Debt Management

“House Poor” Versus Controlling Your Own Destiny

Anyone who’s been awake to watch the changes in the economy over the last five years is familiar with the burst of the housing bubble. Too many people were given mortgages that were bigger than their budgets could handle and when those people couldn’t pay, the banks that offered those mortgages were in serious trouble. …

Low Home Mortgage Rates and Early Payoff Info

Over the last few years, home mortgage rates have drifted up and down between 3% and 4.5% for a thirty year fixed rate loan. That’s astonishingly low, especially considering savings accounts were giving out 6% returns in 2006. (I remember those days… 6% in a savings account. What I wouldn’t give for those days to …

Categories: Debt Management

How to Deal with Debt Collectors: Your Consumer Rights

Money has been tight, there‚Äôs no doubt about it. The Great Recession has taken its toll. But even before a financial crisis shocked the economy, American wages were stalled. According to the Social Science Research Council, the typical American earned $2,200 less in 2010 than in 2000. And while we all want to pay our …

Categories: Debt Management

Do Low Interest Loans Change the Rules For a Mortgage?

A lot of different “rules” are passed around regarding the size of a mortgage that a person or a family should take out in order to afford a home. One common one I see and hear repeated is that you should never take out a mortgage that has a value of more than twice your …

Debt Isn’t Required

Like a lot of people in my twenties, I spent much of that decade in a rush to saddle myself with a lot of debt. I owed money for my education. I owed money for my car. I owed money for my home, too. I had this strong sense that I needed all of those …

Categories: Debt Management

Need Help With Payday Loans? How To Escape The Cycle

I had a long conversation with a reader whose brother seemed to be caught in an endless cycle of payday loans. He works about thirty hours a week earning about minimum wage at a convenience store. About two years ago, his car broke down and in order to get it back on the road very …

Should I Cosign a Loan?

I get this type of question all the time. A family member or a friend is trying to get a loan for some reason. Those evil banks won’t lend them any money. They want you to cosign their loan for them. It won’t cost you anything (so they say) and it’ll help a friend out! …

Categories: Debt Management, Family

Does a Extra Payment Have an Impact On Your Mortgage?

Let’s look at a “typical” mortgage. Right now, the average American mortgage is $235,000, so let’s use that as our baseline. The Seattle Times reports that, right now, the average 30 year fixed mortgage rate is 3.42%. So, let’s use those numbers. We’ll look at a 30 year fixed mortgage at 3.42% that borrows $235,000. …

Categories: Debt Management

The Challenge of Lifestyle Deflation

It’s a pretty common story. Boy (or girl) wants something. Boy discovers that there’s easy credit available. Boy convinces self that they can just pay the debt later. Boy buys that thing on credit. Boy gets more credit and buys more things. Boy starts realizing the bills and interest are drowning him. Boy decides to …

Categories: Debt Management

Examining Two Credit Card Repayment Strategies

Kim writes in: My dad told me that the best way to pay off a credit card is to pay it all off at once so I have been saving up the money to do that. My boyfriend argues with that saying that the best way to do it is to make the biggest possible …

A Seven Year Old Learns About Credit Cards

Here’s some food for thought for those of you out there raising children and hoping to teach them good lessons about money. I was at the store recently with my seven year old son. When it’s just the two of us, he’s very quiet and observant of what’s going on around him (he can be …

Making the Rent

Financial meltdowns often start with a small thing – the figurative straw that breaks the camel’s back. I’ve read stories from readers about the many small things that have caused them to start reassessing their lives. They had a credit card rejected at an inopportune moment. They didn’t have enough cash to pay for the …

Don’t Go Into Credit Card Debt For Special Events

When Sarah and I were married in 2003, we had a fairly low-cost ceremony. We rented a local Knights of Columbus hall for the reception, utilized a lot of family help in the preparation, and the total bill was quite reasonable. The honeymoon, however, was a different story. We went to the United Kingdom for …

Categories: Debt Management

Thoughts on Interest Free Credit Cards and Other Debt

Karen writes in: “I have an offer from a credit card company in which they pledge 0% interest for 15 months on a balance transfer. The way they seem to do that balance transfer is that I give them an amount and they send me a check which I then use to pay off a …

Categories: Debt Management

The High Cost of Low-Interest Debt

Lately, I’ve seen many emails from readers asking me whether or not I think a particular debt is “okay” now that interest rates are so low. It’s true – collateralized debt for people with good credit histories has a very low interest rate right now. You can get car loans and home loans for stupendously …

The Case for Debt Freedom

A couple times a week, I’ll get an email from a reader asking some variation on this question: If I can refinance my house at 3.5% why would I ever want to pay it off early if I can earn 7% over the long term in the stock market? Debt freedom seems like a bad …

A Different Way of Thinking about Your Debts

If you take out a $200,000 loan for 30 years at 4.5% interest, how much in debt are you? Some might argue that you’re only $200,000 in debt. However, when you look at the payments you’ve committed yourself to making over the years, you’re actually promising to make payments totaling $364,813.20. Thus, I’d argue that …

Categories: Debt Management

Retirement Planning: Contributions & Debt Repayment Tips

A few weeks ago, I put out a call on Twitter and on Facebook for detailed posts that people would like to see. I got enough great responses that I’m going to fill the entire month of July – one post per day – addressing these ideas. On Facebook, Tyler wanted to know, “Should I …

Improve Cash Flow By Paying Off Low Interest Debts

Quite often, when I write answers to reader mailbag questions, I encourage people to keep pushing hard against their debts no matter the interest rate. Almost everyone agrees that it makes sense to rapidly pay off the 15% debts, but I’ll often get a lot of disagreement about the 3% debts. People will often ask …