The wisest tips on how to develop a financial plan are of little use if they are not conveyed in an understandable manner—a manner that responds effectively to the questions and concerns of the reader. Likewise, the most articulately expressed thoughts on finance may be wasted if they are not presented in an entertaining style—a style that maintains the interest of the reader.

So how does one write an understandable and entertaining financial planning book?

I hope and believe that The Wealthy Blogger answers that question, by taking a “novel” approach to the teaching of financial planning.

Rather than inundating you with intimidating charts and graphs and a series of lifeless numbers, The Wealthy Blogger will both entertain and inform you. Through a fictional online conversations between Jim, our financial hero, and his online prodigy Kristen, you will learn that sound financial planning is not only relatively simple, but it can also be fun. I wish you good reading and good planning.

Paul MacPherson
http://thewealthyblogger.net

We’ve learned about good debt and bad debt. We’ve examined why a healthy debt-to-income ratio is crucial when applying for a loan. Now, in part four of our series, we’re going to look at the many approaches you can take to getting out of debt. Note: There is no instant cure for getting yourself out of debt. If you simply decide to default on your bills, your credit score will suffer for many years to come. Don’t shoot yourself in the foot financially. Instead, let’s look at some strategies for getting your bills paid off.

Debt consolidation is one popular choice for people who have too much debt. By combining your debt into a single monthly payment with low interest, you’re spending less money and making it easier to afford your everyday necessities. Debt can be consolidated through loans, 0% interest credit cards, or debt repayment programs.

Debt consolidation loans can be obtained through your bank or credit union. They’re a good choice for folks with a moderate debt load. If you’ve been a good customer for many years, you might still be able to secure a loan even with a high debt ratio. The point of getting a debt consolidation loan is to get enough money to pay off your debts. Then you repay the loan over a course of years, at a much lower rate of interest than your original debts (especially credit card debts) were accumulating. If you want to maximize your chance of getting approved for a debt consolidation loan, pay off some of your debt before you apply.

Another option is to move your debt to a 0% interest credit card. This is a good choice for people with less than $10,000 in debt, and with credit scores that qualify them for good cards. When you pay off your debts using one of these credit cards, you typically have one year to enjoy the 0% interest phase. For that reason, you must be certain that you can pay off your balance within a year. After that, your balance will be subject to interest – sometimes at an even higher rate than your original debt!

Those with heavy debt burdens could look into debt repayment programs and credit counseling. Just be aware that there are some organizations who will take your money and not deliver on their promises to negotiate better terms for your debt repayment. Others require you to avoid taking on more debt while you’re enrolled in the system. They’re not for everyone, but these programs have helped many deeply indebted people.

Want to learn more about debt repayment and how you can tell the legitimate programs from the swindlers? Check out our free 15-page report, ‘Know Where to Draw the Line on Debt’. It’s full of information, calculations, tips and tricks for keeping your debt in check. This report is offered to our readers as a thank-you for visiting quicklyoutofdebt.com.

In part 1 of this series, we learned why some debt is worse than others. In part 2, we took a look at what constitutes good debt and how a healthy amount of it can actually help your credit score. Here in part 3, we’re going to learn about healthy debt-to-income ratios and how they can be monitored to catch problematic trends as they emerge.

Your debt-to-income ratio is just what it sounds like: the amount of debt you carry in relation to your income. This number is very important. For one thing, whenever you go to buy a house, purchase a car, or take out a small business loan, your potential lenders will want to know how much debt you already have and whether or not you can afford to take on more. They look at your debt-to-income ratio to determine your creditworthiness.

For another thing, keeping an eye on this number helps you recognize when you’ve reached a balanced level of debt. You can then decide if more debt is manageable, or if you need to pay off some of your accounts before applying for more credit.

So how do you calculate your debt-to-income ratio? For the purpose of illustration, let’s say you make $4,000 a month in gross income. Between your rent, your car payment, student loan repayment, utilities, and other recurring monthly expenses, you have $2,000 in outgoing payments every month. That’s half of your gross monthly income, leaving you with a debt-to-income ratio of 50%.

A ratio of this size would raise warning flags in the minds of lenders. If you’re already paying out half of your income every month, can they trust that you’ll be able to squeeze in more payments? Most lenders will consider the proposition too risky, especially if you have late payments or defaults on your credit report. That would disqualify you from most loans.

Now let’s say you’ve repaid your student loan and reduced your rent and utility costs. Now you only pay out $1,500 a month in expenses, and your debt-to-income ratio is a slimmer 37.5%. This will make you appear more trustworthy to lenders, and they will be much more likely to extend you credit. 36% is widely considered the ideal ratio.

Want to learn more about calculating your debt ratio? Check out our free 15-page report, ‘Know Where to Draw the Line on Debt’. It’s full of information, calculations, tips and tricks for keeping your debt in check. This report is offered to our readers as a thank-you for visiting quicklyoutofdebt.com.

In part 1 of this series, we learned why some debt is worse than others. Using credit card debt as a specific example, we saw why consumable assets shouldn’t be purchased on credit. In part 2, we’re going to see examples of good debt and learn why it’s actually healthy for your financial future.

What do you consider a good investment of your money? Real estate? A house? A college education? These are all examples of purchases that will increase in value over time. For example, a house that costs $100,000 might be worth $150,000 within a few years. The improvements you make to the house and surrounding land will add to its value. A college education will open the door to higher-paying jobs, making it a valuable investment indeed. But what does all of this have to do with your debt?

Healthy debt is good debt. Mortgage loans and student loans are examples of healthy debt. Yes, you pay interest and lock yourself into a repayment schedule. But in the end, your returns (property value, employability) will outweigh the price of your total investment. $50,000 in student loans sounds steep, but what if that education results in a job making $80,000 a year? It’s easy to see the value of healthy debt. For that reason, it’s okay to go into debt to make these types of purchases – as long as your debt load is healthy in relation to your income and other expenses.

Mortgage loans and student loans are also known as “installment” accounts. You repay a fixed amount in regular installments. This is a good way to build a positive credit history. As long as you make your payments on time, you will cultivate a good payment record. Just be sure that your creditors report to the major credit bureaus. That will make you look good to lenders when you go in for your next loan.

So how much debt can you really afford? What looks best to creditors: no debt, some debt, or a moderate amount of debt? In part three of our series, we’ll learn how to calculate a healthy debt-to-income ratio that won’t leave you overburdened by bills.

Check out our free 15-page report, ‘Know Where to Draw the Line on Debt’. It’s full of information, calculations, tips and tricks for keeping your debt in check. This report is offered to our readers as a thank-you for visiting quicklyoutofdebt.com.

Do you want to learn how to draw the line on debt? If so, you’re like millions of other Americans. The economic crisis has left many of us strapped for cash and credit alike. The goal is to manage your bills and pay off outstanding debts during these troubled times so that your credit score will emerge unharmed. In this, the first of a four-part series, we’re going to take a look at the types of debt you should try to avoid.

All debt is not created equal. Some people go into debt to pay for items that will increase in value over time. That’s a good thing. Other people go into debt to pay for items that will inevitably drop in value. That’s not a good idea. Let’s take a closer look to learn why.

Let’s assume you charge $500 worth of groceries on your credit card in the month of November. With the holidays coming up fast, you don’t pay off the balance in full like you know you should. Instead, you make the minimum monthly payment that your credit card requires.

Fast forward to January. Interest has been applied to your grocery tab. Now that $500 worth of groceries will cost you $590 to pay off. (That’s assuming an interest rate of 18% – not at all uncommon in today’s economic climate). You’re paying almost a hundred dollars more for those groceries, and you don’t even have them anymore. Groceries are a consumable asset; that is, they don’t last long. To keep your debt from lingering long after the consumables are gone, use cash or a debit card to pay for things like clothing, toys, food, and home furnishings.

Credit card companies make their money by charging you fees and interest. Minimum monthly payments are designed to keep you in debt, not to help you pay off your balance. In our grocery example, you’d be lining the card company’s pocket by basically throwing away the $90 in interest. What else could you do with that $90? I’m sure you can think of something.

In part two of our series, we’ll look at what it means to carry healthy debt, and how a reasonable amount of good debt can improve your financial outlook. Don’t miss it!

Check out our free 15-page report, ‘Know Where to Draw the Line on Debt’. It’s full of information, calculations, tips and tricks for keeping your debt in check. This report is offered to our readers as a thank-you for visiting quicklyoutofdebt.com.

Credit counselors provide a valuable service by helping you get out of debt. When you enroll in a debt management program, or DMP, you send a single monthly payment to your credit counselor, who then distributes it to pay off your credit cards and other unsecured debts. People drowning in their debt often turn to credit counseling services.

But some credit counselors are little more than scammers, requiring large upfront payments before they will even discuss their strategies with you. Worse, some of these companies have hidden fees that customers don’t know about until it’s too late. Then they owe even more money, and fall even farther behind on their payments. A few particularly disreputable credit counseling services took people’s money and did nothing to alleviate their debt. Luckily, the Federal Trade Commission (FTC) has forced many of these criminal organizations out of business.

So how can you tell if you’re getting involved with a good credit counselor or a money-making operation that will do more harm than good?

Legitimate credit counseling services have debt counselors who have been trained and certified in many areas of personal finance. They will assist you in drawing up a budget, managing your income, paying off your debt, and improving your credit score. If a credit counseling service has nonprofit status, their counselors are required by law to educate and counsel clients. They will also offer information about their services, free of charge. Beware of any business that charges you money before they even outline what their services involve!

When you choose a credit counseling organization, the FTC recommends asking the following questions:

What services do you offer? A reputable organization offers personalized service complete with initial and follow-up consultations. Their advice will be tailored your debt scenario. Steer clear of companies that claim a DMP is your only option. If a DMP is right for you, that will be decided after the counselor spends time carefully scrutinizing your financial situation.

Will I receive a written agreement or contract? Get everything in writing. Scammers count on making a quick deal to confound customers, later slipping in fees and costs that weren’t agreed upon. Get a written copy of your entire agreement and fee structure to avoid misunderstandings. If a credit counseling service pressures you to make a commitment over the phone, take your business elsewhere.

Are your counselors accredited by a third-party organization? If a company’s counselors were trained by a creditor-affiliated organization, they might not have your best interests at heart. For example, they might receive a commission from creditors when you enroll in a DMP, even if that’s not the best course of action.

What is your status with the Better Business Bureau (BBB) and Attorney General’s office? If the company has had complaints filed against them, you can check with those sources to find out details about the complaints. 

Once you’ve found a nonprofit credit counseling service that meets these criteria, get a written contract and get ready to breathe a big sigh of relief – your debt-free days are coming soon!

You took out several loans to help pay for your college expenses. Now you’ve (hopefully) graduated. There’s only a six-month grace period before Uncle Sam comes knocking, wanting his money back. But the job market is scary right now, so you’re either unemployed or working for sub-par wages. With student loan repayment lurking just around the corner, what can you do?

First, stay calm. Student loan providers anticipate that people will sometimes have difficulties repaying their loans. They’ve planned for this eventuality. All you need to do is contact them and let them know what’s going on. If your payments seem a bit high but otherwise manageable, you should consolidate your student loans. If your situation is very serious and you cannot make the payments at all, ask the student loan servicer for a deferment or a forbearance.

Consolidating your student loans combines all of your outstanding debt into one sum. The interest rate on consolidated loans is very low, and doesn’t exceed 8.25%. The reduced monthly payments are more budget-friendly for most graduates. Talk to a loan officer at your bank or apply online to lump your student loans together.

What if you simply can’t find work, or you’ve got other hardships that prevent you from repaying the loan right now? Call up your student loan servicer and ask about a deferment that would delay your payments for a month or longer, as needed. This is a good solution for temporary financial problems. 

If you don’t foresee your situation improving in the next few months, ask for a year-long forbearance. You’re usually eligible for one when your loan enters repayment status, and again when your loans get consolidated. Interest will continue to accrue while your loan is in forbearance, so start making payments again as soon as possible.

You can contact your student loan servicer by phone or over the Internet. They really do want to help you repay the loan, so most of them will be sympathetic to your plight. They might recommend a graduated repayment plan that starts with low payments that increase as time goes on and you, presumably, bring in more income. Income-sensitive plans are another option for low wage-earners.

Don’t forget that you could be eligible for tax breaks while repaying your student loans. Depending on your income, you could be able to deduct as much as $2,500 of student loan interest payments. To qualify for this tax break, single adults have to make less than $65,000 a year, and couples need to make less than $130,000 annually.

If you’re struggling with your student loan debt, rest assured that you have options. Help could be just a phone call or mouse click away. Contact your loan servicer today and get started down the path of recovery.

Credit card debt can creep up on you before you know it, thanks to fees and interest that are subject to change (always for the worse) with very little notice. If you’re not in the habit of paying off your credit card balances in full every month, you could soon find yourself mired in debt that never seems to go down even when you make a payment.

Since you can’t close your eyes and make credit card debt go away, you’ve got to find a way to pay it off – the quicker the better. Many people take out loans to accomplish this. It makes sense; better to pay a single monthly payment at a low interest rate than to make several credit card payments each month, all at higher rates of interest.

But some loans are a bad idea. For starters, let’s take a look at home equity loans. They are often easy to obtain and offer low interest rates. But what if you take out a home equity loan to pay off credit card debt, only to find yourself falling behind on your loan payments? Now you’ve got more at stake than your credit score; you could actually lose your house.

If you’re certain you’ll be able to handle the payments, a home equity loan might be useful for paying off other debt. But be honest with yourself. If you think delinquent payments are a possibility, find another source of money that won’t put your home at risk.

Many people borrow against their retirement funds when they want to pay off their credit cards fast. This isn’t a good idea, either. For one thing, the more money you keep in these funds, the more they will grow. The more money you take out, the less growth potential the fund will have. 

Borrowing from your 401K might sound like a fast solution to credit card debt, but consider the consequences: it will be more difficult to keep up your retirement fund contributions while you’re also trying to repay the loan. And if you get laid off, you’ll have about 90 days to repay the whole loan before it gets taxed and penalized.

If your credit card debt can realistically be paid off in a year, try transferring the balance to a card with a 1-year introductory rate of 0% interest. You can also talk to your bank about a low-interest personal loan, and use those funds to pay off your credit cards.

Just paying off the debt isn’t enough; you also need to figure out how you got so indebted in the first place. Were you paying for urgent expenses like car repairs? Then you should set up an emergency bank fund to pull from when those situations arise. Were you simply living beyond your means? Stick to a good budget, and you’ll get everything you need without overspending on frivolous items. There are many ways to cover unforeseen expenses and little extras, but credit cards are a costly option.

One of the secrets of managing your debt load is knowing when to borrow and when to pay cash up front for purchases. As we’ve discussed before, some debt is good. When you’re making payments on an asset that will appreciate or retain its value, that debt is healthy. The problems set in when you start making high-interest payments on items that will quickly depreciate in value. Credit card debt falls into the bad debt category.

We’ve been taught to charge the things we want as well as the things we need. How many department stores offer us credit cards when we check out? Even smaller specialty retailers have credit cards now, and they’re eager to sign people up.

But almost anything you’d pay for with those credit cards should be bought with cash instead. Think about it: the clothing, appliances, and household items found in departments stores will decrease in value almost immediately. Then you’re stuck with interest-laden debt for items that haven’t retained their worth.

A better strategy is to put aside a portion of your income each month for incidental expenses. These are the miscellaneous purchases that don’t count as entertainment expenses, but don’t fall under your static monthly bills either. Always pay for incidentals in cash so that you don’t add to your debt. And before you sign up for department store credit cards, check out the terms and conditions; they might surprise you, and not in a good way. Store cards tend to have higher interest rates than regular credit cards.

A good rule of thumb is this: if something can be viewed as an investment, it’s okay to borrow money to make the purchase. Investments include things that will keep their value or even go up in value over time. A college education, for example, is something that will go up in value by opening doors to higher-paying jobs. A home increases in value as the house and surrounding land get developed.

Large appliances, furniture and housewares, though necessary and very useful, start to depreciate in value after their first use. For this reason, you should avoid borrowing money to pay for them. It’s not good to pay more and more for an item (payments plus interest) while the value of that item keeps going down.

On the other hand, big home improvement projects and other purchases that will add to the value of your home could warrant a loan. Just look for low interest rates and don’t borrow more than you need. Ideally, you’ll be able to repay such loans within five years.

The national unemployment rate has been hovering around 6%, but economists predict a recession where that figure might jump to 8 or 9%. Sadly, many American workers never realize their jobs are in jeopardy until they get laid off. You’ve heard the old adage, “Expect the best but plan for the worst?” There’s never been a better time to start planning. Here are some helpful tips to follow if you think your job might be in danger.

Be in the Know

Know what’s going on in your workplace. Have there been rumors of lay-offs? Have your benefits been scaled back? Did the office social get canceled? These are all warning signs worthy of your attention. When your workplace suddenly starts cutting back on jobs and extras, it’s time to formulate a Plan B.

If you work for a nationally known corporation, news and radio reports can be your best friend. Your boss might not tell you – or even know – when the business is facing financial problems, but reporters will. Keep your eyes and ears open for signs of trouble.

Change Jobs Within the Company

If you work as a customer service rep or administrative assistant, your job might be one of the first to go in tough financial times. Companies in crisis tend to hold onto positions that bring in revenue, such as sales and marketing, and do away with others. If you think a lay-off will be in your future, apply for a money-making position at your company. Even if you don’t like the position, it can tide you over while you look for a new job.

Dust Off Your Resume

If your resume hasn’t been updated in a year, dust it off and shine it up! You might be sending it to a prospective employer fairly soon. Instead of laying out your experience chronologically, grab people’s attention by starting with a summary of your relevant skills and accomplishments. Don’t be afraid to really sell yourself, and don’t hesitate to have a professional touch up your resume for maximum impact.

Network, Network, Network

Make friends and alliances within your company, and make sure they realize how valuable you are. (It is possible to toot your own horn without being obnoxious.) Be proactive; offer your assistance whenever possible. If you carve yourself a niche as the team meeting organizer or the new-hire trainer, you’ll add to your job’s security.

Networking outside of your job is important, too. If you get laid off, you’ll want to have people you can turn to for job leads. Many online job sites offer networking services. You can also make your own list of potential contacts by writing down all the people you’ve known and worked with through the years. If worse comes to worst, don’t be scared to give someone a call, even if they’re only an acquaintance. Times are tough, and they will understand that you need all the help you can get. Just offer to return the favor if they should find themselves in the same situation.