Published on: 05 October 2021
Last Updated on: 04 November 2024
Are you a young professional who has just graduated college? If so, you might be struggling with how you should budget money. After all, in college anything goes – you are spending money every day to go to the local bars, you are ordering take-out food, and there is no budget for your finances.
However, now that you are in the real world, you need to learn how to pay your bills, pay for your car, and make ends meet. How can you do this if you have had no experience?
By using mycare, you can learn how to budget your money so you can stay above the red zone. After all, earning money and saving now is one of the best ways that you can begin saving money for your future – even though retirement is a long way off, the more money you put aside now the better! Let’s see a few ways that you can use mycare to budget your money! You canfind out more here.
Use mycare to budget your money and be responsible with your finances
There are some basics on how you should budget your money. By learning the foolproof tips from experts on the simplest way that you can save a few dozen – or a few hundred – dollars every month, you will end up saving thousands per year! Let’s go over the basics of budgeting and show you can use mycare to reach your goals.
Figure out your monthly income – one of the best ways you can set a limit for your spending is to determine your monthly income. Are you currently working as a freelancer with multiple gigs? If so, you can calculate how much you are making from each employer and each job so you can have an estimate of your total monthly income. If you are an hourly worker, you need to make sure that you stay constant with your schedule each month so you have a fairly set income per month. For those who are on salary, calculating your income should be easy to do.
Use a budgeting framework and rule for your savings – in this case, we recommend trying to use mycare to do the 50/30/20 rule.
In this case, the 50% would go towards your daily bills and your needs, such as your rent, car payment, food, and other expenses. The other 30% of your monthly income should go to things that you want to spend money on, but you do not need – such as entertainment shopping, and activities. The last 20% of your income should go to savings! If you are currently in credit card debt or you need to repay someone or repay a loan, this 20% will go to repaying any debt that can end up hurting your credit.
Conclusion
Setting up a budgeting framework for your finances and using mycare to help you set aside money for savings is key to being able to stay afloat in your young 20’s. If you find that you’re having a hard time-saving money, paying your bills on time, and repaying your student loans, then you need to learn the basics of how to save money, how much money to set aside, and how much money you should spend per month.
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Many people consider taking out a loan when they don't have the necessary funds to pay for something upfront. This allows them to make big purchases or investments without missing out on limited-time opportunities like discounts or promotions. For other reasons, people may also take out a loan for personal emergencies like paying medical bills or investing in a new business that can help them achieve their goals.
No matter the reason, borrowers are still obliged to pay back the same amount of money within a period of time, with designated interest rates. To enjoy a debt-free life faster, here are some tips on how you can pay off your loans faster:
8 Simple Tips To Pay Off Your Loans Faster:
1. Arrange your debts:
Create a spreadsheet or a list of every single debt you have and arrange it based on whether it is outstanding or not. Include details like how much cash you borrowed as well as the payments you have made so far. This allows you to keep track of your progress and give you a visual motivation to get things done. Remember to always pay on time to avoid increasing your debt further.
Read more: Eight Essential Tips For Getting Out Of Debt
2. Ask help from an expert:
If you need help managing your debt or are looking for expert advice, consider contacting the nearest expert financial group in your area. Many of them offer consultation or debt relief services that help manage complicated loans. For instance, Check Into Cash offers various solutions at affordable rates and have several locations within the United States. You can also visit finance advice blogs and social media websites for industry tips from experts.
3. Create a budget plan and stick with it:
Creating a budget allows you to allocate your finances into segments. This includes dividing your monthly pay into equal portions sorting your expenses according to the following:
Bills and important payables
Grocery budget
Food and transportation allowances
Loans and debts
Savings
Miscellaneous and emergency expenses
Keep this data in a logbook or in your personal spreadsheet to track your progress.
4. Pay off the most expensive ones first:
Not all debts are created the same, if you haven't been paying your credit card loan then you might want to start now. The reason for this is because credit cards have the highest interest rates compared to other lenders. However, depending on your loan you can also pay off the ones with the smallest balance first and use the debt snowball method.
The snowball method is done this way:
List all of your loans from the most to the least
Make the minimum required payments for each loan
Try to allocate as many resources possible for the loan with the least balance
Do it every month until all balances are cleared
Read more: Using Short-Term Loans To Help Rebuild Your Credit Score
5. Pay more than the minimum:
If you have extra money, consider paying it directly to your loans to help pay off your debt faster. Make sure each payment you make is up to date so a portion of it won't go to interest. If you don’t have any extra money, look for a side job like doing paid online surveys or driving for Uber and Lyft. If you’re creative, you can also freelance part-time and create content for clients on various websites.
6. Sell items you don't need:
Many of us can live without a few extra items in our house. Sell off some items like electronics, art, and furniture on a garage sale or online shops like eBay. If you have items that may need refurbishing, try getting them repaired before selling them off. You'll be surprised how much people are looking to buy things on a bargain!
7. Lessen your spending habits:
Learn to live frugally for a while. Instead of paying for gas, use public transportation or walk to your destination. Make home-cooked meals instead of ordering out, and as much as possible try to limit your shopping habits except for necessities like groceries. If you must buy something like a dress or a pair of shoes, consider waiting for a sale or look for bargains online. Every little act counts.
8. Refinancing:
Refinancing your loans might seem counter-intuitive. But it's a smart way of transferring your loan with high-interest rates to another lender that offers affordable loan interest rates. Some examples of these are student loan refinancing options, home loan refinancing, and auto loan refinancing. It's a great way of saving money since you're able to remove yourself from high-interest debts which take a long time to repay.
Final Thoughts:
Paying off your debt faster allows you to enjoy your life without worries, providing you peace of mind while also ensuring financial strength. For the latter, paying off your debt as soon as possible allows you to have better credit scores, which provides you with more financial opportunities in the future. Learning how to live life frugally while paying off a debt can also be a great learning experience since it helps you learn to value every penny you earn.
While it may seem overwhelming at times, learning how to be financially responsible for making a plan and sticking with it will help you become more responsible in the future. If you need any help, contact your local bank or nearest financial group and see whether they have offer consultation services that can help you formulate your own plan.
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Bankruptcy means a test is done to determine who can file for chapter 7 bankruptcy. The means test considers everything while determining your current position to pay your debt to the creditors. It goes through your income, expenditure, assets, and family members.
The means test was designed to reduce the number of debtors willing to get their debts erased. It has been seen that most of the debtors who have applied for the means test have passed.
Those people who cannot qualify for chapter 7 or want to keep their assets to themselves can apply for chapter 13 bankruptcy.
How Chapter 7 Bankruptcy Works?
Applying for chapter 7 can be an expensive and lengthy process. The means test helps the government clarify who is eligible for chapter 7. The Means Test has two parts. Both parts are designed to see through your income and assets and determine the current financial standing.
You have to apply for the Means Test only for the primary consumer debts like medical debt or credit card debts. You do not have to apply for this test if your debt is related to business loans.
First Part
The part of the Means Test determines whether your house income is below the state's median income. The means test starts gathering information about your income, expenses, and assets. These data are mostly collected from the past six months. However, there have been cases where this six months time duration can be changed.
After all the reports, if it is being found out that your income is below the median income, you will qualify the Means Test. In a report made by the US government in 2013, more than 12% of the debtors were able to qualify the Means test in the first stage.
Second Part
The second part consists of going through all your expenses. These expenses consist of everything you pay for, starting from paying your utility bills, grocery bills to the travel expenses and education expenses. Out of all the expenses, only the allowable expenses are considered to be used by you. Other expenses that are not necessary are used to pay off your debts.
While you document the list of expenses, be thorough about the things you add to the list. Remember, those expenses will decide whether your petition will be accepted or not.
Allowable expenses are based on the local and national standards used by the IRS. The national list covers items like food and clothing, and local items cover housing expenses and car payments. You need to work carefully to ensure that all your expenses are thoroughly documented.
What's Next After You Qualify for the Means Test?
Passing the means test means you have the green light to apply a petition for chapter 7 bankruptcy. Once your petition is accepted, most of the unsecured debts will be forgiven. That does not mean that this will be the best route for you.
There are also chapter 13 bankruptcy that might give more advantage over chapter 7 in many cases. Chapter 13 will help you put a hold on all your debts, mortgages, overdue loans, and bank taxes.
What Will Happen After You Fail The Test?
Once you fail the Means Test, there are no more appeals for a certain period. You can apply for the chapter, or you can wait for the cooldown time to apply again for the means test.
We have already mentioned that the Means Test goes through all your financial income and expenditure in the last six months. That means, after a failed attempt at the Means Test, you can apply again after six months.
However, if you do not intend to apply for the Means Test again in the future, you will be restricted to chapter 13 and will have to pay off your debt based on the chapter 13 provision.
The Bottom Line
Is it really hard to apply for a loan after bankruptcy? Well, you can say more than hard; it is more complex. You first need to qualify the Means Test, and then only you can apply for chapter 7. It is better to have an attorney while you are managing legal documentation.
Read Also:
8 Simple Tips To Pay Off Your Loans Faster
5 Must-Have Long-Term Goals for A Secure Future
What are the types of debt that can be discharged in bankruptcy?
Using Short-Term Loans to Help Rebuild Your Credit Score
When approaching retirement planning, it is widely recognized that starting early is a cornerstone of ensuring a secure and comfortable retirement.
The notion of an ideal retirement age may vary individually, but there are certain age-related milestones that can guide individuals in maximizing their retirement benefits and minimizing penalties.
Consistent saving from the beginning of one's career, coupled with a clear understanding of these milestones, is essential in laying a strong foundation for the future.
Retirement planning is not a one-size-fits-all process; it involves a series of strategic decisions tailored to an individual's life stages and financial situation.
Assessing how much do I need to retire on $100,000 a year in retirement is another critical component of the process. This involves not only saving but also making informed choices about retirement accounts and investments to ensure that the funds will grow adequately over time.
Individuals must also be mindful of specific age benchmarks that impact retirement planning. For example, being aware of when they are eligible for certain government programs and the implications of withdrawing retirement funds at various ages can help in avoiding unnecessary fees and optimizing benefits. This strategic management of timing in relation to age is a key aspect of effective retirement planning.
Determining Your Retirement Goals
When planning for retirement, individuals must carefully assess their financial needs and health factors to establish a clear and realistic set of goals.
Assessing Financial Needs
A critical step in retirement planning is determining the amount of savings required to sustain one's desired lifestyle. Retirement calculators can be instrumental in estimating the necessary nest egg. These calculators assess current income, savings, and anticipated retirement age to provide a personalized savings goal. To tailor these estimates, individuals should consider:
The proportion of current income they aim to replace during retirement is often recommended to be around 70-80%.
Expected major expenses, such as housing and leisure activities.
Potential sources of retirement income, including Social Security benefits, pensions, and annuities, which can reduce the reliance on personal savings.
Evaluating Health and Life Expectancy
Individuals' health status and life expectancy play a significant role in retirement planning. Those in good health may require a larger nest egg to support a potentially longer retirement period. Key considerations include:
Life expectancy data to inform the duration of retirement savings should last.
The cost of health care, generally rises as one ages, necessitates a larger reserve in the retirement fund.
Long-term care insurance can mitigate the risk of high unexpected health-related expenses.
By focusing on these aspects, individuals can establish a retirement plan that aligns with their unique circumstances and supports a financially secure and healthy retirement.
Retirement Savings Strategies
Optimal retirement savings strategies are centered on maximizing contributions to retirement accounts, understanding the significant effects of compounding over time, and balancing risk with investment choices.
Maximizing 401(k) and IRA Contributions
Individuals should aim to contribute the maximum allowed amounts to their 401(k) and IRA accounts each year. For 2024, the contribution limit for 401(k) plans is $20,500, with an additional $6,500 in catch-up contributions permitted for those aged 50 and over. IRAs offer a lower threshold, with a contribution limit of $6,000 and a $1,000 catch-up contribution. Taking advantage of these limits can significantly enhance one's retirement savings, especially when employers match a portion of 401(k) contributions.
Understanding the Impact of Compounding
The power of compounding cannot be overstated in the context of long-term investment. When returns are reinvested, they generate additional earnings over time. This effect is particularly potent for those who start investing early. For instance, investing just $100 a month starting at age 20 could lead to a substantial accumulation by retirement age, assuming a modest annual return.
Balancing Risk and Investment
A well-balanced investment portfolio blends various asset classes, such as stocks, bonds, and possibly other investments, to align with one's risk tolerance. Typically, stocks offer higher growth potential but come with increased risk, whereas bonds traditionally provide more stable, but often lower, returns.
As individuals approach retirement age, they may consider shifting their investment focus towards more conservative options to preserve capital. Additionally, the use of a Roth IRA can be beneficial for tax-free growth and withdrawals in retirement, depending on an individual's tax situation.
Navigating Government Benefits
Government benefits for retirees hinge on correct timing and a thorough understanding of eligibility requirements. This section guides through Social Security and Medicare, two pivotal components of retirement planning.
Optimizing Social Security Benefits
To maximize Social Security benefits, individuals must consider their full retirement age (FRA), which varies from 65 to 67 depending on their birth year. Claiming benefits at the FRA ensures the full monthly benefit amount. However, one can begin receiving Social Security payments as early as age 62, but this results in permanently reduced benefits.
Before FRA: Reduced benefits
At FRA: Full benefits
After FRA: Delayed retirement credits
Strategically, delaying Social Security benefits beyond the FRA can increase the monthly payment by a certain percentage until the age of 70, offering one of the simplest ways to enhance one's retirement income.
Planning for Medicare Eligibility
Medicare eligibility begins at age 65, regardless of one's FRA for Social Security. Enrolling in Medicare on time is critical as late enrollment can result in penalties and gaps in coverage. Medicare includes several parts:
Part A: Hospital insurance, usually premium-free if one has paid Medicare taxes for a sufficient number of years.
Part B: Medical insurance, covering doctor's visits and outpatient services, which requires a monthly premium.
Part D: Prescription drug coverage.
Understanding the interplay between Medicare and other health benefits is also important, as it might affect decisions regarding employment benefits or Marketplace coverage. Individuals should review their options within the IEP or Initial Enrollment Period (IEP). It begins three months right before the month of their 65th birthday whereas it ends after three months.
Conclusion: Preparing for the Unexpected
In retirement planning, addressing potential risks and preparing for unforeseen healthcare expenses are crucial. They often advise individuals on incorporating health insurance and long-term care into their financial strategy and emphasizing the importance of an emergency fund and insurance options.
Incorporating Health Insurance and Long-Term Care
One must assess the risk of healthcare expenses and the necessity for long-term care. Health insurance is vital for managing costs associated with medical care during early retirement, especially prior to Medicare eligibility at age 65. Long-term care insurance can safeguard one's finances by covering expenses that traditional health insurance does not, such as in-home care or assisted living facilities.
Assess Early Retirement Needs: Individuals retiring before age 65 should plan for their health insurance coverage to bridge the gap until Medicare.
Long-Term Care Costs: Evaluate the potential need for long-term care services, which can quickly deplete retirement savings.
Building an Emergency Fund and Considering Insurance Options
An emergency fund is a backbone of financial security, acting as a buffer against unexpected expenses. They also stress considering various insurance options, such as life insurance, to mitigate financial risks to dependents. Furthermore, understanding penalty-free withdrawals from retirement accounts can provide greater financial flexibility in case of emergencies.
Emergency Fund Size: Aim to save at least three to six months' worth of living expenses in an easily accessible account.
Insurance as a Safety Net:
Life Insurance: Provides financial support to beneficiaries in the event of the policyholder's death.
Flexibility with Retirement Funds: Familiarize with conditions under which penalty-free withdrawals from retirement accounts are allowed, to avoid unnecessary financial strain during emergencies.
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