Posts Tagged ‘finance’
Save your money instead of paying off debt - a crazy idea huh?
This is for the majority of us that live paycheck to paycheck, have little or no real savings and are in debt.
If you have a large IRA and major investments, you already know how to manage this thing we call money. If missing 2 weeks of work might cause your power bill to go out, you are not managing money well, even if you always make your payments. You are hanging on.
Many “experts” tell you to hurry up and pay down your debt now! I disagree. If you do not have a savings set up, paying off your debt first will become something that will defeat you long term. Consider this… You have $5000 on a credit card and bust your tail to pay if down. You finally get the balance paid down to only $2,500 and feeling great! Then the car needs repairs and since you have no savings, you need to use the credit card. Right back to $5000 and you feel defeated! All that work and you are right back to where you started!
If you had saved $5000 first, when the repairs were needed you would have had the cash to pay for them. Sure you may have had to put the debt reduction on hold until you rebuilt your savings, but knowing you only owe $2500 on that card still offers a mental reward. Add to that the fact that your minimum monthly payment on that credit card is half of what it once was, you can boost the saving up quicker and the go back to attcking your debt!
Afraid to Buy a House? Why Renting is Risky Business
Let’s get real here. Buying a house is a big decision. But not necessarily a risky one. One of the largest concerns for most people is losing the house. What happens if something comes up and income goes away and we can’t make the payment? Don’t let this concern stop you from homeownership. Think about the situation here…
Scenario: You just lost your job, and don’t have enough income to make the payments. If you are renting, this becomes a major problem. Did you know that most rental companies will begin the eviction process if you are as little as 10 days late on your rent? If you can’t pay them, they figure they will kick you out and get someone in your place that can. Then you are forced to find a new place to live… but now we have a different problem. No job and no income and an eviction makes it hard to find another apartment. If you do find one, might need a large deposit… of course if you had that kind of money you would not have been evicted in the first place!
As a homeowner, things are different. You see, the mortgage company does not look to foreclose on a home right away. Actually, they are much more inclined to work with you. Why? Well, it comes from the fear of major financial loss. When a lender forecloses on a house, they no longer make money on interest, which is why they are in business. They have to turn around and sell the house, usually for far below market value… They don’t have time to wait for it to sell for profit! So if you owed $150,000 on the home and they sold it for $128,000, they have lost $22,000 plus real estate agent commissions. Their total loss would be over $29,000! With that in mind, lenders will work with you while you try to recover. Many lenders won’t start foreclosure proceedings until you are several months behind! And if you ultimately can’t get back on track, you can still sell your house and maybe even make a profit!
So you see, buying a house will give a tremendous amount of security where renting can’t. If you ended up 3 months behind, it may affect your credit, but you still have a place to live. And if you get evicted from an apartment, you better believe that will hurt your credit too!
Give yourself and your family something they can feel secure in.