New study: the best & worst states at managing debt

In the process of reaching your life goals, you might accumulate debt along the way. Millions of Americans carry student loans, credit card debt, and mortgages. One important factor many don’t consider is how geographic location impacts your overall debt burden.

A recent study released by Credible looked at 540,000 borrowers from all 50 U.S. states analyzing the average monthly debt payment (credit card, student loan and housing). The information about debt-to-income ratios gives us an idea about which states might provide you a financial advantage.

Low Debt-to-Income States

According to the report, Michigan, Arkansas, Delaware, Kentucky, and Missouri had the lowest debt-to-income ratios. For example, Michigan residents spent just 25.3% of their monthly income on credit card, student loan, and housing payments. Michigan had the best score of all in the study.

High Debt-to-Income States

On the other end of the spectrum, Hawaii, Washington, Colorado, Oregon, and Montana had the highest average debt-to-income ratios. If you live in Hawaii, you spend an average of 36.2% of your monthly income on debt payments. That means for the average annual income of $56,889 in Hawaii, $20,593 goes towards loan payments. Hawaiians pay more debt per dollar earned than any other state in the country.

What Causes the Difference?

Are Hawaiians spend happy and residents of Michigan frugal by nature? Maybe, but the full explanation for the differences probably has more to do with macroeconomic factors in each state. In Michigan, the lower cost of living shows up as lower housing, credit card, and student loan payments. Needless to say, housing costs in the Hawaiian islands are very high.

Where You Live Affects Your Debt Load

Where you live affects your debt burden, and the data proves this point. All other things being equal, the state you live in can have a significant impact on your financial health.

Read the Credible report: Burdened by Debt: The Best and Worst States at Managing Debt.

What Is Insolvency And How Can You Help Yourself?

Insolvency is a term see when you are unable to pay off any debts you have and therefore fall into a void where you are trapped without means of getting out. It can be a life changing thing for many people and makes things incredibly difficult for many.

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When you end up in this rut it can be difficult to think of finding a way back out; but it is important to remember that absolutely anything is possible if you simply start creating better habits in your life. If you feel as if you need help with insolvency this year, here are some of the ways you can prevent it from happening again and also dig yourself out of the rut.

Stop Borrowing

The most important thing you need to remember is that borrowing money will  only lead you to have to pay it back. It means that if you are already in debt and to borrow more money, you land yourself deeper in debt. The trick to staying financially stable and digging yourself out of this hole is to stop borrowing money and instead focus on getting rid of your current debt. It might sound very obvious to you, however it is something many people don’t think about. It is often all too easy to keep on borrowing when you are used to borrowing money.

Budget

Budgeting is something which you need to do if you want to stay afloat and keep your finances stable throughout the year. It is important to set yourself a budget for every aspect of your life because it will enable you to spend money while also not worrying about getting into debt. For example for your food shopping each week let’s say you set yourself a budget of $100. This will be a goal to stick to and will mean you have extra money left over for savings or to use in your lifestyle. Understanding how to budget and making a conscious effort is crucial for better financial health.

Focus on Needs

When you are trying to get yourself out of debt, make sure you always focus on the things you actually need rather than what you want. Sure, it’s great getting a takeaway when you don’t want to cook or popping out to the cinema, but when you are in debt these are things you need to cut down on a lot, if not completely. Save the money you would have spent on these activities and use it to pay off your existing debts.

Talk to your Creditors

If you keep quiet as you begin to have problems with laying off your debts each month, you won’t get the help that you need to get back on track and be able to pay them off. The best thing you can do if you find yourself in trouble is talk to your creditors and ask them for advice on what to do. They will be able to set up a meeting with you to discuss how much you are able to pay every month, and this will mean that you pay off less each month for a longer period.

Check Interest Rates

If you have multiple debts to your name at the moment you will want to prioritise which debts you focus on paying back first. Always focus on the highest interest rates first because this is where a lump sum will build up much quicker for you to pay off. If you can pay off these debts first, it means that you have more time to focus on the lower interest rates because they won’t build up as quickly for you, therefore they will be easier to handle.

Consolidation

Debt consolidation isn’t necessarily the best option for everyone out there, but it might be just the thing you need to make paying off your debts and getting back on track with your finances easier. Debt consolidation involves you taking all of your existing debts and merging them into one large lump sum with monthly payments which are higher. It will usually mean that your payment term is longer than the single debt, but it will make things less complicated for you and will mean you only have one interest rate to worry about. It should make paying off your debts easier in the long term and get you back on track with your money.

Dealing With Financial Problems

If you can breeze through life without any issues with money, then you’re a very lucky person indeed. It doesn’t matter how old you are, what you do, or you background, you’re most likely going to run into some financial issues sooner rather than later. As soon as you leave the safe nest of your family home, you start to feel the strain. As soon as you start your own family, you feel the strain even more. But the one thing people seem to do is deal with financial issues the wrong way. They’ll put other things first, let things build up and up, and before they know it they’re in so deep with their problem that it can seem like they’ll never be able to get out. So, to help you deal with your financial problems, here are the most common issues people face and how you can solve them.

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Work

Work will drag you down until you feel as though you have nothing left. It might not seem that way to begin with, but over time you’re most likely going to be overworked and underpaid. It’s a situation a lot of people are in all over the world. Companies are just treating their staff the wrong way. Plus, with the cost of living to factor in, you really don’t have much money left after having to pay bills. Now, there’s not much you can do in terms of your current job. If there are any promotions going, make sure you’re putting yourself forward for them if you want a chance of being treated better and to have more money. The alternative is finding a company that you actually wish to work for, and one that is going to treat you how you deserve to be treated. The bigger companies out there usually pay the better wages. Companies like Google really know how to treat their employees and how to pay them well. As well as the bigger companies, some smaller ones also pay a really good wage, you just need to make sure it’s actually what you want to do before going into a new job.

Relationships

Yes, relationships can get you into a lot of trouble with money, especially if you’re younger. Young adults are always searching for love no matter where they go. Once they’ve got that love, it’s the acceptance they’re looking for. This is often done by overspending in a lot of cases. The odd treat for their partner here and there suddenly leads to store cards being taken out, and even credit cards. But as adults we’re no different. In fact, we might even be a little worse. Growing up means going into serious commitments such as marriage. Unfortunately, the generation below us seems to be rushing into marriages after a few months of knowing each other. It’s one of the reasons why the divorce rate is actually so high at the minute. Companies such as austin kemp divorce solicitors have to deal with cases daily, and getting you the right settlement is always at the heart of what they do. But going through a divorce is just so expensive itself, it can often put people in a lot of trouble. To make sure you don’t find yourself in troubled waters as soon as you come out of a divorce, the best thing you can do is ask for help from a family member. The money you’ll need to lend will only be temporary, and you’d be able to give it back as soon as the money from the settlement came through. It just saves you having to go through a loans company which could ultimately damage your credit score, and it’ll definitely have interest rates that are going through the roof.

Home

As we’ve said, once you leave the warm nest of your family home, you soon realise just what living truly is. Nothing seems to be more expensive than bills, but bills are just something you can’t escape if you want to have your own home. The best thing you can do here to reduce them is look at your own habits within the home. If you know you and your family spend 20 or more minutes each in the shower each day, then you’re obviously going to have a problem with your water bill. If you’re someone who leaves the plugs on no matter what, then you’re going to have a more expensive electricity bill than you need to.  Smart choices equals a better future, so just think about what you can do around the home to save yourself a bit of money. If you have a family with children of any age, it’s important that you’re educating them on what they might be doing to cause the bills to be so high. It’s often them that creates the most problems, but they often don’t even realise they’re doing it.

Debt

Debt is one of the most scary money problems that you’ll ever face in your life, yet two thirds of the earth’s population are in debt right now. That’s because it’s just so easy to get into a situation like it. One thing leads to another, and all of the sudden your debt will spiral out of control, and you’ll feel as though there’s no turning back from the situation you’re in. When you’ve got bills to pay, mouths to feed, and debts to pay off, it’s obviously the debts that come last in line. The best thing you can do is sit down and do a plan of what needs paying off by when, and how much money you’re going to be able to sacrifice a week or month in order to pay it off. The more methodical you are, the easier it’s going to be to follow. You might also benefit from talking to a financial advisor to see if there are any alternative methods to paying off the debt. They might advise you do to debt consolidation. This puts all of you debts into one place, with one monthly payment. A lot of people find this so much easier to manage.

Defeating The Villains Of The Financial Business Fairy Tale

Any fairytale needs a hero and a villain. Neither can exist without the other, and there have been some fantastic villains. You’ve got the obligatory evil stepmother, the snow queen, and even the big bad wolf. Any one of which is sure to send shivers down your spine.

Sad to say, such villains don’t only exist in books. There are many real-world villains, too. They make themselves known in the criminal, political, and even financial world. If we had our way, there would be no bad guys when it comes to finances. But, that’s rarely the case. Both our personal and business finances go up against the baddies. This can be tough enough with private finances, but when your business is up against it, the risks are even more substantial. That is unless you find a way to defeat those baddies. Which is precisely what we’re going to look at here.

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Debt

The first financial villain is debt. It makes itself known, even in the business world. There’s no way to start an enterprise without borrowing, or spending, a significant amount. Of course, that isn’t an issue if  profits cover the cost. But, if your business takes a while to get off the ground, debt can get out of control. When you’re failing to pay large amounts, there’s a risk that your company could go bankrupt. To make sure that doesn’t happen, it’s essential to get a grip on finances. Cut costs and do your utmost to meet payments. If there is a delay, talk to the company in question. With open communication, it’s likely you’ll be able to reach an agreement. If you keep quiet about your troubles, however,  you’ll soon find yourself in a bad situation.

Bad credit

In many ways, bad credit is debt’s right-hand-man. If you miss payments, you can be sure that bad credit will follow. And, this can make life difficult in many ways. For one, it’s a black mark against your business. On top of which, this will make it difficult to get a loan down the line. The good news is that there are still options out there. With a fast business loan, bad credit doesn’t have to ruin your options. What’s more, keeping up with payments on this second loan can improve your credit rating. As such, facing the fear here could be the best method of defeat.

Unexpected expenses

Villains love to make us jump, and unexpected business expenses often do just that. Just when we think we’ve found our financial footing, you can guarantee that a breakage of some sort sets us back again. The best way to defeat this villain is to save a rainy day fund. When things are going well, set aside as much money as you can. Then, you can dip into this if anything happens. A fast loan, like those mentioned above, can also save you here. But, remember that you won’t have to repay your savings, so that’s by far your best option.

The Good, the Bad and the Ugly: Teaching Your Children about Debt and Borrowing Money

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Most people don’t get into debt out of sheer stupidity. Most people get into debt because they have not been educated about money – or more specifically borrowing money. They find themselves in a situation whereby they need money quickly, and they borrow it without fully understanding what they are letting themselves into. There are then those who are enticed by all of these amazing promotional offers, and they sign up to a number of credit cards without considering how this is going to impact their rating. The obvious solution may seem simple: avoid borrowing money altogether. However, if you do this, you won’t have a credit history at all, and this is arguably just as damaging as having a bad credit report. So, we need to educate our children about borrowing money responsibly, the impact of borrowing on their credit report, and what to do if they do find themselves in debt. After all, in some cases, debt is unavoidable.

LESSON ONE: THE VARIOUS WAYS YOU CAN BORROW MONEY

Firstly, you need to make sure your children are aware of the different methods of borrowing money. In general, this can be split into two categories: loans and credit cards. Of course, there are then many different types of loans and credit cards. With regards to the former, you will be given a certain amount of money, which you will then have to pay back to the lender with interest on top. With a credit card, you will have access to a certain amount of money, and you will only be subject to interest if you do not pay the full amount off by a certain day of the month. Credit cards are ideal for those who need access to money to tick them over until they get paid. If you are self-employed, for example, and you don’t know what date of the month your money is going to come in, you can use a credit card to tide you over until then. A loan is more suitable when you are making a large purchase. There are many different types of loans, including bank loans, secured loans, and payday loans. The latter provides a fast loan approval for those in need of money as quickly as possible. However, the APR tends to be very high, so you’ll end up spending a lot of money taking the loan out. A secured loan will be secured against one of your assets, for example, your car or your home. If you default on your payments, the lender can sell your vehicle or your property to cover the payments you have missed. It is important to teach your children about the different factors they need to consider when taking out a loan or applying for a credit card. A lot of people never learn about APR, and so they end up borrowing money without having a full understanding of how much they are paying for it. This is an easy way to get into debt, and it can be avoided with simple education.

LESSON TWO: CREDIT REPORT

The next thing you need to teach your children about is their credit report. Explain that their credit report is something that a lender will view when determining whether to lend them money. This does not only relate to companies who deal with loans and credit cards, but catalogue companies, furniture stores offering financial plans to pay off furniture over the course of a few years, phone contract businesses, and such like. It is, therefore, critical to maintain a good credit score. Unfortunately, a lot of people end up causing damage to their credit report without even realising it. This is why you need to teach your children about the different aspects that do and do not impact a credit score, and the steps they can take to improve their credit score. One thing a lot of people do not realise is that they do not have one set credit score. There are a number of companies that provide credit reports, and most companies and lenders will look at one or several credit reports to gauge whether someone is credible to lend to. People can access their credit reports online, and it is a good idea to do so, so that you can have a general understanding of what your score is, where you are going wrong, and where you are going right.

So, let’s go over the different elements that make up your credit report, and the impact they have:

  • Your personal information – One of the easiest and most effective ways to improve your credit score is to make sure that all of your personal information is up to date. If it isn’t, lenders may struggle to verify who you are, and this can have a negative impact on your rating. Plus, if your personal details aren’t correct, you could miss out on notifications, which could result in you failing to pay a bill, which will, of course, have a bad impact on your credit score.
  • The total balance of your active credit accounts – The total balance of your active credit accounts plays a crucial role in determining your score. If you have a mortgage, this will not be included within the calculations. This includes your credit cards, any purchases you are still paying for, overdraft facilities you are using, and any loans you have taken out. If you owe more than $15,000, this will have a negative impact on your credit score. If you owe more than $30,000, this will decrease your score even further.
  • How much of your available credit you are using – There are a number of factors to consider here. Firstly, your highest credit limit will play a role. If you have a credit card with a limit over $1,000, this will improve your credit rating, as it shows that you are a low risk borrower. However, you also need to think about how much of your available credit you are using. For example, if you are using 95 percent of the credit you have available to you, this is bound to have a negative impact on your score, as it indicates you are relying heavily on credit.
  • Payments – Are you keeping up with your payments? This is the most important factor of them all when it comes to your credit score, as a late or missed payment will stay on your account for roughly six years.
    • The age of your credit accounts – Again, there are a number of factors to take into account here. Firstly, the average age of all of your credit accounts is considered. Having an average age of 33 months or more is considered a positive. Also, the number of new credit accounts you have opened. If you have opened a number of accounts within a three-month period, for example, this will have a negative impact. However, if you have only opened one credit account, this will not have a bad impact on your score.
    • Credit applications – This is where a lot of people have a negative effect on their score without even realising. Many people decide to make numerous credit applications, and then they will accept the best credit card they get approved for. A lot of people also try their luck, applying for cards they are unlucky to get accepted for on the off chance that they will. This will have a negative impact on your score, as credit applications are included in your report. There are soft searches, which don’t impact your score, and hard searches, which do impact your score. The best thing to do is use one of the online services that are available to determine your chances of being accepted. This ensures you only apply for credit cards whereby you have a high chance of approval, so that you don’t need to carry out numerous applications.

LESSON THREE: WHAT TO DO IF YOU GET INTO DEBT

Last but not least, it is important not only to teach our children about avoiding getting into debt, but also about what to do if you do get into debt. The problem can easily get worse and worse when someone does not know how to deal with debt. It can seem like the end of the world, but it doesn’t need to be. In fact, you will find plenty of inspirational stories on the Internet about people that have gotten themselves out of severe debt.

Most people agree that the best way to tackle debt is to pay off the biggest debt first while making the minimum payments on all loans and cards to ensure you are not subject to any further fees. You should also ring up your credit card provider or any other lender you owe money to and see if you can negotiate more favourable terms. It is then a case of examining where you went wrong and how you got into debt in the first place. This will help to ensure you do not make the same mistake again.