had already talked to a few different agents and the most recent quote that he was given was a standard plus nonsmoker rate from MetLife with an annual premium of $1109 (see screenshot below). This was the independent agent that he trusted and felt knew what they were doing. Being the wiser, he decided to shop around just to make sure. Good thing he did.
Working With an Independent Life Insurance Agent That Knows Their Stuff
One of the biggest benefits of working with an independent agent is that they should be able to work with dozens of different carriers. But just because they can work with dozens of different carriers isn’t always a good thing if they don’t know the underwriting guidelines for each company. This situation was a case in point example.
Our potential client was quoted a standard plus rating with an annual rate of $1109. This is because MetLife will only give a preferred rating if the individual had quit smoking for greater than five years. I was confident that we do better. Much better.
Right now, the high risk life insurance companies that treat former smokers the most favorably will give you a preferred rating so as long as you quit smoking for a period of one year. Currently, these companies include Nationwide, Minnesota Life, and Principal. You can see their rates below. FYI, these premiums are based on the individual that was applying. He was approximately 40 years old and seeking a $1 million for a 20-year term.
20 Year Policy for $1,000,000
Principal
Minnesota Life
Nationwide
Male
20 Year Policy for $1,000,000
$924.40/YR
$965.00/YR
$1,485.00/YR
Female
20 Year Policy for $1,000,000
$767.70/YR
$785.00/YR
$1,065.00/YR
Non-Smoker Rates
As you can see from the chart above, just because you can get preferred doesn’t necessarily mean it will be cheaper. Nationwide would actually cost more for him at preferred than Metlife would at standard plus. A good independent agent will do their homework to find this out.
What was cheaper was the two other companies with Principal being the cheapest at $924 per year.
We were able to save the client $185 per year because we knew which carriers would approve him at preferred.
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How much Insurance Coverage you need
First you have to choose the best insurance policy to fit your needs. Then you need to calculate your life insurance needs.
Thankfully, it’s easy to do. To start, you need to combine all of your debt. How much debt would you leave to your family? Make sure your life insurance is bigger than that number.
After you’ve got all those debts together, not you need to multiply your paycheck. Not only will your spouse or kids have to pay your debts, but they will still have to pay for monthly expenses. Make sure your plan can replace your paycheck.
Bottom Line on Quitting Smoking
If you’ve quit smoking and are looking for affordable life insurance, it is possible. If you’ve quit for over a year, getting a preferred rating is a cinch with the carriers mentioned above. Please keep in mind that you still have to meet other underwriting guidelines and can’t have any high risk conditions. If you’re seeking a preferred plus rating, you’re looking at least having quit for 1 year.
Each company has a different system for rating applicants that are smokers or used to be smokers, which means you could receive drastically different premiums for the same coverage. Finding the best companies for your situation could mean thousands of dollars in your wallet.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
When you are trying to tighten down the hatches on your spending, you are doing everything possible to stick to your budget.
You are determined to stick to your budget this time around. But, you always hear that budgeting can be hard.
Well, here are some quick budgeting tips that will make sure to stick to your budget.
As most new budgeters learn, they struggle to stick to a budget for their monthly expenses. It is a natural process everyone goes through.
Budget, if you are looking for an easy button, then learn which payment type is best if you are trying to stick to a budget.
Especially if you spend a lot of time on social media, studies have shown you are more likely to overspend. So, you must learn which payment type will have you stick to a budget.
Then, you may be wondering and wanting help deciding which payment type is best for you.
The Optimal Solution Payment Type Solution
The most efficient payment type is something that is instantaneous and there are no fees associated with the transaction.
Cash is the most efficient payment type: Cash payments are usually the most efficient and convenient way to pay for goods or services.
Credit cards can be a less favorable option: Credit cards tend to have high-interest rates and can lead to financial disaster if used irresponsibly.
Debit cards are a great way to keep your spending within your budget: Debit cards should be considered a top priority for budgeting because they keep you within your spending limits.
Developing a budget will help you avoid financial disaster: A budget helps you stay organized and make informed decisions about which payment method works best for you.
Today, there are so many options on which payment type to use in today’s online world.
1. Cash
Cash is a payment type that can be used to reduce debt spending. It is versatile and can be used for a variety of expenses, such as groceries, medical bills, and gym memberships.
Cash is an excellent choice for people just starting to budget and save.
It is more restrained than credit or debit cards. The envelope method of cash budgeting can be used to train your brain to reduce spending. Cash is the most traditional payment method and has the fewest drawbacks. However, you need a safe place to store your cash, and some stores may not accept it.
Benefits of Cash:
Cash is an excellent payment type when your financial goals are to reduce debt spending.
Cash is a finite payment method that prevents you from overspending.
You have a set amount of money to spend each month, so there’s no chance of overspending.
Easy to track with the envelope method: Utilizing the envelope method ensures that you are tracking your spending (i.e groceries, gas, medical bills) and making sure that you aren’t overspending.
Cash is a quick and easy way to pay for goods and services.
No Fees. No maintenance fees or interest rates as credit cards. Cash is just plain cash – printed paper of currency.
You can avoid high fees associated with card transactions: There are no associated fees when paying with cash, making it the cheapest option overall.
Cash discounts may be available. Since you are paying with cash many small businesses offer a cash discount of 2-5%.
You can use cash at any store: No need to carry around extra cards or checks.
It’s easy to get cash: You can easily get cash and make extra cash.
There’s no need for bank account details: No need for bank account details means you’re free from identity theft risks and other inconveniences that come with having a bank account.
Cash allows you to skirt some financial regulations: Because cash payments don’t fall under the purview of many financial regulations, businesses can take advantage of loopholes in the law that allow them to charge higher interest rates on loans or engage in shady business practices. (highly recommended to stay above book)
Cons of Cash:
Possibility of losing or stolen cash: Keep your cash in a safe place!
You need a safe place to store your money: Another disadvantage of using cash is that you may need a safe place in which to keep it – some stores don’t accept it as a payment method.
Why Choose Cash?
Total control over your money, so there’s little chance of unexpectedly running out of funds.
Cash is a great way to stay on budget, as you can easily track your spending and see where you need to cut back.
Unpleasant to spend money with cash, which can help train your brain to reduce spending.
Cash is a quick and easy way to pay: Using cash eliminates the need for banks, credit cards, or other forms of payment.
Verdict: Paying with cash is the best method for budgeting and saving.
Overall, cash is a great payment type when it comes to budgeting. You can immediately see how much money you’ve spent and what needs to be cut back.
You can’t make impulsive buying decisions with debit cards or credit cards.
With a finite amount you can spend, cash is an excellent choice to prevent overspending. According to research, paying with cash can feel unpleasant, which can train your brain to reduce spending as much as possible.
2. Credit cards
Credit cards offer a number of benefits, including convenience, cash back, and the ability to make large purchases or pay bills in case of emergency. However, credit cards also come with credit card debt and can lead to overspending and financial problems if not used carefully.
For many, credit cards are the easiest way to blow your budget because you don’t have control over how much money you spend.
It is possible to overspend with credit cards if you are not mindful of what you charge.
On the flip side, this is a preferred method as many credit cards also offer rewards programs that give you cash back or points for purchases. If you make the conscious decision to use credit cards, you must make payments on time to avoid penalties.
Benefits of Credit Cards
Credit cards are convenient: Convenient to use and don’t have to worry about losing cash.
Use a credit card if you are disciplined and have strict spending habits: If you are disciplined and have strict spending habits, then using a credit card can work well for budgeting purposes.
Flexibility on larger purchases: Some benefits that come with having a credit card include more cash flow as well as being able to make larger purchases.
Credit cards provide support in times of crisis: Many credit cards offer extended services that can help like 24-hour fraud protection, lost wallet services, traveler’s insurance, and many other benefits – check each issuer for details.
$0 Liability on Unauthorized charges: Your credit card company will not be held responsible for any charges that were not authorized by you. This means that if you did not authorize a charge in person, online, or otherwise, you will not be responsible for it.
Fraud protection: Check your credit card issuer, but many offer fraud protection.
New card introductory APR is helpful to pay down debt: The introductory APR for the new card may not last long.
Payments on balance transfer should be manageable: Make sure that the payments on your balance transfer are manageable.
Points: You can accrue points along with your spending which can be a great perk.
Credit card interest rates are significantly lower than payday loans: Interest rates on credit cards are usually much lower than payday loans.
Due Date is After your statement closes. Since your bill cycle is at least another 21 days between the closing date for your statement and the due date, it gives you flexibility. Personally, I still account for the credit card bill in the same month that it was accrued.
Cons of Credit Cards
Potential for credit card debt: When using a credit card, be aware of your credit limit and the interest rate that you will have to pay on your debt. Also one of the categories of debt.
Credit limit often leads people to spend money: The credit limit often leads people to spend money by giving them a false sense of security, when they should stick to a budget and pay attention to their credit card statement and the billing cycle.
Credit card overspending can lead to debt: Consider the purchase if it is essential or delay it if possible.
Ability to easily purchase something you cannot afford. Buying something that you don’t have the money saved up for will cost you interest fees associated and maybe even with a credit card balance transfer.
There are a number of fees associated with a balance transfer: Transfer fee, interest on new purchases charged to the card.
Your introductory APR may not be valid if you make too many payments late: If you fall more than 60 days behind on payments your introductory APR might be canceled and you may face higher interest rates.
Credit score can suffer from debt: When you carry a credit card balance or don’t pay your monthly bills on time, you will lower your credit score.
Avoid carrying a balance: Pay your statement in full each month to avoid paying interest and maximize your grace period.
Key Takeaways on Credit Cards
Make sure to pay attention to the dates: Don’t spend more than you can afford, and make sure you’re making your minimum monthly payments on time so that your debt doesn’t increase over time.
A credit card can be used for budgeting only if you’re very disciplined: If you know that overspending is NOT an issue and you pay the credit card’s monthly balance in full, then using a credit card is fine.
Credit card transactions usually take several days to register in the feedback system: Something to look out for!
You can step back into debit cards or cash if needed: If credit cards are not for you, there are other options available such as debit cards or cash
3. Debit cards
Debit cards are a good option if you want to stick to a budget because the predetermined amount of funds can help you stay within your means. Additionally, debit cards are more convenient than cash and just as accepted as credit cards in most places.
A debit card works more similarly to cash than to credit cards.
They provide an easier way to track your spending and avoid having to carry a lot of cash.
Pros of Debit Cards:
No Need to Carry Cash: A debit card is better than cash because you don’t have to carry a lot of paper money and change around, and they’re also safer.
Debit cards are faster and easier to use: Debit cards work just like credit cards – withdrawing cash, making purchases, and paying bills – but they are linked directly to your bank account, so there is no need to carry around a separate cash envelope wallet or purse for them.
A debit card is a good option if you want to stick to a budget: Debit cards come with a predetermined amount of funds that you can spend from your bank account just like cash.
Tracking payments is easy with debit cards: Your debit payments will appear on your issuer’s dashboard, which you can monitor anytime from any location.
Convenience: Debit cards are more convenient to use and faster than needing to write a check or carry around cash. Plus they don’t add to your debt.
Shopping online is easy. You can use your debit card to make online purchases with your bank account, and digital banking tools make tracking your spending easy.
Points: Some debit cardholders can earn points for spending on their cards, which can be redeemable for rewards such as cash back or gift cards. This is new to compete with credit cards.
Fraud protection is typically offered for free with most debit cards—meaning if your card is stolen or used without your permission, you can get your money back.
No impact on your credit report. When you use a debit card, the funds are actually withdrawn from checking or savings accounts so there is no credit reporting occurring.
Cons of Debit Cards:
An overdraft on a debit card can happen when a purchase exceeds the amount of money in the checking account, leading to overdraft fees.
Funds on hold with fraudulent charges. If your account gets hacked, your losses will be limited since most banks protect their users against fraudulent charges and online purchases with their accounts. However, those funds will be held while they investigate and you may be liable for $50.
No chance to improve your credit score. Since you are not borrowing money, you are unable to improve your credit score.
Debit cards are a great way to keep your spending within your budget and avoid overspending which can lead to many detrimental issues.
Regardless of the overdraft fee, debit cards are still better than cash because they’re safer and easier to carry around.
4. Checks
Checks… do people still write checks? Why yes they do!
Checks offer a few benefits as a payment method, even though they are slowly being replaced by more modern options.
This can help you keep track of your spending and make sure you do not overspend. Additionally, if you ever need to dispute a charge, having a check can be helpful in proving what you paid for.
What is a check?
A check is a written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer from the check writer’s account. The date is usually written in month/day/year format. The signature of the check writer is usually on the line below “Pay to the order of.”
There are three main types of checks:
A cashier’s check is a check guaranteed by a bank, drawn on the bank’s own funds, and signed by a cashier.
A certified check is a personal check for which the bank has verified that there are sufficient funds to cover the payment.
A personal check is one that you write yourself and that is not guaranteed by the bank.
Pros of Checks
Checks are still a payment option: Checks are one of the traditional payment methods, but it is slowly dying out because of modernization.
Physical written record. It can be helpful to have physical copies of checks in addition to digital records through the bank.
You need to make both digital and physical copies of the check: Save check stubs but also transfer the information to a budgeting system.
Cons of Checks
Saving check stubs is helpful, but you still need to transfer the information to a budgeting system: Useful for tracking spending, but you’ll likely want more detailed records than just check stubs.
Not as convenient as credit or debit cards.
5. Apple Pay or Apple Cash
Apple Pay is easy to use and convenient since you only need to connect your smartphone to your cards and bank accounts via the app.
It is easy to use since you just hold your phone up to the reader and wait for the payment screen to appear.
You can even get cash back with apple pay.
Pros of Apple Pay:
Apple Pay is easy to use and convenient: You only need to connect your iPhone to your cards and bank accounts via the app.
You don’t need to carry any extra cards or cash: No need for additional cards or cash when you’re out and about
You can use Apple Pay on different devices: You can use Apple Pay on your iPhone, iPad, and Mac.
Transactions are secure: Your transactions are secured with Touch ID or a passcode.
Set up Spending Limits for each user. This way you can make sure you (or others with authorized access) are not spending more than you intended. Learn how.
Protection of Data during transactions. Your actual credit card number is changed to a different digital number, which allows limits your card number’s exposure.
Cons of Apple Pay:
Not widely accepted (yet). This method of payment is 100 percent guaranteed. While many stores offer apple pay, not all do quite yet.
The same rules apply if you load apple pay with a debit or credit card drawbacks include late fees, interest rates, and overspending: Keep that in mind when choosing Apple Pay as your payment method.
6. Mobile wallets like Google Pay, Samsung Pay, Venmo, or Zelle
Mobile wallets are digital payment systems that allow you to pay for items with your smartphone. Many people find mobile wallets are very convenient and becoming a traditional method of payment (such as credit cards).
With mobile wallets, you are making digital payments without having to carry around cash or cards using just your smartphone.
Mobile wallets are easy to use and provide instant payment convenience, making them perfect for shopping online.
Pros of Mobile Wallets:
Mobile wallets use credit cards and debit cards: Connect your smartphone to your bank accounts and use it for digital payments.
Mobile wallets are easy to use and convenient: Instant payment convenience makes them perfect for shopping online as well.
No need for cash or cards: No need for cash or cards.
Strong secuirity features provide privacy and security features that ensure your personal information is safe from data breaches and unwanted charges.
You can make purchases without having to show your identification: You can make purchases without having to show your identification.
Additional Layer of Security. Additionally, mobile wallet data is protected with verification, such as fingerprints.
Cons of Mobile Wallets:
With Zelle and Venmo, it is easy to send money to the wrong person or add an extra zero and send more money from planned. More often than not, it is difficult to recover your money.
You need to be disciplined when using a mobile wallet: Pay attention to late fees and interest rates, as well as the amount you spend in a month.
7. Prepaid Cards or Gift Cards
A prepaid card or a gift card could be right for you. The advantage of these is the mere fact that you reached the limit is enough to deter overspending.
It can make you think twice about whether you need to purchase an item or not.
Pros of Prepaid Cards and Gift Cards
Easy to use: Prepaid and gift cards are easy to use and manage your finances with.
The mere fact that you reached the limit is enough to deter overspending: It can make you think twice about whether you need to purchase an item or not.
No strings attached: No need to worry about any fees associated with the prepaid card once activated.
Privacy: The prepaid card does not track your spending or use any personally identifiable information.
Credit Score Doesn’t Matter: Your credit score does not matter when obtaining a prepaid card.
Cons of Prepaid Cards or Gift Cards
Losing a prepaid card is not a fun experience. Contact the prepaid card issuer right away to protect the funds on the prepaid card.
Fraud protection: Consider whether your prepaid card issuer offers any theft or fraud protection, as not all providers offer this feature.
Prepaid cards have limits on how much money you can load onto them, which can be frustrating if you need to make a large purchase.
8. PayPal
PayPal is a very convenient way to pay for items online or in person. It is widely accepted and used by many people.
PayPal is a digital payment service that offers convenience and ease of use. You can use them to send money to people or pay for online purchases.
However, because these services can only be used online, they should not be relied on as your sole method of budgeting and tracking expenses. Instead, consider Paypal in combination with another budgeting tool, like a spreadsheet or app, to get a fuller picture of your spending.
Pros of PayPal:
PayPal is one of the most popular online payment methods: Widely accepted and used by many people.
You can use them to send money to people or pay for online purchases: Help you review your spending prior to purchase.
Cons of Paypal:
EasyTarget for phishing scams. A phishing scam is when someone tries to trick you into giving them your personal information, like your password or credit card number. They might do this by sending you an email that looks like it’s from PayPal, but it’s not. Or they might create a fake website that looks like PayPal. If you enter your information on these sites, the scammers can then use your account to make purchases or send money to themselves.
Reputation for poor customer service. This is evident in their customer service ratings, which are some of the lowest in the industry. The majority of complaints against PayPal revolve around poor service received when asking for assistance with fund freezes and account holds.
9. Cryptocurrency (ie: Bitcoin)
Cryptocurrencies offer a new and innovative way of handling payments. They’re not yet widely accepted, so there’s potential for businesses to get in on the ground floor with this new technology.
However, because cryptocurrencies are so new, it’s uncertain if they will be regulated or not. This could pose a challenge for businesses down the road.
Pros of Crypto
Not subject to the same regulations as traditional currency, which makes them appealing to those who want to avoid government intervention.
The valuation of Crypto changes rapidly. If you are smart with crtyple this is a great way to spend your crypto coins.
Cons of Crypto
Cryptocurrencies are not accepted everywhere: Cryptocurrencies are not accepted by most organizations yet, which it makes it difficult to use them in day-to-day life.
It’s unclear if cryptocurrencies will be regulated: It’s uncertain if cryptocurrencies will be strictly regulated or not. This poses a challenge for those who want to use them as a payment method.
Bitcoin and other cryptocurrencies are still in their infancy: Bitcoin and other cryptocurrencies have only been around for a few years, so they may still face challenges in the future.
Here are the most popular budget apps today:
Other Payment Methods:
ACH payments
ACH Payments is an excellent way to pay bills and other financial obligations: You can easily set up a billing cycle for recurring payments, making it safe and convenient.
Fewer people are aware of your transactions when using ACH payments, reducing the chances of fraud or theft.
Key Facts:
Fewer people know about your transactions when using ACH payments, reducing the chances of fraud or theft.
Your checking account information is not shared or accessed by the system in any way.
You can quickly pay bills and other expenses with ACH payment: Financial institutions offer this as part of their deals.
When setting up recurring bills with ACH payment, you are aying your bills on time is important for maintaining a good credit score.
Pay attention to your check account balances: Make sure you have enough funds in your check account to avoid paying overdraft fees.
Money orders
A money order is a document that orders the payment of a specified amount of money. Money orders are convenient because they can be bought at many locations, including post offices, banks, and convenience stores.
To get a money order, you will need to fill out a form with the payee’s name, the amount of the payment, and your contact information. You will then need to purchase the money order with cash or a debit card.
To cash a money order, you will need to take it to a bank or post office. You will need to show identification and sign the back of the money order. The teller will then give you the cash for the payment.
More secure than cash: Money orders are more secure than cash because they don’t require a bank to make the transaction.
Less convenient: money orders are less convenient because you must purchase them in person.
Able to trace. They are also more secure than cash because they can be traced if lost or stolen.
Wire Transfers
Wire transfers are a more secure way to transfer money than traditional methods like checks and cash. These are sent through the banking system and are usually processed within two business days.
Typically, wire transfers are used when sending and receiving large sums of money (over $10000).
More secure than cash: Wire transfers are more secure than cash as the bank verifies there is enough money to make the wire transfer.
Fees involved with using a wire transfer. Most institutions charge for handling a wire transfer.
What method of payment is best?
Cash is the most widely accepted form of payment, but debit and credit cards are very popular.
The payment method that is best for you depends on which one helps you to stick to your budget and spend less money. The goal is to be financially stable.
What method is best for sticking to a budget?
There are several different types of budgeting methods that people use in order to manage their finances. Many people focus on using the 50/30/20 method, in which each percent corresponds to a different category of expenses.
There are plenty of budgeting tools available today to make sure you stick to your budget.
You need to find what works best for you. At the end of the month, you want to spend less than you make. That is the winning combo!
1. Budgeting App
There are many budgeting tools available online, which can be helpful as it can be easier to track your progress and budget over time.
You can use various popular budgeting apps like Quicken, Qube Money, or Simplifi.
These apps can help you track your spending, set goals, and stay on track with your budget.
2. Paper and Pen or Simple Spreadsheet
Some people find that they prefer using a simple spreadsheet or paper budget. This may be due to personal preference or because they find it easier to understand and use.
Additionally, using a paper budget may help you stay more organized as you can physically see where your money is going.
Options to get you started include our own budgeting spreadsheets or using an automated system like Tiller.
3. Envelope budgeting method
The cash envelope system is a good way to stick to a budget because it is rigid and based on envelopes and cash. You can’t get more money until your cash payday. So, this system helps you track your spending and budget better.
However, using only cash can have drawbacks as having large amounts of cash on hand can be risky.
The envelope method gives you a sense of control over your spending and makes it more tedious to write down your transactions. If you find writing down your transactions tedious, the envelope method may be too much for you.
4. Know Your Budget Categories and Track expenses
Tracking expenses is essential to move ahead financially: Knowing what you have spent in each category will help you make better financial decisions.
Be specific with your budgeting categories. Don’t make it too complicated. Always remember to include household items, clothing, and groceries when tracking expenses.
5. Prioritize your Budget Plan
A budget can provide a realistic picture of your finances, help reduce stress related to money matters, and guide you toward achieving your goals.
Creating a budget can help ensure that you are able to meet your financial obligations and still have money left over for savings and other goals. A budget can also help you track your spending so that you can make adjustments if necessary.
Make a budget plan: This will help you stay on track and make sure that you are spending your money wisely.
You decide where to spend money: A budget helps you set future goals and achieve your financial goals.
Creating a budget can help reduce stress: If you tend to get stressed about money matters, creating a budget can give you peace of mind.
A budget has other benefits beyond financial ones: If you want to achieve something in life, creating a budget can help guide you in the right direction.
See where to cut back spending. You can also look at your past spending habits to see where you can cut back. Sometimes it may be necessary to save more in order to achieve long-term goals, like buying a house or having a wedding. Always be mindful of your budget when making payments and spending money.
It’s a three-step process that involves basic math: Making a budget is simple and requires only basic math skills.
Stay on track: Making a budget plan will help you stay organized and keep track of your expenses.
A budget plan will help you stay on track and make sure that you are using the best payment type for your budget.
Making a budget is an easy way to save money. By following a few simple steps, you can keep track of your expenses and make sure that you are spending your money wisely.
Which type of payment is best for sticking to a budget?
One of the main pros of using cash as a method of payment is that it is the most efficient way to keep track of your finances. This is because it is very easy to budget when you are only dealing with cash.
However, many people prefer debit or credit cards are the best type of payment. They are more convenient than cash and can help you keep track of your spending. However, if you have a bad credit history or a low credit score, credit cards may not be the best option for you.
Cash payments are the most efficient: Most convenient and easiest to keep track with cash envelopes.
Credit cards allow you to accrue points along with your spending: These are a great benefit and one that can be a perk if handled well as part of your budgeting process. As long as pay them off in full each month to avoid credit card debt, high-interest rates, and other negative consequences.
Debit cards are also a good option for sticking to a budget. They can be used like credit cards but with less risk of debt.
Cash-based payments are a newer option and are more reliable: May not have as many negative consequences as other payment methods such as credit cards or loans.
What Not to Use when you are Trying to Stick to a Budget
You need to steer clear of these types of payments if you want to be financially stable person.
Personal loans
Personal loans are a risky way to budget. However, if you need the money for an emergency or unexpected expense, a personal loan can be a lifesaver.
There are many risks to consider and other ways to lower your spending before resorting to a personal loan.
Loans can cause budgeting problems: Loans can mess up your budget and make it difficult to stick to spending plans.
Taking out a personal loan just for the sake of having money can disrupt your budgeting: Consumers often borrow money in order to pretend they’re doing better financially than they really are.
Borrowing money is usually not a good idea: When you borrow money, you may find that you cannot handle seeing low checking account balance, which can lead to deeper debt problems.
Payday Loans
Payday loans are a bad option for someone looking for a long-term solution. They are expensive, and there is a high chance that the person will not be able to pay back the loan.
The interest that is charged is also high, and it can add up quickly.
Write bullet points about what happens with a payday loan
Payday loans can trap people in a cycle of debt, as they are often unable to pay back the loan in full on the due date.
When someone takes out a payday loan, they are borrowing money from a lender in a short amount of time, usually two or three days.
Payday loans are often expensive, with interest rates that can be above 300%.
Debt Consolidation Loans
Debt consolidation can be a good way to manage your debt because it can result in a lower monthly payment and extended payments may impact your financial plan. You can use a debt consolidation calculator to estimate how much debt you can afford before taking out a consolidation loan.
Debt consolidation loans also provide convenience because they have lower interest rates than payday loans. However, be careful when consolidating your debt because it is possible to overspend and lose your introductory APR.
You may be able to pay off your debt with one monthly payment: A consolidation loan often results in a much lower monthly payment than all of your previous monthly payments combined.
Extended payments may impact your financial plan: Take a look at how these extended payments will impact your financial planning.
You can estimate how much debt you can comfortably afford: use this tool – Tally .
It is possible to overspend with debt consolidation: If you spend more money than you planned on your day-to-day expenses, this could increase your debt. Consider if the purchase is necessary or if it can be delayed.
You may lose your introductory APR: If you fall more than 60 days behind on payments, you will likely lose your introductory APR and may even trigger a penalty interest rate.
You need to be careful when transferring a balance: Transferring a balance can also forfeit your grace period and you’ll need to pay interest on new purchases charged to the new card.
What type of payment method is best for sticking to a budget?
There are a variety of payment methods available, and each has its own benefits and drawbacks. It’s important to choose the payment method that’s best suited for your business and budget.
A payment method that allows you to stick to a budget is the best option.
FAQs
There are three main types of payment methods: cash, debit cards, credit cards, and cash-based payments.
The envelope budgeting method is a simple way to create a budget. You will need envelopes and divide your money up into the different categories that you spend money on. You will then put the corresponding amount of money into each envelope. This method can be helpful if you have a hard time sticking to a budget.
The zero-based budgeting method is a more methodical way to create a budget. With this method, you track every penny that you earn and spend. This can help you to see where your money is going and make adjustments accordingly.
A debit card is a plastic card that is linked to a checking account. Customers can spend money by drawing on funds they have already deposited. An overdraft on a debit card can lead to overdraft fees, which have high-interest rates.
A credit card is a plastic card that allows customers to borrow money up to a certain limit in order to purchase items or withdraw cash. Using a credit card can help build credit or improve your credit score.
There are a few different ways to use a credit card. You can use it to check your balance and review your spending history, which can be helpful in staying accountable.
Credit cards also offer online tools which make the analysis of your spending easier which can be helpful in tracking your budget.
Finally, you can use a credit card to rebuild your credit score by using it responsibly and paying off the balance in full each month.
Which payment type can help you stick to a budget?
When it comes to choosing a payment type that will help you stick to a budget, there is no one-size-fits-all solution.
The best payment method for you will depend on your specific needs and preferences.
When you are creating a budget, it is important to consider which payment type will help you stay on budget. Different payment types work better for different people, so it is important to experiment and find the one that works best for you.
As I stated for me, I have learned how to use credit cards to maximize cash back. But, I learned how to budget with cash when first starting.
Please pay attention to your budget and how it changes over time, as different payment types may work better at different stages of your life.
Consequently, I hope that this guide has given you a better understanding of the different payment types available and helped you narrow down your options. There are a variety of payment types that can help you stick to a budget, so it’s important to research each one carefully.
I highly recommend using an app to track your expenses and know where you spend your money. By developing a budget and choosing the right payment type, you can stick to your financial goals.
Know someone else that needs this, too? Then, please share!!
Long-term financial goals are an essential part of financial planning. They help you define your aspirations and create a roadmap for achieving them.
Long-term goals aren’t easy to achieve. But why?
Could it be that motivation wanes over time? Perhaps external circumstances change. Maybe it has to do with the feasibility of the goals.
Many people have trouble sticking to something over the course of a single year let alone several years or decades.
Perhaps that’s why long-term goals – like most financial goals – are so difficult to achieve.
How do we fight against whatever it is that holds us back from achieving these financial goals? Is it possible to win?
Yes. It is.
Today I’d like to share with you some ways you can achieve your long-term financial goals. I won’t claim it will be easy, but it will be worthwhile.
So whether you need to pay off debt, build an emergency fund, save for your kids’ college education, or invest for retirement, here are some ways you can make it hap’n, cap’n.
Why Long-Term Financial Goals Are Important
Long-term financial goals provide direction and motivation for your financial decisions. By defining your long-term goals, you will have a clear picture of what you want to achieve and what steps you need to take to get there. Setting long-term financial goals can help you:
Stay focused on your priorities: Setting long-term financial goals will help you prioritize your financial decisions and avoid getting distracted by short-term financial needs or impulses.
Achieve financial stability: Long-term financial goals can help you create a safety net, build wealth, and prepare for unexpected events such as medical emergencies or job loss.
Enjoy the benefits of compound interest: Investing in long-term goals, such as retirement or education, can help you take advantage of the power of compound interest and grow your wealth over time.
1. Capture your long-term goals in your to-do list.
Long-term goals of the financial sort are usually more like projects than individual tasks.
For example, if you want to pay off your debt, chances are that you don’t just have one credit card to pay off – you might have three credit cards, a vehicle loan, and a student loan to overcome (if not more).
“Pay off debt” would be the project. “Pay off Visa #1” would be the task.
The truth is that without writing down your projects and tasks within a task management system of some type, you’re much less likely to accomplish your long-term goals.
There’s just something about seeing your long-term goals on paper (or on a screen) that makes them real. The very act of writing them down is a type of commitment.
Give it a whirl. Write down your long-term financial goals and review them on a regular basis.
2. Don’t bury your long-term goals.
It’s not enough to write down your long-term financial goals. Additionally, you need to make them readily available to your eye.
One idea that I’ve found works well is to write down your goals on a whiteboard where you can’t help but see them. But that’s not for everybody.
The point is that you need to find a way to see your long-term goals in the context of all your other goals (namely, your short-term goals). If only your short-term, urgent goals are displayed for you to see, you’ll tend to focus on those instead of kicking butt on your long-term goals.
Don’t bury your long-term goals. They’re important too!
3. Dedicate certain days of the week to long-term goals.
One helpful tip I derived from Strategic Coach was to dedicate certain days of the week to certain goals. This has proved to be very helpful in my own life, and I believe it will in yours, too.
For example, you could dedicate a certain day of the week to managing your finances and brainstorming ways to improve your financial future. Perhaps you have a day off of work that would work best for you.
Now, I can hear you saying, “Oh Jeff, if I only had a day for such tasks – I’m way too busy with other stuff!” That’s fair.
But here’s the thing, you don’t just have to make this day about finances – you can make it about your other long-term goals too. Add in health, family, and other areas of responsibility. Consider this day (or these days) of the week to be all about bettering yourself and your life. Can’t you make time for that?
4. Prioritize your long-term goals properly.
When it comes to long-term financial goals, you need to properly prioritize them. There are some preliminary goals that should only take you less than a month, like setting up a budget and cutting expenses, but we’ll leave that for another article.
What are some common long-term financial goals and in which order should you complete them? Generally, I recommend you complete the following long-term financial goals in the order they are displayed below:
Build Your Emergency Fund
Think of your emergency fund as the foundation of your financial future. Without some liquid money, you’re going to be out of luck when financial disaster strikes. Believe me, they happen.
Your car engine might explode. Your kneecap might explode (ouch). Your water heater might explode. There are so many things that can explode . . . and it’s not easy to just walk away from those explosions while keeping your cool. It’s stressful!
But you know what would make those situations a little less stressful? You guessed it: an emergency fund baby!
Wipe Out Your Debt
Once you have your foundation in place, it’s time to knock out that debt. This can take several years or a few months – it depends on how much debt you have and how quickly you can shovel money at it.
Write down all of your debts and attack them one by one. It’s easier that way.
Start Investing for Retirement
Now it’s time to start investing for your latter years. Why? It’s possible that your earning potential can go down when you’re physically unable to work. Who knows, you might have a self-sustaining business upon reaching retirement age, but don’t count on it. Invest for the future!
Helping people retire well is what I do.
Start Saving for Other Long-Term Goals
This might include saving for your kids’ college education, purchasing a new vehicle, saving for a home renovation, or another goal that will take some time.
By prioritizing your long-term goals in the proper way, you can ensure that should you experience a slump in income, you aren’t wiped out due to a lack of financial planning.
5. Discover and focus on your motivations.
I’m convinced that one of the main reasons people don’t accomplish their long-term goals is because they really haven’t discovered their motivations.
For example, everyone knows it’s a good idea to pay off debt. It’s a financial goal that’s been embedded in our minds by countless financial advisors. But unless you discover your motivation for paying off debt, chances are you’ll give up before you achieve your goal.
In fact, if you’re paying off debt for the sake of paying off debt, you might as well give up now. You’re not going to be motivated enough to get the job done.
Instead, focus on some common motivations that can become your motivations. Here are some great reasons why people want to pay off debt:
To not have to pay interest on their purchases
To free up money for vacations
To free up money for investing for retirement
To not have to worry about those bills
To reduce the amount of stress in their lives
To free up the time it takes managing debt to focus on family
These are just a few of the motivations of others. What’s your motivation?
Assign a motivation for every long-term goal you have. Otherwise, you’re just trying to accomplish your long-term goals for the sake of accomplishing them – that’s not a real motivating factor if you ask me!
Long-Term Goal Examples
Long-term financial goals can take many forms, depending on your values, aspirations, and time horizon. Here are some examples of long-term financial goals in the SMART framework:
Example 1: Save for Retirement
Specific: Save $1 million by age 65 for retirement.
Measurable: Save $500 per month in a retirement account.
Achievable: Based on current income and expenses, it is feasible to save $500 per month for retirement.
Relevant: Retirement is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal by age 65.
Example 2: Pay off Debt
Specific: Pay off $30,000 in credit card debt.
Measurable: Pay $500 per month towards credit card debt.
Achievable: Based on current income and expenses, it is feasible to pay $500 per month towards credit card debt.
Relevant: Paying off debt is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal within 5 years.
Example 3: Invest in Education
Specific: Save $50,000 for a child’s college education.
Measurable: Save $200 per month in a 529 college savings plan.
Achievable: Based on current income and expenses, it is feasible to save $200 per month for college education.
Relevant: Investing in education is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal in 18 years.
Example 4: Buy a House
Specific: Save $100,000 for a down payment on a house.
Measurable: Save $1,000 per month in a high-yield savings account.
Achievable: Based on current income and expenses, it is feasible to save $1,000 per month for a down payment.
Relevant: Buying a house is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal in 5 years.
Example 5: Start a Business
Specific: Launch a profitable business in the next 5 years.
Measurable: Develop a business plan and secure funding within the next 12 months.
Achievable: Based on current skills and experience, it is feasible to develop a business plan and secure funding within the next 12 months.
Relevant: Starting a business is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Launch the business within the next 5 years.
Long-Term Goal
Specific
Measurable
Achievable
Relevant
Time-bound
Save for Retirement
Save $1 million by age 65 for retirement.
Save $500 per month in a retirement account.
Based on current income and expenses, it is feasible to save $500 per month for retirement.
Retirement is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal by age 65.
Pay off Debt
Pay off $30,000 in credit card debt.
Pay $500 per month towards credit card debt.
Based on current income and expenses, it is feasible to pay $500 per month towards credit card debt.
Paying off debt is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal within 5 years.
Invest in Education
Save $50,000 for a child’s college education.
Save $200 per month in a 529 college savings plan.
Based on current income and expenses, it is feasible to save $200 per month for college education.
Investing in education is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal in 18 years.
Buy a House
Save $100,000 for a down payment on a house.
Save $1,000 per month in a high-yield savings account.
Based on current income and expenses, it is feasible to save $1,000 per month for a down payment.
Buying a house is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal in 5 years.
Start a Business
Launch a profitable business in the next 5 years.
Develop a business plan and secure funding within the next 12 months.
Based on current skills and experience, it is feasible to develop a business plan and secure funding within the next 12 months.
Starting a business is a long-term financial goal that aligns with personal values and aspirations.
Launch the business within the next 5 years.
Need More Long-Term Goal Examples?
Knowing I’m not the only goal-setting freak that exists in this world, I asked fans from the Good Financial Cents Facebook page what their long-term goals (big shout to the Fincon community for contributing, too!).
Fincon Community Long-Term Goals
Here’s a great list of examples of long-term goals:
Bob Lotich at SeedTime.com says:
[I want] to provide a comfortable life for my family, to have enough cash to maintain a flexible lifestyle, and to use everything else to financially support charities and organizations that are making a huge impact on the world.
Ryan Guina at TheMilitaryWallet.com says:
[I want] to become financially independent. What this means to me: to have no consumer or mortgage debt and have enough resources in savings and investments to cover my everyday living expenses without relying upon income from my job. This will provide more freedom in pursuing activities based on fulfillment vs. the need to generate revenue.
Larry Ludwig at InvestorJunkie.com says:
[I want] to be financially free. I define it specifically as to accumulate $10,000,000 in investment assets that can generate at minimum 4% per year of income.
Teresa Mears at LivingOnTheCheap.com says:
[I want] to support myself, both now and in retirement, and enjoy life. What else is there?
Steve Chou at MyWifeQuitHerJob.com says:
[I want] to generate enough income so that I can spend more time with my family and be there for the kids. Growing up, my parents worked their butts off so I could go to a good school but I didn’t see them very often during the week. With my kids, I’m going to send them to a good college and always be present.
Grayson Bell at DebtRoundup.com says:
[I want to] build a business and a financial stockpile to allow my family and I to travel when and where we want to. I don’t want to be stuck due to a job or financial situation. This will require scaling my business and looking for more opportunities to expand my passive income streams.
Robert Farrington at TheCollegeInvestor.com says:
[I want] to generate enough passive income to replace my current income. This will require a long-term strategy of earning more money (through my salary and side hustles) and investing the excess. The goal, of course, is to retire early while still being able to provide the quality of life I want.
My Lifetime Goals
Long-term goals can be difficult to articulate but deserve to be written down. I previously shared my lifetime goals on this post. Looking them over I recognize I would make a few tweaks, but; for the most part, they are still align with what I want to achieve in life. Here’s a look:
1. Spiritual leader of my household. I want my kids to see me first as a God-loving father who puts his faith first before success. I want to continually love and support my wife, and do so in an Godly manner.
2. Live a long and filling life with my wife and family. Raise my kids with the philosophies of: working hard, but not sacrificing “work” for what you love; love first; and treat people with respect (Golden Rule)
3. Have several multiple-system driven businesses that produce >$100,000 a month of passive income.
4. Live in multiple countries (5+) for an extended period of time (minimum 3 weeks) with entire family
5. Inspire over 1,000,000 people to invest in themselves. This can be through traditional investing (Roth IRA, 401k), obtaining a higher degree or certification, or investing in a small business.
6. Be a successful entrepreneur and best-selling author of numerous works. I want to be recognized as as a hard worker who put his family and faith first.
The Bottom Line – Long-Term Financial Goals
Setting long-term financial goals is an important step towards achieving financial stability and building wealth. By defining your values, aspirations, and time horizon, you can create a roadmap that aligns with your priorities and guides your financial decisions.
Remember to monitor your progress, stay motivated, and seek professional advice when needed. With discipline and perseverance, you can achieve your long-term financial goals and secure your financial future.
Here’s your homework
I want you to implement at least one of these strategies for reaching your long-term goals over the next year. When the year is over, write me. Tell me how well the strategy worked out for you. I want you to put your heart and soul into one or more of these strategies.
Why? I want you to see success.
Make it hap’n, cap’n!
FAQs – Long-Term Financial Goals
How do I balance saving for long-term goals with short-term needs?
It’s important to strike a balance between saving for your long-term financial goals and meeting your short-term needs. You can achieve this by creating a budget that allocates some of your income towards both short-term and long-term goals.
This way, you can address your immediate financial needs while also making progress towards your long-term goals.
How can I stay motivated to achieve my long-term financial goals?
Staying motivated to achieve your long-term financial goals can be challenging, especially if your goals are several years away.
One way to stay motivated is to break your long-term goals into smaller, manageable milestones. Celebrate each milestone as you reach it, and use the progress you’ve made as motivation to keep going.
How do I know if I’m on track to achieve my long-term financial goals?
Regularly monitoring your progress towards your long-term financial goals is essential to staying on track.
You can use financial planning tools and software to track your progress and adjust your plan as needed. You can also work with a financial advisor or planner to evaluate your progress and make any necessary adjustments to your plan.
Can I adjust my long-term financial goals as my situation changes?
Yes, it’s important to be flexible and adjust your long-term financial goals as your situation changes. Life is unpredictable, and unexpected events can impact your financial situation. Review your financial plan regularly and adjust it as needed to ensure that it aligns with your current situation and goals.
Need some more long-term goals? Check out The Top 10 Good Financial Goals That Everyone Should Have. If you’re a baby boomer, check out 5 Financial Goals for Baby Boomers.
Long-term financial goals are an essential part of financial planning. They help you define your aspirations and create a roadmap for achieving them.
Long-term goals aren’t easy to achieve. But why?
Could it be that motivation wanes over time? Perhaps external circumstances change. Maybe it has to do with the feasibility of the goals.
Many people have trouble sticking to something over the course of a single year let alone several years or decades.
Perhaps that’s why long-term goals – like most financial goals – are so difficult to achieve.
How do we fight against whatever it is that holds us back from achieving these financial goals? Is it possible to win?
Yes. It is.
Today I’d like to share with you some ways you can achieve your long-term financial goals. I won’t claim it will be easy, but it will be worthwhile.
So whether you need to pay off debt, build an emergency fund, save for your kids’ college education, or invest for retirement, here are some ways you can make it hap’n, cap’n.
Why Long-Term Financial Goals Are Important
Long-term financial goals provide direction and motivation for your financial decisions. By defining your long-term goals, you will have a clear picture of what you want to achieve and what steps you need to take to get there. Setting long-term financial goals can help you:
Stay focused on your priorities: Setting long-term financial goals will help you prioritize your financial decisions and avoid getting distracted by short-term financial needs or impulses.
Achieve financial stability: Long-term financial goals can help you create a safety net, build wealth, and prepare for unexpected events such as medical emergencies or job loss.
Enjoy the benefits of compound interest: Investing in long-term goals, such as retirement or education, can help you take advantage of the power of compound interest and grow your wealth over time.
1. Capture your long-term goals in your to-do list.
Long-term goals of the financial sort are usually more like projects than individual tasks.
For example, if you want to pay off your debt, chances are that you don’t just have one credit card to pay off – you might have three credit cards, a vehicle loan, and a student loan to overcome (if not more).
“Pay off debt” would be the project. “Pay off Visa #1” would be the task.
The truth is that without writing down your projects and tasks within a task management system of some type, you’re much less likely to accomplish your long-term goals.
There’s just something about seeing your long-term goals on paper (or on a screen) that makes them real. The very act of writing them down is a type of commitment.
Give it a whirl. Write down your long-term financial goals and review them on a regular basis.
2. Don’t bury your long-term goals.
It’s not enough to write down your long-term financial goals. Additionally, you need to make them readily available to your eye.
One idea that I’ve found works well is to write down your goals on a whiteboard where you can’t help but see them. But that’s not for everybody.
The point is that you need to find a way to see your long-term goals in the context of all your other goals (namely, your short-term goals). If only your short-term, urgent goals are displayed for you to see, you’ll tend to focus on those instead of kicking butt on your long-term goals.
Don’t bury your long-term goals. They’re important too!
3. Dedicate certain days of the week to long-term goals.
One helpful tip I derived from Strategic Coach was to dedicate certain days of the week to certain goals. This has proved to be very helpful in my own life, and I believe it will in yours, too.
For example, you could dedicate a certain day of the week to managing your finances and brainstorming ways to improve your financial future. Perhaps you have a day off of work that would work best for you.
Now, I can hear you saying, “Oh Jeff, if I only had a day for such tasks – I’m way too busy with other stuff!” That’s fair.
But here’s the thing, you don’t just have to make this day about finances – you can make it about your other long-term goals too. Add in health, family, and other areas of responsibility. Consider this day (or these days) of the week to be all about bettering yourself and your life. Can’t you make time for that?
4. Prioritize your long-term goals properly.
When it comes to long-term financial goals, you need to properly prioritize them. There are some preliminary goals that should only take you less than a month, like setting up a budget and cutting expenses, but we’ll leave that for another article.
What are some common long-term financial goals and in which order should you complete them? Generally, I recommend you complete the following long-term financial goals in the order they are displayed below:
Build Your Emergency Fund
Think of your emergency fund as the foundation of your financial future. Without some liquid money, you’re going to be out of luck when financial disaster strikes. Believe me, they happen.
Your car engine might explode. Your kneecap might explode (ouch). Your water heater might explode. There are so many things that can explode . . . and it’s not easy to just walk away from those explosions while keeping your cool. It’s stressful!
But you know what would make those situations a little less stressful? You guessed it: an emergency fund baby!
Wipe Out Your Debt
Once you have your foundation in place, it’s time to knock out that debt. This can take several years or a few months – it depends on how much debt you have and how quickly you can shovel money at it.
Write down all of your debts and attack them one by one. It’s easier that way.
Start Investing for Retirement
Now it’s time to start investing for your latter years. Why? It’s possible that your earning potential can go down when you’re physically unable to work. Who knows, you might have a self-sustaining business upon reaching retirement age, but don’t count on it. Invest for the future!
Helping people retire well is what I do.
Start Saving for Other Long-Term Goals
This might include saving for your kids’ college education, purchasing a new vehicle, saving for a home renovation, or another goal that will take some time.
By prioritizing your long-term goals in the proper way, you can ensure that should you experience a slump in income, you aren’t wiped out due to a lack of financial planning.
5. Discover and focus on your motivations.
I’m convinced that one of the main reasons people don’t accomplish their long-term goals is because they really haven’t discovered their motivations.
For example, everyone knows it’s a good idea to pay off debt. It’s a financial goal that’s been embedded in our minds by countless financial advisors. But unless you discover your motivation for paying off debt, chances are you’ll give up before you achieve your goal.
In fact, if you’re paying off debt for the sake of paying off debt, you might as well give up now. You’re not going to be motivated enough to get the job done.
Instead, focus on some common motivations that can become your motivations. Here are some great reasons why people want to pay off debt:
To not have to pay interest on their purchases
To free up money for vacations
To free up money for investing for retirement
To not have to worry about those bills
To reduce the amount of stress in their lives
To free up the time it takes managing debt to focus on family
These are just a few of the motivations of others. What’s your motivation?
Assign a motivation for every long-term goal you have. Otherwise, you’re just trying to accomplish your long-term goals for the sake of accomplishing them – that’s not a real motivating factor if you ask me!
Long-Term Goal Examples
Long-term financial goals can take many forms, depending on your values, aspirations, and time horizon. Here are some examples of long-term financial goals in the SMART framework:
Example 1: Save for Retirement
Specific: Save $1 million by age 65 for retirement.
Measurable: Save $500 per month in a retirement account.
Achievable: Based on current income and expenses, it is feasible to save $500 per month for retirement.
Relevant: Retirement is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal by age 65.
Example 2: Pay off Debt
Specific: Pay off $30,000 in credit card debt.
Measurable: Pay $500 per month towards credit card debt.
Achievable: Based on current income and expenses, it is feasible to pay $500 per month towards credit card debt.
Relevant: Paying off debt is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal within 5 years.
Example 3: Invest in Education
Specific: Save $50,000 for a child’s college education.
Measurable: Save $200 per month in a 529 college savings plan.
Achievable: Based on current income and expenses, it is feasible to save $200 per month for college education.
Relevant: Investing in education is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal in 18 years.
Example 4: Buy a House
Specific: Save $100,000 for a down payment on a house.
Measurable: Save $1,000 per month in a high-yield savings account.
Achievable: Based on current income and expenses, it is feasible to save $1,000 per month for a down payment.
Relevant: Buying a house is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal in 5 years.
Example 5: Start a Business
Specific: Launch a profitable business in the next 5 years.
Measurable: Develop a business plan and secure funding within the next 12 months.
Achievable: Based on current skills and experience, it is feasible to develop a business plan and secure funding within the next 12 months.
Relevant: Starting a business is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Launch the business within the next 5 years.
Long-Term Goal
Specific
Measurable
Achievable
Relevant
Time-bound
Save for Retirement
Save $1 million by age 65 for retirement.
Save $500 per month in a retirement account.
Based on current income and expenses, it is feasible to save $500 per month for retirement.
Retirement is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal by age 65.
Pay off Debt
Pay off $30,000 in credit card debt.
Pay $500 per month towards credit card debt.
Based on current income and expenses, it is feasible to pay $500 per month towards credit card debt.
Paying off debt is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal within 5 years.
Invest in Education
Save $50,000 for a child’s college education.
Save $200 per month in a 529 college savings plan.
Based on current income and expenses, it is feasible to save $200 per month for college education.
Investing in education is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal in 18 years.
Buy a House
Save $100,000 for a down payment on a house.
Save $1,000 per month in a high-yield savings account.
Based on current income and expenses, it is feasible to save $1,000 per month for a down payment.
Buying a house is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal in 5 years.
Start a Business
Launch a profitable business in the next 5 years.
Develop a business plan and secure funding within the next 12 months.
Based on current skills and experience, it is feasible to develop a business plan and secure funding within the next 12 months.
Starting a business is a long-term financial goal that aligns with personal values and aspirations.
Launch the business within the next 5 years.
Need More Long-Term Goal Examples?
Knowing I’m not the only goal-setting freak that exists in this world, I asked fans from the Good Financial Cents Facebook page what their long-term goals (big shout to the Fincon community for contributing, too!).
Fincon Community Long-Term Goals
Here’s a great list of examples of long-term goals:
Bob Lotich at SeedTime.com says:
[I want] to provide a comfortable life for my family, to have enough cash to maintain a flexible lifestyle, and to use everything else to financially support charities and organizations that are making a huge impact on the world.
Ryan Guina at TheMilitaryWallet.com says:
[I want] to become financially independent. What this means to me: to have no consumer or mortgage debt and have enough resources in savings and investments to cover my everyday living expenses without relying upon income from my job. This will provide more freedom in pursuing activities based on fulfillment vs. the need to generate revenue.
Larry Ludwig at InvestorJunkie.com says:
[I want] to be financially free. I define it specifically as to accumulate $10,000,000 in investment assets that can generate at minimum 4% per year of income.
Teresa Mears at LivingOnTheCheap.com says:
[I want] to support myself, both now and in retirement, and enjoy life. What else is there?
Steve Chou at MyWifeQuitHerJob.com says:
[I want] to generate enough income so that I can spend more time with my family and be there for the kids. Growing up, my parents worked their butts off so I could go to a good school but I didn’t see them very often during the week. With my kids, I’m going to send them to a good college and always be present.
Grayson Bell at DebtRoundup.com says:
[I want to] build a business and a financial stockpile to allow my family and I to travel when and where we want to. I don’t want to be stuck due to a job or financial situation. This will require scaling my business and looking for more opportunities to expand my passive income streams.
Robert Farrington at TheCollegeInvestor.com says:
[I want] to generate enough passive income to replace my current income. This will require a long-term strategy of earning more money (through my salary and side hustles) and investing the excess. The goal, of course, is to retire early while still being able to provide the quality of life I want.
My Lifetime Goals
Long-term goals can be difficult to articulate but deserve to be written down. I previously shared my lifetime goals on this post. Looking them over I recognize I would make a few tweaks, but; for the most part, they are still align with what I want to achieve in life. Here’s a look:
1. Spiritual leader of my household. I want my kids to see me first as a God-loving father who puts his faith first before success. I want to continually love and support my wife, and do so in an Godly manner.
2. Live a long and filling life with my wife and family. Raise my kids with the philosophies of: working hard, but not sacrificing “work” for what you love; love first; and treat people with respect (Golden Rule)
3. Have several multiple-system driven businesses that produce >$100,000 a month of passive income.
4. Live in multiple countries (5+) for an extended period of time (minimum 3 weeks) with entire family
5. Inspire over 1,000,000 people to invest in themselves. This can be through traditional investing (Roth IRA, 401k), obtaining a higher degree or certification, or investing in a small business.
6. Be a successful entrepreneur and best-selling author of numerous works. I want to be recognized as as a hard worker who put his family and faith first.
The Bottom Line – Long-Term Financial Goals
Setting long-term financial goals is an important step towards achieving financial stability and building wealth. By defining your values, aspirations, and time horizon, you can create a roadmap that aligns with your priorities and guides your financial decisions.
Remember to monitor your progress, stay motivated, and seek professional advice when needed. With discipline and perseverance, you can achieve your long-term financial goals and secure your financial future.
Here’s your homework
I want you to implement at least one of these strategies for reaching your long-term goals over the next year. When the year is over, write me. Tell me how well the strategy worked out for you. I want you to put your heart and soul into one or more of these strategies.
Why? I want you to see success.
Make it hap’n, cap’n!
FAQs – Long-Term Financial Goals
How do I balance saving for long-term goals with short-term needs?
It’s important to strike a balance between saving for your long-term financial goals and meeting your short-term needs. You can achieve this by creating a budget that allocates some of your income towards both short-term and long-term goals.
This way, you can address your immediate financial needs while also making progress towards your long-term goals.
How can I stay motivated to achieve my long-term financial goals?
Staying motivated to achieve your long-term financial goals can be challenging, especially if your goals are several years away.
One way to stay motivated is to break your long-term goals into smaller, manageable milestones. Celebrate each milestone as you reach it, and use the progress you’ve made as motivation to keep going.
How do I know if I’m on track to achieve my long-term financial goals?
Regularly monitoring your progress towards your long-term financial goals is essential to staying on track.
You can use financial planning tools and software to track your progress and adjust your plan as needed. You can also work with a financial advisor or planner to evaluate your progress and make any necessary adjustments to your plan.
Can I adjust my long-term financial goals as my situation changes?
Yes, it’s important to be flexible and adjust your long-term financial goals as your situation changes. Life is unpredictable, and unexpected events can impact your financial situation. Review your financial plan regularly and adjust it as needed to ensure that it aligns with your current situation and goals.
Need some more long-term goals? Check out The Top 10 Good Financial Goals That Everyone Should Have. If you’re a baby boomer, check out 5 Financial Goals for Baby Boomers.
Let’s start off with everyone’s least favorite kind of data. Without checking, do you know how much you have in debt? And how much of that total is interest?
Are you cringing? I certainly am whenever I think about how much debt I owe.
Turns out, we’re not just worried about debt, we’re planning our lives around it. CBS News reports that 74% of student loan borrowers in Gen Z and 68% of Millennials are putting off critical financial decisions — like saving for emergencies and building a retirement fund — because of student debt.
This crisis means there’s a huge market for Changed, a microsaving app that funnels your spare change directly toward debt payments.
What is Changed?
Changed uses the “round up” model popularized by other spare change apps like Acorns. The Changed app rounds your purchases to the nearest dollar and transfers the rounded-up amount to a bank account, which then sends the money to your loan issuers.
Changed was founded by Dan Stelmach, who figured spare change installments could help his debt load go from ridiculous to manageable. And an automated savings app could do the work for him.
In 2018, Stelmach and his brother Nick Sky pitched Changed on the reality show Shark Tank, walking away with an investment to kickstart the company. At the time of this writing, they’ve helped borrowers pay down over $25 million in total loan costs.
Read more: Student Loan Debt: Understanding the Growing National Crisis
How Does the Changed App Work?
Download Changed on the Apple App store (for iOS) or Google Play store (for Android). There are links to download on the Changed website.
First, you enter your basic sign-up information (address, birthdate, phone number). This is only used to set up your account.
Next, Changed opens an FDIC-insured savings account for you through the financial software company SynapseFI. Banking info is encrypted and secure, as with any savings account. The account is for storing your funds until they’re transferred to the student loan provider.
Then, you’ll enter your student loan information by linking to your loan servicer. Changed links up to almost all federal and private loan servicers — if your lender isn’t listed, let Changed know and they’ll help you add the info manually.
Changed walks you through where to find all your student loan stats, like your account number and the date your loans were issued. You can round up from multiple accounts, and from more than one servicer. You can also pick which account you want to fund first.
Read more: How Student Loans Work
Finally, you’ll link your Changed account to your checking or primary spending account(s). Changed doesn’t store your checking account info, it just has you log in through the app.
From there, the app looks at your spending patterns and starts setting aside your spare change. If you’ve used other microsaving apps, this pattern will be familiar.
Each time you make a purchase, Changed rounds the purchase amount up to the nearest dollar and saves the difference. If you buy a cup of coffee for $3.45, Changed would round up to $4 and save the extra 55 cents.
Once your total round-ups reach $5, the app transfers the money to your Changed savings account. Round-up transfers are limited to $10 a day so you don’t overdraw your checking account by accident.
Once the round-up amount in your savings account reaches $50 or $100, the app transfers the money from savings to your debt balances. Until then, the money’s still available to you. Loan payments take about five to 10 days to process, and Changed limits them to $500 per week.
It’s worth noting here that Changed payments do not replace your regular payment plan. (That would be nice, right?) Instead, they help you reach your payoff goal a little faster — or a lot faster — without much effort on your part.
Read more: The Pros and Cons of “Spare Change” Investment Apps
How Much Does Changed Cost?
Changed charges users $3 a month. The app is free to download; charges kick in once you start using it.
The monthly fee covers the cost of maintaining your savings account and moving money to your loan servicer. There’s no free trial period — once you start, you’re committed. Changed auto-renews your subscription each month. But the $3 fee covers all the site’s features, so you won’t be hit with extra charges.
Changed Features
Progress Screens
Changed lets you see your repayment progress in real time, which can be super motivating.
You can toggle between a few different screens on the app. The home screen has a nifty visual to show how the money you’ve “squirreled” away is adding up.
Other screens show you:
Round-up amounts from each purchase
Extra payments applied to your loans each month
How much each payment saves you in student loan interest
How much you could save over time
How early you could pay off your loans
Pick Your Savings Speed
Changed has a few different savings speeds — Budget, Standard, and All mode — which you can select or change. This is a good feature for people whose income or expenses fluctuate.
You can also pause transfers for 15, 30, or 60 days if you need to budget money toward other goals for a while.
Extra Payments
On the other hand, if you want to accelerate your savings speed, Changed is all for it. The “BOOST” rocket on your home screen lets you make an additional single or repeated transfer of $1-20 toward your loan principal, on top of the money you’re already saving.
Read more: Principal Only Vs. Principal and Interest. Which is Better?
Link a Credit Card
If you can link your checking account to a credit card account, Changed will round up your credit card purchases. Round-ups go through the checking account so the charges don’t raise your credit card interest.
Have Another Payer Help Out
If a family member or loved one is chipping in to help you with loan costs, Changed lets them sign up for their own account. They’ll link their own checking accounts, but they’ll need your info to link their loans. You can also use this feature if you’re giving a helping hand to someone else.
Other Features
For those who want or need to refinance, Changed has a ton of bank offers on the site so you can compare interest rates.
If you have time and want to be really extra — by referring a friend, buying from a Changed sponsor, or taking their “Know Your Loan” course — Changed gives you “perk points” which enter your name in a weekly drawing to win free payments.
Read more: Student Loan Refinance Options
Stash My Cash
Changed can also help you build your savings accounts. You can choose to split your round ups and put some in savings and some to debt.
For example, you can choose to put 75% of your change towards debt but move 25% of the money into your savings account.
This will help you meet other goals while you still make progress towards your debt.
My Experience Researching Changed
I found Changed to be refreshingly forthcoming about the limits of their automated savings app. They follow federal guidelines about which loan costs to pay first — fees, interest, and principal, in that order — and they don’t promise that payments will go directly to the principal.
Their main communication method is email; I couldn’t even find a phone number on the site. I prefer email contact, so that’s fine with me.
But down to brass tacks: How much money would I save with this app? Changed, like most micro-saving apps, can’t give you an estimate before they look at your spending patterns — round-up amounts can be all over the place depending on your spending habits.
I figured many of us could spend enough to make $50 in round-ups in the average month. Then I crunched some of the latest available averages on student loans from Education Data:
The average federal student loan debt per borrower is about $37,693.
The average monthly student loan payment is around $460.
The average interest rate is a rounded 6%.
So, let’s say a borrower pays off a $37,693 loan at a 6% interest rate for 10 years.
Without any microsavings from Changed, they’d make an average monthly payment of $418.47. Their total interest would add up to $12,523.35.
With $50 a month in Changed microsavings, their average monthly payment would go up to $468.47. Their total interest would be lower, since they’re paying down the loan more quickly — just $10,648.63.
Changed would save this borrower $1,874.72 in total interest payments over the loan’s life. Even subtracting the $360 you’d pay in 10 years of Changed fees, that’s still $1,514.72 saved in interest.
These savings may be even higher if you have a larger loan principal or save more through round-ups.
It’s hard to argue with these numbers, so I may have to give Changed a try.
Who Should Use Changed?
People Who Struggle to Prioritize Extra Loan Payments
Part of the magic of spare change apps is that they take away the cognitive work of saving money, or the part where you have to remember to transfer a little extra into savings (on top of all the other things you have to remember).
If you’d like to make extra loan payments but you doubt you’ll actually make it happen, Changed may be for you.
People with Competing Financial Priorities
Micro-saving apps are designed so you don’t miss the extra round-up cash, because the transfers are so small. Maybe you want to apply heftier payments to other debts with higher interest rates, like credit cards. Changed makes sure you’re not neglecting your loans in the process.
Borrowers with Single or Multiple Loans
If you have more than one loan and you want to direct payments to a specific loan first, Changed can arrange this for you.
Borrowers in Deferments or Grace Periods with their Student Loans
Changed lets you get an early start on loan payments if you can, without affecting your repayment status.
Frequent Debit or Credit Card Spenders
The more you spend, the more round-ups you’ll have (within the $10 daily limit). If you already spend a lot on your debit or credit card each month, you’re likely to build savings quickly.
Who Shouldn’t Use Changed?
People Who Want Full-Service Repayment Assistance
While Changed has some borrower education, it doesn’t offer specific guidance — like comparing different repayment plans or exploring your options for loan forgiveness. It can work in tandem with other debt management resources, but not as your only resource.
People Who Use Other Round-Up Apps
More specifically, if you already use a no-fee spare change app or you’re already budgeting to make extra payments to your loan servicer, you probably don’t need Changed. The fee covers the work of Changed taking these steps for you.
People Who Want to Pay off Their Debt ASAP
Changed doesn’t pay your loan providers until you’ve gotten to $50 or $100 in your round-up savings, which could take some time. Setting aside extra money for student loan payments on your own may get the job done faster, if you have the funds to do so.
Last Updated: March 28, 2021 BY Michelle Schroeder-Gardner – 2 Comments
Disclosure: This post may contain affiliate links, meaning I get a commission if you decide to make a purchase through my links, at no cost to you. Please read my disclosure for more info.
Looking for a free debt thermometer printable?
Making your goal visual is a great way to find motivation for paying off your debt.
Having your financial goal displayed in front of you can make it that much realer, plus it’s nice to have a constant reminder of what you are working towards.
One way to do this is to have a debt thermometer.
With this free printable, you can keep track of your debt payoff progress.
How to use this debt payoff thermometer printable:
At the top, under “Total Debt,” you will write down how much debt you have.
Then, on each line below that, I like to write out how much debt you’ll have to pay off in order to color each section. For example, if your total debt is $10,000, then each 10% amount would be $1,000.
After you reach each level, you then color up to that line so that you can better visualize the amount of debt that you are working with.
You can get the free printable by signing up below.
Save more, spend smarter, and make your money go further
photo: quaziephoto
Everyone knows the story. Unemployment is up. FICO scores are down. Home values are down. And because home values are down, home equity has disappeared for millions of homeowners. And since home equity was the financial safety net millions of consumers used to pay off their credit card debt, well, you know the rest. Let’s just agree that, right now, millions of consumers have no way to pay off all of their credit card debt.
There are a variety of ways to get out of credit card debt, right? You can budget your way out of debt. You can file bankruptcy. You can enroll in a debt management plan (DMP) through one of the member organizations of the National Foundation for Credit Counseling, commonly referred to as Consumer Credit Counseling Service (CCCS). You can work with your credit card issuer directly and seek help through one of their hardship programs. You can attempt to settle the debt on your own. Or you can enlist the services of a debt settlement company.
Opinions vary on these options. They all have their pros and cons. The purpose of my article isn’t to explore each option. I’ll do that soon.
The purpose of this article is to explore debt settlement as an option.
Settlement is quite an easy concept to understand. You agree to pay your credit card issuer an amount of money less than what you really own them and they consider the debt to be paid in full. So, if you owe John Ulzheimer’s Bank $10,000 and I agree to accept $5,000 as “full payment” then you have settled your debt with John Ulzheimer’s Bank. The bank reports the settlement to the credit reporting agencies and sends you a 1099 for the forgiven amount. Settlement, incidentally, is considered one of FICO’s Seven Deadly Sins.
Settlement can be accomplished by working directly with your bank. You do not have to hire someone to do this for you. That’s a myth. In fact, many credit card issuers won’t even work with debt settlement companies so you have no choice but to deal with them directly. This is okay because all creditors have their version of a “Remediation” department, which is where you’ll likely end up if you call them asking for a settlement deal.
Now, let’s move on to the debt settlement companies. You’ve all seen their commercials. Distraught couples staring at their credit card statements magically turning into happy families playing with puppies in their front yard, all thanks to ye ole friendly debt settlement company. Heck, there’s even a version that has excerpts from one of President Obama’s speeches and a picture of a government building in the background. It’s clearly intended to come across as a governmental program. Of course, it’s not a government program.
Here’s how they work. First they find out how much debt you have. This is to determine if you’re even worth doing business with. If you have too little debt then they won’t make enough money working with you. That’s why their ads contain statements like “If you have more than $10,000 in credit card debt call now…” If you have enough debt, in their eyes, then they’ll sign you up.
When you sign up they’ll tell you to stop communicating with your credit card issuers. I’m not kidding, they really tell you this. That means no more payments and no more return calls. The hypothesis here is to get your credit card issuer so desperate for payment that they’ll accept a settlement offer.
At the same time you’ll be asked to make monthly payments to the settlement company. Why? Because you’re creating a war chest that serves two purposes. First, this is where their fees will come from. Second, this is where the settlement offer will come from.
After several months, or longer, there will be enough money for them to make some sort of offer to the credit card issuer. The issuer may accept the offer, or they may decline the offer. Either way, your fees to the settlement company have been paid.
So what happens during the period of time you’re paying the debt settlement company (and ignoring your creditors)? Well, since that’s not a part of the commercials I’ll have to be the one who breaks the bad news.
1.Your credit will be trashed.
The credit card issuer will report the ascending level of late payments to the credit bureaus, which remain on your credit file for seven years. Now the debt settlement guys will say “well, your credit is probably already trashed so no big deal.” Wrong, new (and numerous) late payments help to lock in lower scores for additional time. And it gets worse…
2. The card issuer will likely enlist the services of a 3rd party collection agency to collect the debt.
This means a brand new collection will be reported to your credit files. Again, this remains for seven years. And, these guys can pull your credit reports to find you and determine your ability to pay them. That means you’ll have to explain collection inquiries. You’re supposed to ignore these guys as well. And it gets worse…
3. That knock at your door…yeah, that guy is called a process server.
Your credit card company or a collection attorney has sued you for nonpayment of the debt. You can’t ignore him like you’ve been ignoring your credit card issuer. If you do choose to ignore the summons you’ll lose by default for not showing up to court. This is called a default judgment. And yes, the judgment can show up on your credit report for seven years. And it gets worse…
4. Become familiar with the term “Writ of Sequestration.”
In English this is either legal garnishment of your wages or seizure of your assets. If your wages are garnished your employer will now be made aware of your defaulted debt problems because they’re the ones who will hold back a portion of your salary.
You’ve totally lost control of the situation because you chose to ignore your creditors, at the request of a company trying to profit off of your debt situation. Smart? Or not?
And, just to tie a nice bow on the top of this one, the Attorneys General in the states of Florida and Alabama have shut down major debt settlement networks because, and I quote, “they’re a scam because consumers get no value for their fees.” I’ll write soon about the DSCPA (Debt Settlement Consumer Protection Act), which will put most of these guys out of business.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and the author of the “credit history” definition on Wikipedia. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 70 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.
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Let’s say you buy a life insurance policy that has kicked in immediately or after a waiting period, and you meet your unfortunate demise a day, month, or several years later. Will your beneficiaries receive the entire amount? Broadly speaking, yes.
So, how long do you have to have life insurance before it pays out? If you have, say, a 25-year term life policy, then your loved ones are usually covered for 25 years. If you have an active permanent life policy, the entire death benefit is generally in place during your lifetime.
There’s a significant cost difference between term life and permanent life insurance, though. Stay tuned.
Life Insurance Basics
Life insurance is meant to protect a spouse or partner, children, or other family members upon your death. It is intended to replace your income and avoid a large financial loss while paying the costs of a funeral or a memorial service.
When it comes to life insurance plans, there are two main types: term life and permanent life. Both kinds of insurance are sold by the majority of life insurance companies.
No matter which type you have, when you die, your beneficiaries or the executor of your estate will need to file a claim with the insurance company in order to receive the death benefit. The payout may come in one lump sum or in another form, depending on the insurance company.
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How Does Term Life Work?
Term life insurance is often viewed as more cut and dried than permanent life insurance. Policy owners make regular monthly payments during the term. The insurance company pays a death benefit — or the amount of the coverage — if the policy owner dies during the term.
Term life insurance covers a set period, such as 20 or 30 years.
The coverage can range from $25,000 to several million dollars, depending on the insurer and your financial needs and plans. If the insured dies after the time period chosen, the insurance company will not provide the payout.
The intent of term life insurance is to ensure that your financial responsibilities are taken care of in case of an illness or tragedy. A policy can support the financial needs of children, help a stay-at-home parent find their footing, or cover a mortgage, credit card bills, or other outstanding debt.
Parents may decide to buy term life insurance while their children are younger and before they go to college or establish careers. Some people might also choose term life insurance because it typically costs less than permanent life insurance. Others may opt for term life because they believe they’ll be self-insured when the term ends or because they want to protect certain assets, such as paying off a mortgage.
What Is Permanent Life Insurance?
Unlike term life, permanent life insurance provides coverage for a lifetime. For example, when you purchase whole life insurance, a common kind of permanent life, the policy remains in effect for the rest of your life unless you cancel it or miss payments. Beneficiaries receive the death benefit after the insured passes away.
Permanent life insurance can be more complicated because there is a “cash value” included in the policy. These financial products are seen as a combination of insurance and savings.
One of the main differences between term life and permanent life insurance is the amount of the premium, or the money that you pay each month to maintain the policy. Permanent life insurance is usually more expensive than term life insurance because it provides longer coverage.
Recommended: 8 Popular Types of Life Insurance for Any Age
What to Consider When Choosing a Policy
There are several things to evaluate before you purchase either term or permanent life insurance. Examining the options will help you decide which type of insurance will meet your financial needs the best.
Waiting Periods
A waiting period is the length of time the insured person must wait before some or all of their coverage kicks in. Some life insurance companies will make policies effective immediately or as soon as the first payment is made.
Waiting periods were created to avoid fraud and are one way that insurance companies protect themselves. If the insurance company does not have a waiting period, the policy is likely to be more expensive than one that requires someone to wait.
When applying for any life insurance policy, it’s best to ask if there is a waiting period and whether any exceptions exist. Then, once a policy is issued, it’s smart to confirm the details.
Cost of Premiums
One major factor in weighing term life and permanent life insurance policies is the monthly premiums. Typically, term life insurance costs less — often much less — than permanent life insurance, even though the coverage amount is the same.
The difference is that permanent life insurance has a cash value component. If you need to take out a loan, you can use that money as collateral based on the interest rate given in a policy. The cash value part of a permanent life insurance policy generally grows tax-free, though in some cases withdrawals, loans, and surrenders may be taxed.
Permanent life insurance has a cash value component and costs more than term life.
One main difference between term life and permanent life is that if you live beyond the term that you chose, no money is paid out. Term life insurance policies have no cash value.
Recommended: How to Buy Life Insurance in 9 Steps
Making the Right Choice
Choosing between term life and permanent life insurance policies can be difficult. While permanent life insurance policies have a savings portion, the “cash value” is invested by the insurance companies and they choose what assets they want to invest in.
Other criteria that may help you make a decision are whether you are married or not, if you have children and how old they are, if you think your salary will increase over time, and how much debt you have, such as your mortgage, other loans, and credit card bills that would need to be paid off if you died.
Changing a Current Policy
You may already have a life insurance policy, but life circumstances can change rapidly. Some life insurance companies might allow you to either increase or decrease the amount of coverage.
Permanent life insurance policies tend to be more complicated, and changes may mean that you will have to pay administrative fees.
Most permanent life policies have a surrender charge, which is subtracted from the top of your cash value if you end, or surrender, the policy. Surrendering a policy means giving it up. You’ll receive the cash value, minus any fees. By canceling the life insurance policy, your heirs will receive nothing from it when you die.
The Takeaway
Life insurance can help protect your family from the financial impact of your death. Term life insurance provides coverage for a set amount of time. If the insured person dies during that time, their beneficiaries receive the entire payout. Permanent life, on the other hand, provides lifelong coverage and comes with a cash value. Beneficiaries receive the payout after the insured dies. As you consider policies, be sure to note the costs involved.
If you’re shopping for life insurance, SoFi has partnered with Ladder to offer competitive life insurance policies that are quick to set up and easy to understand. You can apply in just minutes and get an instant decision. As your circumstances change, you can easily change or cancel your policy with no fees and no hassles.
Complete an application and get your quote in just minutes.
Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. SOPT0523005
Return on Equity vs. Return on Assets: Key Differences
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Return on equity (ROE) and return on assets (ROA) determine how efficient a company can be at generating profits. Both formulas that can help investors determine how good a company is at turning a profit. Let’s take a look at both metrics, how to use them, how they differ and what their limitations are.
If you’d like personalize investment advice, consider working with a financial advisor.
Return on Equity Definition
According to the Corporate Finance Institute, return on equity (ROE) is a percentage that expresses a company’s annual income relative to its total shareholder equity. The equation for ROE is the company’s net income for the year divided by its shareholders’ equity. ROE is a great way to calculate a company’s profitability—put simply, how good it is at making money.
A company’s net income is the amount of money it brings in after paying all its financial obligations, such as taxes and operating expenses. Shareholder equity is the sum of a company’s net worth. The idea is that if the company shut down and liquidated its assets and paid off its debts immediately, the shareholder equity would be the remaining amount that would be distributed to those who owned stock in that company.
Here’s a simplistic example to illustrate how ROE works: Let’s say Company A has a net income of $10 million. Meanwhile, their total stockholder equity—the amount the company would pay to stockholders if it liquidated all its assets and paid off its debts—is $80 million. The ROE for Company A would be 12.5%.
Thus, ROE can be a valuable metric to use as an investor. If you’re considering investing in a company, you can look at their ROE over the years to see if its growing or diminishing, which can point to whether leadership is making wise decisions that benefit shareholders. You can also compare that company’s ROE to other companies in the sector to see how their financial performance matches up.
Return on Assets Definition
Return on assets (ROA) is a different equation but serves a similar purpose: determining how effective a company is at utilizing their assets to create more value. The equation used for ROA is taking the company’s net income and dividing it by their total assets.
A company’s total assets include everything that company owns that can generate money. That might be plain old cash, inventory, intellectual property such as patents, real estate and more. If they could sell it for a profit, that’s an asset.
Let’s take a look at what a simple example of ROA might look like. Let’s say Company B has a net income of $5 million and owns $25 million in assets. When you do the math, you see that Company B has an ROA of 20%. That means for every dollar of assets, the company generates 20 cents in profit.
ROA can be helpful because it shows how a company is using its current investments to generate profits. Higher percentages mean the company is better at its assets to make more money; lower percentages mean that its worse at it.
How ROE and ROA Differ
If both of these measurements sound pretty similar to you, you’re not wrong. They do have a lot in common — both in what they measure and the purpose they serve. But they do have some important differences.
The single biggest difference between ROA and ROE is that ROA takes into account a company’s debt, while ROE doesn’t. If a company doesn’t have any debt, these two numbers would be the same for that company. Debt can add new assets to a company’s balance sheet, but of course the company also now has a financial obligation to its creditor.
Companies can use debt to artificially boost their ROE. Companies can generate profits by borrowing large amounts of money and using that to drive greater income. Of course, that money isn’t free and a company with too much debt isn’t healthy. Make sure you examine both of these metrics rather than just relying on ROE.
How to Use These Metrics
It’s important to know that there are some limitations to these metrics. Investors should not make decisions based on any one number. Any one number may not be representative of the company as a whole, and there are many ways that numbers can be manipulated by unethical accounting methods.
ROE particularly can be manipulated due to the fact it’s not impacted by how a company is leveraged—that is, how much debt it has. As mentioned above, company can borrow extensively to boost profits and artificially inflate their ROE. Stock buybacks can have a similar effect. Make sure that you’re taking a look at the company’s entire balance sheet and wider strategy before making any investment decisions.
And you may be asking: How will I know whether a certain percentage is “good?” For ROA, over 5% is good and over 20% is great. For ROE, 15-20% is considered good — in 2022, S&P 500 companies averaged a ROE of just over 21%. However, these standards can differ greatly between sectors and industries.
The Bottom Line
ROE and ROA can both extremely useful metrics for investors determining the financial health of a company. These formulas can help you determine whether a company is using their assets in a productive and efficient way—and thus, whether or not you should invest in them.
Tips for Investing
Investing isn’t always easy to get into, especially for beginners. But you can get personalized, detailed financial advice from a profession to help you build an investment strategy for your current and future life. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
One of the most important lessons in investing is to maintain a diverse portfolio. A variety of investments in different sectors, industries, locations and risk levels can help you create a portfolio that minimizes risk while still generating strong profits. Use SmartAsset’s asset allocation calculator to help determine a well-diversified portfolio that works for you.