debt | John J. Bowman Jr

Tag: debt

September 1, 2020

Strategies For Building An Emergency Fund

One of the best things you can do to support your financial health is to create an emergency fund. This fund can be used in case of a medical emergency, a sudden visit to the veterinarian, a home repair, or other unexpected costs that could lead you to take out a small high-interest loan to cover the emergency.

Eventually, it can also be a way to cover your expenses if you lose your job.

These kinds of incidents, both large and small, put people into debt and their finances in a tangle for years.

By building an emergency fund, you develop a financial safety net for yourself.

Many people see the suggestion of saving for six months of expenses and feel that goal is far out of reach; they don’t even want to try. This is a big mistake. If you’re in that situation, first focus on building a small emergency fund of five hundred to fifteen hundred dollars. If this takes you a little time, it’s still worth having. Having a thousand dollars at your back can keep your finances well in hand on a tight budget.

How do people save a sizable emergency fund on any budget?

Open a High Yield Savings Account

Your emergency fund should be accessible, so you don’t want this invested in a 401k or stocks. Put this somewhere it can accrue the most interest and still be at the ready.

Use An App For Automatic Savings

There are many apps that can help you automate your savings in various ways, so it happens without you having to think about it. This makes building an emergency savings something you never have to consider again.

Some people prefer to have a specific amount taken from every paycheck that comes in; others like to round up their purchases. Choose a path that works for your goals.

Prioritize Your Emergency Savings

Keep your emergency savings in that separate account. Never mix it with your vacation savings fund or anything else. You don’t want this money to go toward other things on a whim.

Save At Least Half of Your Tax Refund

Your emergency fund can get a big boost when you earn a bonus during the holiday season or receive your tax refund. Put away at least half of this money to help your savings grow.

July 15, 2020

How an Accountant Can Help You Combat Debt

A fiduciary gives you insights into your finances that effectively help you fight a history of toxic debt. Accountants understand financial concepts and can communicate those ideas in simple, understandable terms. With a fiduciary, you’ll get help in navigating the legal parameters for any class of debt you hold. However, you should be fully aware of how your accountant will work and what they’ll do. Below are steps an accountant will take to get rid of your debt.

Creating a Financial Portfolio
Your certified public accountant (CPA) needs a clear overview of your finances before evaluating them adequately.

A financial portfolio is created by forming a list of all of your assets, which even includes a dog if you have one. A professional fiduciary will then list your income sources along with any financial liabilities you have. Insurances, investments, and retirement funds are things to account for within a financial portfolio. As you help an accountant to organize your finances, be honest about any outstanding bills and the debt you have.

Starting with Student Loans
Most CPAs begin to target the debt of their clients by immediately looking at their student loans.

Student loans often account for the most significant portion of the debt that borrowers have, so accountants target it to get rid of the bulk of money owed. Or, if you owe $25,000 in debt, and 75% of it is from a car, then your accountant will work to reduce your vehicle debt first.

Strategizing a Payment Plan

The general picture created by your outstanding debt and financial portfolio gives an accountant sufficient data to form a payment strategy. Here are some of the strategic points that an accountant can use to devise a suitable plan that pays off your debts:

Budgets—An accountant can substantially improve how you spend money by verifying your needs versus your wants.

Taxes—Tax accountants are trained to allocate your tax returns to pay off any outstanding debts that you have.

Prioritizing—Above all, your accountant determines how to prioritize your payments so that the damaging debts you owe are paid off first.

March 25, 2020

How To Plan For Student Loan Payments

Many students get out of college and realize that they need to pay off their loans. With colleges sticker prices on the rise each year, it’s easy to feel overwhelmed by student debt. However, if by applying these tips, students can plan for debt and pay off their loans as quickly as possible.

Consider Refinancing Your Student Loans

Some people may not know where to start, especially if their student debt is going to be quite high. If you fall into that camp, you could look into refinancing your loans. Refinancing your loans means that you use another loan to pay off your student loans.

If you have a stable job and you can find loans with lower interest, then you may want to refinance. This way, you pay off the student loans and then don’t have to pay as much money over time when you work on the other loan.

Set Money Aside Each Paycheck For Your Loans

You should focus on budgeting your money so that you can set aside some of that income from each paycheck. This way, you can always pay off that set amount with each paycheck. Such a consistent system will go a long way in helping you pay off those loans.

Some people may worry that it would take too long to use this approach, but consistent payments do offer a tremendous benefit. Yes, it may take some time, but this method helps you calculate when you’ll have that debt paid off by. As your financial situation changes, you can accurately pivot and recalculate to get a clear picture of your debt payment schedule.

Prioritize Your Student Loan Payments

People tend to push their loans to the side, but you need to prioritize your loan payments. Sure, you can buy a new phone or gourmet coffee, but you should consider putting that extra money towards your loans. If you prioritize your payments, then you can put all your extra money towards your loans. This will help you to pay them off sooner and reduce interest.

Conclusion

While student loans are scary to think about, keep in mind that you can pay them off with careful planning. Look at how much money you make, set aside specific amounts and continue to prioritize your loans until you pay them off. This way, you can overcome your loans and start saving money for life’s next big adventure.

August 18, 2019

Tips for Financial Independence and Early Retirement

What do you consider to be “retirement age”? Perhaps early 60s or late 50s. What about 30s and 40s? The FIRE movement, which stands for “financial independence, retire early,” has gained traction with individuals as young as their 20s. The idea of working 9-to-5 jobs for several decades is an intimidating one, and FIRE offers the chance to work hard and, earlier than expected, play hard. However, FIRE is not an easy process, and it takes plenty of planning to truly retire early. Here are some considerations to take into account if you plan on retiring early.

Do Your Research

Monthly earnings from social security and pensions, costs of present and future healthcare concerns, and similar factors must be considered before an individual takes any steps towards early retirement. There are several complications, ones that often work against each other, to sort out during the planning phase of FIRE, but these factors help paint a picture of your financial future. Make sure you understand what FIRE really is, and what it means for you and your situation. In some cases, research may prove that early retirement isn’t the best option; rather, switching to part-time work or taking a temporary hiatus from work is better.

Speak With a Financial Advisor

Financial advisors often assist individuals experiencing drastic life changes, such as making a family or retiring. When it comes to the latter, financial advisors will examine whether a client’s current financial system sets a strong foundation for retirement. Additionally, financial advisors look to the future to predict potential issues. Taking all of this into consideration, clients and advisors can develop a plan to work towards that independence. While hiring a financial advisor does come at a cost, the benefits of receiving an expert’s advice and planning assistance can be a lucrative investment.

Don’t Rush the Process

A simple Google search can unearth a plethora of FIRE horror stories. A common trend in these tales involves early retirees jumping the gun and retiring before they’ve hit their financial goals. For some, this means retiring several years sooner than planned. While earlier-than-early retirement is enticing, it’s unwise to throw your financial goals out the window. Doing so means deviating from your financial plans, which in turn leads to increased risks of your independence returning to dependence. Remain patient and diligent as you work towards retirement, and avoid making rash decisions to save time—that won’t always equate to saving money.

Understand Your Drive

Why do you want to retire early? Is it to avoid unhealthy amounts of stress? Are you trying to spend more time with your family? Has a hobby become your life-long passion? A thorough understanding of the “why” behind your desire to retire early will help you figure out how to reach your financial goals. Anyone can say they want to have more free time. But what are you going to do with that free time? Take some time to introspect and figure out what drives you towards early retirement.

March 1, 2019

4 Ways to Wisely Use Your Tax Refund

Now that tax season is fully underway, you may be thinking about what you want to do with your tax return when it comes in. For some, it might go right into a savings account. For others, it might be an opportunity to splurge on different items you’ve had your eye on. A healthy balance between the two, is looking into some wiser ways you can utilize your refund. If you’re waiting on your refund to come in, consider some of these great options to put it towards:

Contribute to Your Emergency Fund

You may have one already, and if you don’t, it might be a good time to consider starting one. An emergency fund is a great tool to have in case you encounter an unfortunate major expense that you wouldn’t regularly have the funding for. You can contribute to your emergency fund on a regular basis depending on your pay schedule. However, when your tax refund comes in, depending on the amount, you may be able to make a large contribution, and give yourself a better financial cushion in the event of an unexpected expense.

Invest in a Down Payment

You may be in the process of looking for a new home, or even a car. Both of these purchases are likely to require some sort of down payment, especially if you want your monthly payments reduced as much as possible. Your tax return is a great way to contribute to a downpayment and significantly lower what your monthly costs or the length of your finance or mortgage term will be. If you’re buying a home, for example, this lump sum of money will be a great contribution to your down payment or even your closing costs.

Pay Down High-Interest Debt or a Mortgage Payment

Any debt you’ve been carrying for a while is likely racking up interest, and depending on the company or what type of loan it is, the interest rate could be extremely high. Your tax return would be a great way to pay down some high-interest debt and bring you closer to having it paid off completely. Additionally, you can also consider contributing to your mortgage payment if you’re a homeowner. However, you should always make sure that your mortgage company isn’t going to charge you a penalty for early or pre-payment. If you’re certain you won’t get a penalty charge, consider using your tax return to make some additional mortgage payments.

Make a Home Investment

If you’ve been wanting to make some interior or exterior home updates, refund time is a great time to do it. This extra money may help you make improvements or updates that you might not have been financially ready for before. In the long run, this will ultimately improve the value of your home while turning it into exactly what you envisioned.

June 13, 2018

Strategies for Quick Debt Repayment

It’s a warm Saturday afternoon, and you’ve decided that you deserve a day out on the town with your friends. You’re exhausted and burned out from a too-long work week, sick of the grind and needing a break. You’ve been so thoughtful lately, you think, minding your budget, that you deserve to splurge a little. You hit the mall with a gaggle of friends and start swiping; more than a few bag handles circle your wrists as you reach for your credit card to pay for overpriced popcorn and soda at the complex’s theatre. You haven’t gotten your paycheck yet, but that’s okay – you know that your credit will cover you for now. When you check your banking app the next day, though, you can’t quite believe the number that blinks up at you. How can your credit balance be so high?

Sometimes, using a credit card to cover purchases can feel like playing with Monopoly money. We spend and spend and spend, knowing that we don’t have to pay back our debt right now. The fact that the money will need to be paid back at some point is a concern for later…until later rolls around to the present, and we face a veritable mountain of debt. According to a 2017 nerdwallet study on household debt, the average American consumer owes $15,983 in credit card debt. Totaled across the nation, that’s $931 billion owed by US consumers. Paying off this debt is an intimidating endeavor, but not an impossible one. Here, I provide a few strategies for a quick and efficient debt repayment.

Put the Cards Down

If you want to lower the mountain, why would you add to its height? Stop using your credit cards, and avoid making purchases that would add to your overall balance. Steering clear of credit for a few days or weeks might help you keep better tally of how much you actually spend in a day; the dues feel dearer when you have to pay them immediately, rather than at some hazy later date.

Revisit Your Budget

Take a closer look at your current budget! Can you trim any of your costs? Be tough but fair with yourself; you probably don’t need Netflix, Hulu, and HBOGo. Being on a budget doesn’t require you to give up all entertainment, but treating yourself should only go so far. Once you have a pared-down budget, you can start crunching the numbers and make an estimate of how much you can afford to apply towards your debt each month. Remember, paying off your balance now will greatly decrease what you pay in interest later!

Pick Up a Side Hustle

Trimming a budget can only go so far. In the end, you’ll make more from a part-time job or side hustle than you would ever save by canceling subscriptions or couponing. Find a money-making gig that can fit with your schedule!

Apply Unexpected Income Sources Towards Your Balance

It can be tempting to splurge when you find yourself with an unexpected windfall. However, the money you spend on luxuries now could be handicapping your ability to pay for more basic needs later. Put bonuses, inheritances, and tax refunds towards paying off your debt! Once you live debt-free, you will be able to afford splurging now and again.

Be Consistent

Debt repayment won’t happen unless you hold yourself to a firm budget and repayment schedule. Be consistent! As much as it might hurt to pass on dinners out or afternoons at the mall, your debt-free future self will be much happier and more financially secure for your efforts.