Retirement: Save a Million Dollars Right Now

Retirement

Retiring as a millionaire may be easier than you think. With the power of compounding interest, you can become a millionaire by putting aside just a few extra dollars each month.

How Much Do You Need to Save for Retirement?

Here’s how much you need to save each month and how long it will take to reach a million dollars if you invest in an S&P 500 index fund. These numbers assume the index matches its historical ten percent per year rate of return.

  • $100 per month = 45 years
  • $250 per month = 36 years
  • $500 per month = 29 years
  • $1,000 per month = 23 years
  • $2,000 per month = 17 years

The lesson learned? Anyone can become a millionaire by setting aside only a small amount of money each month over their working life. If you got a late start or want to retire early, you can still get there with smart budgeting.

Where to Save

Warren Buffet recommends S&P 500 funds because they let you own 500 of the strongest companies in the United States at a low cost. Other investors prefer to use total stock market index funds that own every stock on the stock market or to put some of their money into an international index fund to add diversification.

You may also want to consider a target-date fund which gives you a mix of U.S. stocks, international stocks and bonds and automatically lowers your risk as you get closer to retirement. No matter what you choose, how much and how early you save will be the biggest driver of your success.

How to Find the Money

It can be hard thinking about the future when money is tight, but small adjustments add up. Instead of buying things because they’re only $X per month, remember that only $X per month will make you a millionaire.

Simple steps like packing a brown bag lunch and skipping a barista-made coffee can save $10 to $20 per day. If you have credit card debt, paying it off sooner or consolidating it at a lower interest rate can turn money wasted on interest into retirement savings.

The most important thing to do is to start right now. Remember, the sooner you start, the easier it will be to become a millionaire.

 

Sources:

http://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp

https://www.forbes.com/sites/robertberger/2017/03/27/an-sp-500-index-fund-is-it-a-good-investment/

http://www.investopedia.com/terms/t/target-date_fund.asp

5 Ways to Pay Off Credit Card Debt

Pay Off Credit Card Debt

Paying down credit card debt is one of the best methods for repairing credit and improving your credit score. Here are easy and painless ways you can pay off your credit card debt:

1. Pay More Than the Minimum

With most minimum payments, it can take years to pay off credit card debt. Paying the minimum will not only hurt your credit score, but it will cost you a ton of money in interest. If you can afford it, you should pay more than the minimum.

If you can’t afford to pay more than the minimum, keep in mind that as you pay the principal down, your minimum payment will go down as well. However, you should keep paying the same amount you were paying before in order to pay down your debt faster. Eventually, you will be able to pay more than the minimum and repair your credit.

2. Find Extra Money

If you can’t afford to pay more than the minimum payments, try and find extra money. You don’t have to get a second job to pay down debt. For example, if your minimum payment is $40, be conscious of the fact that only $40 more per month will double your payment. You may have extra money in your budget or you may be able to earn cash. Here are some tips:

  • Fill out surveys
  • Use apps like Ibotta to get cash back from shopping
  • Use coupons
  • Try a no-spend challenge
  • Reduce your spending by just $10 per week

3. Use the Snowball Method

For multiple credit cards, the best and simplest way to pay them off is to use the snowball method. With this strategy, you pay off the card with the lowest balance first. Then, you put the money you were using for that card toward the card with the next lowest balance, and so on. Here’s a step-by-step example:

  1. You have three cards. One has a balance of $300, the 2nd a balance of $1,000, and the 3rd has a balance of $1,500. You’re paying the minimum payments on all three, but you have an extra $50 you can use toward the debt.
  2. Take the extra $50 per month and apply it toward the 1st card; then, pay minimums on the others until they are paid off.
  3. Take the extra $50, the 1st card’s minimum and the 2nd card’s minimum, and apply to the 2nd card until it’s paid off. Continue paying the minimum on the 3rd card.
  4. Apply the $50, the 1st, 2nd and 3rd card’s minimum to the 3rd card until it’s paid off.

You will be debt-free relatively quickly without having to put a lot of money toward your credit cards.

4. Make the Most of Unexpected Cash

The fastest way to repair credit and pay off debt is to pretend extra money doesn’t exist. If you get a raise, bonus, overtime payment or cash gift at work, apply it toward your credit cards. You should budget as if overtime or bonuses don’t exist. That way, when you get the money you can use it to pay off debt or build savings.

5. Pay Twice

Some credit cards calculate interest based on average daily balance. If your credit card is one of them, remember that the easiest way to pay off the balance is to pay twice per month. Before you panic, you don’t need to pay twice the minimum payment each month. Instead, take your payment and divide by half. Pay that amount every two weeks. This will reduce your average daily balance, which will reduce your interest so you can pay off debt faster.

You can repair your credit score and pay off debt by following these strategies. Credit card debt may seem daunting, but you can unbury yourself and improve your credit.
 

Sources:

https://www.thesimpledollar.com/the-debt-snowball-concept-how-i-made-it-work-for-me/

https://www.nerdwallet.com/blog/credit-cards/minimum-payment-credit-card/

http://www.investopedia.com/terms/a/averagedailybalance.asp

Debt after Death: 10 Things You Need to Know

When a loved one passes away, one of the last things you want to hear is debt collectors calling to try to take their money. Unfortunately, dealing with a loved one’s debt is a chore your family will have to take care of. Here’s what you need to know.

Debt After Death

1. Debt Isn’t Inherited

Debt does not pass on to family members. If an account is in one person’s name, creditors can’t make anyone else pay off the debt. If someone dies with debt and no assets to pay it off, the creditors take the loss.

2. Co-Signers Become Fully Liable

One common point of confusion is the responsibility of co-signers to an account. Many people don’t realize that co-signing involves much more than helping with the credit check.

When you co-sign a mortgage, credit card or other loan, you’re saying that you will pay in full if the primary account holder can’t. This includes if they can’t pay due to death, and creditors will coldly enforce this provision.

You should also be aware that some loans may contain a provision that they become payable in full immediately upon either the primary account holder’s or the co-signer’s death. This could require the survivor to refinance the loan, raid their retirement account or take a negative hit to their credit when the original loan defaults.

3. Spouses May Still Share Liability for Individual Accounts

One more exception to the debt isn’t inherited rule is spouses. Some states hold spouses liable for the other’s debt even if the account wasn’t a joint account.

One way this can happen is in community property states where any debts acquired during marriage become marital debts regardless of whose name was on the account.

Another is where courts decide who’s responsible based on who benefited from the debt rather than who signed for it. If debt benefited both spouses or the household as a whole, it becomes the responsibility of both.

4. Creditors Will Still Ask You to Pay

Just because creditors can’t make you pay doesn’t mean they won’t ask you to. Often, they’ll try to guilt you into it by saying things like it would harm the deceased’s honor or that you should do the right thing.

Not only do you not have to pay them, but by agreeing to pay in part or in full — even if you’re just trying to get them off the phone — you could be assuming legal responsibility for the entire debt. Simply tell the creditors to never contact you again, and they must honor your request.

5. Creditors Can Make a Claim Against the Estate

Debt may not be inherited, but it can reduce your inheritance. Creditors get first rights to any property in the estate up to the amount of the outstanding debt.

This applies even to family heirlooms left to a specific person in the will. For a mortgage, creditors can foreclose and take the family home.

If you want to keep a specific piece of property and the estate doesn’t have enough cash to cover outstanding debts, you will have to buy it from the estate at its fair market value.

6. Both You and the Creditors Need to Give Notice

Creditors only have a set period of time to make a claim against an estate. After that, they forfeit any claims.

At the same time, you can’t try to avoid creditors by keeping them in the dark. Depending on your state, you may need to file in probate court, notify creditors directly or take some other action. Failure to follow the rules could extend the creditors’ time to make a claim or leave you personally on the hook for the debts.

7. Don’t Use Credit Accounts

It’s illegal to use a loved one’s credit accounts to pay for things like funeral expenses even if the entire family agrees. Because the account isn’t in your name, it’s considered fraud.

Additionally, you shouldn’t use a loved one’s accounts to pay any bills they owed. Again, you technically don’t have legal authorization to do so. Instead, notify anyone you receive a bill from to cancel the account and contact the estate’s executor.

8. You Should Tell the Credit Bureaus

You should promptly notify the three major credit bureaus of a loved one’s passing. This will prevent identity thieves from trying to assume their identity and open new accounts in their name.

At the same time, the executor can request a copy of their credit report to identify debts that will need to be paid.

9. You Will Need Copies of the Death Certificate

Every time you work with a creditor or go to close an account, you will need to provide a copy of the death certificate. This lets the company know that you have legal authority to take action on the account and that your loved one isn’t faking their death to try to skip out on the debt.

10. The FDCPA Still Applies

The Fair Debt Collection Practices Act and other consumer protections continue to apply after death. If creditors harass you or lie about your responsibility for the debt, you may be able to sue them. If creditors wrongfully report your loved one’s debt on your own credit report, you have the right to have that information removed.

To protect yourself during this difficult time, you may wish to sign up for credit monitoring or other services to keep you one step ahead of identity thieves and unscrupulous debt collectors.

Sources:

  • http://blog.credit.com/2016/11/debt-after-death-10-things-you-need-to-know-162406/
  • https://www.nbcnews.com/better/money/debt-dying-five-things-surviving-family-need-know-n387341
  • https://money.usnews.com/money/personal-finance/articles/2016-06-02/will-your-heirs-have-to-pay-up-when-you-die-with-debt
  • https://www.creditcards.com/credit-card-news/credit-card-debt-death-1282.php