6 Steps to Crushing Debt

You and debt are so over. You’ve just about had it with those endless piles of credit card bills and those hideous numbers that never seem to get any lower. It’s time to kiss that debt goodbye!

Getting rid of high debt will take hard work, willpower and the determination to see it through until the end, but it is doable. Here, we’ve outlined six steps to help you start crushing debt today. 

Step 1: Choose your debt-crushing method

There are two approaches toward getting rid of debt: 

  • The snowball method, popularized by financial guru Dave Ramsey, involves paying off your debt with the smallest balance first and then moving to the next-smallest, until all debts have been paid off. 
  • The avalanche method involves getting rid of the debt that has the highest interest rate first and then moving on to the debt with the second-highest rate until all debts have been paid off. 

Each method has its advantages, with the snowball method placing a heavier emphasis on achieving results at a faster pace, which then motivates the debt-crusher to keep going, and the avalanche method, focusing more on actual numbers and generally saving the borrower money in overall interest paid on their debts. There’s no right approach, and you can choose whichever method appeals to you more.

Step 2: Maximize your payments

Credit card companies are out to make money, and they do this by making it easy to pay just the minimum payment each month, thus really paying only the interest without making progress on the actual principal, thereby trapping millions of consumers in a cycle of endless debt. Beat them at their game by maximizing your monthly payments. Free up some cash each month by trimming your spending in one budget category or consider freelancing for hire and channel those freed-up or newly earned funds toward the first debt on the list you created in Step 1. Don’t forget to continue making minimum payments toward your other debts each month!

Step 3: Consider a debt consolidation loan

If you’re bogged down by several high-interest debts and you find it difficult to manage them all, you may want to consider consolidating your debts into one low-interest loan. A personal loan from Advantage One Credit Union can provide you with the funds you need to pay off your credit card bills and leave you with a single, low-interest payment to make each month. Or, you can transfer your credit card balances to a single card with a low-interest or no-interest introductory period. Be aware, though, that you will likely get hit with high interest rates when the introductory period ends. 

Step 4: Build an emergency fund

As you work toward pulling yourself out of debt, it’s important to take preventative measures to ensure it won’t happen again. One of the best ways you can do this is by building an emergency fund. Ideally, this should hold enough funds to cover your living expenses for three to six months. Start small, squirrelling away whatever you can in a special savings account each month, and adding the occasional windfall, like a work bonus or tax return, to beef up your fund. 

Step 5: Reframe your money mindset

Sometimes, like when there’s a medical emergency or another unexpected and expensive life event, a consumer can get caught under a mountain of debt through no fault of their own. More often, though, there is a wrongful money mindset at play  leading the consumer directly into the debt trap. 

As you work on paying off your debts, take some time to determine what got you into this mess in the first place. Are you consistently spending above your means? Is there a way you can boost your salary or significantly cut down on expenses? Lifestyle changes won’t be easy, but living debt-free makes it all worthwhile. 

Step 6: Put away the plastic

Credit cards are an important component of financial health and the gateway to large, low-interest loans. However, when you’re working to free yourself from debt, it’s best to keep your cards out of sight and out of mind. You can set up a fixed monthly bill to charge one or more of your cards to keep them active, but only do this if you know you will pay off the charge in full before it’s due. Learning to pay your way using only cash and debit cards will also force you to be a more mindful spender. 

Kicking a pile of debt can take months, or even years, but there’s no life like a debt-free life. Best of luck on your journey toward financial freedom!

Your Turn: Have you kicked a significant amount of debt? Tell us how you did it in the comments. 

Get the Hell Out of Debt

Title: Get the Hell Out of Debt: The Proven 3-Phase Method That Will Radically Shift Your Relationship to Money

Author: Erin Skye Kelly

Paperback: 320 pages

Publisher: Post Hill Press

Publishing date: July 20, 2021

Who is this book for? 

  • Anyone who is fed up with living in debt. 
  • People seeking to get rid of credit card debt without paying a fortune in interest.
  • Readers who want to improve their money management and find most personal finance books boring.

What’s inside this book?

  • An honest, incisive and often humorous guide for paying off debt.
  • An outline for the three phases of getting rid of debt.
  • The two most important tools of money management.
  • Kelly’s own journey toward a debt-free life.

3 lessons you’ll learn from this book: 

  1. How to pay off a large amount of consumer debt.
  2. How to create and maintain wealth. 
  3. How to change your money mindset so you’ll stay debt-free.

5 questions this book will answer for you: 

  1. Why do people tell me to consolidate and refinance my way out of debt when this advice only takes me deeper into debt?
  2. Is it possible to kick my debt for good?
  3. What practical steps do I need to take to get rid of my debt?
  4. Is financial stress an inevitable part of life?
  5. How can I find true financial freedom?

What people are saying about this book: 

  • “Erin has a brilliant way of explaining, step-by-step, how to radically shift your finances for the better.”  — Peter Mallouk
  • “Erin understands that wealth is about so much more than money. It is about creating, living, and leaving a legacy of love and happiness.”  — W. Brett Wilson
  • “With a welcomed irreverence and absolutely no judgment, Erin shows us all of the nuanced, messy, and dysfunctional ways we stumble and fall into debt. But then! Then she shows us how to get up and stand tall before we kick, claw, and fight our way out of it. It’s you against your debt. Read this book if you’re ready for your gloves to come off.”  — Jesse Mecham

Your Turn: What did you think of Get the Hell Out of Debt? Share your opinion in the comments. 

Why You Need to Be Financially Fit

Individual Americans spend hundreds of dollars a year and at least as many hours on keeping themselves physically fit but too many people neglect their financial health. Just like physical health, being financially fit is crucial to your well-being, your future and your quality of life. 

Here’s why being financially fit is so important and how you can overcome common barriers to achieving financial wellness. 

Financial wellness: a ripple effect 

Being financially fit is about more than just having enough money in your account to cover your expenses and put away something for tomorrow. Managing money responsibly will affect many aspects of your life:

  • Marriage. According to a recent study by AARP, financial problems are the second leading cause for divorce in the country. Money brings resentment and arguments into a marriage. In a study reviewing over 740 instances of marital conflict between 100 couples, money was found to be the most common topic couples argued about.  
  • Mental health. Money stress can severely affect your mental health, causing depression, restlessness, anxiety and more.  
  • Physical health. Stressing over finances can also directly impact your physical health, leading to recurring symptoms like headaches, fatigue, upset stomach, insomnia, high blood pressure and an increased risk of heart disease and stroke.
  • Work life. Being bogged down by money worries can make it difficult to focus while at work, which can bring down productivity levels and hamper career growth. In addition, prospective employers tend to review the financial wellness of new hires as part of their background checks; high rates of debt and a poor credit score can cost an employee a new job. 
  • Parenting. Managing money irresponsibly can mean not having sufficient funds to pay for a child’s education, private lessons, medical needs and more. 

What are the leading causes of money stress? 

According to a survey by Credit Wise®, 73% of Americans rank money issues as the number one stressor in their lives. Here are the top causes for financial stress: 

  • High-interest debt
  • Insufficient savings
  • Medical bills
  • Living paycheck to paycheck
  • Lack of retirement planning

Stressing over money is never fun. Stressing over money, when any of the above applies to you, takes on its own form of angst by adding a level of long-term anxiety. It takes time, sometimes years, to undo the damage of any of these stressors but it can be done!

Barriers to financial wellness and how to overcome them

We’re convinced: being financially fit is super-important. But what happens now? Why are 80% of Americans in debt?  Why do only 39% of Americans have enough saved up to get them through a $1,000 emergency? 

Unfortunately, while many people may understand that financial fitness is crucial to their wellbeing, there are several barriers that make it difficult to follow through on their convictions. 

First, many lack the basic financial knowledge necessary to responsibly manage their money. Second, many people mistakenly believe that budgeting, saving and being more mindful of how they manage their money are too time-consuming and tedious. Finally, some people may have fallen so deeply into debt, they’ve begun believing they will never be capable of ever pulling themselves out. 

Here are some simple steps you can take today to help you achieve and maintain financial wellness:

  • Get educated. There is no shortage of financial literacy available to the interested consumer, from financial literacy blogs to personal finance books, podcasts, online classes and so much more. Learning how money works, the power of a long-term investment and how much you’re really paying each time you swipe that high-interest credit card can help you make better choices. 
  • Have the money talk with your partner. Whether you’ve only been sharing expenses for half a year or you’ve been married more than a decade, it’s important to be on the same financial page as your partner. Talk openly and honestly, being careful not to be judgmental in any way, and discuss your individual and shared long-term and short-term money goals. Then come up with a plan for how you intend to reach them together. 
  • Pay all bills on time. If you can’t take aggressive steps toward paying down debt just yet, be sure to make the minimum payment on each credit card bill each month. 
  • Create a budget. Giving every dollar a destination makes it easier to spend mindfully and cut down on extraneous expenses. 
  • Start saving. There’s no such thing as a sum of money that’s too small to put into savings. Every dollar counts, and once you get the ball rolling, you’ll be motivated to pack on the savings until they really grow. 

You give your abs a great workout each day now it’s time to get those money muscles into shape! Follow the tips outlined above to stay financially fit at all times

Your Turn: What are your best tips for maintaining financial wellness? Tell us about it in the comments. 

Bitcoin and Cryptocurrency Trading for Beginners 2021: 3 Books in 1

Title: Bitcoin and Cryptocurrency Trading for Beginners 2021: 3 Books in 1: The Ultimate Guide to Start Investing in Crypto and Make Massive Profit with Bitcoin, Altcoin, Non-Fungible Tokens and Crypto Art

Author: Nicholas Scott

Paperback: 397 pages

Publisher: Independently published

Publishing date: April 11, 2021

Who is this book for? 

  • Aspiring cryptocurrency investors who are looking for advice on entering this unique market. 
  • Experienced cryptocurrency investors who want to expand their knowledge of cryptocurrency, non-fungible tokens (NFTs) and crypto art.
  • Readers who don’t want to take the risk of investing in cryptocurrency, but are interested in learning how it works. 

What’s inside this book?

  • A down-to-earth beginner’s guide into the world of crypto investing. 
  • Advanced analysis of the cryptocurrency market. 
  • Tips and tricks for making it big through cryptocurrency.
  • Strategies for choosing the perfect coin and keeping your investments safe. 
  • A step-by-step guide for creating and selling your own NFTs. 

3 lessons you’ll learn from this book: 

  1. How to make your first cryptocurrency investment.
  2. How to build the perfect cryptocurrency trading strategy.
  3. The 6 secret qualities of a high-value NFT.

5 questions this book will answer for you: 

  1. What is cryptocurrency and how does it work? 
  2. Is it a good idea to invest in cryptocurrency? 
  3. What are NFTs and why are they the currency of the future? 
  4. How can NFTs be used in the digital world?
  5. What is crypto art? 

What people are saying about this book: 

  • “Don’t know what a Bitcoin is? Confused by cryptocurrency and art? These three books explain what they are and how to invest in them. The author also explains how crypto art can be a profitable investment.”
  • “I found this book understandable and well written. I found the part on the NFTs really interesting. I used to be skeptical about NFTs, but after reading this book, I understood how they work and how they can be used as an investment.”

Your Turn: What did you think of Bitcoin and Cryptocurrency Trading for Beginners? Share your opinion in the comments. 

Q&A: Why Are Prices So High Now?

Q: I’m trying to heal financially as life returns to pre-pandemic norms, but the rising cost of many commodities, like groceries and gasoline, is making a financial rebound a challenge. Why are prices skyrocketing right now?

A: The jump in prices of many goods is proving to be a formidable challenge to millions of Americans who are attempting to recover from the pandemic. There are several compounding factors triggering the rise in prices across multiple industries, and the upward trend is likely to continue for a while. Here’s what you need to know about the sky-high prices dominating the post-pandemic economy.

How much more do groceries cost compared to a year ago?

A trip to the grocery in 2021 doesn’t come cheap. According to new data from NielsenIQ, all 52 tracked food categories are more expensive now than they were a year ago. The cost of fresh meat, for example, jumped by 8.6% from May 2020 to May 2021, while processed meats are up by 9.2% and the cost of eggs has seen a nationwide increase of 8.2%.

What is causing the increase in grocery prices?

A confluence of factors is causing grocery prices to rise.

For one, the pandemic has caused a shortage in many materials due to a prolonged disruption in the labor force and supply chain, which has increased demand, and the prices of these goods, to rise. Grocery items, in particular, also saw a surge in demand due to the many Americans cooking at home while on lockdown during the pandemic. Many industries are still suffering from these shortages and don’t expect to recover for a while. In fact, the Bloomberg Commodity Spot Index, which tracks 23 raw materials, is at the highest level it’s been in nearly a decade.

Second, there is a shortage in the labor market now, which can likely be attributed to the inflated and extended pandemic unemployment insurance, which made many laborers reluctant to return to work. Employers are forced to offer more pay for attracting workers, and they pass this extra cost on to consumers.

Finally, the increase in prices can be linked to the rise in transportation costs as gas prices continue to rise, which we’ll explore more in a moment. Again, this increased expense is passed on to the shopper through higher prices on consumer goods.

Why are gas prices so high?

It’s sticker shock at the gas pump these days, with prices as high as $4 per gallon in some parts of the country.

There are many factors contributing to the rise and fall in gas prices, of which the fluctuating price of crude oil is most prominent. According to the U.S. Energy Information Administration (EIA), approximately 60% of the money we pay for a gallon of gas goes to cover the costs of the crude oil that went into making it. Another 25% pays for the costs of refining, distributing and marketing the gas, while the rest pays for federal taxes, and state taxes in some states as well.

Crude oil prices, in turn, rise and fall in direct correlation of multiple factors. Most recently, here’s what’s causing the price of crude oil to peak:

  • Basic rules of supply and demand. The last few months saw a loosening of COVID-19 restrictions around the globe. This led to an increase in the demand for gas, and in turn, for crude oil. In contrast, at the height of the pandemic, demand for crude oil fell sharply — and so did its price tag.
  • The presidential election. Crude oil prices have spiked by an average of $0.75 per gallon since Nov. 3, 2020. The oil markets evidently see the current administration as one that will inhibit U.S. oil production, which leads to a tightening on the global oil market. Traders responded by driving up the price of crude oil.
    Seasonal market changes. The price of crude oil tends to rise and fall with the seasons, where prices generally rise in the spring and summer months as more motorists hit the road, thereby increasing demand. The changeover to summer gasoline blends also leads to a jump in gas prices at this time of year
  • Change in the value of the dollar. Oil is priced in U.S. dollars within the world market. When the dollar is strong, relative to other currencies, crude oil is cheaper for Americans and more expensive for the global market. When the dollar is weak, as it is now, oil becomes more expensive for Americans.
  • Strong discipline among the OPEC+ nations. When the nations which are part of OPEC+ stick to their agreement to cut back on oil production, prices increase.

What can I, as a consumer, do about the rising cost of goods?

Unfortunately, as a private consumer, there’s not much you can do to bring down the costs of common goods. However, there are steps you can take to help you manage these costs in a financially responsible manner.

First, you’ll likely need to make some changes to your monthly budget to accommodate the higher costs of groceries and gas. Shuffle your spending categories by trimming discretionary expenses until you have enough money to cover the costs of food and transportation.

Next, incorporate cost-saving techniques you may not have needed to use until now to help you manage these increased expenses. Think couponing, shopping the seasons and the sales, buying items you always use in bulk, and cutting back on pricey grocery items you can do without. To save on gas costs, consider walking to work or to do your errands, carpooling when possible, or using public transportation more often.

Rising prices might be hard on the wallet, but with some proactive steps, you can still stay on top of your finances and help bring your financial health back to pre-pandemic norms.

Your Turn: How are you budgeting for the rise in the cost of groceries and gas? Share your tips with us in the comments.

Needs Vs. Wants: How to Tell the Difference

One of the most important parts of setting up a monthly budget is separating needs from wants. Before assigning dollar amounts to any categories, it’s important to know which parts of your monthly expenditures are an absolute need, and which items would be nice to include, but are not a necessity. Many people find this particularly challenging, and many even give up on budgeting when they can’t move past this step.

Fortunately, it doesn’t have to be this way. Below, we’ve outlined how to tell the difference between wants and needs, as well as how to separate these two categories on a monthly budget plan.

Defining needs and wants

A need is something that is necessary to live and function.

A want is something that can improve your quality of life.

Using these criteria, a need includes food, clothing, shelter and medical care, while wants include everything else. However, as you’ll find when creating a budget, these terms are more fluid than they appear to be at first glance. While working through your lists, you may find that some items can fit into both categories, making the process confusing.

A good trick for dividing wants from needs is to let some time pass before fulfilling your desire for the item, either theoretically or practically. The desire to obtain a need only grows stronger as time passes, while the desire to fulfill a want will weaken with passing time.

Listing your needs and wants

Now that we’ve defined each of these budget categories, you can begin listing your own needs and wants.

Start with your needs, including the basics, like food, rent or mortgage, as well as other fixed expenditures that are necessary for you to live and function. Those things may include transportation costs, health insurance coverage and any clothing or tools you need for work.

It’s important to note that needs will vary from one person to another, and even for one person at different stages of life. For example, a family with two working parents who live in a community where there is no reliable public transportation may require two vehicles. Conversely, a family living in a city with several dependable transportation systems may list a second car as a want. Similarly, a four-bedroom home may be a need for a family while they’re raising several young children, but turn into a want later when the kids go off to college.

If you get stuck on a particular item and don’t know where to place it, hold it up to the following questions:

  • Do I really need this item to live and function?
  • Is it possible to fill this need in a less expensive way?
  • How would my life be different if this item were not a part of it? When you’ve completed your list of needs, you can list all remaining expenses in your category of wants.

Reviewing and tweaking your lists 

After completing this exercise, review your list of needs to see if anything can be removed. Will you still need these items a few years from now, or even a few months from now? Can any of your needs be swapped for a cheaper option? For example, you may need clothing, but do you need eight pairs of designer jeans?

Do the same for your list of wants. Which of them are only there because of pressure to keep up with others or look good? Which of your wants were more important to you in the past than they are today? Which are status symbols? Pare down your list until you’re only left with the wants that truly add value to your life.

Now that you know how to tell the difference between needs and wants, creating a monthly budget is simple. Assign dollar amounts to your fixed and non-fixed needs, set aside money for savings and use the rest to pay for your wants.

Going forward, you’ll likely also have an easier time keeping your impulse buys under control. Before purchasing an item, ask yourself if it’s a need or a want. If the item is a want, consider its importance and other wants you’ve recently bought before going ahead with the purchase.

Separating wants and needs can be one of the most challenging parts of creating a monthly budget. Follow the steps outlined above to learn how to make the distinction between these two spending categories with ease.

Your Turn: How do you separate wants from needs? Share your tips and tricks with us in the comments.

Post-Pandemic Money Moves

Re-acclimating to normal life as pandemic restrictions are lifted and businesses reopen across the country will mean more than just getting used to wearing real pants again and working without your cat on your lap. You’ll also need to consider your finances. How has your overall money management changed during the pandemic? Have you dipped into your savings? Have you been letting your retirement accounts slide? Or, maybe you’ve been waiting for the chance to hit your favorite retailers again, and you can’t wait to splurge after a 15-month financial fast.

As you prepare to leap back into normal life, proceed with caution. Be sure to consider your full financial picture as well as long-term and short-term goals.

Here are some forward-thinking money moves to make as you adjust to post-pandemic life.

Review and adjust your budget

Pandemic times required their own budget, as people cut down on costs like dining out and updating work wardrobes, but spent more on things like at-home entertainment. Others may have had to adjust their spending to fit a changed income level or to help them coast during a stint of unemployment. The pandemic may have also shifted something in some people’s mental list of needs and wants, as they found they can live with a lot less than they’d believed.

As you adjust to post-pandemic life, take some time out to review and tweak your monthly budget. Be sure to incorporate any changes in income, as well as a readjustment to pre-pandemic spending or changed priorities. You may need to review and adjust your budget, and maybe even your spending behaviors, every few months until you find a working balance.

Rebuild your savings

If you are one of the many Americans who were forced to dip into savings, or even to empty them completely, during the pandemic, create a plan to get your savings back on track. Tighten up your spending in one area until you’ve built up an emergency fund that can keep you going for 3-6 months without an income, or use a windfall, such as a work bonus or tax refund, to get the bulk of your emergency fund in place.

Once your emergency fund is up and running again, continue to practice basic saving habits, such as setting aside 20% of your monthly income for savings, or whichever approach you prefer. If the pandemic taught us anything, it’s that it’s always best to be prepared, because you never know what can happen.

Rethink your long-term and short-term financial goals

The pandemic has prompted many people to reevaluate their goals. Retiring before you hit 50 or spending a month in Europe next summer may not be as important to you as you’d originally believed; or it may be even more important now. Similarly, you may realize your family has outgrown its living space and that moving to a new home is your number one financial priority. Or maybe you’ve decided you can live without a second car.

Take some time to rethink your long-term and short-term financial goals and adjust your savings and budget accordingly.

As you move through this step, be sure to consider any long-term goals you may have put on hold during the pandemic. Have you stalled your contributions to your retirement accounts or toward your child’s college tuition fund? Have you been making only the minimum payments on your credit cards? If any of these apply to you, be sure to revert your savings and debt payments back to pre-pandemic levels as soon as you can.

Spend with caution

It’s perfectly fine to enjoy a shopping spree in celebration of a return to pre-pandemic norms, but it’s best to spend with caution.

First, prepare to encounter inflated prices wherever you go. Gas prices have jumped recently, and costs of many consumer goods have spiked as well. If you planned to purchase a big-ticket item like a new car or tickets for a cruise, consider waiting it out a bit until prices cool off.

Also, you may be eager to make up for lost time, but no amount of nights out on the town will bring back the months you spent at home. Similarly, overbuying for this fashion season won’t bring back the seasons you spent at home in a hoodie and sweatpants. To avoid irrational overspending, set up a budget before you hit the shops and only spend what you’ve planned.

The restaurants and movie theaters are open for business again, and mask mandates are dropping all over the country. As life returns to pre-pandemic norms, be sure to consider the state of your finances and to make responsible, forward-thinking money moves like those listed here.

Your Turn: What post-pandemic money moves will you be making now? Tell us about it in the comments.

What Do I Need to Know About the Advance Child Tax Credit Payments?

Q: I’ve heard that the IRS will start making advance payments toward the Child Tax Credit of 2021 this summer. What do I need to know about these payments?

A: The advance payments of the Child Tax Credits of 2021 will be distributed monthly to eligible families, beginning on July 15, 2021. Here’s what you need to know about these payments.

What are the changes to the Child Tax Credits for 2021? 

As part of the American Rescue Plan Act (ARPA) of 2021, the Child Tax Credit (CTC) for tax year 2021 will be significantly expanded.

Here are the most important changes to the CTC for 2021:

  • Families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. The credit will include children who turn 17 in 2021.
  • Families claiming the CTC will receive $3,600 per qualifying child under age 6 at the end of 2021.
  • The credit for qualifying children is fully refundable. This means taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
  • Advance payments of up to 50% of the total CTC per family will be distributed once a month, from July 15 through Dec. 15, 2021.

For comparison’s sake, for 2020, the amount of the CTC was up to $2,000 per qualifying child under age 17 at the end of the year. Also, the credit was only refundable by up to $1,400 per child.

Who is eligible for the Child Tax Credits? 

Taxpayers who have a primary residence in the U.S., and reside in it for at least half of the year, are eligible to receive the child tax credits.

The payments will begin to be phased out for married taxpayers filing a joint return and earning more than $150,000 a year, for heads of household earning more than $112,500 a year and for all other taxpayers earning more than $75,000 a year. Income eligibility will be based on 2020’s tax return (more on this later).

Do I need to take any action to receive the monthly payments? 

Taxpayers need not take any steps to receive the advanced Child Tax Credits. Of course, taxpayers need to file their 2020 taxes, which were due on May 15, 2021. Filing electronically may speed up the receipt of the CTC payments.

How much money will I receive each month through the advanced Child Tax Credits?

The advance payments being sent to qualifying families from July through December will be equal to up to 50% of each family’s total Child Tax Credit. The payments will be based upon the income information found in taxpayers’ 2020 tax returns. If these were not filed yet, the 2019 tax returns will be used to determine each family’s eligibility.

Families eligible for the full CTC will receive half of the total across a six-month time span. This means eligible families will receive a total of $1,800 for children under age 6, or $300 a month per child from July through December, and a total of $1,500 for children ages 6-17, or $250 a month per child from July through December.

How will I receive my monthly payments? 

The IRS has announced that payments will be issued in the same way as the three stimulus payments distributed to all eligible taxpayers since the start of the pandemic. If you received your stimulus payments via paper check, you’ll likely receive the CTC payments the same way, and if you received them via direct deposit, expect the same now.

The one caveat here is for those who have not signed up to receive their Economic Impact Payments via direct deposit but have filed their 2020 tax returns electronically. These taxpayers will receive their CTC payments the same way they filed their taxes; either electronically or via direct deposit.

Can I decline the opportunity to receive the advance payments of the 2021 Child Tax Credits?  

Eligible taxpayers who do not want advance payments of the 2021 Child Tax Credit can choose not to receive them at this time. The IRS has not yet provided the public with instructions for how to officially decline the advance payments, but has promised to update its website when the instructions become available.

Is it a good idea to decline the advance payments of the 2021 Child Tax Credits? 

While it is generally better to receive money owed to you upfront, under certain circumstances it may be better to decline receiving the advanced Child Tax Credits.

If you have reason to believe you will not be eligible for the full CTC amount at the end of 2021, you may end up owing the IRS some or all of the money you received when you file your 2021 taxes. This can happen if your income level rises in 2021, or if you have primary custody of the child(ren) receiving the credit in 2020, but not in 2021. If either of these may apply to you, consider opting out of the advance CTC payments. You won’t miss out on these payments, as you’ll receive whatever is owed to you at the end of 2021.

The advance CTC payments will be a boon for families who are struggling with the financial fallout of the pandemic, but it may not be in every taxpayer’s best interest to accept these payments now. Use our guide to brush up on the details of these payments so you can make an informed decision.

Your Turn: How do you plan to use the advanced Child Tax Credits? Tell us about it in the comments.

How Do I Read the Fine Print on My Credit Card Paperwork?

Q: Paperwork from credit card companies always seems to be filled with tiny print that’s hard to read and even harder to understand. How do I read the fine print from my credit card issuer?

A: Fine print is designed to keep you from paying attention, but it often contains important information you can’t afford to miss. Here’s what you need to know about reading and understanding the fine print on credit card applications and billing statements.

What do all those terms mean, anyway?

First, let’s take a look at 12 basic credit card terms that are important to know but are often misunderstood:

  • Accrued interest – The amount of interest incurred on a credit card balance as of a specific date.
  • Annual Percentage Rate (APR) – The rate of interest that is paid on a carried credit card balance each year. The amount of interest charged each month will vary according to the current balance. This number can be determined by dividing the current APR by 12 to get the monthly APR rate, and then multiplying that number by the current balance.
  • Annual fee – The yearly fee a financial institution or credit card company charges the consumer for having the card.
  • Balance – The amount of money owed on the credit card bill.
  • Billing cycle – The amount of time between the last statement closing date and the next.
  • Calculation method – The formula used to calculate the balance. The most common is the daily balance method, where charges are calculated by multiplying the day’s balance by the daily rate, or by 1/365th of the APR.
  • Cash advance – Money withdrawn from a credit card account. Cash advances usually have strict limits, higher interest rates and fees.
  • Credit limit – Also known as a line of credit, this refers to the maximum amount of money that can be charged to your credit card.
  • Default rate – Also called the penalty rate, this refers to an especially high rate of interest that kicks in if the consumer is late in making monthly payments and/or has violated the terms and conditions of the card.
  • Grace period – The time between making a purchase and being charged interest on that purchase.
  • Late payment notice and fee – These will alert the consumer to a missed payment and its associated fee.
  • Minimum payment – The smallest amount of money the consumer can pay each month to keep the account current.

What’s the big deal about all the small print on my credit card application?

Don’t sign on the dotted line (or digital signature pad) just yet! Those microscopic letters on your credit card application actually contain important information. Here are some common claims you might find on an application and what the small print below these claims actually says:

Claim: Sign-up bonus: $950!

Fine print: Must spend $3,000 on the card within the first three months of ownership. Redeemable only at participating airlines.

Claim: Interest-free offer!

Fine print: Expires after 18 months, the same time a 22.5% interest rate kicks in.

Claim: 0% balance transfer!

Fine print: With a $300 balance transfer fee.

Claim: 5% cash back on grocery spending!

Fine print: Capped at $1,000 per quarter and only at participating grocery stores.

Claim: Cash advance of up to $1,500!

Fine print: With 20% interest and a $200 cash-advance fee.

Claim: Generous 25-day grace period!

Fine print: We reserve the right to shorten the grace period at any time.

How do I find the fine print on my credit card application or statement? 

Read the fine print before you sign up for a credit card offer. You can find this information on the credit card’s paper or digital application under a label marked “Pricing and Terms” or “Terms and Conditions.” You can also find this information when researching credit cards online; look for it under the “Apply Now” button where it may be labeled as described above, or as “Interest Rates and Fees” or “Offer Details.”

If you’ve already signed up for the card, you’ll find these conditions on the “Card member Agreement” that generally accompanies a new credit card. The text will be lengthy, but will likely be divided into sections, including a pricing schedule, relevant fees and payment details.

Your credit card statements will also have lots of fine print, though most of it will be on the back of the bill. This information will include all the information from your application, as well as some additional information, including reports to credit bureaus, how your interest rate on the balance is calculated, how you can avoid paying interest on your purchases and how to dispute fraudulent charges on your bill.

You can find the small print on your credit card applications and statements by looking for an asterisk (*) or dagger (†), which indicates small-type footnotes at the end of the page or document.

Do I need to read all the fine print? 

Fine print will appear all over your credit card paperwork, but it’s best to pay attention to the tiny letters near the points you most care about. For example, be sure to read up on the information given on all special promotions, introductory offers, bonuses, rewards and more. In general, you’ll find this rule to be true: “The large print giveth, and the small print taketh away.” In modern English, this means that the large print is designed to grab your attention and make you sign up for the card immediately, while the small print contains all the qualifiers, exclusions, justifications for future cancellations and more, about these claims.

Fine print written in financial jargon can be difficult to spot and to understand, but ignoring the small words on your credit card paperwork can have disastrous consequences. Let our guide help you learn how to read the fine print on your credit card applications and statements. Don’t let anything get past you!

Your Turn: Have you ever regretted missing the fine print on your credit card paperwork? Tell us about it in the comments.

Learn More:
fool.com
cardratings.com
nerdwallet.com
experian.com
cnbc.com

The Comprehensive Guide to Insurance Coverage

Insurance premiums can take a big bite out of a monthly budget, but not having enough coverage can be even more costly.  Let’s take a look at the five primary insurance types and the most important information to know about each one.

1. Health insurance

What is it? 

Health insurance is coverage that typically pays for medical, surgical and prescription drug expenses in exchange for a monthly premium. Many states mandate health insurance coverage and will collect fees, along with state taxes, from taxpayers who do not have sufficient coverage.

Types of health insurance plans

Health insurance plans are divided into two primary categories: public and private.

Public health insurance is provided at low or no cost through the federal and/or state government. The most common public insurance plans are:

  • Medicaid – Public insurance plan for low-income families and individuals. Eligibility requirements vary by state.
  • The Children’s Health Insurance Program (CHIP) – A federal and state program designed to cover children below the age of 18 whose families have incomes above the qualifications for Medicaid, but are too low to afford private health insurance.
  • Medicare – A federal health insurance program for Americans age 65 and older.

Private health insurance may be provided through an employer or purchased privately from the insurance provider, or through a broker.

These are the most common private health insurance plans:

  • HMO: Health Maintenance Organization – The most restrictive plans that only work with a network of healthcare providers. The insured must choose a primary care physician (PCP) who is in the network to benefit from coverage. To see an out-of-network specialist, the insured will need a referral from their PCP. HMOs tend to have cheaper premiums than other health insurance plans.
  • PPO: Preferred Provider Organization – The most flexible health insurance plans, which allow the insured to choose an in-network doctor at a lower cost, or an out-of-network doctor at a higher cost. There is no referral necessary to see a specialist. Premiums are generally more expensive than other plans.
  • EPO: Exclusive Provider Organization – A blend of HMO and PPO plans, EPOs do not cover out-of-network physicians, but do not require referrals for specialists. Premiums on EPOs fall between HMOs and PPOs.
  • POS: Point of Service – Another blend of HMO and PPO plans, POS plans will require a PCP on an HMO-style network, while also allowing out-of-network options at a higher cost. A referral is required for specialists. Premiums are generally more expensive than HMO plans but less expensive PPOs.

2. Life insurance

What is it?

Life insurance is a contract between an insurance company and a policyholder that guarantees a sum of money to the policyholder’s designated beneficiaries when the policyholder dies, in exchange for monthly premiums paid during the insured’s lifetime.

Types of life insurance

These are the five most common kinds of life insurance plans:

  • Term insurance – The most basic form of life insurance, with a predetermined term, usually ranging from one to 10 years. Plans are renewable at the term’s end, but the premiums will increase with each renewal. Term policies generally have the cheapest premiums, but no cash value.
  • Whole life insurance – Offers policyholders a cash-value component coupled with increased protection. Premiums can be locked in throughout the term, and a portion of premiums goes toward the policy’s cash value. The insured can borrow up to 90% of the cash value, tax-free, but loans reduce the policy’s death benefit.
  • Universal life insurance – Offers increased flexibility for policyholders. Premiums can go up or down, or even be deferred within certain limits. Cash values can be accessed and withdrawn, though this directly decreases the death benefit. Face values can be modified as well.
  • Variable life insurance – Fixed premiums and investment options make this policy the choice for true risk-takers. The policyholder’s cash value will be invested in the insured’s choice of stock, bond or money market portfolio. Cash values and death benefits will fluctuate along with the investments’ performance. These policies usually have higher fees than universal life insurance, but all cash value accumulation grows tax-free.
  • Universal variable life insurance – A blend of universal and variable life insurance, these policies offer flexible premiums and the ability to modify face values, along with investment options.

3. Auto insurance

What is it? 

Auto insurance is a contract between a policyholder and insurance company, protecting the policyholder from financial loss in the event of an auto accident or theft. The coverage is provided in exchange for a monthly premium. Some form of auto insurance is required in all 50 states.

Types of auto insurance policies

These are the primary categories of auto insurance coverage:

  • Liability coverage – Includes coverage for bodily injuries, property damages or auto damages to another motorist if the policyholder is at fault.
  • Comprehensive coverage – Pays for damages and losses to the car that were not caused by another driver.
  • Personal injury protection – Covers medical bills for the policyholder and their passengers in the event of an accident.
  • Collision insurance – Covers damages to the policyholder’s car if it’s involved in an accident.
  • Uninsured/under-insured motorist protection – Pays for damages caused by another motorist who does not have sufficient (or any) coverage.
  • Gap insurance – Pays the difference between what the policyholder owes on a financed or leased vehicle and what it is valued at when there’s a total loss of the vehicle.

4. Long-term disability insurance

What is it?

Long-term disability insurance is an insurance policy that provides income replacement for workers if they are unable to work due to a debilitating illness or injury.

Types of long-term disability insurance

There are two primary types of long-term disability insurance policies:

  • Own-occupation disability insurance defines a disability as an inability to work at your regular occupation. Benefits are paid even if the policyholder can work at another job.
  • Any-occupation disability insurance defines a disability as an inability to work at any occupation. These plans are generally cheaper, but claiming benefits can be more difficult.

5. Homeowners/renter’s insurance

What is it?

Homeowners insurance is a policy designed to protect homeowners and their families from liability and financial loss in case of damage to their home and belongings in exchange for monthly premiums. Renters insurance is purchased by tenants and only covers damage or theft of their personal property.

Types of homeowners insurance policies

  • HO-2 – A policy that only protects against 16 specified perils.
  • HO-3 – A broad policy protecting against all perils other than those excluded in the policy.
  • HO-5 – A premium policy that usually protects newer homes and covers all perils, except the few excluded in the policy.
  • HO-6 – Insurance for co-ops/condominiums, which includes personal property coverage and liability coverage.

Each plan type will also include some extent of liability coverage. Most policies will only cover events if they are sudden and accidental. Some natural disasters, like earthquakes and floods, require a separate policy for coverage.

Types of renters insurance policies

Renters insurance policies will generally fall within either:

  • Replacement-cost plans – Will pay for the full cost of replacing your damaged or stolen belongings up to a predetermined cap. This plan offers more robust coverage, but premiums are generally higher.
  • Cash-value plans – Will only offer payouts to cover what the damaged item was worth at the time of the disaster.

Insurance is a big part of financial responsibility. Use our guide to help you make the right choices in all major types of insurance coverage.

Your turn: What are your best tips for buying insurance?

Learn More:
policygenius.com
smartasset.com
iii.org
allstate.com
nerdwallet.com
investopedia.com