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What’s Better, Investing Your Money or Using it to Pay Off Debt Sooner?

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Managing Your Finances - Investments vs Debt PayoffEvery day, people have to make decisions about their money. The choices they make have an impact on their financial health, so people have to be informed if they want to make the right decision.

When presented with the choice to invest or pay off your debt, you need to understand how each will affect you if you want to determine which is the better option.

How Can You Benefit from Investing?

Investing is one way for people to build their wealth. Whether you choose real estate, stocks, bonds or other types of investment, the many investment opportunities that surround you can benefit your financial health in more than one way.

  • An additional source of income: You probably already earn an income from working a job, but investing allows you to create an additional source of income. Depending on the investment, the return may be small, but it is still money in your pocket.
  • Reduce your taxes: Certain investments, such as retirement accounts, are tax-deductible. However, this is not the case with all retirement accounts. Additionally, there may be a limit on how much you can deduct.
  • Extra money to save for retirement: Retirement is expensive. Even though you probably won’t retire until the age of 65, the traditional age of retirement, you have to start saving early if you want to have enough money to cover all the expenses during this phase of your life. With more money coming in from your investments, you can have extra cash to put away for retirement to ensure you reach your savings goal.

How Can You Benefit from Paying Down Your Debt Sooner?

Many people view debt as a burden. Even if repaying these debts takes 20 years, they have to be repaid. But you always have the option to pay down your debt early.

Having debt can negatively impact your life, but when you pay it off sooner, you’ll experience a number of positives.

  • Save money: If you have credit cards or loans, you are expected to pay interest. The longer it takes to repay the debt, the more money you will pay in interest. By paying down your debt sooner, you will save money because less interest will be paid.
  • Improved credit score: Credit scores factor in how much a person owes. A high amount of debt can contribute to a low score, so when you pay down your debt, you will see a score increase. This increase will be slow if you take your time paying back the debt, but you can see a significant change in credit score if you pay off your debts sooner.
  • Peace of mind: Debt is a source of stress for many people. Repaying your debt sooner can decrease stress and give you peace of mind because you will be free to spend your money the way you would like and not have to worry about paying any more debt.

Should You Invest Your Money or Use It to Pay Off Debt Sooner?

Should you invest your money or use it to pay off debt sooner? There is no definite answer that can be given to this question because it depends on your individual circumstances.

One thing you can do to help you determine which option is best is to ask yourself questions that will help you get a better idea of your financial health.

  • What types of investment opportunities are you interested in?
  • How much can you potentially earn from investing?
  • Is there a chance of losing your money if you invest?
  • How much debt do you owe?
  • How soon would you be able to pay it off?
  • How much would you save by paying off your debt sooner?

There are ways you can benefit from investing, and there are ways you can benefit from paying down your debt sooner. Remember that what may be a smart move for one consumer may not benefit you in the same way. Regardless of which option you choose, you have to be the one to decide if it would be a smart move for you.

 

 

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How Much Should You Save for Retirement? Find Out Here

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When you start saving for retirement, you may have a lot of questions. As you search for the answers to the unknown, the one thing you may really want to know is how much money you’ll need to live comfortably during this phase of your life.

Although it is suggested that every year people save between 10% and 15% of their annual income for retirement,  you want to be sure that you have enough, and that can be done by examining certain factors.

Saving for RetirementExamine your current income and expenses

What is your current source of income? How much of that income do you spend every month? As you make your plan for retirement, it is important to know where your current finances stand.

Estimate your future income and expenses

Your current income and expenses can actually be used to estimate your future income and expenses. Yes, retirement is years away, but you should be able to determine your future income and expenses if you know what to expect. If you know your home and student loans will be repaid by the time you retire, then you’ll know that you won’t have to save enough to continue to make monthly payments on these debts during retirement.

Additionally, depending on your source of income at the time, you may be able to calculate how much money you’ll have coming in every month. For example, you can estimate your Social Security payments just to get an idea of all or a portion of your future income.   

Consider the potential cost of the unexpected

Retirement does not mean you don’t have to be prepared for the unexpected. You can expect to pay a monthly bill when it arrives, but what about those little surprises that life will throw at you? At any point in time, your car could break down, your roof could need replacing or an accident can leave you with a high medical bill.

Your retirement fund should allow you to live comfortably, but it should also protect you from financial hits that are hard to come back from. If you don’t plan for the unexpected, a good portion of your retirement fund can be wiped out.

Consider your preferred lifestyle and spending habits

People’s lifestyles vary, so what one person may find necessary another may not. If you wish to maintain your current lifestyle and spending habits when you retire, it will be important to consider this fact when you are trying to determine how much to save.

For example, if your annual income of $70,000 allows you to take a few vacations every year, and that is something you would like to continue to do when you retire, then you’ll want to ensure you have the money necessary to afford these vacations.

Consider the amount you currently have in your retirement fund

Have you already started saving for retirement? Whether the answer is yes or no, the amount that you currently have saved should, of course, be factored into the amount you will need to save. However, not having anything in your retirement fund could be a problem because this means that you may have to put a larger amount away when you start to save.

Say you plan to retire in 30 years, if you do not have anything in your retirement fund, rather than saving $300 a month, you’ll have to save $500 a month to ensure you reach your goal.

Saving for retirement is not a priority for everyone. However, not saving for this phase of your life can negatively impact you. As you plan for your retirement, be sure you are considering the right things, so you don’t find yourself re-entering the workforce during a time when you should be relaxing.

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5 Credit Card Facts From The Credit Repair Experts

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Credit Card FactsThe fact is it takes lengthy research and education to truly understand the credit system in its entirety, and many devote themselves entirely to making it their career.  Credit lenders, banks, credit card companies, and almost any kind of big business has people on staff whose entire job is to fully understand the system.

But while it might require a college degree to get a job in the field of credit, you don’t need one to get insight into how the credit card system works.  With a little research, you can quickly gain knowledge in credit that you can use to your advantage.

5 Quick Facts About Credit Cards

A rudimentary understanding of the credit card system can be gained with just the following 5 facts:

•    Many people believe that if they close a 10-year-old credit card they will lose all of the positive history associated with it.  That isn’t true.  The age and history of the card will remain on your credit report as long as the bureaus themselves don’t remove it from your report.  That history will continue to be considered even if the credit card is closed for the next 10 years.

•    Another commonly believed myth is that a credit card will stop aging after it is closed.  But if you close a credit card today that has a 10-year history behind it, at the end of the year it will have 11 years of history.  So it will go until ten years after you have closed the card when it is finally deleted from your credit report with a 20-year history.

•    Credit cards do not have to have a negative balance in order to build credit, as is commonly believed.  As long as the credit card is open, acquiring charges, and being paid on, it is reporting to the credit bureaus.  In fact, it is usually a better idea to keep the balance at zero, charging and paying in the same billing month to keep positive reports flowing.

•    New store credit cards aren’t necessarily a bad idea, as many people think.  In fact, store-specific credit cards usually have lower criteria for approval, making them much easier to qualify for.  With a single store credit card, you can boost your credit score, raise your limit ceiling, and improve your overall standing.  However, the temptation to over-use your store credit can quickly sneak up on you and build debt that could be bad for your credit report.

•    Many people also believe that a good credit card history will automatically override other sources of credit.  While a credit card is a good way to build and maintain credit, it is only a stone in the river combined with other lines of credit such as furniture payments, loans, or delinquent medical bills.  A credit card alone won’t fix your credit, you must keep all of your lines of credit in check.

Congratulations!  You now know more about credit cards and how they really affect your credit score than the majority of credit card-carrying Americans.

Get More From The Best Arizona Credit Repair Experts

For more information on how to build, repair, and maintain a healthy credit score with your credit cards and other lines of credit, contact Credit Absolute – the most trusted name in Arizona Credit Repair.

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What is the “Mortgage Blind Spot”? Can it Jeopardize Your Chances of Closing a Loan?

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The Mortgage blind spot

What is the Mortgage Blind Spot?

It is the “quiet period” is the time between origination and closing when consumers can accrue undisclosed debt or new tradelines, increasing their debt-to-income ratio. Thus, the closing may be jeopardized.

We’ll explain why hidden debt is a major industry issue. Then we’ll discuss how to handle hidden debt in a digital origination strategy.

Why is this an issue for  “3%” of lenders

Three percent of the undisclosed debt is significant. A 3% rise in a borrower’s DTI ratio can trigger costly loan repurchase demands. The 3% increase will hurt a lender’s GSE scorecard. Unable-to-pay guidelines can result in regulatory action.

Agencies are acutely aware of the risk. That’s why lenders must thoroughly check undisclosed liabilities as one of the big six areas before closing.

The data show that the risk exists. According to a recent Equifax analysis of 98 million+ mortgage originations between 2010 and 2018, 4.5 percent of borrowers applied for an auto loan in the same month. Among borrowers who opened only one new trade line during the quiet period, 36% increased their DTI ratio by at least 3%.

Aside from skewed DTI ratios, hidden debt can indicate increased fraud risk. According to Fannie Mae, misrepresented liabilities cause 23% of mortgage fraud findings.

On the other hand, it’s in Mortgage closings are hampered by undisclosed debt, which clogs underwriting resources and degrades This will delay or obstruct their path to homeownership. Unreported debt is a problem. It can harm loan pipelines and ultimately lender profits.

Digital monitoring removes the blind spot

With the rapid adoption of digital strategies, lenders now have a unique opportunity to reduce unreported debt risk. Automated undisclosed debt monitoring (UDM) tools can continuously monitor loan files for new tradelines and other credit changes. UDM sends daily alerts whenever new activity is detected. This gives lenders daily access to a borrower’s credit. Monitored activity includes new tradelines, inquiries, balance changes, late payments, public record bankruptcy, and more.

Identify hidden debt risks faster No more last-minute surprises. To resolve most issues, lenders can work with borrowers. This keeps their closings on time.

Lenders can intelligently prioritize using three categories: Low Risk – The majority of your pipeline is low risk/good. These borrowers can close quickly and confidently.
Unwanted new alerts – Consumers. Identify these loans earlier. Concentrate underwriting resources on borrowers who may need more documentation. The underwriter can then close quickly.
Highly alerted consumers allow you to escalate the review process, identify re-underwriting, fraud, or unintended liability. When an approval expires, the underwriter can stop the closing to avoid additional costs.

Instead of being surprised at closing, integrate undisclosed debt monitoring technology, for clear visibility into borrower credit files. Daily alerts can help streamline underwriting tasks and maximize resources. So lenders can close more loans faster and with less risk.

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