Why Should You Consider Debt Consolidation?

If you are looking to minimize the payment of your debts as well save the cost of your interests, then a debt consolidation can help you a lot. Get an idea of the below mentioned benefits of debt consolidation and understand why should you consider it.

  • One Monthly Payment:

The debt consolidation process consists of taking a single loan in order to pay off all balances available in your various accounts. Some of the individuals own numerous credit cards along with credit accounts that have balances on each of the accounts. By opting for debt consolidation loan, you can consolidate each and every balance into a single source. So rather than getting worried about several payments and deadlines, make a single payment each month to clear off your debt. Thus you will be able to stay focussed on your debt as well pay off it faster. You do not have to think about which account you should pay off at first. Put your additional money in one debt account. The monthly payment will become very small as you will be getting more time to clear off your loan.

  • Stress Reduction:

Clearing off all your debts is very stressful, mostly if you have to deal with different creditors. You will be in a financial condition where you either have to take call or respond to some letters regularly. Debt is known to be one of the major factors that will create stress. So if you are constantly thinking and getting worried about it, you would not be able to concentrate anywhere else. In such scenarios, a debt consolidation loan will aid you in changing your life. By taking it you will no longer have to deal with a huge number of creditors. Consolidating all the debt in a single account will work well for you. Thus you do not have to spend days in fear, thinking about any calls or letters coming from the creditors.

  • Reduce Rate Of Interest:

Debt consolidation will help you in saving an important amount on the interest that you are paying. Most of the people who are suffering from huge debt have many credit cards maxed out. The interest rates of credit cards are high in comparison to other market rates. By availing a debt consolidation loan, you will get an interest rate that is much cheaper and will thus aid you in saving money on each monthly payment and over the life of a loan. You can also approach any debt consolidation company as they will negotiate with creditors on your behalf and try to reduce the rate of interest not only on debts but also on bills. The creditors will be restructuring your payments and it will help you to manage the debts better.

  • Make Your Credit Score Better:

Any late payments along with defaults as well as the charged-off account will impact your credit report negatively. But as soon you get enrolled in any debt consolidation program, your accounts will start to get cleared off and then your credit score will improve. After every account is paid off completely, the debt consolidation company will negotiate with the creditors and try to make the accounts reported in the credit report in your favor. So by consolidating your debt in a single place as well as clear off all payments well, you can rebuild the credit score again.

  • Become Debt Free Quicker:

Paying a little above your credit card’s minimum due will be taking comparatively much less time to clear off your debt. A consolidation program will help you in making payments and thus you will not have to continue with any account for a long time. So it will be accelerating that period when you will require to become debt free. With debt consolidation, you will be able to get rid of debt within 4-6 years in comparison to the average period of 20 years or above.

  • Put An End To Collection Calls:

Debt consolidation will reduce your worries related to collection calls. When an individual has huge debt, they stay behind on the payments. The creditors are seen to turn such accounts over to the collection agency. Then daily you will receive several collection calls. These calls will be very stressful as well as annoying. By taking a debt consolidation loan you can clear off the outstanding balances as well as get rid of these collection calls. Moreover when you will be signing the power of attorney with a consolidation company, the creditors along with collection agencies will no more contact you. Thus debt consolidation will prevent you from getting harassed by the creditors and collection agencies.

Thus debt consolidation is vital for those individuals who are with different debts. So you should consider debt consolidation if you ever wish to get benefitted by any of the above mentioned situations.

What Are The Reasons To Refinance When Rates Are High?

Homeowners might get discouraged from refinancing at the time of high rates of interest. But there are few great reasons to refinance even during the rise of interest rates. This means paying high interest than you actually paid. Mentioned below are the few reasons to refinance when rates are high.

·         Reduce The Repayments:

If the rate of interest has changed since the time you pay the first home loan, you will be able to refinance a new loan with lower rate. This refinancing will aid you in reducing the amount of interest that you will be paying. By reducing the monthly repayments, you will be paying less over the life of the loan.

·         Fixed Rate As Well As Payment:

Mortgages either come with a fixed or variable interest rate. A fixed interest rate will never change. But the variable one has a tendency of changing over the time. Adjustable rate mortgage come with a rate that gets adjusted only after 3, 5, 7 or 10 years. This mortgage has monthly payments that can shift up as well as down if the rates of interest fluctuate. Most will have an initial period of fixed rate and the borrower’s rate will not change in it. It will be followed by a longer duration during which the rate will change at pre-set intervals. You will be exposed to the risk associated with higher payments by an adjustable rate. So the closer you come to an adjustment as well as the longer you make plan to retain the home, you make the adjustable rate mortgage more risky. Refinance into any fixed rate and let the risk go away.

·         Stop Mortgage Insurance Payment:

If you do not repay your loan, private mortgage insurance will protect your lender. You will have to make payment for private mortgage insurance if you have made a down payment that is lower than 20% of the home’s purchase cost when you buy, It is also applicable if your equity is lower than 20% of the home’s present value when you refinance. Some of the loans will also let you stop payments for PMI, once your equity has reached a specific percentage of the home’s value. This is either because you have cleared off the loan or the home’s value got increased. Unless you sell your home or refinance, other loans will need PMI for the entire term of the loan. So refinancing from a loan along with PMI to any loan without PMI will make sense when the rate is higher due to the fact that you do not have to pay the mortgage insurance premium monthly.

·         Spend Cash:

One of the main reasons of refinancing is extracting cash from the equity. You can use the cash for multiple purposes like renovation, repairs, starting as well as expanding the business, clearing off other debts or paying any medical and educational expenses. Costly requirements along with wants exist irrespective of the interest rates. This suggests that homeowners will wish to refinance to draw out some cash even when the rate of interest is rising. Your perception regarding the benefits as well as risks will add sense to cashing out. You can also avail a home equity loan instead of taking a new first mortgage. The rate of interest of the second loan will be higher, but it will have less principal and shorter term.

·         Add Or Remove Borrower:

The borrower on a loan is held responsible to make the payments. If you have home equity conversion mortgage and your wife was very young to become qualified for it or got married after taking it, you can refinance in order to add your wife. It is essential to allow your non-borrower wife to stay in the home even if you move out or die. On the other hand, if you are the one who is solely responsible, your agreement will need you to refinance during rising rates in order to remove your spouse from whom who got divorced.

·         Cash For Investment:

The rise in the values of a home will create great opportunities for refinancing as well as extracting cash in order to make investments in various available assets. This will be beneficial if you can make payment of your new mortgage without relying on the profits that are made from the investments. Take some advantage of the benefits associated with income tax, afford to lose that money you have invested, have great credit as well as plan to keep your home for a long duration.

So is refinancing perfect for you? Refinancing a loan has lots of benefits but there are several risks that are involved in refinancing during high rates of interest.  You should remember that your investment returns should not be more than the interest expense and then you should refinance carefully.

Pros And Cons Of Target-Date Funds

Investing has been made easier by target-date funds by providing the investors with a one-stop solution for their investment needs. But along with its pros comes its cons. Mentioned below are some pros and cons to consider before you invest in target-date funds:

Pros

  • Excellent For Getting Started:

Most of the companies are doing away with the pensions and thus the stress related to saving during retirement is affecting individuals. The main problem behind this is that most of the people are not aware of the ways of placing together a portfolio that is well allocated. Target-date funds are believed to offer a great start for those who are not much familiar or are financially ignorant investors. Target-date funds are considered as excellent launching point for young investors who have just started to invest. They will aid you in saving and investing for a long-term by offering a portfolio that will be suitable for everything for a particular date out into the near future. Even the most knowledgeable investor should be aware of when to start off. But if you have any recent goals like saving for a new home, then you should know how to make use of such funds.

  • Great Diversification:

A target-date fund is designed in such a way that you will be able to invest in various mutual funds. Thus investors will be instantly accessing varied asset classes as well as market capitals. Almost each and every target-date funds will be holding small, medium and large capital as well as domestic and international stocks, bonds such as corporates, junks and treasuries along with some alternatives like trusts for real estate investments. As a result of this, portfolio will have a scope for complete range of investment under one investment tool.

  • Reasonable Investments:

If you wish to build your portfolio with various underlying mutual funds and put them in any target-date tool on your own, then the least initial investment could make you spend $10000. But with the aid of target-date funds, the least amount can drop off to $100 and you will also have access to every asset class.

  • Cheaper Fees:

In early days, target-date funds had many fees. Investors used to pay management fee apart from the fees for the underlying mutual funds. But these days, a roll-up structure is used for the fee by many sponsors. In this structure, only a single fee is included. With the blooming assets, most of the sponsors have their portfolio holdings shifted to larger as well as cheaper institutional share classes. Fees on any target-date fund costs only around 0.70% in a year.

Cons

  • Tax-Inefficiency:

One of the greatest disadvantages of target-date funds to investors are tax inefficiency. Individuals who will buy these funds outside an IRA or any qualified plan will understand the capital gains. Taxes related to capital gains will also be triggered regularly. This happens when shares of those funds which performed well in a target-date portfolio are sold and then moved to the shares of those funds which have not well performed. So to avoid such problem, target-date funds are mostly used in all those retirement plans that are tax deferred.

  • Risk Tolerance:

One assumption is made by the target-date funds that the younger individuals will be taking risks willingly. But that is not always true. Two of the worst recessions in the US history have bookend today millennial. So many people are afraid of investing in sticks and thus prefer saving more as well as minimize their risk. If you consider using any target-date fund, then at first have a look at its allocation from the same family of fund that will become mature or already matured. It will aid you in determining if the target-date funds that you are selecting for investment suit your risk tolerance at this target date.

  • Excessive Expense Ratio:

Target-date funds will be often charging excessive fees than any other types of mutual funds. This is because such funds actually will be passing through some fees that will be charged by those underlying fund options that hold the fund and its individual management fee. So some of the target-date funds come with a fee that you have to pay for any underlying mutual fund along with another fee in order to manage the funds. It has found that the average annual fee of target-date fund is more than 1%. This may decrease the return that has been posted by this fund. Investors who overlook these target-date funds and directly invest in some underlying funds can easily avoid these fees. But they have to manually relocate the funds to match the path of any target-date fund.

  • Lack Of Complete Diversification:

When you select any target-date fund from a particular company, you will only be able to view that company’s funds as the holdings. It would not allow investors to pick up and select the best one for each and every particular asset class. This will make way for only a similar style of investment across several underlying mutual funds. Target-date funds have various stocks as well as bonds but there is no exposure to any commodity, infrastructure and precious metals. Investors need to include all these assets to attain complete diversification.

 So a little research will let you understand how to invest in target-date funds effectively.

Be Satisfied With Budgeting Strategies

It is often said that money is not the only important thing for an individual. However, you can find something next to the air that tells, that you cannot live without money. Money gives you freedom and choices. The first step in managing the money is to determine the budgeting strategy that works best for you.

Budgeting Strategies That Really Works


Maintaining the right balance between your income and expenses would probably help you to have a sound financial status.  Creating a spending plan will help you to regulate and establish whether you have enough money to carry out the things you need to do, or you would like to do.

There are numerous ways to create a budget. However, there are a few things that have to be kept in consideration before framing an effective budget.

  • First of all, you need to think about your financial goals. What is the purpose of the budget and what are your financial goals; whether you need to pay off your debts, making saving to buy your dream home, making plans for your future, life after retirement or plans that you are saving for the post-secondary education for your children.
  • Keep track of your expenses. You should know what your incoming money is and how much is it outgoing or what is the expense?. Even small changes to your regular spending habits will make a lot of changes to your budget and help you to save. For example, if you are spending nearly 3 dollars for coffee every day, in a year, you are spending an average of 950 dollars.
  • Understand between your needs and wants. A need is something that makes your basic necessities of life like the food, clothing, and shelter, however, a want is something that it is not necessary rather you make the expenses out of impulse. For example, enjoy eating at hotels though you have healthy cooked food at home is a want rather than a need.

Based on these aspects, you can design the right financial budget which can serve you the best. Let us see what these strategies are

Having Problems Sticking To The Budget Explore Solutions

Sticking to the budget is one of the toughest decision in life. Although it looks frugal in the beginning, however towards the end of the month, you would be literally surprised to see that you have money left behind in your wallet. In order to achieve this, you have to be more financially responsible.  For this, you need to

  1. Create an annual budget to figure out the things spent on bills and basic essentials. Based on the leftover, determine how much you can set aside for your savings
  2. Track down all the expenses you make. This will offer you a better insight into whether your expenses are happening for unnecessary reasons
  3. This can be done using a mobile app. Take advantage of technology to get accurate results
  4. Make your expenditures through bills rather than credit or debit card. Determine how much money, you will require for the week and take the money out of your account. When you run out of money stop your spendings.
  5. Grocery shopping is one of the incredible ways to blow your budget, so when you want to stick to your budget stick to the grocery list and never go far behind it.

Multi-bank account budgeting system – If you want to get out of debt and make your finance in order, then in addition to sticking to the budget having multiple bank accounts or breaking down of your accounts is essential, it can be so effective for a number of reasons

  1. Household checking for living expenses
  2. Set aside money strictly dedicated to eating out
  3. Bills account that you require for quarterly, semi-annually and annually
  4. A separate account for escrow monthly mortgage payments

Cash Envelope System

One challenge that people have during budgeting is, they don’t have money directly in their hands, and instead they are in the form of credit cards and debit cards. However, these things make you lose track of things and don’t have any insight into how much is the spendings. This will lead to making financial mistakes. Apparently, cash envelop system is an ideal solution to sort out this problem.

Zero-based Budgeting

When a written budget is followed, it removes a constraint from your finances. Perhaps, the best form of budgeting in which the expenses must be justified and approved where your income subtracted by expenses turns zero. It is one of the open and transparent ways of creating a budget.

Closing Thoughts

Each of these strategies has both benefits and flaws. Although it is pretty hard to follow however when you make it as a habit, it can become part of your lifestyle. The overall point about these strategies are, they don’t require a bigger spreadsheet for your budgeting, or endless number that require calculations rather they are simple approaches that can be overwhelming when you save a considerable amount of money.

Advantages Of ETFs

Exchange traded funds better known as ETFs have been a part of the investment market for many years. So it is quite evident that their popularity is continuing and is also increasing. Mentioned below are some of the advantages of ETFs.

Cost Efficient:

There will a single transaction that will be conducted per trade and hence the commissions are much lower on ETFs as compared to an index that needs various stocks along with multiple trades. Load fees are also not present. The managing fees of ETFs are lower in comparison to the regular mutual funds. ETFs are not expensive to buy, sell as well as own. On average the cost involved in ETFs investing is 75% less than the cost of mutual fund investment. A transaction fee to buy ETFs is there. But the extra costs such as sales loads, exit fees, distribution fees, commissions, annual marketing fees along with early withdrawal penalty that is associated with mutual funds are not applicable to ETFs.

Tax Benefits:

Capital gains take place when a security is sold off at a high price compared to its purchase price. Since ETFs have a very passive investing approach, there lie fewer security turnovers in an ETF. As a result of this capital gains along with its potential for lower distribution at the year-end are triggered not so frequently. The taxes of capital gains for ETFs are much lower than for any traditional mutual fund because of each trade’s structure. If a gain is identified in everyday trade of mutual fund or in any index trade, taxes of capital gain will be incurred immediately. But with ETFs, it is completely the opposite. No single capital gain is identified until selling of the assets occurs along with the total fund. Thus ETFs are considered as one such investment that is tax friendly. In case of any dividend ETFs, the pay-outs of actual dividend are differently treated and it will also create a tax benefit.

Diversification:

If you buy an ETF, you will be getting instant exposure to its following index. It will contain a huge number of securities. An ETF will give you exposure to a group of equity, market segment, and style. It is capable of tracking a wide range of stocks or making an attempt of mimicking a country as well as a group of countries returns. Mutual funds can also be diversified. But ETFs have lower fees and they trade similar to an equity investment. So it will act as an excellent way to achieve exposure to various asset classes that will be diversified.

Simple:

Investing in the shares of an individual company requires professional help. But active funds also need lots of research. You are never sure how your manager is actually running the money. But ETFs have an aim of matching an index and thus they are known as straightforward investments. The structure of ETFs are simple and thus they can be easily understood other than intricate funds like leveraged as well as inverse ETFs. So if you wish to invest in a particular industry or emulate the rate of interest on any specific index or maybe underlying asset, you can start off with ETFs.

Transparent:

If you invest in ETFs you will have a proper understanding of whatever you will be buying. Most of the ETFs are seen to replicate their underlying indexes and hence their components are getting disclosed each trading day. But the traditional mutual funds will be revealing their total holdings once quarterly. Once you can find out what is actually present in your fund portfolio, you will be able to evaluate how well your fund manager is adhering to each and every objective as well as the fund’s style.

Variety:

ETFs offer choices that are inaccessible through mutual funds. It has been reported that at the end of the year 2015, almost 1600 ETFs were available in the US. Along with the equities, ETFs also offer various investments in commodities, fixed income, currency, and international security. ETFs cover the US investing scene from different angles, thus making them one such investment tool that is very flexible. One can invest in ETFs by market capitalization as well as sector or even asset class. International ETFs are also available and they are hedged to the Canadian dollars. So no need to feel worried about any impact of changes in the currency exchange rate on the returns. With the help of this variety, investors will be able to make some targeted investments very easily and also attain a diversification level. This level of diversification will not only be time-consuming but also costly to replicate by purchasing individual security.

So there are many advantages that will make you believe that you should include ETFs in the investment portfolio. ETFs will act as your ultimate investment tool among all the other solid investments.

Benefits Of Rental Property Investment

Rental properties are bought or developed properly to earn income. These properties are considered as a true business my many people. So if you are thinking of becoming a rental property owner then you must have a look at the below-mentioned benefits.

Rental Income:

One of the biggest benefits of owning any rental property is the fact that renters will be providing you a direct and steady source of income. The rent checks that will give you monthly will directly go in your account. This will be more than enough for offsetting expenses for that month. If you own a property that you have rented out for $1500 each month, then that house will give you $18000 each year when completely occupied. With rental property investment, partial results are also great. So if you rent your property for at least half of the year, then also you will be earning enough. Try to use your networking skills as well as time to get hold of better deals that will be providing you a much better and greater return. So by investing in a property that will be occupied by tenants, you will be receiving rental income and it will become your passive source of income.

Appreciation Of Real Estate:

Individuals who invest in real estate can earn money with the help of cash flow as well as appreciation. Appreciation of real estate means an increase in the value of the invested property over time. So it simply means that when an investor will be generating steady cash flow from his rental property, more value will be added to the property. Thus by renting your property, you can hold because if it appreciates you have the option of selling it off at the right time. The amount of appreciation will vary according to the market. You can research the potential of the appreciation of various cities along with your neighborhoods to find out what you can expect.

Tax Write-Offs:

If you are an owner of a rental property, then will receive great tax deductions. You can get rid of the interest on the mortgage and credit cards that you used to purchase the property. You can also write-off the insurance, any maintenance repair, travel expense as well as property taxes. Other than these deductions, depreciation of the purchase price of the property is also allowed on the basis if some depreciation schedule even if the property is appreciating well in value. So if you own of a rental property, you will get several tax benefits that will help you in mitigating all the risks as well as grow the returns.

Inflation:

Are you afraid of the term named inflation? But if you own a rental property, you should not. Real estate investment acts as a shield against inflation. As a result of no property investor if affected negatively by inflation. If inflation occurs, any individual who owns a real estate property can escalate the monthly rental charges. The value of the property will increase. If you plan to sell the property during inflation, you can also list it for a high price and earn profits in real estate markets that have less supply of the investment property.

Direct Management Of Investment:

Investors of rental properties will be solely responsible for my investment’s outcome. Before buying a property you should analyze it well. Ensure that the property is in proper condition for renting. You do not have to depend on anyone else to manage your investments directly as well as personally.

Huge Variety:

Rental properties will offer you a wide variety within an asset class. As a rental property investor, you will be able to make an investment in single-family houses, multifamily property, office buildings, and many other options. You can also find larger, smaller and newer within each of these classes. So you will have endless possibilities as a rental estate investor.

High Security:

There are many people who shift temporarily for work and some inherit their family house as they do not wish to sell them off for sentimental issues. There are several reasons due to which individuals will find themselves with an empty property. Any vacant house is left open to vandalism as well as squatters. The maintenance issue also goes unnoticed. This can quickly lead to greater problems. It is really difficult to keep an eye on such a house where you no longer live. So renting such property to tenants will give peace of mind. You will feel relaxed that the property is maintained well and taken care of.

Owning a rental property can benefit you financially as well as personally. Rental properties like any other real estate investments always come with risk. So becoming a rental property owner is a great commitment. But you need to handle it well and let this huge commitment bring great financial returns.