Topics:Personal Loans 101 Financial Advice Personal Loan Industry News Home Improvement Financing Credit Advice Debt Consolidation Personal Finance Basics Personal Finance Retirement Interest and APR Emergency Loans Bad Credit
A personal loan is money borrowed from a bank, credit union, or online lender that is paid back over a specified period of time. These loans can be used for a variety of purposes, such as debt consolidation, home renovations, medical expenses, and other large expenses. While this sounds like a great deal for borrowers, lending money is a large risk for lenders, especially if borrowers are unable to make their repayments. To assess risk, lenders need some way to determine whether or not a borrower is “trustworthy,” and for this reason they will look at your credit score and credit history to see how you’ve managed debt in the past. This is fine if you have a robust credit score, but what if you have bad credit? Or not credit at all? Will you never be able to take out a personal loan? How to know if you have bad credit For the most part, a credit score between 300 to 580 is considered bad. Even if you have fair credit, ranging up to 680, this may not be enough to qualify for a personal loan, and you would likely get hit with high interest rates if you were able to qualify. Good to excellent credit is anything beyond 700, so that is the number to shoot for, if possible. While it becomes more difficult to qualify for a personal loan with a bad credit score, that does not mean that there aren't any loan options available. Some lenders focus on lending to low-credit borrowers. Here are the top three: Best personal loans for bad credit Upgrade Minimum credit score — 600 APR range — 6.94%–35.97% Loan amounts — $1,000–$50,000 Upgrade is a marketplace lender, connecting borrowers with multiple lenders in its network. Generally, marketplace lenders are a better option for low-credit borrowers because they often don’t have a minimum credit score requirement. Since they are not funding a loan directly, there is more flexibility with rates and terms. If you are looking to build credit, Upgrade offers a free credit monitoring service for all consumers. This service allows you to access your VantageScore, latest credit reports, and personalized credit health insights. The majority of Upgrade customer reviews are positive with 68 percent of reviews highlighting a fast and easy loan process, and 26 percent of reviews highlighting good experiences with customer service, including professionalism and fast response and resolution on issues. Upgrade Customer Review: Ardelle Faralli from Sicklerville, New Jersey "Customer service was great and very helpful. Didn't take long to get approved and receive the money in my account. My credit cards I chose were paid off quickly. I've paid off other expenses and feel good that I only have one monthly bill to pay instead of multiple bills. Thank you Upgrade so much!" Upgrade review data is taken from a sample of 100 reviews. Upstart Minimum credit score — 620 APR range — 8.27%–35.99% Loan amounts — $1,000–$50,000 Upstart is a peer-to-peer (P2P) lender focusing primarily on offering loan solutions to recent college graduates and young professionals — individuals who may not have an established credit history. Upstart claims to look at more than your credit score for qualification, including your education and employment history. This can increase your chances of approval if you have a low credit score. Upstart reviews are a mix between positive and negative. Twenty-three percent of reviews highlight an easy loan process, but the majority of reviews highlight unfavorable experiences with getting approved, as well as bad experiences with customer service: 20% of reviews outline bad experiences with customer service. 17% of reviews mention that they received very high rates. 37% of reviews outline difficulty in getting approved. Upstart Customer Review: Albert Chiang from Santa Clara, California "Fast and simple approval process. Very responsive customer service for parts that I had questions about. Very competitive rates, I'd highly recommend!" If you are trying to get a personal loan with bad credit, remember that in most, if not all cases, you will get higher rates because you pose more of a risk to a lender since your credit score either reflects poorly against you, or your credit history is so limited that they don’t know if you are a responsible borrower. With so many reviews outlining difficulty in getting approved, this may not be the best choice for a lender, even though the company claims to serve low-credit borrowers. Upstart review data is taken from a sample of 30 reviews. OneMain Financial Minimum credit score — varies APR range — 18.00%–35.99% Loan amounts — $1,000–$20,000 On the surface, especially when looking at OneMain Financial’s rates and terms, it may not seem like the company would be the best choice since its APR range is much higher than other lenders, and it offers a much smaller maximum loan amount than other lenders. However, if you have bad credit, these rates and terms are actually more in your favor and can indicate a better chance of getting approved. With higher interest rates and smaller loan amounts, OneMain Financial mitigates its risk taken on borrowers, allowing the company to provide loans to a wider range of borrowers. OneMain Financial reviews are a mix of positive and negative sentiments. Forty-one percent of reviews highlight good experiences with customer service, while 20 percent highlight bad experiences. For the most part, customers are pleased with the professionalism and response speed of OneMain Financial representatives, but at the same time, some customers describe experiences in which responses were delayed. OneMain Financial Customer Review: Richard Hutchinson from Glenwood, Iowa "One Main has worked with me to provide me with the appropriate loans to fit my personal needs. Customer service was outstanding and professional." Perhaps more relevant to bad credit borrowers, 11 percent of customers mention that being approved for a OneMain Financial loan was easier than with other lenders, but 6 percent of customers outline that they had a difficult time getting approved. OneMain Financial reviews data is taken from a sample of 80 reviews. How to know if a lender is a good bad credit option Perhaps you’ve already been doing your own personal loan lender research, but what are the things to look out for to know if they would lend to someone with bad credit? Based on what we’ve seen across lenders, here are some suggestions: Minimum credit score The first thing to look at when comparing personal loan lenders, especially if you have bad credit, is the company’s personal loan requirement. The average industry requirement is 660, although there are lenders that will accept scores as low as 620 or 600, and even lower depending on the lender. Generally, if your credit score does not meet a lender’s minimum requirement, it wouldn't be in your best interest to apply, as you would most likely be rejected. APR range Another factor you can consider when comparing bad credit lenders is advertised APR ranges. Generally, bad credit lenders will have higher interest rates to accommodate the risk they are taking in lending to a subprime (low-credit) borrower. For example, referring to the three lenders featured in this article, rates can range from approximately 7.00 percent APR to 35.99 percent APR. While many lenders offer a similar APR range, if you have bad credit, you can expect to get a much higher interest rate. Loan amounts Typically, lenders that lend to bad credit borrowers offer a lower maximum loan amount than you might see with other lenders. Thus, if you see lenders that offer loan amounts up to $100,000, for example, it is a good rule of thumb to assume that that lender isn’t for you, since lenders are more cautious in how much money they lend to borrowers with low credit. Loan terms Similar to loan amounts, if you see lenders offering wide loan term ranges, it is likely that they aren’t meant for you. In most cases, lenders want to ensure that they will get their money back and will seek to accomplish that in the shortest amount of time possible, especially if you have a low credit score, because that could be an indicator that you were not responsible in making payments on past debt. Secured loan option One easy way to know if lenders will provide you with a loan is by seeing if they offer secured loans. A secured loan varies from your typical unsecured installment loan which depends on credit for approval. Instead, a secured loan requires some type of collateral, such as a home or car, which provides the lender with protection if you were unable to make your payments. How to improve your credit score If you want to improve your chances of qualifying for a personal loan, or getting a lower interest rate, there are some ways that you can improve your credit score. Make on-time payments Your payment history on past or current debt is the largest factor that makes up your credit score. Make on-time credit card, mortgage, auto loan, and installment loan payments to keep your score on the high side or even raise it up. Late or missed payments may incur a late fee, but can also take a big hit at your credit score. If you are unable to make on-time payments for any reason, contact your lender and find a solution, potentially saving you from any credit score stress later on. Manage credit card balances and keep credit utilization low One other factor that is largely taken into account when forming your credit score is your credit utilization rate or ratio. In the simplest of terms, your credit utilization ratio is a numerical representation of how much credit you are using in relation to how much credit is available to you. Generally, it is wise to keep your credit utilization low. If you find that you are using the majority of your credit, you can seek to increase your credit limit, which can help keep this ratio in check. Avoid closing credit cards While you might think that closing some of your credit cards is a good way to improve your credit score because you’re decreasing your debt, this actually isn’t the action that you want to take. Closing a credit card can impact your credit score, and while there are options to cancel cards safely, it is in your best interest to leave credit accounts open even if you aren’t using them. Sign up for a credit repair service While there are other solutions that could easily do the trick, if you’d like some extra and professional help in improving your credit score there are a variety of credit repair services that you can choose from. In most cases, credit repair companies charge a fee for removing negative marks from your credit reports. The credit repair company won’t just magically remove negative marks from these reports, but will work with you to identify inaccuracies in your reports that could be fixed.
Life is full of unexpected twists and turns — medical emergencies, car repairs, home renovations, or repairs. It is important to be as financially prepared as you can for these circumstances when they arise, but it isn’t always possible. Fortunately, emergency loans are available for when those unexpected expenses come up. An emergency loan is any loan or amount of money that you can borrow on short notice. To cover unexpected expenses, there are various options available, including personal loans, payday loans, credit card cash advances, title loans, or simply asking a friend or family member to provide you with a loan. Maybe you've found yourself in this position: "I need an emergency loan, today!" You may need money immediately, or at least as quickly as possible. Personal loans are one of the most reliable and sure-fire ways to get money quickly and easily. Depending on the lending company, you can receive same-day approval and funding for your emergency loan. It is important to note that personal loan lenders will conduct a credit check, and lower rates are only available to those with good credit scores. But there are other options for those with bad credit scores in the form of payday loans. Payday loans are a good option for those with bad credit scores, generally providing up to $500 almost immediately. However, payday loans often come with high interest rates and must be paid back in two to four weeks, or before your next payday. On the other hand, personal loan lenders conduct credit checks and typically require a good credit score to qualify. A better credit score means that you could qualify for a larger loan, if needed, and receive lower interest rates. Applying for a personal loan is also a safer process with no required collateral, although that varies with each lender. Therefore, it is important to do research on multiple personal loan companies before choosing one for your emergency loan. Luckily, we’ve done some of that research for you already. Based on fees, services, comparison, and customer reviews, we’ve created a list of the top five personal loan companies for emergency loans. 1. Best Egg Minimum credit score: 600 APR range: 5.99%–29.99% Great customer reviews With an instant decision process, you could receive money in as little as one business day if you are approved and submit the required documentation. However, it is important to note that Best Egg has a loan origination fee between 0.99 percent and 5.99 percent of the total loan amount. This fee is taken directly from the loan before being added to a bank account. Customers generally have nothing but good things to say about working with Best Egg for their personal loans, highlighting the speedy approval and funding process, as well as great customer service. Best Egg Customer Review: Gordon from Ocean Shores, Washington "Quicker and the interest rate is cheaper than payday or other personal loans. I needed emergency dental work and could not be without my two front teeth...thank you Best Egg." 2. FreedomPlus Minimum credit score: 620 APR range: 7.99%–29.99% Good customer reviews With a lower minimum credit score requirement than most other lenders in the industry, FreedomPlus offers same-day lending decisions on personal loans ranging from $7,500–$40,000; a great option if you have some unexpected expenses that come up. FreedomPlus doesn’t have any application fees or prepayment penalty fees, but there is an origination fee of 0 percent to 4.99 percent on personal loans. This fee is lower than other personal loan lenders, but there are some companies in the industry that don’t have an origination fee. If you have any questions as you’re applying for an emergency personal loan, FreedomPlus will quickly connect you with a customer service representative or loan consultant that will help answer your questions and make the loan process as simple as possible. Here’s what customers have to say about their experience with FreedomPlus: FreedomPlus Customer Review: Nancy Jones from Nenana, Alaska "I felt very comfortable working with FreedomPlus. They were very responsive and helpful. They let me know step by step what I needed to do to help them get me approved for the emergency funding I needed." 3. Upstart Minimum credit score: 620 APR range: 8.94%–35.99% Good customer reviews Upstart is a great option for those with little to no credit history, such as young professionals and recent college graduates, a group that might have a harder time making ends meet when unexpected expenses arise. But, even if you aren’t a recent college graduate, Upstart won’t just look at your credit history for approval, but will take things such as your job history and income into consideration, making it easier for you to get an emergency loan. Although APR rates are higher with Upstart than most other lenders in the industry, it does have low fees, a competitive maximum loan repayment term (five years), and a quick application process that can get money in your pocket as fast as one day after approval. Many of Upstart’s customer reviews are positive, speaking to its quick and easy approval process. However, there are many negative reviews as well, stating that the company makes a borrower jump through a lot of hoops, and customer service was difficult to work with. Upstart Customer Review: Jo Temp from Belton, South Carolina "The quickest loan I have ever received, money was deposited in 2 days, unbelievable wow!" 4. OneMain Financial Minimum credit score: varies APR range: 18.00%–35.99% OK customer reviews OneMain Financial has been around for a very long time (108 years, to be exact), and knows its way around personal loans. Loans from $1,500–$20,000 are available with a variety of term lengths. If you apply for a personal loan with OneMain Financial by noon on a business day, you could receive funds as early as that same day. In addition, loans have fixed rates and fixed payments, so you can feel confident and secure in your repayment, because your rates and monthly payments will not increase. OneMain Financial doesn’t have a minimum credit score requirement; therefore, if you have a poor credit score, you could be approved for an emergency personal loan. Customers are generally satisfied with service through OneMainFinancial, highlighting a simple loan application process and quick payment. OneMain Financial Customer Review: Jess Patton "When I had a medical emergency and could not work, I got a loan from them, using my old car as collateral. It was fast and easy, no hassle, and in two days it was deposited into my account. I have auto payments pulled from my account twice a month, on the days I chose, and I never have to think about it. It was perfect, and easy! And a life saver!" 5. LightStream Minimum credit score: 680 APR range: 2.49%–19.99% Negative customer reviews If you are in need of a large loan, fast, LightStream is a good option, offering personal loans from $5,000–$100,000. Because it offers a much higher maximum loan amount than most other lenders, LightStream requires a higher credit score to qualify. However, cosigners and joint applications are accepted, which would increase your chances of qualifying if you have a poor credit score. However, if you need money as quickly as possible, finding and working with a cosigner may not be in your best interest. LightStream offers same-day funding after your application is approved. This is great, especially for funding emergencies, and there are no origination fees or prepayment penalty fees. It is important to note that if you receive a loan through LightStream, you must use it for the reason stated in your application. The majority of LightStream customer reviews are negative, with many saying that the guidelines are difficult to follow and that loan acceptance rates are very low, even with an excellent credit score. LightStream may be one of the fastest options for an emergency loan, but these are also important things to consider. LightStream Customer Review: Douglas Jennings "Very very impressed. Went very smooth and fast response to approval. I will tell others. Repeat customer right here for sure. Thanks again LightStream." Other types of emergency loans Credit card cash advances are the easiest and most immediate way to get money for an emergency. Borrowers simply stop at the bank or at an ATM and withdraw cash from their credit card, which must be paid back. However, interest begins to accrue immediately, increasing the amount of money owed over time. Specific to car repairs and emergencies, title loans are short-term secured loans, requiring borrowers to put up their car title as collateral. This is a risk because borrowers could lose the title to their cars if unable to pay off the loan. Home equity loans can provide more funds than a personal loan because the loan amount is based on the value of your house relative to your mortgage balance. Depending on your circumstances, the ability to secure a larger loan might be the best option, but it is important to keep in mind that you risk foreclosure on your home if you’re unable to pay the loan back, which could create greater financial hardship for you overall. If you have an emergency that needs an immediate financial solution, turning to your friends and/or family members for a loan may be a good option. Because they are close to you and may know the situation you are facing they could be sympathetic and willing to front some money with little to no interest. Be patient and do your homework Make sure you do some research before jumping into any type of loan or cash advance options. You don’t want to create greater financial hardship for yourself in an attempt to pay for the emergency that has come up in your life. Securing funding in an emergency can be stressful, and you may feel a need to rush. However, if possible, take some time to slow down and weigh the options available to you. Various personal loan lenders can approve and provide funding quickly, but not all lenders are equal in what they offer. Another option might be better for you in the long run. Top Personal Loan Companies Learn more about personal loans by looking at the top-rated companies and their offerings, and verified customer reqviews. Learn More
Guest Post by Andrew Latham As consumers, we love to spend time comparing every detail about the things we buy. On average, We spend 124 hours comparing an average of 19 homes (RealTrends). We invest more than 14 hours researching a new vehicle (Cox Automotive). We spend on average up to 20 hours to plan a week’s vacation (VacationKids). It is smart to take your time and analyze your options when making a large purchase. However, the same can’t be said about the way we compare the financing options for those purchases. Granted. The reason we spend so much time geeking out over specs and features is that we enjoy planning and thinking about our next vehicle, home, or vacation. But failing to show similar enthusiasm in the rates and terms of the loans we use to finance our purchases is costing us. Not comparing lenders is an expensive mistake For most homebuyers, the mortgage shopping process stops after their first application. A study by the Consumer Finance Protection Bureau reported that 77 percent of homebuyers only applied to one lender. However, comparing multiple lenders on a typical $250,000 mortgage would save the average buyer up to $3,900. A recent survey by the Federal Reserve reported that 76.1 percent of car buyers negotiated the purchase price with the seller, but only 31.6 percent negotiated the interest rate on their loan. Failing to compare several auto lenders causes the average car buyer to pay an interest rate that is 1.3 percentage points higher than the best rate available, according to a 2017 study. In other words, most borrowers pay more than they need to just because they don’t know they have better offers available. We also find this trend in the unsecured personal loans sector. People tend to go with the first lender that approves their loan. This is a big deal. The price dispersion of personal loans In 2019, Americans held a balance of $148 billion in personal loans. Even a modest variation in interest rates could have a significant impact on the debt of American consumers. To illustrate, let's assume that $148 billion balance has an average term of 36 months and a 13.5 percent APR. Dropping the average APR by only 3.5 percentage points to 10 percent would save Americans $3 billion a year. A recent study by SuperMoney, a financial services site, analyzed nearly 160,000 loan offers to over 15,000 borrowers who recently applied for a loan. It found that the average difference between the highest and lowest APR offer (for the same borrower and loan term) was 7.1 percentage points. The potential savings on even modest loan amounts are huge when the range of rates is so broad. Consider one borrower in the study’s dataset that had a credit score of 720 and applied for a $30,000 loan with a 36-month term. The lowest APR offered was 5.99 percent APR and the highest was 15.87 percent. This price dispersion on a $30,000 loan translates into savings of up to $5,050 — or 17 percent of the loan balance. It is worth emphasizing again that this price dispersion is for loan offers to the same consumer. Comparing multiple lenders when shopping for a personal loan is a smart idea no matter what your credit score is. However, the study showed that borrowers with fair (580–669) and good credit (670–739) had the most to gain from comparing multiple lenders. Both credit score brackets had a price dispersion of 8 percentage points. That does not mean that comparing lenders is not important when you have excellent credit. According to the same SuperMoney study, failing to compare multiple lenders could save borrowers with very good credit more money than increasing their credit score by 100 points. The problem Every year, Americans waste billions of dollars on inflated interest rates. Many borrowers only check one or maybe two lenders. There are several reasons for this. For starters, applying for multiple loan quotes is tedious and time-consuming. Borrowers often think it is a waste of time to compare prices because they assume all lenders have similar rates for people with their credit score. Some also worry that applying for multiple loans will hurt their credit score. They are not wrong. Every time you get a hard pull on your credit report, your credit score will probably drop by a few points. The solution The good news is that many lenders allow you to prequalify and check your rates with a soft credit pull, which will not ding your credit score. There are also fintech companies that are reducing search frictions and price dispersion by making it easier to compare mortgages, auto loans, and unsecured personal loans. Next time you get a mortgage, auto loan, or unsecured personal loan, do yourself a favor and invest just a few minutes of your time comparing prices. There is no upside to paying more than you have to for a loan. Just spending a few minutes comparing the loans you qualify for could save you thousands of dollars over the life of the loan. Andrew Latham is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.
Millennials are often the brunt of internet memes and office humor. I should know, I’m a millennial myself. This group born between 1981 and 1996 are given unique opportunities, yet face unique financial challenges that generations before them simply did not. Technology has opened the door for some amazing advancements, yet modern income levels have not mirrored the same sort of acceleration. For example, the average salary of a millennial today is an estimated 20 percent lower, than the average salary of a baby boomer at the same age. Low salaries, rising debts, and increasing costs of living leave millennials at a financial disadvantage when it comes to saving for one of the most important things — retirement. If you yourself are a millennial, you need to be proactive about becoming financially savvy and thinking towards the future. Saving for retirement now in this early stage of your career is critical to your retirement planning success, because you can leverage the power of time and compound growth. Why is it important to get started early? 35-Year Investment Growth Table Where do I start with retirement planning? Why is it important to get started early? Time is one of the most crucial elements of investing. The more time your money has to grow, the more interest you’ll be able to accrue on your investments. Sure, the stock market can be volatile over short time periods, but on average a diversified index fund grows by about 10 percent. If you let your investment sit for years, the dips and highs of the stock market will eventually adjust to a healthy return, but you just have to be patient. The personal finance expert at Semi-Retire Plan, Mr. SR, lays out what investing can look like if you get started early. “For the simplicity of this example, let’s say that the stock market consistently grows by 10 percent each year. Let’s say you invest $5,000 at the beginning of each year and achieve that 10 percent growth per year. That 10 percent growth during the year equates to $500, so you’ll have a total of $5,500 after that first year. The next year, you’ll invest another $5,000, plus your existing $5,500 also grows by 10 percent. In year two, you’ll have $1,050 in growth." Over time, the growth of your investment will actually outweigh the money that you’re putting into your portfolio each year. Let’s extend this example for a period of 35 years. Check out the $ growth and Total amount in account columns, in particular." 35-Year Investment Growth Table Year # New money invested at the start of each year Total money invested during the year (previous total + new money invested) Percentage growth $ growth Total amount in account at the end of the year 1 $5,000 $5,000 10% $500 $5,500 5 $5,000 $30,526 10% $3,053 $33,578 10 $5,000 $79,687 10% $7,968.71 $87,655.84 15 $5,000 $158,862 10% $15,886 $174,749 20 $5,000 $286,375 10% $28,637 $315,012 25 $5,000 $491,735 10% $49,174 $540,909 30 $5,000 $822,470 10% $82,247 $904,717 35 $5,000 $1,355,122 10% $135,512 $1,490,634 Before year 10, the annual growth in the account starts to exceed the amount you’re contributing to the account. After year 25, your annual growth starts to exceed $50,000. After year 30, your account balance is over $1 million. By the end of year 35, your account has nearly $1.5 million. And you only contributed $175,000 total.” This is why they call compound interest the seventh wonder of the world. Over time your money will earn more than you’re able to contribute on your own. Saving for retirement can become a much for achievable goal if you use the power of compound growth. Use the time that you have to your advantage. Where do I start with retirement planning? Here are some practical steps you can take to start planning out retirement. 1. Take advantage of matching/free money Many employers will match a certain percentage of your retirement account contributions. Take advantage of that small percentage that they are willing to match and reap the rewards of the free money. Even if you can’t yet afford to contribute a large percentage of your income to retirement savings, make it a priority to earn the employer match if it’s offered. Mr. SR, the personal finance specialist, says that, “Ideally you’ll work your way up to contributing at least 15 percent of your income to retirement savings. Different experts will recommend different percentages for retirement savings. Personally, I like to save about 20 percent. Aspiring early retirees may save 50 percent or more. Either way, your personal savings rate should ultimately reflect your target retirement age and retirement expenses.” 2. Create an emergency fund After you qualify for the full employer match, set some money aside as an emergency fund. You don’t want an unexpected expense or job loss to cause you to go into debt. Even though an emergency fund isn’t “saving for retirement,” it does protect your investments and it protects you from accruing high-interest debt. Here is a great video that gives a quick overview of how to prepare for a financial emergency. 3. Pay off and consolidate debt Speaking of debt, your early career years are a great opportunity to focus on limiting and eliminating anything you owe. One of the best ways to consolidate multiple debts is by following the avalanche method: Focus on clearing your smallest debt first while making minimum payments on the other debts. Once you’ve paid off the first debt, allocate the amount you were paying toward the first debt into the second smallest debt on the list. Focus on paying off this second debt. You then keep snowballing your payments until each subsequent debt is finally cleared. In addition, if managing all of your different debts is giving you a headache then considering consolidating all of your debts with a personal loan. A personal loan can be a great option to simplify debt and refinance for a lower APR rate. It’s one payment to worry about and a possible alternative to the avalanche method. 4. Consider tax-advantaged accounts When it comes to additional retirement investing, any tax-advantaged retirement account you qualify for will be better than a taxable brokerage account. However, choosing between the different tax-advantaged accounts can feel perplexing, personal finance expert at Semi-Retire Plan breaks down different retirement accounts that you should look into. “Early in your career, Roth accounts (like a Roth IRA or Roth 401k) can be advantageous. Roth accounts let you pay income tax on money now but then the growth in the account is tax-free. At a basic level, Roth accounts are a good option if you think your current income is lower than your income will be in retirement. Conversely, tax-deferred accounts like a 401k or 457 let you avoid income tax now — but you will pay taxes on the money and growth later when you withdraw it from the account. These tax-deferred accounts can be most helpful when you’re at or near your highest-earning part of your career because you’ll defer the taxation until later when your income will likely be lower.” 5. House hack if possible Another factor you may have more flexibility with in your twenties and thirties is your housing arrangement. This age range can create an opportunity for income or savings through “house hacking.” Typically this involves buying a property that you live in and also sublet to tenants. Then, you can essentially reduce or eliminate your monthly housing costs with the income from your tenants. I would argue that even renting with multiple roommates is a housing hack, in a way. You can drastically reduce your personal housing expenses this way, even without owning the property. The trickiest thing about this method is finding the right tenants. If you have tenants that are not the most respectful to your house and amenities, maintenance fees can start to add up. Start by screening tenants with a detailed application, here is a free rental application that can be used a great starting off point to find the perfect tenant. 6. Stick to your plan After reading through this article my hope is that you will start to understand the strengths and weaknesses of your current retirement plan — or the lack thereof. Perhaps you are an investing guru, but you haven’t considered house hacking. Or, maybe you’re about to finally pay off that pesky college debt, but don’t know how to take advantage of an employer match. Wherever you are in your personal financial journey, use these tips to effect change in your own life. You may approach these tips out of order, but the important thing is to recognize where you are lacking on your journey to retirement and make some actionable steps today to improve. Make a plan and stick to it. Retirement saving is a marathon, not a sprint.
Did you know that six out of ten households face some kind of unexpected financial emergency each year? Clearly, you can never be too prepared for an emergency — especially when it comes to your finances. This video goes over four ways you can start preparing for a financial emergency: Establish an emergency fund Safeguard critical documents Consult with a financial counselor or coach Review your insurance coverage Although these steps can help you get started with financial emergency preparation, you should also take your personal financial and life situation into account and do what is best for you. Overall, getting your financial situation in order can take time, but it will prove to be worthwhile when you or a family member is faced with a financially taxing emergency. For more financial tips, check out these article for answers to common personal finance questions: "Should I Get a Credit Card or a Personal Loan?" "What if I Miss a Payment on my Personal Loan?" "9 Myths about Credit Card Debt"
These awesome companies have earned a coveted spot on Best Company’s top five best personal loans companies list for 2021. After factoring in each of the company’s overall services and over 10,300 customer reviews, you’ll know why these personal loan companies are the best. Discover which of these personal loan companies may be the best option for you: 1. Best Egg What to expect Best Egg is known for having some of the speediest and easiest loan approvals in the industry — often times in as little as one business day. For customers that are in need of a quick loan approval, Best Egg is a great option. Director of Content & Mass Media for Best Egg, Sarah Zangrilli, lays out what makes Best Egg a standout personal loan company: “[Best Egg has an] amazing culture, top notch customer service, and quickly funded loans.” Read Full ReviewVisit Site Customer sentiment criteria Value for your money — 4.5/5 Quality of product or service — 4.5/5 Customer service — 4.5/5 Company trustworthiness — 4.5/5 2. FreedomPlus What to expect FreedomPlus has unique debt consolidation loan options and benefits. If you are wanting to pay down your credit card debt, FreedomPlus will exclude that debt from your debt-to-income ratio, helping you to qualify for more money and possibly better rates. Senior Director of Marketing for FreedomPlus, Archuna Jagota, highlights two of FreedomPlus's strengths: “Unmatched customer service — FreedomPlus offers a quick and easy online application process with a focus on personalized customer service via the phone. Our knowledgeable loan consultants make the application process informative, efficient, and easy for borrowers. Smarter loan solutions — We go beyond the credit score to understand a customer’s full financial situation. We reward consumers through lower rates for doing responsible things like paying off debt with a FreedomPlus loan, adding a co-applicant who has income, and saving for their retirement. FreedomPlus has helped thousands of customers find a personal loan solution to fit their budget and goals.” Read Full ReviewVisit Site Customer sentiment criteria Value for your money — 4.5/5 Quality of product or service — 4.5/5 Customer service — 4.5/5 Company trustworthiness — 4.5/5 3. SoFi What to expect If you are wanting to borrow a large sum of money, SoFi is most likely your best option. Most other lenders cap their personal loans at around $40,000; however, SoFi will lend approved borrowers up to $100,000. Affiliate Manager for SoFi, John Wong, explains more about why SoFi is different:“We pride ourselves to be one of the top prime lenders on the market. We provide our over 900,000 members with the tools they need to borrow, save, spend, invest, and protect their money—all from the SoFi mobile app. Read Full ReviewVisit Site Customer sentiment criteria Value for your money — 4.5/5 Quality of product or service — 4.5/5 Customer service — 4.5/5 Company trustworthiness — 4.5/5 4. Upgrade What to expect Most personal loan companies require a credit score around 650. Upgrade has one of the lowest credit score minimums in the industry with a minium requirement of 600. For those that have poor credit and are having trouble finding approval for a personal loan, Upgrade may be worth looking into. Marketing Manager for Upgrade, Kyle Wood, shares two additional characteristics that differentiates Upgrade from others: "Fast funding — Applicants can get approved and receive their funds in as little as one day. Co-applicants — We offer joint applications to our borrowers.” Read Full ReviewVisit Site Customer sentiment criteria Value for your money — 4.5/5 Quality of product or service — 4.5/5 Customer service — 4.5/5 Company trustworthiness — 4.5/5 5. Upstart What to expect Upstart has high approval odds, taking into consideration a number of different factors, such as education/area of study, job history, credit score, years of credit. For those with little to no credit history, but have a quality college degree or a high-paying job, you are likley to qualify for a personal loan from Upstart. Head of Communications for Upstart, Diana Adair, expands on Upstart's unique personal loan qualification criteria: “Upstart believes you are more than your credit score. Your education and job history help us understand more about your future potential. Upstart is the leading AI lending platform partnering with banks to expand access to affordable credit. More than two-thirds of Upstart loans are approved instantly and are fully automated. In addition, Upstart's patent-pending platform is the first to receive a no-action letter from the Consumer Financial Protection Bureau related to fair lending.” Read Full ReviewVisit Site Customer sentiment criteria Value for your money — 2.5/5 Quality of product or service — 2.5/5 Customer service — 2.5/5 Company trustworthiness — 2.5/5
A recent survey asked millennials how they felt about paying off all their credit card debt this year. The responses indicated a real lack of optimism: 25% felt not at all confident 28% felt slightly confident 20% felt moderately confident 28% felt very confident Nearly three-fourths of the millennials surveyed did not feel fully confident in their abilities and skills to pay off credit card debt. Are you part of this group too? Don’t let your stress or lack of understanding push you away from developing great personal finance skills; instead, embrace your misconceptions and learn where to go from here. Below is a list of myths that many millennials believe when it comes to handling credit card debt. If any, or all, of these myths have come across your mind, don’t stress — a panel of over 20 financial experts have shared their wisdom to help guide people just like you, a millennial struggling with debt. Go on, start clicking through the list of myths; I guarantee you'll walk away feeling a bit more financially confident. Myth 1: You shouldn’t save money if you are trying to pay off debt Myth 2: The “Keeping Up with the Joneses” mindset won’t hurt you Myth 3: “Don’t sweat the small stuff” — Convenience spending isn’t a big deal Myth 4: Millennials should know better than to go into debt Myth 5: All credit cards are created equal Myth 6: Millennials are lazy and irresponsible Myth 7: There is only one way to pay off credit card debt Myth 8: Your credit card company is out to get you Myth 9: Spend now, go into debt later Myth 1: You shouldn’t save money if you are trying to payoff debt Many millennials attempt to aggressively pay off all their debts, putting every extra dollar they can afford to credit card debt. What most don’t realize is that paying off debt is a balance of putting money towards credit debt and putting money towards savings. Kudos to paying off your credit card debt, but think about how a lack of savings could cause even greater financial instability. “Say your apartment floods, you get fired, need surgery, or face car troubles. You may fall back into credit card debt in order to pay for the unexpected emergency. You’re just continuing that cycle of debt when you don’t set aside money for savings, unable to ever truly breathe," warns Gideon Drucker, Certified Financial Planner. Solution 1: Saving is empowering — pay yourself The word saving needs a change of reputation — most associate the word with restrictions. However, many financial experts champion the notion that saving is paying yourself for the future, rather than depriving yourself today. A good savings plan is one that is specific, organized, and trackable: Specific — Choose a specific percentage of your income that you can put towards your savings with every paycheck. It is often recommended that 10 percent of your paycheck should be put towards your savings each month. Budget the rest of your expenses with the remaining 90 percent of your income each month. Organized — The Capital One Mind Over Money Study suggests, “Set up goal-directed banking accounts to help you focus on long-term goals. For example, name an account after a big life goal that you want to work towards, such as buying a house. Use this account exclusively for your savings pool.“ Trackable — Many online tools make it easy to automate and track savings. Automating your savings allows you to auto deposit money from your paycheck into your savings account, meaning you don’t need to worry about it. Apps allow you to track all of your expenses and income, making you accountable to your savings plan. It’s never been easier to track where your money goes. Myth 2: The “Keeping Up with the Joneses” mindset won’t hurt you What is a “Keeping Up with the Joneses” mindset anyway? Essentially, it is the idea that you should use people around you as the benchmark for your own material wealth expectations — If the Joneses are buying a boat, then you should too. As a millennial myself, I have found this mindset easily amplified through the use of social media, the ultimate comparison platform. It is now easier than ever to see so much of what others have, evoking feelings of material comparison. “Many millennials fall into this trap, spending money on “Keeping Up with the Joneses” type vacations, meals out more often than they should, etc. Money is so hidden, you only see what people do,” says financial coach Heather Albrecht. This attitude can lead to debt and dissatisfaction in the long run for those who cannot truly afford the luxuries that they are seeking out. Solution 2: Avoid minimum payments If you are capable of making more than the minimum payments on your credit card balance each month, do it! Those minimum payments end up costing you more in interest and give you a false sense of wealth. It is dangerous to get into the habit of spending credit that you cannot afford now with the mindset that you will pay it back later. Accountant Howard Dvorkin reinforces this principle expressing that, “millennials are so unique, even their debt is different. They run up big balances just trying to make ends meet. I’ve never seen a generation that puts so many daily expenses on their plastic. it’s too darn easy to slip into making just the minimum payments.” Avoid the temptation to run up your card with expenses that you cannot afford to pay in full every month. Myth 3: “Don’t sweat the small stuff” — Convenience spending isn’t a big deal Millennials have been raised in a world of new and enticing ways to spend money. Convenience spending and instant gratification put millennials in a unique position to spend money in a number of different ways — ways foriegn to previous generations. For example, “Amazon Prime, food delivery apps, Uber, you name it make it super convenient to say yes to immediate wants. Convenience is nice for saving time, but it isn't so friendly when it comes to saving money and avoiding credit debt. Additionally, the inability to say ‘No’ to not just ourselves, but social situations makes it easier to simply say yes to spending” explains finance educator Josh Hastings. Solution 3: Limit convenience spending You do not need to cut out all convenience expenses, time is precious after all, but consider cutting out a few. Pinpoint which convenience expenses truly help you save time, versus the expenses that stem from laziness or impatience. After you have pinpointed which convenience expenses you can live without, “be willing to make those changes to your lifestyle. Use that extra money from your cut down expenses as a way to help repay your debt,” advises Gladice Gong, personal finance blogger. That extra $50 saved from convenience spending each month can now get you one step closer to being debt free. Myth 4: Millennials should know better than to go into debt About one-fifth of the experts that contributed to this article explicitly expressed the concerning reality that millennials execute minimal personal finances skills. Millennials are blamed for being reckless with money, but everyone seems to agree that the previous generation did little to teach millennials good personal finances skills. Ken Rupert, author of "Financial Self Defense" explains, “millennials have become conditioned to supplementing their incomes with debt. This, however, is not entirely their fault since the generation before them set the example. Adding to this reality is the lack of financial acumen they have. Rarely in high school or college are they required to take a personal finance class. This lack of financial priority and understanding has led to increased values in consumer debt for millennials.” In addition, personal finance blogger, Freya Kuka expresses how student debt adds to the issue of credit card debt amongst millennials: “Salaries have not risen proportionately to student loans and we can not blame the youth for the nature of the economy. By the time they are done with their degrees, they are struggling to pay bills and meet their student loan payments. What is the answer? Credit cards. The evil piece of plastic that actually accounts for 25% of all millennial debt!” Solution 4: Start with the basics, take on your debt one step at a time For millennials who feel overwhelmed by credit card debt, here is the first thing that you need to drill into your mind. Tell yourself that while your debt won’t go away overnight, you can be debt free if you work little by little. This mindset shift is crucial. Believing that financial freedom comes with time and dedicated effort means that you are finally taking an honest, realistic step in the right direction. No quick fix, no loophole, just a determined plan to eliminate debt one step at a time. Millennial Kalyn Lewis shares her own personal experience and advice: “Don’t look at the overall debt and allow yourself to get overwhelmed and shy away from getting after it. Instead, look at it month by month and know that this is going to take you a bit of time. Once I got everything in my month-to-month plan, I started to pay off more each month, and the months needed to get debt to zero also became fewer. Rather than having debt paid off by April 2021, we'll now be credit card debt-free by the end of 2020!” Myth 5: All credit cards are created equal This myth is for millennials who are looking to apply for their very first credit card. Be aware that your status as a credit novice makes you a target for credit card companies. “College students are often targeted by credit card companies with “easy” money offers, i.e., credit card offers for those with little or no credit. When a college student needs some money, it’s hard to say no to one of those offers. College students may not be shopping around for the best rate making them more willing to take what is in front of them,” explains counselors from GreenPath Financial Wellness. Solution 5: Counter your credit card mistakes by improving your credit score If credit card mistakes have been the catalyst for your debt, then it’s time to take your credit score seriously. Your credit score determines your interest rates for loans, credit cards, mortgages, etc. so if you want to pay less, then you’ve got to have a higher credit score. “Payment history is the most important factor in determining your credit scores so make sure to develop responsible on-time payment habits every month. Late payments can last up to seven years on your credit reports — the last thing you’ll want to carry with you in your financial journey,” advises Nathan Grant of Credit card insider. For more information on the five main factors that influence credit score, read our article that goes over the in's and out's of credit score. Myth 6: Millennials are lazy and irresponsible Millennials seem to be an easy target for workplace jokes and internet memes. Every generation has its quirks, but the reality is that millennials were born into an era that makes it uniquely easy to fall into debt. Credit analyst Yvette Glover empathizes with the many millennials that find themselves in a troubling financial situation: "Millennials get a bad rap for being lazy or overly sensitive, but the reality for a lot of them is very different. Some face surmounting debt because of the high cost of college tuition. With a housing market that's even more expensive, millennials are paying more in rent while having fewer opportunities to own. Stuck with higher costs and lower-paying jobs than previous generations, a lot of millennials lean on credit cards to fill in the income gap. These circumstances add an enormous financial burden to a generation that's still just getting started.” Solution 6: Pay down debt using the Avalanche Method Out of the 25 experts that offered up tips for this article, nearly one-fourth of them suggested using the debt Avalanche Method, also known as the snowball method, as a strategy to climb out of debt. Finance expert Nathan Wade of WealthFitMoney gives an overview of how to implement the avalanche method today: Create a spreadsheet with a list of your debts organized from the smallest balance to the largest balance. Focus on clearing your smallest debt first while making minimum payments on the other debts. Once you’ve paid off the first debt, allocate the amount you were paying toward the first debt into the second smallest debt on the list. Focus on paying off this second debt. You then keep “snowballing” your payments until each subsequent debt is finally cleared. Myth 7: There is only one way to pay off credit card debt A very common, and typically ineffective, way to pay off credit card debt is to apply for several credit cards in an effort pay off already existing credit card debt. Financial expert Robert Farrington comments on this strategy, “It’s common for millennials to get into credit card debt due to a lack of experience in [credit cards]. It’s easy to max out one card, then apply for another, max that out, and then apply for another. Eventually, the bill comes due and it can be stressful to make multiple payments.” The reality is that if you can not afford to pay off your first credit card, what are the odds that you will be able to pay off your new lines of credit as well? Solution 7: Consolidate credit card debt with a personal loan Thousands of people use a personal loan to pay off multiple lines of credit card debt. If you are unfamiliar with what a personal loan is, here are a few benefits: Convenient — You can essentially consolidate any number of credit card debts into one large payment, eliminating the need to pay off several credit cards and instead just making one monthly payment. Affordable — Personal loans are characteristically known to offer lower interest rates than credit cards — especially those with great credit scores. Financial and law expert, Jennifer Jancosek advises, “Those with a high credit score can use a low-interest personal loan to pay off high-interest accounts, saving significant money over the course of debt due to the lower interest rates.” Strict — In order to pay off your personal loan you have to pay a complete monthly payment each month, you cannot only pay a minimum amount like a credit card. This is great because it forces you to pay off your debt, but can be difficult for those who are not able to financially commit to a set payment each month. Or, Compare the Best Personal Loan Companies. Myth 8: Your credit card company is out to get you Many bank and credit card companies aim to be transparent and trustworthy, offering free resources such as trained employees, personal finance guides, online courses, etc. to help out new customers like you. Don’t be afraid to take advantage of the free resources; it is all at your benefit. Reading customer reviews is a great way to gauge a company’s dedication to its customers. Do your homework to find the right company with resources that can help you out. Steer clear of the few companies that do not appear to be as transparent with its customers. For example, some credit card companies will “pop up on college campuses to nab students right after they graduate [with credit card offers],” warns Brian Hanly, finance educator. If you find yourself in a similar situation, disregard the persuasive offers and remember that some banks and credit card companies are truly willing to help you achieve your financial goals. Solution 8: Ask a favor from your credit card company Do not let credit card companies intimidate you. Credit card companies, unfortunately, are not always going to proactively go out of their way to save you money. However, you will be surprised how willing credit card companies are to waive fees or lower APR rates if you pick up the phone and talk with one of their representatives. For example, money hacker Dave Mason says that, “the easiest way to lower your credit card interest is to call the company and ask them for a lower interest rate. A huge percentage of card holders qualify for lower rates, but never think to ask and the card companies have no incentive to lower the rates on their own. In addition, credit card fees are often reversible. If you get charged a fee, just call your credit card company and ask them to remove it as a courtesy. Some card companies have a policy of removing one fee every six months. But again, they won’t do it unless you call and ask.” Myth 9: Spend now, go into debt later With credit card debt averaging around $8,398 per household, it is easy to fall into the trap to spend now and pay off debts later — isn’t that what everyone else is doing? “Many millennials have fallen in love with the idea of instant gratification. As a millennial myself, I have seen firsthand how easy it is to resort to credit cards to finance extravagant lifestyles — even when the income level can most likely cannot support it. With credit cards, individuals sometimes do things they really can’t afford to do” says James Lambridis, founder and CEO of DebtMD. Just because the joy of spending may have gotten you into debt before, it doesn't mean your relationship with spending always has to be a love/hate relationship. Solution 9: Create a budget Starting a budget may sound overwhelming and restrictive right now, but think about how less overwhelmed and restricted you will feel when you don’t have thousands of dollars in credit card debt. Freedom Debt Relief suggests to combat impulsive spending habits and debt by “starting with a motivating budget. Before you dive into the numbers, set and write down goals — and do so with your family/spouse as appropriate. Goals may range from taking a vacation to buying a house. Write down the goals, and then proceed to build the budget around those goals. Paying off debt is infinitely more doable when you are trying to achieve goals that matter to you.” Before you close out of this article, take a proactive step. Put this new found knowledge into action — make financial goals and formulate a plan that is tailored to your personality. If you need a quick recap of the advice given in the article, below list four key takeaways to help you begin your personal finance journey towards zero debt. Key takeaways 1. Avoid debt if you can “Realize that we live in an 'instant' society that encourages everyone to spend money now and pay it off later. Instead of procrastinating your credit card payments, pay more than the bare minimum of what you owe that month! It will save you in the long run.” Ethan Taub, CEO of Billry and Creditry. 2. Think towards the future “Millennials should begin financial planning with the end in mind — stop living for the moment with your dollars and instead consider the significant wealth that you could build up in your middle aged years. Build up the confidence to start investing, planning for retirement, and paying down debt.” Jeff Mount, President of Real Intelligence LLC 3. Back to basics: “Millennials should start paying off debt by instituting a budget, tracking spending, cutting back wherever necessary, and/or securing additional income opportunities. Paying down debt is not an overnight solution, but staying organized and being smart about spending are great ways millennials can reduce their interest liabilities and regain financial confidence and control.” Brittan Leiser, Founder/CEO of SavviHer 4. Consider professional debt help: “If you’ve accumulated debt on multiple cards consider a debt consolidation loan to consolidate your various credit debts into one manageable monthly payment with lower interest rates.” Jessica Vomiero, Editor of Lowest Rates. Don’t hope to get out of debt, prioritize it. To help consolidte debt: Compare the Best Personal Loan Companies.
Experts help engaged couples navigate their financial relationships Should you pay your fiance's debts? Are you obligated to? Is it even a good idea? I have recently come across several advice columns that dealt with the issue of helping a fiance pay off their debt. Having never been affianced, this totally blew my mind thinking that I could just get married and share my debt with another person. I always understood the idea of marrying rich, but never actually expected that someone I marry would be obligated to help me financially with student loans that I had accumulated before they even knew I existed. To help understand the different perspectives, obligations, and customs surrounding debt and finances during an engagement, we asked experts in several fields for their advice. Here's what they said: Consider both perspectives Matt Edstrom is the CMO of GoodLife Home Loans, a mortgage company based in Laguna Hills, California. Matt is an expert in finance and professional and personal development. "While there isn’t a standard form of etiquette that I’m familiar with when it comes to paying off your fiance’s debts, I do know that it's a general rule of thumb to keep some degree of separation between yours and your fiance’s finances. That isn’t to say that you should be hiding aspects of your finances with your future husband or wife. It’s a valid question to ask, and the answers will vary quite significantly, I’d imagine. It can be especially tough to ignore the elephant in the room which is the increasing rate of divorce. If an engaged friend came up to me asking me this question, I’d instinctively not want to bring up the possibility of a divorce, because that pessimism can drive wedges between people. Having said that, I’d also feel obligated to say something along the lines of 'I know you two plan on having a healthy marriage, but don’t you think the possibility of divorce should be taken into consideration in this particular scenario.' There is another side to this coin. Let’s say you were in a financially stable place in life that allowed you to help your fiance out with his/her debt. You wouldn’t do this unless you would still be in good financial standing after said debt has been paid off. So worst-case scenario is you help him/her pay off the debt, there is a divorce down the road, and you helped somebody pay off some debt. It doesn’t damage your credit or any other aspects of your future finances. Yes, there will be a sense of bitterness about the money you used to help with the debt, but in terms of financial health, the consequences are far less severe. Any relationship (even familial ones) can be severed and/or neglected by either party, so if you bring money into any of those relationships, there is always going to be a little more risk to it. It’s something that should not be decided on in a moment’s notice and needs lengthy discussions with both an advisor and your significant other." Don't keep secrets Tiiu Lutter has a master’s degree in psychology with a concentration in counseling and secondary guidance certification, and has completed the three-year ESFT Family-based Clinical Training, and writes for SR22InsuranceQuotes.org. Tiiu has worked in mental health for the last 15 years and co-owns a family and couples’ counseling center. "So you’re in love and in debt, well, half of you are in debt. It’s still a great idea to get married, but you definitely should talk about the debt before the wedding so it doesn’t get in the way. Disagreement about money is the top reason for divorce, so you need a plan ahead of time. If you are thinking of keeping your debt a secret, you should re-examine your relationship completely. If you don’t trust your partner enough to talk about money, there are significant issues there. As for paying it off, there isn’t really etiquette now that spouses are equal legal partners. However, the most successful money style (in terms of marital longevity) is the 'mostly ours, some yours, and some mine' method where most money is pooled, but you each retain a bit of your own to do with whatever you like. This doesn’t necessarily address the debt. For that, you need to set your financial goals and look at the total amount you owe as a couple. Look at interest rates and see what payment strategy gives you the best progress toward your goals. It could be that the debt holder contributes less to the common pot, or that you both chip away at the debt. Having a lot of debt doesn’t necessarily damage your credit rating, but if you have different credit ratings and you want to buy a house, it might be a good idea to keep everything separate so that you can get better interest on your mortgage. This assumes the better credit score also has enough income to get a loan. One last word of caution, if you are keeping your credit separate, don’t lovingly get an extra copy of your credit cards for your spouse to have 'just in case.' The instant you give them a card, that entire debt profile will now be attached to both of you! Just be patient with one another and know that you fell in love with the other person both because of, and in spite of, their saving and spending styles. Just as you developed your own money habits as a child, you will also develop your own money habits as a couple." Have open and honest discussions Dennis Shirshikov is a New York City-based financial analyst for FitSmallBusiness.com. He has a master's degree with a focus in Financial Risk Modeling and teaches Economics at Queens College. "There’s no one-size-fits-all approach when it comes to discussing finances with a significant other because so much depends on the people involved. Nonetheless, it’s crucial to establish concrete, transparent rules that achieve tangible goals and not damage the relationship. When discussing finances with a loved one, it’s essential to establish boundaries. For example, if a fiance suffers from poor spending habits, it’s disadvantageous for his or her future spouse to pay off that person’s debt as that will not solve the root problem. Avoiding resentment is equally crucial when discussing finances. Too often, a person will volunteer to pay on behalf of their significant other and wrongfully expect a form of repayment in the future. To avoid ‘financial resentment,’ it’s critical that both parties are transparent and forthcoming about their financial obligations early in the relationship. Although it may seem obvious, the essential step to a healthy, productive discussion about finances is to give it the time it’s due. Proposals and marriage constitute a significant commitment; therefore open and honest discussions are all the more crucial. How else would a couple be able to move in a unified direction? While discussing financial matters can be complicated, many people are surprised by how simple they can be when they sit down and simply talk about them." Follow the rules of L.O.V.E Angelique Hamilton, MBA, is a marriage and life coach with a background in human resources. She is the CEO and Founder of HR Chique Group. "Finance is the number one root cause of failed relationships and marriages. It's important for couples to effectively manage their funds. I have four tips to understand your partner's finances called LOVE: L- Learn/List as much as possible about your partner's financial obligations including monthly payments, spending, and debts. You need to understand the depth of liabilities that are owed. Document your monthly and annual bills, and any items that is reduced from your income. Make a decision about how will you conduct your banking either from a joint account or separate account. Budget management will soon become your responsibility as a married couple. O- Be Obedient in your planning and preparation of the household's planned budget. It's essential for couples to plan the household budget to allocate available funds appropriately. Think of it as the 'Bank of the House.' One of you will act as the CEO overseeing the budget and the other as the Operating Officer in care of all day to day financial transactions. You both should agree and approve your finances. V- Be Vigilant in your approach to managing your funds. You must become watchful financial stewards over your finance. Your finances will become a puzzle to you both, if you're not knowledgeable about what's being spent or what funds are coming into the household. It's always best to seek mutual approval prior to make purchases or spending the dedicated funds on anything outside of the budget. There will come a time where challenges like an illness, job loss, etc. will affect your relationship. Your vows of 'in sickness and in health' and 'for richer and for poorer' are created in love and honesty. Your finances should embody those principles too. Make sure to set a plan to save for an emergency. The emergency fund can start off as three months of your salary and then increase to six months of your salary. Define a plan for your future life events including wedding, auto purchase, home purchase, child(ren), retirement. Consider investing to diversify your income. E-Make the Effort to encourage each other that you're in this together. All financial decisions should be a mutual decision and not one controlling all. Keep all lines of communication open and regularly schedule time to discuss your budget. You are one team! LOVE is all about you and your relationship. Keep the Love in it to maintain a happy, loving, and enjoyable marriage." Set financial goals together Dwain Phelps is the owner of Phelps Financial Group in Kennesaw, Georgia. He has more than two decades of experience in financial services, wealth management, and retirement planning. "According to Insider, 36 percent of divorcees cite money as the cause. The key to any successful relationship in life is communication, especially about money. Effective communication solves most problems and prevents unclear motives. Communication also allows couples who are engaged to have healthy and productive conversations about their finances. The first order of business for couples who are engaged is to have an open and honest discussion on the level of education regarding financial matters such as saving, money management, budgeting, taxes, investing, and retirement planning. This open and honest discussion will allow each person to potentially to see areas of strengths and weaknesses as it relates to their knowledge on financial literacy. One person may have a stronger financial background than the other individual. Hopefully, this open line of communication will allow the couple to agree on who should take the lead as it relates to their finances and provide a platform for effective goal setting. One of my favorite lines to quote to clients is that you are only as strong as your weakest link. Debt can become a weak link in any marriage. The best method in approaching this is to have open communication that will allow engaged couples to discuss and develop a plan to deal with debt issues. I can’t stress how important and critical having this discussion is as it relates to debt before marriage. Let’s assume that one person has accumulated very high credit card debt and other debts, such as student and car loans. There should be an agreed-upon plan to eliminate that debt. This agreed plan should include discussing salaries and which debts will be eliminated first. In my opinion, the person with less or no debt should help their partner reduce their debt. Marriage isn’t always a 50/50 deal, it’s each person giving 100 percent. Having both individuals working towards the same goal will reduce the couple’s overall debt-to-income ratio and improve their ability to develop a savings strategy for their future. One other important point of emphasis for engaged couples is not to go into debt before the marriage even starts. Couples need to communicate effectively on minimizing the cost of the wedding itself. Most couples start off the marriage in debt due to paying for expensive weddings. My recommendation to engaged couples is to seek a financial advisor who specializes in budgeting and debt management. This will set the tone for the success of any relationship. My firm has perfected a debt management program to help couples not get into massive wedding debt, and one of the things we recommend is to set a dollar amount that both individuals can pay for with their savings. Resist the urge to acquire loans and to use credit cards to pay for weddings." Keep your debts seperate Adeodata Czink is the founder of Business of Manners, an etiquette consultancy based in Toronto, Canada. She teaches seminars and workshops on international business etiquette and social graces. "No, it is not your job to pay your fiance’s debt that occurred before you met. Make sure when you divide who pays for what, that the fiance has enough money to pay off their debt, but don’t make yourself responsible for it. It is not your debt." Don't let resentment enter the picture Adam H. Kol, J.D. is a Couples Financial Counselor. He helps couples who love each other make sure that the money conversation doesn't get in the way, leaving them with greater peace and partnership. "There's no one best way to organize or handle finances within a couple. What's most important is that each partner feels good and that it fosters a healthy dynamic. What's healthy is determined by each partner and what moves the couple towards the future they want. Even if there is a predominant custom etiquette-wise, I would be wary of it. Financial stress remains a top cause of fighting and divorce; our norms and ways of handling it need an overhaul. No matter what direction you go, it's essential to watch out for resentment, which is the intimacy killer. This must be done actively over time, as well. For example, imagine the partner who paid off the other's debt later being unable to make a certain financial decision. They may resent that they put money toward their spouse's debt and see that as part of why they are now hamstrung. I start my clients off by exploring their money story, i.e. their experiences and viewpoints around money growing up, as well as in prior and their current relationships. Each partner should then share what they discovered. This is a safer conversation, as it's more descriptive, leaving little to argue about. It also builds mutual understanding and helps get the money talk flowing. Here are a few key strategies, action steps, and tips: Seek first to understand, then to be understood Ask open-ended questions that encourage your partner to give more than a 'yes' or 'no' response Build partnership around the emotional parts of money and your shared vision first; once that's in place, the tactical piece will be much easier and more likely to stick." Learn about eachothers financial history Deborah Sawyerr is a financial literacy educator and founder of Sawyerrs' House. She teaches kid, young adults, and adults about being smart with money. "Engaged couples should not only create an atmosphere of open discussions about their wedding plans or where they will live after they get married, but also about their individual and joint finances. The etiquette could be to have a date where they specifically discuss their finances — after all, this is about their future as a couple. During such discussion, both parties should provide clear evidence of their financial circumstances in the form of their credit file. Doing it this way means that there are no secrets or surprises later on down the road. In addition, during these discussions, evidence should be provided of any repayment plan in place by way of a show of bank statements. These discussions should also happen over a period of time and on a regular basis. The discussion should focus on being non-judgemental because it is about finding a solution as a couple. The environment and atmosphere where such a discussion takes place should be relaxed — perhaps after a nice meal or over a glass of wine at home. The ambience plays a vital role in such discussions. If one party is financially stable and able to pay off debts, I absolutely suggest that they do so. This is because such a debt will eventually have an impact on them as a couple. For example, if the party with the debt is stressed out about the debt, it will have a knock-on effect on their relationship. It can cause a strain in their relationship. By the same token, if the party with the debt is paying off the debt, it will also have a knock-on effect on their financial contribution to household bills. It may be that they are only able to contribute a small amount towards bills whilst they clear such debts. Additionally, it makes perfect sense for the financially stable individual to pay off the debt because it will drastically reduce the amount of interest which is likely to accumulate over time. Why pay more towards interest when they can save that money for other things? Again, the process for paying off the debt by the financially stable party should be asking the other party to put pen to paper by writing down ALL outstanding debt and any repayment plans. There should be evidence of this versus simply word of mouth! It is a known fact that some people with debt will underplay what they truly owe. Yes, accounts and credit profiles should be still be kept separate. Why? There is always the risk that the party with the debt can quite easily fall back into debt. There is, therefore, no point in dragging an innocent party down the slippery slope. To summarise, I would say that it is a very risky task paying off a fiance's debt. This is simply because the financially stable party may not know if they are being taken for a ride. How can they be sure that they are not dealing with a gold digger? Furthermore, couples should really be having discussions about finances way before they even get engaged." Whatever you do as couple, make sure you both agree Lisa Mirza Grotts is the Golden Rules Gal, a warm and no-nonsense expert on the thorny subject of manners. She helps her readers and clients deal with tricky business, social, and political situations by always putting their best foot forward. "There’s a reason why an engagement is a formal agreement to be married, as in pre-marital or pre-nuptial. Common sense would dictate not taking on someone else’s debt, as it's extra baggage! It can be a challenge combining money. There’s enough to deal with as a married couple; to start your life with this hanging over your head makes little sense. On the flip side, once you have the discussion, your spouse to be may be okay with taking on your debt. If you’re not able to have the discussion about finances on your own, it might be time to think about a marriage counselor. It takes a village to be married, so if you can iron out this important detail you’ll be all the wiser in the long run. Money Talks: Mergers and Acquisitions Agree to disagree about how you handle your monies. Separate or joint accounts etc. If one or both of you has means, then by all means, hire an attorney and get a prenuptial agreement! The keyword here is Pre, as in before you say 'I Do.' Marriage is a contract. Think we vs. me. You’re headed in that direction, so avoid the blame game and figure out how you will work through your finances. Communication is the key. Sometimes the un-discussion can do more damage. Assuming anything is asking for trouble and adding day to day expenses, investments, debts, retirement talks, saving and spending equals trouble when it comes to finances." Establish financial roles and responsibilities Emily E. Rubenstein is a Beverly Hills divorce and family law attorney. Her firm handles family financial agreements and she has written about financial infidelity. "Many of my premarital and postnuptial agreements involve these issues — one fiance paying off the debts of another, income/asset disparity, and how to best discuss and combine finances. Interestingly, studies show that clarity about financial roles, responsibilities, and expectations may actually deter marital conflict and divorce. It's critical to have these conversations prior to marriage. That said, there are many, many combinations and options for couples when it comes to combining finances. Couples need to have open and honest conversations about their values and finances, consider the laws in their state, and engage professionals (whether attorneys, financial advisers, accountants, etc.) to make sure they know all of their options to make fully informed, empowered decisions." You're in it together Robert J. Forrest is a financial advisor at Jacobitz Wealth Management Group. He helps clients and their families find financial security, based on current financial needs and long-term goals. "Ultimately this decision is up to every couple. Personally, my wife had three times the amount of debt as I did when we got married. But we firmly believe that what is mine is hers and what is hers is mine — that refers to good things and bad things. When discussing the matter of finances with a fiancé or spouse it’s important to understand the underlying conversation: How do each of you view your relationship now and in the future? Are you one unit? Are you cohabitating? Do you depend on each other? What is your fundamental belief about marriage and what that means for a relationship? Having that conversation will lay a great foundation for handling many other issues that will inevitably come up down the road. Regarding money specifically, be sure to come prepared with what you own, what you owe, and how much you make. Understand where each of you are in your financial journey, because your journey will become one. Understand that when you’re having this conversation, you’re both being vulnerable and that isn’t easy to do. Affirm your care and support for each other. Make sure they know that you don’t value them based on their financial picture — you care for them, not their money. If you decide to pay off one another’s debts (either simultaneously or because one party is financially very well off) I would approach each debt as if it were your own. For example, it makes sense to pay off high interest debt as fast as possible. So if your fiancé or spouse has credit card debt, crush it right away. When it comes to lower interest debt, or debt with tax-deductible interest, it may not make sense to pay that off fast. Bring that debt into the relationship and budget it in with all of the other expenses — you’re now jointly responsible. Some debts you cannot legally combine (i.e. student debt). Some debt you cannot combine due to credit — maybe one of you has a very low credit score. Practically, putting both of your names on the debt won’t provide any benefits unless you’re refinancing. In the long run, the most helpful thing is to repeatedly reaffirm your commitment to one another and to never hang anything over the head of your spouse." Talk about debts as soon as possible Randolph (Tré) Morgan III is a family law specialist in North Carolina. He has a B.A. in Psychology and a J.D. from UNC-Chapel Hill. He regularly handles prenuptial agreements and divorces that take into account marital finances. "In my experience, the large majority of couples treat all of their pre-marital debt (called 'separate debt' in my jurisdiction) as their joint obligation and pay these debts from funds they earn during the marriage. However, some couples feel a need to clearly delineate their obligations before they are married and enter into pre-nuptial agreements to clarify expectations as well as legal obligations. Typically, the larger the debt, the more interested one prospective spouse or the other (or one of their parents) is in addressing expectations and obligations before they are married. In my experience, three and four-figure debts don't trigger a couple's need to talk about the debt before marriage as much as five and six-figure debts. There can be important and surprising legal implications based on how and when these debts are paid. These issues come into play in divorce and can even come into play when debts are paid and then engagements are called off. So it makes sense to address these things on the front end. My experience working with couples both before and after a marriage has taught me that it is always better to address expectations on the front end rather than to discover that your expectations differed down the road. Many people don't want to ruin the fairy tale feeling of being in love with practical, legal, or financial conversations. But, if you cannot have good, calm, productive conversations about these things before you are married, how will you have them when the really big issues come up during the marriage?" Do not judge your partner Darren Straniero is a certified financial planner with OnPlane Financial Advisors. Darren has more than ten years of experience in financial services and helps professionals and families plan for their financial futures. "Couples who are engaged should certainly have a very frank, open, and honest discussion about finances. It should be a judgment-free zone and that's really all we can ask for here. Money is extremely emotional for a lot of people. If that requires meeting with a financial advisor, a therapist, etc. then make it happen. The first step is to lay out what each person has financially. Income, savings, investments, debts, and spending habits/requirements. From here, real conversations can take place in terms of how to accomplish financial goals as a team, as a partnership. In my experience, couples who merge finances tend to experience better financial results. Not always, but more often than not. Having everything owned together makes it harder to hide things like credit card debts, spending habits, etc. And it can also diffuse the potential for resentment. When it comes to paying off a fiance's debts, I think absolutely. You're about to come together as a team in all facets of life. Why not financially? Imagine your future spouse lost a job. Would you not support him/her financially? Or your future spouse unexpectedly lost a parent or a child. Would you abandon him/her during a time of severe emotional need? I don't think so. And so the financial journey should also be a joint or team effort. I don't think there's a right way to go about it. But I do think a wrong way to go about it is thinking of it in terms of 'Well, I'm going to do this for you so you owe me,' aka tit-for-tat. That can lead to resentment and harbor other ill-founded feelings. Unless we're dealing with things like income-based resentment on student loans and other factors, I think accounts should, for the most part, be owned jointly (save for a few exceptions) and credit profiles should also be shared freely."
Guest Post by Michael Deane No one knows how long they’ll live and thus how much money they’ll need in their retirement. But you must plan anyway, especially if you would like to go into retirement early. Many people dream of retiring early so they can travel more, spend time with their loved ones, or take up a hobby. This requires substantial funds, discipline, and a little bit of creativity because you have less time to save all that money than an average retiree. Speaking about early retirement in an age where 66 percent of working millennials have nothing saved (according to the National Institute on Retirement Security) seems a little far-fetched. But as difficult as it sounds, going into early retirement is still possible if you follow the right steps and stick to your goals. If you are considering early retirement, take note of these steps that will help you prepare for it. Calculate how much you intend on spending annually Living within your means is essential to saving for the future. You don’t want to sacrifice your long-term financial goals to buy things you don’t need. Marie Haaland of SWNS Digital found that the average American spends $1,497 per month on non-essential things. That adds up to about $18,000 per year! Think about that: $18,000 that you could have put in your retirement savings or used to pay off a high-interest debt. You should aim to cut your monthly costs significantly so that you can set aside more money for your savings. Of course, you still need to live so make sure that you create a realistic budget and have enough money to cover your monthly bills and basic needs such as nutrition and clothing. Before you do that, assess your yearly spending. Your annual spending in your retirement will depend on the lifestyle you choose. Do you plan on living modestly or traveling as often as possible? Will you retire completely or have a side-job, start a business, etc.? Many retirees simply transition from full-time to part-time jobs or even start their own businesses. In this case, you will need to save less money for your retirement. Once you do come up with the target number for your annual spending, your goal should be to save up to 25–30 times of your annual expenses, according to Grant Sabatier’s book, Financial Freedom: A Proven Path to All the Money You Will Ever Need. Of course, calculating exactly how much you will need in your retirement is difficult and depends on certain factors that you cannot always predict (such as a recession). Paula Pant of The Balance recommends focusing on spending rather than on your current income when it comes to your retirement projections. That’s because some people with entry-level income tend to spend more than they earn, which results in credit card debt. But also keep in mind that your expenses might be significantly lower once you retire because you will have paid off your mortgage, for example. On the other hand, there is the risk of outliving your retirement savings, too. As you can see, calculating how much you will need in your retirement can be complex. A financial planner can help you figure it out so you have a clear plan for the future. Strive to pay off all your debt It is unwise to enter retirement with unpaid debt. Naturally, you first think of your high-interest debt. In order to enjoy financial freedom in your early retirement (this is the ultimate goal, isn’t it?), you should be debt-free. This would give you true peace of mind. This includes your mortgage. You might not be able to relax and enjoy your well-deserved retirement if you have debt hanging above your head. However, unlike consumer debt, your mortgage represents a much greater barrier to a carefree retirement. Michelle Singletary of The Washington Post believes that getting rid of your biggest expense (your mortgage) would leave room for managing other relevant expenses such as healthcare. She also points out that paying your mortgage off can save you thousands of dollars in interest. But be cautious, you should not spend all your savings to pay off your mortgage. Balance is key here so if you can make extra payments towards your loan balance every month without draining your savings, go for it. However, there is a dilemma that many people face regarding this problem: should you pay off your mortgage or invest that extra money? Business Insider consulted Brian Fry, a financial planner, to help clarify this matter. Fry recommended several scenarios depending on different financial goals. According to his analysis, if you get a raise and have extra money, the best action would be to refinance and invest more aggressively. Create multiple sources of income Retiring early means you need to save a lot more money (when compared to traditional retirement) in a much shorter time-frame. That is why the key to preparing for early retirement is creating multiple sources of income. Not depending exclusively on your fixed income creates new opportunities and eases the burden of saving. There are numerous ways you can achieve this from getting a second job (part-time, something with flexible hours) to buying stocks/investing. A lucrative side-job can make a huge difference for your future. A second stream of income can help generate money to cover some of your monthly bills and essentials. That leaves more money to put in your retirement savings or paying off debt. Additionally, having more than one source of income can help you reach those financial goals much faster. However, with your 40-hour a week regular job and your family and obligations, it’s hard to balance everything and still have time left to for a second job. That is why passive income is probably the best option for you. Investing in dividend stocks and bonds is usually the right choice since it doesn’t require a lot of money to start and it will allow you to slowly grow your wealth. To enjoy a comfortable retirement, keep in mind that you should focus on long-term investment goals rather than on short-term ones. Jeff Rose, a financial planner who writes for Forbes, suggests diversifying your investments, starting a passion project, or selling something to create multiple streams of income. Other things to keep in mind In the old days, retiring meant not working anymore and not having an income. Nowadays, things have changed which brings us to one important question: how do you envision your early retirement? What is your definition of it? Your further planning and savings strategy will largely depend on this. Perhaps you have a passion project in mind that you hope to focus on more diligently once you retire. Or you have dreamed of starting a home-based business that will likely bring you a decent monthly income while allowing you to relax at the same time? Whatever the case may be, ask yourself what retirement means to you before you venture into retirement planning. Lastly, don’t forget that consistency and discipline are key skills you will need for achieving your long-term financial goals but not at the cost of starving yourself in the present. Save as much as you can, but don’t forget to live a little too and reward yourself for your hard work from time to time. Michael Deane has been working in marketing for almost a decade and has worked with a huge range of clients, which has made him knowledgeable on many different subjects. He has recently rediscovered a passion for writing and hopes to make it a daily habit. You can read more of Michael's work at Qeedle.