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How to Be Responsible With Money

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Is your goal to live life like your favorite reality TV star, or do you just want financial stability and a luxury vacation every now and then? Whatever your lifestyle goals, you can’t meet them without learning how to be responsible with money.

No one wants to be stuck in debt. The best way to avoid debt is to develop good financial management habits as soon as you start earning money. But even if you’re decades past the point where you started earning money from your first job, improving your money-managing skills can make a difference in your financial situation.

Go over these 15 tips to learn how to be responsible with money, and apply them to your life. Paying bills on time, staying ahead of your expenses, guarding against rainy days and saving money for that once-in-a-lifetime vacation are all goals within reach.

1. Stabilize Your Income

If you’re a young person, get a job. If you’re a working adult, stabilize your income. Obviously, you must have money coming in to improve your skills in managing money. Temporary income, borrowed money and sporadic earnings help in the short term but make it hard for you to meet ongoing financial obligations.

Put underemployment in this same category. You should always try to maximize what you’re paid for your time and skills. If you took a job to pay bills but you’re qualified to do something that pays more, keep working to advance your earnings.

2. Set Financial Goals

Take a few minutes to set some money goals. For example, determine how much it costs you to live for a month at your current level, then make a goal to save at least six to 12 months’ worth of expenses to protect yourself against losing your job or another catastrophe.

You might also set goals for short-term savings, such as putting away $25 a week for an upcoming summer vacation. Goals might also include reducing debt, making a large purchase such as a home or saving for retirement.

3. Educate Yourself

Financial savvy is not something you’re born with. Everyone has to learn how to manage money, and the more interest you take in learning financial responsibility, the less likely you are to develop bad habits that lead to financial ruin. Fortunately, there’s a wealth of information available online and through financial management classes that can help expand your knowledge and raise your money-management skills. Take advantage of these resources to elevate your financial future.

4. Make a Budget

Budgeting is a simple skill that can have a big impact on your financial stability. Basic budgeting involves tracking your expenses so you know where your money is going and can make adjustments as needed. With a budget, you’re less likely to overspend. If you do have a shortfall at the end of the month, you can look back to determine what happened and make different decisions going forward.

5. Save Money

Responsible money management is not just about how you spend money. Saving money is just as important to financial responsibility. Your savings protects you against unforeseen events that can prevent you from paying bills on time or meeting emergencies.

Take advantage of any options you may have for automatic savings. Some banks let you set up automatic transfers from checking to savings to make it easier to save a regular amount each paycheck. Ask your payroll department about adjusting your W-4 to pay a little extra in federal taxes from your paycheck to get a bigger refund every year. These types of automatic savings can be a help if you find it hard to set aside money on your own.

6. Learn About Employment Benefits

Take a moment to look through your employer’s benefit manual. You may be surprised how your employment benefits can help you save money. Some jobs offer a transit allotment, and others have flexible-benefit plans that let you pay for some expenses with pre-tax dollars. The bottom line is that you can’t use your money responsibly if you don’t know about or take advantage of benefits that offer savings.

7. Establish a Credit Profile

Being good with money and having good credit go hand-in-hand. You establish a credit profile with the first line of credit you obtain, so choose wisely. Don’t buy something on credit simply because you can. Evaluate the credit terms, and pick a credit product that’s well within your ability to pay on time.

8. Avoid Expensive Debt

After you establish a credit profile, it’s your job to continue to choose the debt you take on wisely. An interest rate is one of the ways to compare credit products, but other fees and charges can play a role. Avoid expensive debt with high interest rates and excessive fees for things like late payments and overdrafts. If you don’t have ample savings, you may be forced to accept poor credit terms on loans to cover emergencies because you don’t have time to shop around.

9. Monitor Your Debt-to-Income Ratio

It’s not bad to have some debt. Lines of credit in good standing show other lenders you know how to pay your bills on time. As your credit score goes up, more lenders might feel comfortable extending credit to you.

But keep track of your debt-to-income ratio, which compares the amount of debt you have with your gross income. It’s a financial calculation that lenders use to determine if you have enough income to make your current credit payments and if you can afford to take on more debt. Ideally, keep your debt-to-income ratio around 25% or lower.

10. Use Credit Cards Responsibly

Learn to use and not abuse credit cards, and you’re on the road to responsible money management. The credit allotted to you on a credit card isn’t free money. The extension of credit comes with an interest rate that reflects the cost to you of using the credit line.

To make it easier for you to compare the cost of using one credit card over another, credit companies provide you with an annual percentage rate, or APR. Take notice of the APR for the credit cards you use regularly, and use the cards with the lowest APR when you need to make a credit purchase.

Avoid maxing out your credit cards or running high balances on credit card accounts. A high debt load can bring your credit score down, even if you make timely payments. Missing a payment can lead to a poor credit score, which can lead to higher interest rates on future credit or credit rejections.

11. Buy Smart

Use your money wisely. Be a savvy shopper, and take advantage of price cuts and sales. Responsible money management starts with living within your means and refusing to purchase items on credit that you really can’t afford.

12. Check Your Credit Score Regularly

Keeping an eye on your credit score can help you manage your money better by showing you the fruits of your financial activity. It can also alert you if someone has fraudulently accessed a credit account before the situation snowballs. Check two of your credit scores at no charge through Credit.com, and use their free tools to make changes and track progress over time.

13. Avoid Cosigning Credit for Friends and Family

Sometimes to do the best job managing your money, you have to know when not to do favors for family and friends. While it’s always nice to help another person out, keep in mind that any credit application you cosign on behalf of another person becomes part of your credit profile. Ultimately, you may be responsible for paying any outstanding balance if your friend or family member defaults.

14. Avoid Lending Money

Remember the adage, “Never a borrower or lender be?” It can be true wisdom for anyone striving for responsible money management. If you can’t afford to never see the money again, it’s probably best to avoid lending it in the first place.

15. Invest Wisely

Put your savings to work for you with a combination of smart investments that mix levels of risk and return. Make it your business to understand the different types of savings, such as emergency and retirement savings, and position your money to meet goals in each area.

Credit.com contains a wealth of information and free tools to help you learn how to manage money responsibly and meet your personal goals. Take advantage of Credit.com’s credit repair resources to learn how to improve your credit profile for a brighter financial future.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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