How to Get Rid of Credit Card Debt

While talking about the retirement plan, financial advisers mostly focus on how much you need to save. But you should know, that to cut your debt is not any less important, especially your mortgage and credit cards. And in order to get out of debt you need to:

1. Evaluate Your Debt
The first thing you should start with is figuring out how much debt you have to deal with. So, take a piece of paper, and put down all of your debts. This includes credit cards, charge cards, mortgages, home equity loans, car loans, personal loans, medical bills and any other debts that you’ve got. Beside each debt, include in this list the associated interest rate and minimum monthly payment. Now, count up all of your entries, and you see a true picture of your current debt load.

2. Make a Budget
A carefully thought out budget will help you to get out and stay out of debt. Be honest with yourself about your spending habits and you’ll receive a much more realistic picture. Make a list of your usual monthly expenses (do not forget about fun things, hobbies and entertainment) and calculate how much you make per month including all forms of your income. And then create a budget that will minimize the usage of credit cards, cash-only is your goal.

3. Reduce Your Spending
In order to get money for debt repayment you will have to cut your spending. Look for some ways to lower your phone and electronic bills, auto and homeowner’s insurance and all your other bills. In such way, you’ll able to use your savings directly for your debts and enjoy the fact, that you’re on the right way to a debt-free life.

4. Begin Saving
While getting out of debt, the avoiding new debt is important as well as paying off debt. So, it’s very important for you to be prepared for some unexpected expenses – such as medical bills or car repairs – that could make you start spending with your credit card again. Assess how much it may cost you and put that sum aside. You should understand that fact that building up your emergency fund may take a lot of time. So, even $20 a month will help, just do not worry if that’s all you can afford.

5. Struggle With Your Debt
Now, when you have finished with all of the previous steps, it is the right time to start struggling with your debt. Apply the money you’ve saved with your new budget to your debt. Keep this way until all your debts will gone. Of course, it may take a while, but if you adhere to this plan you’ll become a happier, stronger and debt-free person.

How to Avoid Credit Card Fees

 

Credit card distributors always advertise handsome promotional rates just to allure potential cardholders. If you want to become a new cardholder, you must watch out for credit card fees. Although they offer the lowest of interest rates, the credit card company will definitely be getting back at you by embedding extra fees. How to avoid paying them more than what you owe?

Many people just rush into applying to get a credit card without even being aware of all of the accumulated costs. Almost all credit cards come with some hidden fees and unknown charges; and you should always pay extra attention to them before applying.

Almost all cases, all of these fees and extra charges will not even be noticed until it is too late. And you easily end up paying thousands in the end without even realizing it.

Here are some tips to help guide you in avoiding excess credit card fees:

Pay the bill ahead of time

Never wait until you’re the due date arrives before settling payment. Pay off all the necessary charges as soon as you got cash to do it. It is required that all credit card issuers provide at least 28 days grace period.

Try to sign up for an automatic payment facility especially if you are prone to forgetting monthly due dates. This very ideal for people who have multiple credit cards and those who are managing many types of credit lines like car loans, mortgage, and personal loans.

Request for waive

In some cases, wherein an emergency could not be avoided, at the same time you will not be able to make your payment on time, try to call the credit card company immediately and request them to waive some late payment fees and promise to make your next month’s payment on time. In addition, if your records prove that you have become a very reliable client, chances are, you may be granted that wish, thus avoiding additional credit card fees.

Do not go over the credit limit

It is obvious that exceeding your credit limit will automatically cost you extra fees on your bill. Always check your credit account to assure that all the charges are accurate. Before making a large purchase using a credit card, be sure that you have enough credit left. And always keep your credit card spending to just a minimal portion.

Don’t borrow cash from your card

All credit cards offer cash advance features. This provides the cardholder an option to get from their account by withdrawing cash thru the ATM. Although it seems like a good provision, especially in times of emergency, these are charged with very high interest rate. And cash advances are not automatically covered by the grace period; you will incur extra credit card fees every time you make cash withdrawal.

ETFs: Your free guide to exchange-traded funds

An exchange-traded fund (ETF) is a security that tracks a particular index or basket of assets. This could be the FTSE 100 or a selection of shares of companies involved in alternative energy.

ETFs are traded on the stock market, just like ordinary shares. So they can be bought and sold whenever the market is open, at a regularly updated price. By contrast, passive unit trusts – a rival tracking product – can only be dealt with once a day and only through the issuing manager.

Even though ETFs trade like ordinary shares, they don’t attract stamp duty when they’re purchased.

Diversification and cost benefits

ETFs offer exposure to an entire index, usually at relatively low cost. They are not actively managed, which means there is no need to pay fat salaries to a fund manager. As a result, annual expenses paid by the ETF investor are relatively low, typically between 0.2 and 0.75 percent of funds invested.

What’s more, ETFs are not subject to an initial charge or set-up fee, as is the case with unit trusts. The only costs when dealing are the standard brokerage commission and the spread – the difference between the prices at which you can buy and sell.

What’s on offer?

Today, the range of ETFs on offer is wider than ever before, covering an ever-expanding array of national indices, industrial sectors, commodities, futures, bonds, and other asset classes.

Consequently, it is now much easier for private investors to gain exposure to a range of previously inaccessible markets. There are also opportunities to achieve double or treble returns, as well as to sell short.

Index and specialist ETFs

Besides mainstream ETFs that track the world’s top indices such as the FTSE 100 or the Dow Jones, you can also buy or short sell individual industries such as mining or financial services. So, if you were bullish on the stock market in general but bearish about miners, you could buy an index ETF while short selling a mining ETF.

As well as national stock markets such as China or Brazil, ETFs cover segments of the market, such as mid-sized or small companies, and also entire geographic regions such as Europe or Asia.

Away from equities, there are ETFs that track commodity indices, government and company debt, real estate, private equity, and currencies.

Profit when markets fall

Whereas unit trusts generally only benefit when the markets they track go up, there is a type of ETF that gains in value when their underlying market falls. Short ETFs provide a mirror image of whatever the price of the underlying asset does. So if oil falls, they rise.

However, in terms of the equity-linked indexes, these types of ETFs are only really suitable for sophisticated traders. This is because the price of the benchmark index is re-set daily, and the returns are compounded – so, even if the index is down over an extended period, an investor who held on through volatile trading conditions could still conceivably lose money even if he was right in his prediction of a fall in the underlying.

Exchange-traded commodities

Originally, the large size of commodity futures contracts prevented small investors from getting direct exposure to commodities. With the advent of exchange-traded commodities (ETCs), the minimum financial outlay has been markedly reduced, thereby easing the way for private investors.

ETCs track the performance of individual commodities such as copper, petroleum or wheat, or even total return indices based on a single commodity. For example, many investors have recently gained exposure to physical gold for the first time through the use of ETCs such as ETFS Physical Gold (code: PHAU), which has been designed to provide a return equivalent to movements in the gold spot price. Currently, around 70 percent of private investment is allocated to precious metals, while 15 percent is given over to energy ETCs.

If, however, you want to spread your risk, you could always opt for an ETF that invests in a more diversified basket of commodities, such as the ETFs All Commodities ETF (AIGC). This has been structured to track the DJ-AIG Commodity index.

Government and corporate bonds

ETFs have also made it much easier for private investors seeking to buy into the government and corporate bond market. As ETFs are traded on the stock exchange, both historic and real-time pricing must be made readily available. Such price transparency was once the preserve of institutional investors, so ETFs have done much to open up this market.

As most bonds are held till maturity, the main problem facing those structuring a bond ETF is ensuring that it is comprised of enough liquid bonds to track a particular index. (This is more of a problem for corporate as opposed to government bonds). For this reason, representative sampling is often employed, which involves reducing coverage of an ETF to the most liquid of the bonds, and is a feature of ETFs such as the iShares Euro Corporate Bond (IBCX), which offers exposure to a range of euro-denominated investment-grade corporate bonds.

Tracking issues

Tracking errors pertaining to the bulk of ETFs and ETNs currently in issue remain relatively small, according to recent research from Morgan Stanley. Despite extreme market volatility, these instruments demonstrated close alignment to most indexes. Last year, the weighted average tracking error for all US ETFs was just 0.39 percent.

This is not to say, however, that negative tracking errors do not occur. Some specialist ETFs, or those subject to diversification requirements, haven’t always fared well, and the process of representative sampling (referred to above) is another factor that can lead to tracking errors.

The Vanguard Telecom Services ETF (VOX) and the iShares FTSE NAREIT Mortgage REITs (REM) both fell short of their tracking indexes last year. Additionally, investors need to remember that ETFs with larger expense ratios tend to have higher tracking errors simply because fees come directly out of investors’ returns.

Interest and distribution payments

Bond ETFs pay out interest through a monthly distribution, while any capital gains are paid out on an annual basis, fewer fees, and expenses. Holders of share-backed ETFs are also eligible to receive payments in the form of a pro-rata share of dividends payable on the portfolio of stocks comprising a given ETF.

It may be possible in some instances to reinvest your dividend payments. Dividends paid out of an ETF’s net investment income or net short-term capital gains – if any – are both taxable as ordinary income. Distributions of net long-term capital gains, in excess of any net short-term capital losses, are taxable as long-term capital gains.

Tips on how to manage money when you get a raise

A raise can be a boon to your household finances. Although it is tempting to immediately spend the entire raise on a new car, handbag, laptop, or gadget, there are several considerations that should be addressed before you splurge.

The first thing you should do if you get a significant raise is checking your tax situation. There are some instances when the raise pushes your income into the next tax bracket. Most employers will automatically adjust your withholding, but if you are already claiming zero exemptions, you may need to have an additional amount withheld in order to avoid penalties. This will require an updated W-4 form.

The next thing to consider is your retirement contributions. If you have access to a 401(k) account from your employer and your employer offers matching funds, you should contribute at least enough to the account to receive the full company match. Even if your fund choices are meager, the employer match is free money that is available to fund your retirement. If your 401(k) offers low-cost mutual funds or index funds, consider increasing your contribution to the federal maximum. In 2009, the maximum annual contribution is $16,500 or $22,000 if you are over 50.

When considering a significant 401(k) contribution, keep in mind that every employer has slightly different limitations that may prevent you from contributing to the federal maximum. One limitation is the maximum percentage limit or the maximum percentage of your pay that you are allowed to contribute and shield from taxes. The second limitation is the highly compensated employee (HCE) income limit. Employees that have an annual income greater than the HCE limit will have their maximum contribution lowered or even reduced to $0.

If you do not have access to a 401(k) account or you are contributing the maximum amount, consider saving most or all of your raise in an IRA or a savings vehicle. The savings vehicle should be chosen based on your timeline. Money earmarked for an emergency fund should be liquid, either in a high-interest savings account or in a combination of savings and a short-term (under two years) CD ladder. Money designated for large expenses should be in a CD ladder with a timeline based on when you expect to incur the expenses.

Finally, if you are able to fully fund a 401(k) or another retirement account, an emergency fund, and a large expense fund, use some of your raise as a reward for your fiscal responsibility, but keep in mind that a permanent boost in your standard of living may put you at risk for living beyond your means in the future.