Tag Archive: financial health

  1. Student Loans and Credit Cards

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    Is It Possible To Manage Both Credit Card & Student Loan Debt?

    Going off to college comes with new found financial freedoms, and for many students that means their first foray into a world of credit and debt.

    The Credit CARD Act of 2009 restricted students under the age of 21 to open a card without a co-signer and direct promotional card offers on college campuses. This helped reduce the number of cards issued to students, but unfortunately only made a small dent in decreasing debt for those graduating.

    According to an Experian College Graduate Survey conducted in April 2016, 58 percent of soon-to-be-graduates said they had a credit card, while 30 credit cardspercent said they had credit card debt with an average balance of $2,573. Another survey found 63 percent made purchases without having funds to pay the bill.

    It’s no secret that average student loan debt has been steadily growing. In 1993-94, about half of bachelor’s degree recipients graduated with debt averaging more than $10,000. Two-thirds of the Class of 2017 graduated with debt and the average student loan debt was at $35,000 after graduation. This number more than tripled in two decades.

    We wouldn’t be overreaching to say there is a correlation between higher student loan and credit card debt. As a new grad, you’re facing some tough financial decisions as you begin life in the real world. For instance, which debt do you pay off first?

    Credit card interest rates are typically higher than student loan interest rates, which means this debt is more expensive. For example, a $10,000 student loan at a 6.8 percent APR paid over 20 years would cost $8,321 in interest. A $10,000 credit card balance at 17 percent APR paid over 20 years would cost $25,230 in interest, and that’s assuming both interest rates remain fixed over that payment period. The long-term interest cost goes up if the interest rate increases.

    In the end, both student loans and credit cards can keep you in debt for many, many years and it’s easy to get overwhelmed by them if you’re only making minimum payments. What it comes down to is making the proper decisions to meet your financial goals. Making the a few smart decisions when your in 20’s could set you up financial success instead of struggling with debt for years.

    This is where The Debt Doctors can play an important role in helping you decide what is the best financial plan for you to manage your debt. To receive the guidance you need for a brighter financial future, you can schedule a free consultation today.

     

  2. Save For Retirement Now, Benefit Later

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    Start Your Retirement Investments Now to Better Your Financial Future

    When is the best time to start saving for retirement? The answer is simple: as soon as possible. But like most things in life, that is easier said than done. Given the job market, high student loan payments and other personal situations, the last thing young adults want to do is sacrifice a portion of their retirementhard-earned paycheck for a retirement that is not happening for at least 30-40 years.

    A recent Pittsburgh Post-Gazette article highlights how putting away even as little as $20 a month can compound and grow into much more by the time retirement rolls around:

    Click for Post-Gazette Article

    As the article explains, saving money takes discipline and financial planning. Our financial expert, Matt Herron strongly believes the only way to acquire wealth is through saving and earning interest, not paying interest. So take advantage of your automatic deduction 401k plans to help save without effort. Additionally, avoid borrowing and taking withdraws from you retirement or 401k. Your 401k is not a checking account. Early withdraws and loans are expensive and will dilute your ability to compound money.   If debt is keeping you from making your best effort to save call us to eliminate your debt and develop a plan to start saving your financial future depends on it.

  3. To Co-Sign or Not??

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    Adding a co-signer can make a loan more attractive to lenders, but can cause serious repercussions if the co-debtor defaults.

    A common question many of us face is whether to co-sign for a loan. Initially, co-signing a loan seems like a nice and supportive gesture. But helping a close family member or friend by co-signing can have major impacts on the future of your financial health.

    Before you co-sign on a loan there are a few important things to consider:

    • First, in the event the person you co-sign for cannot pay the loan, you will be the one who is responsible.  By becoming a co-signer, you are essentially taking on someone else’s debt. You are putting the future of your financial health into someone else’s hands.  If they are unable to pay off the loan, you will be completely responsible to pay it off for them.
    • Next, co-signing can have a negative impact on your credit.  Because of the debt you have taken on, your credit score can drop.  Additionally, it will be harder for you to qualify for loans you need because of the increase in your debt-to-income ratio.
    • Lastly, although co-signing can make a loan more attractive to lenders, there are serious repercussions if the co-debtor defaults. This is the worst-case scenario and negative impacts may include you having to pay the money back in its entirety, a lower credit score and your bank account could be frozen.

    Overall co-signing is a long-term commitment to take on someone else’s financial debt.  This is where The Debt Doctors can play an important role in helping you to decide if you should co-sign or not. You can schedule a free consultation today and receive the guidance you need to make the best decision for your financial future.

  4. Savings: The Cornerstone of Financial Health

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    In America, it has been ingrained in our financial psyche that our credit score is an important indicator of a healthy financial outlook. The truth is, your credit score is only an indication of your ability to engage in the behaviors that benefit your bank. For instance, the more you use credit and pay the bank, the more your credit score goes up. However, your ability to save and pay yourself isn’t even considered.

    If you have money in the bank, you can pay for unexpected expenses, buy the things you want and  earn interest instead of your bank earning it in your place. So how do you know if you have a healthy financial situation? Here are some good indicators:

    1. You have more savings than credit card debt.
    2. You have a set amount every month that you save.
    3. You earn more interest than you pay every year.
    4. You have enough money saved to weather a loss of income for a period of time (you should save up for at least two months of lost income) and have enough money saved to manage life if you have a serious medical issue.
    5. You have money saved for unexpected repairs.
    6. You’re maxing out your retirement savings.

    If you can check off those six items, your financial situation is healthy and it’s not likely you will need a Debt Doctor anytime soon. But if you can’t check them off and credit cards, a failed business or overspending on your house is keep you from saving, give us a call and we can develop strategies to reduce expenses and start saving today. Stop paying your bank and start paying yourself.

The Debt Doctors

607 College Street, Suite 101
Pittsburgh, PA 15232

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