Top 5 Steps To Get Approved For Student Loan Refinancing

You need to refinance your student loan because you know it makes a lot of financial sense. In fact, when refinancing your student loan, the managing of payments becomes easier. But the problem is that you are not sure of the ways to get it approved. Nevertheless, you should not get into refinancing of your student loan before you are aware of a few preliminary steps just like Meet the Parents II and III, Zoolander I and II, and Jurassic World should not have been made before some preliminary checks.

Oh, they already were! Oh well!

What is refinancing of a student loan?

Refinancing of student loan means consolidation of the existing private and federal loan so that it could be consolidated into a new single loan which has a lower interest rate. The benefit is that you have to make lower monthly payments which in turn frees up some money that could be either saved or invested elsewhere.

What are the ways to get your student loan refinancing approved?

Almost all of you are aware of the fact that the criteria to obtain private student loan are pretty strict. This is because private lenders lend money at their own risk. They give loans to students believing that they have the capacity to repay the amount.

However, the lending criteria of one lender vary from the other and also the circumstance of the borrowers is also different from one another. Hence, when you apply for a student loan refinancing, the loan might either get rejected or approved. If it gets rejected you feel disheartened. So have a fair idea about the top 5 ways that could make the approval process of student loan refinancing easier.

  1. Credit Score: The credit score of an individual is considered as a measurement of financial responsibility. When you apply for a student loan refinancing, most likely is that the lender will evaluate the credit score to understand whether you meet your financial obligations or not. Usually a credit score of more than 600 seems good to go but to be on the safe side you should aim at having a credit score of more than 700.
  2. Income: In case of student loan refinancing it is most likely that the lender will scrutinize your income. They want to ensure that they have a steady monthly income and regular cash flow to ensure that the borrower will be able to make the monthly payments. So before you apply for a student loan refinancing you should carefully examine your sources of income. You need also find out whether after making the monthly payments for the loan do you have enough for other necessary expenses. In case you do not have an adequate monthly income you can increase the chances of your approval with a qualified co-signer.
  3. Other Debt: In case you have other debts like credit card payments, auto loans, or mortgages it might influence the approval process of your student loan refinancing. This is because lenders will be apprehensive whether you will be able to make the monthly payments after you have had met all other financial obligations. Hence, a better approach is to repay as much as you can from your existing debts before you apply for a student loan refinancing.
  4. Debt-to-Income Ratio: While you have applied for a student loan refinancing, the lender will obviously have a look at the debt-to-income ratio. It is a ratio of one’s total monthly earnings when compared to your monthly debt obligations. For instance, if you have a monthly income of $10,000 and $4,000 per month debt expenses in that case the debt-to-income ratio is 40%. In case, you have a higher debt-to-income ratio the chances of getting approval for your student loan refinancing dwindles. Thus, it is recommended that before you apply for the student loan refinancing option, you should either increase your income or lower your debt or both.
  5. Employment Status: When you are applying for a student loan refinancing it is important that you are either employed or have a written job offer in hand. It makes the approval easier. However, there are many private lenders who may offer you loans even when you are in school or residency, while most of the lenders will seek for some kind of work experience. In case, you have still not obtained a job getting your student loan refinancing approved can be quite difficult but you might give try with a co-signer.

The factors mentioned above may be a guideline to make the approval process of student loan refinancing easier but it does not guarantee a confirm approval. The final approval depends to a large extent on the lender, the borrower, and a lot of other factors that may be beyond your control. What is not beyond our control is lowering taxes and being business friendly which creates jobs which is what Texas has done but not New York or California but this is another topic.

Good luck on paying off your school loans! Hopefully you did not spend too much money on acquiring a degree that does not lead to a high paying career such as English, Humanities, Psychology, and so forth.

7 Tips For Cutting Credit Card Debt Quickly

Credit card debt is always a nagging burden, the long term consequences of which can be quite serious. Thus, it always pays to get rid of this burden as soon as possible and you can do it successfully, provided you work out the following strategy to reduce your debt.

  1. Take stock

You first need to see what is your total net debt on all credit cards before starting to reduce its accumulated debt. Brutal honesty with yourself is required here and writing down the debt amount along with the interest rate on every single card that you have will be a constant reminder of where you stand as a debtor.

Do not tell yourself something is right when it is not, your name is not Barney Frank or Barrack Obama (the housing market destroyer who devastated Fannie Mae and Freddie Mac via giving home loans to irresponsible people and the health care system destroyer which the ACA law has laid waste too, respectively)

  1. Stop making minimum payments

Against a large outstanding amount, the minimum balance payable every month looks tiny and looks easy to pay off. However, if this amount is everything you pay towards this debt on a monthly basis, it will take you much longer to settle the debt.

Moreover, the interest charges on the remaining amount will continue to accrue and increase your debt burden further by compound interest. Remember, the more you pay, the lesser the interest amount becomes because this means you give less time for this interest to accumulate. Your credit card issuer should point this out to you on the monthly statement, for you to see how it’s applicable to your monthly bill.

  1. Tackle debt singularly

If you have multiple debts on numerous cards, make sure to pay the minimum payable on each card. Subsequently, focus on clearing the total unpaid balance on a single card at a time. Choosing the card to pay off first can be chosen by either checking your statement’s interest rates section to identify which credit card slaps the highest interest rates on to you, and then concentrating on paying off the outstanding amount on that card first. Or, you could settle the smallest debt first, graduating to the larger debts in succession.

That could help you psychologically just like when Rocky was fighting Ivan Drago in Rock 4 when he got that first hard punch in and he saw Drago bleed. Then he knew this was not a machine but a man. Now you know you can pay off these cards if you get that first one dealt with.

  1. Combine & win

Consolidation of your debt lets you combine numerous high-interest balances into a single one with a lower interest rate. This enables you to pay off your debt faster without increasing the payment amounts. You can consolidate debt by taking advantage of a transfer rate that is low- balance to remove debt off cards that charge a higher interest.

However, do note that fees for a balance transfer are often between 3 to 5 percent, but the savings accrued from a lower interest rate may be greater than the transfer fee. This should always be factored in when taking this option into consideration.

Having equity at home helps in paying down credit card debt. A home equity credit line may give you a lower rate than those chargeable by cards. However, here closing costs apply, but the benefit is that payments for home equity interest are usually tax-deductible. In addition, when consolidating, it’s absolutely imperative to remember that you have to control your overall spending so you do not accrue new debt in addition to the debt that you’ve recently consolidated.

  1. Reprioritizing budgets

In order to ensure that you don’t accrue any further debt because you are not the US government or California, categorize your monthly expenditures in terms of transportation, groceries, entertainment (don’t watch any more Zoolander or Jurassic World movies!), and housing. Next, identify those areas in which spending can be cut back drastically. Use the money saved from this exercise to pay off your debt.

  1. Try improving your rates

You can also lower your debt burden by negotiating lower interest rates with your credit card issuer. By shaving off a percentage point even, you could save hundreds of dollars over the next year or so, for instance, while paying off the debt. A polite request in this regard may work in your favor and help you become debt free in the long run.

  1. Start using cash

Put all your credit cards away until their debts are settled. Instead use cash. This will reduce your spending by at least 20 percent and the amount saved could be used to pay off your debt. Staying off plastic until the time you are debt free sure makes sense. 

Also while paying off your debt, track your progress. Keep detailed notes of how much still remains unpaid and how you can reach your target of being a debt-free person. This will keep you motivated to reach that ultimate and altruistic goal.

True Cost of Owning a Car in the US

As a car owner, you are perhaps aware that the sticker price of your car doesn’t give out the accurate figure about its ownership cost. Buying a relatively less expensive car is likely to save you a penny initially but may burn a huge hole in your pocket later by way of expensive repairs.

On the slip side, buying an expensive SUV could make your gas bill spiral. That’s why you need to keep the sticker price in abeyance to identify a truly reasonable car.

Factors on which owning a car in the US and its cost depend

To begin with, you have a sticker price, which of course, is not the prime factor. However, it affects the overall ownership cost, particularly insurance rates and sales taxes (and all working Americans know that taxes are too high but this is another topic) which you need to pay. If the car is financed, you’ll have to work out the interest rate. This again will vary on your individual credit score.

For instance, new cars come with reduced interest rates and long-term loan will always have lower interest rates but do not let that fool you since this means it will take you longer to pay off that car so that means a $28,000 car will perhaps cost you $33,000 by paying it off over the years to the financing company. Something to think about!

Depreciation in cars happens at an average of 15%-20% per annum for the first 5 years. The more expensive vehicles, however, tend to depreciate faster as do sub-compacts.

In addition, while it’s almost impossible to predict how much you will be spending on repairs in the future, you can scour its reliability scores through consumer reports or locate common problems with the car to work out the repair costs.

With repair costs come insurance costs, which again can vary largely for competing models even. The insurance premium payable and the coverage that comes with it is fully dependent on your driving skills and habits, history, your own age, and personal credit score (it does not depend on whether or not you have seen Transformers 5 but you should since that movie is amazing with an incredible submarine scene to boot, but this is another topic!). Older cars usually attract lower premiums, while the newer models with state-of-the-art safety features could get you some hefty discounts which you should consider too.

Fuel costs matter and the less you drive, obviously the less you spend on fuel. That’s why taking your car’s MPG into account is essential when deciding which car to buy.

There are also characteristics that reduce car prices. For instance, while most cars come with 3-year warranties for 36,000 miles, carmakers like Kia and Hyundai offer 5-year warranties for 60,000 miles with other benefits such as roadside assistance. Some eco-friendly models also qualify for tax credits that offset higher purchase prices.

Calculating the cost

The calculation for owning your own car is simple. The operations cost of an average American vehicle is around $0.60 a mile. A new car in the US costs about $33,000 on average, making buying one an important financial exercise.

Another crucial aspect to consider and remember is not to go by the sticker price or monthly payment but take other costs in to account as well. This will give you a fairly accurate figure about the real cost involved in owning a vehicle; the components that in their totality go into the total ownership cost; and comparison costs with various models that also includes the standard five-year cost.

Going by published statistics, the average loan payment per month for a new car in 2014 was around $482. If you drive your vehicle over 15,000 miles per annum, the total ownership costs comes to about $8,698 per annum, according to the American Automobile Association’s study on driving costs in 2015. That works out to about $725 every month.

Further studies have revealed that operational costs also vary by vehicle types. Small sedans recorded an average cost of $6,729 a year or $561 on a monthly basis. An SUV four-wheel-drive, costs around $10,624 yearly ($885 monthly), making the cost spiral by almost 58%.

Since the real cost of owning and driving a car includes fuel, maintenance & repairs, tires, license & registration fees, taxes, depreciation, insurance premium & interest on financing, figures recorded by the American Automobile Association show that average fuel costs amount to $1,682 per annum depending on premium or regular gasoline used and the mileage achieved by the vehicle. Over a five-year period, the fuel costs for an SUV could be $18,000 as compared to $11,000 for a sedan.

Your new tires could cost you around $147 along with installation charges ranging from $60 to $100 or even more. Similarly, repairs and maintenance comprising of tire rotations, oil changes, testing and battery inspection cost about $767 per year. Your fees and taxes amount to $665 every year, says the AAA report.

In order to own a cost effective vehicle, you need to work all of this out. Moreover, you also need to look at a higher resale value. So it’s essential that you look beyond the sticker price and also at the EMI or equated monthly installment. Your research on the ongoing costs of operating and maintaining a particular model will give you a true picture of its affordability.

Saving Money on Health and Dental Insurance

There’s a basic problem in choosing a wrong or inappropriate health and/or dental insurance: you may end up paying a hefty premium for both without actually getting broad coverage or protection for a specific purpose, should you become sick.

This would add to your financial woes substantially if you have to foot the bill from your own pocket despite having medical and/or dental insurance. You can save on health and dental insurance in the following ways.

Stick to the family’s existing health plan: Should you be less than 26 years of age, it would be cheaper to stick with your existing family plan for health insurance. It’s a viable option for many young people who live close to their parent’s homes with access to doctors in the insurer’s network. Though when the ACA law goes away and taxes and regulations are lowered America’s economy will shoot upward creating more opportunities for college graduates. One of the themes of the movie The Internship will then no longer be true!

On the flip side, however, when you’re living in a separate state, without access to your normal network, you could be paying more and getting less coverage. Thus, it would make more sense to secure affordable medical coverage by yourself. Work out the math to see what saves some serious expenses.

Start exploring the non-government health insurance sector: Nowadays, the average health insurance seeker has the privilege of choosing insurers operating in the private sector, including certain major players which have opted out of government control recently. Surf sites like to get an idea of who all are the major private operators and what they are offering. You can also go through an online agent who is licensed at no extra cost and he may guide you to more affordable choices. Yes, we know, the Affordable Care Act has made health insurance not so affordable and turned millions of jobs into part time jobs which is horrendous. Hopefully this is fixed in the next year or so.

Optimize coverage on prescription drugs: All leading plans for health insurance provide full reimbursement for prescribed drugs. However, this can significantly vary from plan to plan. If you regularly use prescription drugs, you stand to save a substantial amount of money potentially by knowing beforehand which plan covers your regular needs for prescription drugs at the maximum level. This could lead to a median saving of more than $1,600 when compared with over-the-counter prices.

Catastrophic plans for health insurance: Another viable option for the young. For those under 30, buying a major catastrophic medical insurance plan makes sense. These are designed especially for the young, who generally are healthy and don’t need medical attention that frequently. The plan, however, will keep you covered with notable health benefits and cater to your requirements if and when they arise. It cuts your premium payment by nearly 50%.

Go for short-term coverage: If a major plan for health insurance is unaffordable to you, a short-term plan may provide temporary coverage for any unexpected injuries or illness. The average monthly premium is around $110. In addition, packaged products on medical insurance are also viable. These combine short-term coverage along with other items such as critical illness or accident insurance, vision or dental insurance and even telemedicine benefits.

Finding the Right Dental Insurance

Ask your dentist: Many dentists nowadays offer insurance plans. For instance, one such plan could get you dental scaling for $10 that can last an entire year, free consultations, and also x-rays for a $200 annual premium. Moreover, hefty discounts are available for dental implants and/or crowns.

Start comparing: In order to acquire a clear picture of what’s available in terms of dental insurance, check out sites like or to make a clear comparative analysis. Then make a shortlist of the finest options and finally zero in on one that suits your purpose the best.

Working part time: Many employers offer suitable coverage at reasonable costs for employees working part-time. Even if the employer doesn’t pay your premium, the available group discount could help you save quite a bit.

Enroll with your alma mater or association’s group insurance: If your ex-school offers you a membership of a dental group insurance plan, you may want to put pen to paper. It could cut your premium payments significantly while also offering you some salient discounts. Similarly, as a member of a professional association, group discounts could be available.

Explore the new marketplace for health and dental care: Since dental insurance isn’t mandatory, not all states offer it. Among those that do, some consider it to be a part of health insurance while others offer dental insurance as standalone products. Study this carefully before selecting your policy to extract the most savings.

Of course you do not even need dental insurance. If you eat right, brush, and floss, you should be good to go! You may not want to play basketball or some sports though. Also, if you travel to Mexico such as Cabo San Lucas once in a while you can take care of your dental needs there. The dentists in Mexico are as good as they are in America and you can utilize their services at a much cheaper cost.

For whatever reason, dental costs in America are outrageously high. You can get excellent eye care in Mexico as well.

It pays to pay attention to this for a variety of reasons or else you could be become bankrupt while facing huge medical bills. Choose your policy with care so you can handle a medical emergency which can happen at any time!

How to Save Money on Auto Insurance

The amount you pay for your auto insurance premium varies by a few hundred dollars. This principally depends on the type of vehicle you own and who your insurer is. However, you can certainly increase you savings when paying your auto insurance in the following ways.

Before buying the car, study insurance costs:  Before you buy a used or new car, check out its insurance cost. The premium will be based on the vehicle’s price, costs of repair, its overall past safety record, and its likelihood of getting stolen. And if you live in San Francisco, that could be even higher since that city leads the country in property crimes and it seems the people there do not even care but this is another topic!

You may also get discounts from insurers for any special feature that the vehicle has to reduce the risk of injury or theft. Safety rankings for certain models may be checked using the rating tool for top safety picks of the IIHS or Insurance Institute for Highway Safety.

Look before you leap: That in other words means shop around. Premiums vary from insurer to insurer, so make a comparative study, getting at least four price quotes. Searching online is the best way to do it as you get all the quotes on a single Excel sheet and making a choice becomes easier and faster. Or else, call insurers directly or even the insurance department of your state which may give you some comparative premiums payable to the major auto insurers.

Prices, however, shouldn’t be your only deciding factor. Consult relatives and friends and take their advice, too. Working with an insurance agent or professional dealing in auto insurance will also get you the answers to all your questions.

Older cars can do with lesser coverage: Make sure to thoroughly review the total coverage you receive during the insurance renewal time to ensure that your insurance is in perfect sync with your specific and total requirements. For instance, if your vehicle’s worth is less than ten times the payable premium, turning the ignition (pun intended) for such coverage is not a sensible thing to do. In such cases, simply do away with comprehensive and/or collision coverage. The value of your vehicle is easily calculable online through various free sites such as Kelley, NADA, and TrueCar.

They will not count those nice rims on your car or the new paint job so these numbers may not be the full truth.

Higher deductibles lead to lower premiums: You pay a deductible before the insurance policy becomes officially operational. When you choose an enhanced deductible, you stand to lower costs significantly. However, if you select a higher deductible, be sure to keep enough cash aside to pay it out should a claim arise.

Reliable credit history: Anyone with a decent credit history gets many benefits, and this includes reduced insurance costs. The bulk of insurers uses your credit information to price their auto insurance premiums. Research, in fact, reveals that those who manage their personal credit levels effectively, also make fewer claims. To ensure that you get the deserved good credit, check your personal credit record regularly to be absolutely sure that all information contained therein is accurate.

If you are that rare cash payer and do not play the credit game, then do not worry about this aspect on saving money on auto insurance.

Let there be one insurer for your home and car: You could obtain a discount on the premium when you combine your home and auto insurance together or get more than one car insured with the same insurer. This multi-policy offer comes from many insurers for loyal customers and shopping around for such deals makes sense. Even if you buy from different insurers, these discounts may be available. So look around by all means.

You do not need to look around to see a movie when a Transformers movie is out though, they are all awesome!

Group insurance: Certain major insurers also offer premiums at reduced rates to drivers who take out insurance by way of a group plan, usually from their employers, business, professional, and alumni groups or any such associations. If you can get a group to take out a common insurance policy, you stand to gain yourself on this based on economies of scale.

Discounts pertaining to low mileage: Some insurers offer special premium discounts to vehicle owners whose total annual driving is less than the annual average miles driven per year. Such discounts for low mileage is also available for these types of drivers. So if you are one such carpooler, look around for these types of opportunities.

Look for other discounts: As a policyholder, you may also get special discounts when you have never been in any accidents (or an accident that was pinned on you) or have faced charges of moving violations for a specified period; drive less annually as compared to other average motorists, or have undergone a defensive driving course.

The critical aspect to remember, however, is that discounts are not the main key to your savings. Rather, the final net price is. That’s why any company offering fewer discounts may have a lower overall price still compared to its counterparts.

First Time Home Buyers Guide

It’s your dream come true. A permanent roof over your head, an asset for life and you very, very own – the first house that you buy. A home that allows you the unparalleled and sheer freedom to live the way you want to.

However, do keep in mind that buying the first home of your life is a somewhat time consuming and tedious process and takes about a year from the time you think of buying one to finally closing the deal and taking possession. The first time home buyer’s guide will tell you how to sidestep mistakes, such as paying excessive interest on your home loan or picking the wrong home.

Your personal credit score needs checking: Most of us buy our first home on a loan. That’s why our credit reports matter. Moreover, it’s also seen that almost 25% of credit reports contain errors, which could possibly lead to your paying higher interest rates on the loan you take. Thus, take ample time to check your score before you take out a loan. Also ensure that the credit report is absolutely error free unlike the movies Meet the Parents II and III which were horrendous and prone with all sorts of errors but this is another topic.

Budget: Your final selection of your first house will obviously depend on your budget. That’s why you need to take a hard look at what you can actually afford. A lender will usually consider a full debt load of a maximum of 43% of the gross income per month and will also include all future mortgages, car & student loans, or credit card outstanding debts.

Therefore, first work out what is affordable to you and reduce your debt-income ratio to the furthest extent possible. Making a down payment of at least 20% will also reduce your loan cost substantially, also getting you a lower interest rate. Additionally, try and keep stable funds in your personal bank account for sixty to ninety days before you apply for the loan. This will increase the banker’s confidence in you.

Prioritize: Every first time home owner has certain expectations from his new home. Therefore you need to very clearly ask yourself what you need from it most. Is it a closer proximity to the workplace or a large backyard that you want to develop as a garden later?

Do you want it designed on open floor planning? Do you prefer a quiet neighborhood? Once you’ve prioritized these demands, it’ll be much easier for you to start short listing. Another vital issue is to know beforehand what trade-offs you can make.

Research: Based on your shortlist, start visiting neighborhoods and prospective open houses or even start gathering information about them. You can use sites that list properties so that you get some idea of the neighborhood and public transport available. Visits to open houses will give you some ideas about homes within your affordable price range and the neighborhoods that appeal to you strongly. This will also help you reduce your debts & save for the down payment.

Budget for home acquiring expenses: When you buy a house, you also have to pay for certain miscellaneous expenses upfront. These could be for title search, home inspection, and property surveys as also home insurance. Costs may vary according to where you live, but a couple of hundred dollars is almost certain. So start saving for that if you haven’t already.

Start organizing the paperwork for your loan: Banks are indeed most particular about mortgage loans and demand all sorts of documentation. These would include W-2 forms or tax returns over the preceding 2-3 years; recent pay slips; credit card statements; recent statements for brokerage accounts; personal bank statements; all past addresses; and statements pertaining to retirement accounts. Start organizing all of this paperwork. You do not want to have your paperwork tossed around in your closet like Peter Le Fleur from Dodgeball did.

Consult a buyer’s agent: The buyer’s agent’s job is to get you the appropriate property, negotiate the deal with the agent of the seller while also guiding you during the deal closing time. Even mortgage brokers will secure for you a more competitive rate on your loan.

Start home hunting: Once the pre-approval on your loan comes through, start visiting prospective properties with your buyer’s agent so that you don’t waste time on unaffordable houses. Once the selection is finally made, put in your formal offer. If accepted, employ a home inspector to look into the property’s physical conditions and drawbacks, if any.

Closing the deal: Keep all financial documents and down payment amount in perfect order before closing. Make an objective review of all mortgage documents and get home insurance, which should be secure before closing. You may pay off the buyer through a cashier’s check or wire transfer, so keep this ready too. Sign on the dotted line of the property transfer form, hand over the money, and be the proud owner of your first home!

And hopefully you get along better with your neighbor than Mike and Phil did in the average comedy Kicking and Screaming!

Signs That You Are Living Beyond Your Means

With credit card companies literally crying to let you have as many credit cards as you want, buying something on credit anywhere is pretty easy. These two ideas or concepts sort of go hand in hand. This combined with a YOLO or “You Only Live Once” mentality could be your death knell and push you towards living beyond your means.

The consequences in the long run, however, could be disastrous. You could end up bankrupt or caught forever in a debt trap from which getting out is something easier said than done. The only thing worse than this is owing food and supplies to The Saviors in The Walking Dead or perhaps watching the cheating Patriots or Warriors win a championship but that is another topic.

The following signs clearly indicate that you are indeed living beyond your means:

  • Your Personal Credit Score is Low: Credit bureaus track your payment history, outstanding loan balances, and legal judgments, if any, against you. This information is used to compile your credit score that actually reflects your credit worthiness. The range is between 300 to 850. The higher the score, the better because lenders use it to gauge whether you’re worthy of a loan or not. In general, a credit score that’s below 600 implies that you are in debt and living beyond your means. You can check with any of the leading credit bureaus and get a copy of your credit report. This will tell you what these bureaus, financial institutions, and lenders think of you as a potential debtor.
  • Your savings are below 5%: If you are saving less than 5% of your net monthly income, you are probably living beyond your means. Pragmatic spenders desiring financial security after retirement usually put aside as much as they can every month to ensure that they never cross their spending limits.  A below 5% savings rate indicates that you could face the real danger of complete financial ruin in case an emergency like an illness or accident should happen to you (remember, you are not a politician, you cannot spend money you do not have and there not be any consequences). This also implies that you don’t even have the funds to pay necessary insurance deductibles. The safe limit of saving is at least 10% of your gross income.
  • Rising Balances on Credit Cards: Buying on credit is a typical thing done by spendthrifts and more often than not, leads to their financial ruin. Thus, if you’re paying only the minimum amount due on your credit card balances every month or sending just a small portion of the total principal balance, this is a clear indication that you are over your head. That’s why it makes sense to keep track of your credit card spending and keep aside the amount in cash so that the entire amount can be paid off as soon as the bill arrives.
  • Household Expenses Consume More Than 28% of Your Income: When you have your net monthly income figure in hand, calculate the percentage of it that goes towards paying off your house mortgage, property tax, and insurance. If it exceeds 28% of your gross monthly income, then it is also an indicator that you are in the red. 28% is the standard chosen because conservative lenders feel that this is the rate at which the average person can get by comfortably even after paying off their mortgages. You may, of course, cut other expenses and spend more on your house but again, that’s a dangerous move to make.
  • Spiraling & Out of Control Bills: Buying on credit and paying off in installments is a grand option to many. Pick up whatever you want without thinking whether you can afford it or not and get lured by the salesman who tells you that paying an extra $60 per month on your installment won’t hurt you. The fact of the matter is these bills gradually start adding up and you inch towards bankruptcy. Once your monthly income starts getting sliced and directed to pay for a lot of unnecessary installment purchases and services, it’s time you faced the fact that you are living beyond your means like the states of New York and California are but this is another issue.
  • Cut and Slash: Go through all your monthly bills with a hawk’s eye and decide on what is truly required for you and for your family. Any frivolous expense such as a premium 500-channel cable TV package or satellite radio bill can be simply dispensed with – cut the fat, you cannot afford this right now in your life! Cut back on mobile and land line costs, utility bills, and entertainment expenses (Rings 3 was not that good anyhow, neither was Logan, and Jurassic World was horrendous!), and you’ll find that you have eliminated useless expenses which can help you get back on track and give you some money to help you pay down your debt.

What is an emergency fund?

An emergency fund is essentially the money that you’ve been setting aside to take care of unexpected expenses arising out of unforeseen events in life such as when a politician like Barney Frank passes laws that devastates your home’s value. When this happens, and it did too many people on a colossal scale in and around 2008, you want to have some money set aside.

You can call this a rainy day fund too!

An emergency fund allows you to survive at least for a few months just in case you suddenly receive the pink slip (job growth will soon be picking up with lower taxes and less regulations but sometimes companies still lay people off regardless) or get into an accident that prevents you from earning for a substantial period of time.

It could also be a leaking roof or a major car breakdown that needs immediate attention. In other words, it’s like an insurance policy, where instead of paying premiums to your insurer, you’re setting aside some money to be used later should any of the following circumstances suddenly arise:

  • Emergency medical bills
  • Mortgage payments
  • Credit card bills
  • Pending taxes
  • Emergency home repairs (we have all seen Transformers 4; some robot called Lockdown may blow up your home!)
  • Unexpected car damage and repairs

The whole objective is not to borrow for these expenses thereby increasing your debts.

Creating an Emergency Fund

The amount that should be kept as an emergency fund depends on your income and status; thus differing from person to person (you may not need as much money as Katy Perry who lives in her bubble land!). The thumb rule is to save about 3 to 6 months’ worth of funds that are required for all non-discretionary expenses. This fund will help you manage any financial crunch if you suddenly find yourself unemployed. With the aid of this fund, you should still be able to pay your household bills till you find employment again.

You may have to find a job though that is different than what you were doing before. You have to be able to pivot in life.

So how much money there should be in an emergency fund? It will vary. For instance, for a couple with kids, around six months of income is sufficient for an emergency fund. If you are single, have a mortgage, auto loan, and no school going children, you may only need three months since single people tend to be able to relocate easier and they do not have children to clothe and feed.

Automate the Process

One of the best methods for creating an emergency fund is a 401(k); buying a new Lexus is not part of this plan! Do not take financial advice from your neighbor unless they are credible! And if your neighbor is Charlie or Alan Harper, do not do what they say! If your employer offers you a 401(k) plan, sign up for it so that the money you earn is automatically funneled out of your paycheck into a separate account. These contributions are pre-tax and you will soon realize you do not have to sacrifice much to make this financial decision.

For instance, if your yearly earnings are $60,000, increasing your 401k contribution from 2% to 5% will reduce your weekly paycheck by $27. That is it! Also make sure to contribute enough to equal your employer’s “match,” because leaving “free money” on the table is unwise.

You can schedule when you want the money taken out of your pay check as well.

Also, a majority of 401(k) plans come with an auto-escalation feature. This enables you to automatically increase the savings rate by any amount of your choice, which is usually between 1 to 3% every year. For external accounts, create your personal semi-automatic-escalation system: keep a calendar alert that reminds you to spike up contributions by one percentage point or two on an annual basis, maybe every time you get a pay increase or on your birthday.

Pay yourself!

What to do After You Reach the Goal?

If you have accumulated the amount that is suitable for you, you can then pat yourself on the back. Now that you are in control of your finances, you can start investing. The point is, you need to keep on investing a part of your income and create another source of income from it. For instance, if you invest in stocks, every year you will earn some money in the form of dividends. But be careful, stock prices can go down.

You can read about the tech bubble during the turn of the century and know all about that!

In conclusion, having an emergency fund is having extra security. You might have life insurance coverage, health insurance, auto insurance, home insurance, dental insurance, and critical illness insurance to cover you in case you experience some sort of calamity. But none of these will help you if you lose your job. Well, just not as easily has having a 401(k) or a savings account with money saved away for a rainy day.

Life and critical illness insurance are for most people a waste of time and money but that is another topic!

Here are 9 States that will Save You Thousands if You Relocate

Is your state taxing you too much? If you live in California and New York, it is most likely a yes then, and certainly if you work in the private sector in either of those punishing states.

Here are nine states that will save you thousands of dollars in cost of living expenses if you are thinking of relocating. For each state, you will see an index list which means a normalized average cost of a given class of goods or services. 100 is the normalized average cost, or national average, and the lower the score the better. You can have a score higher than 100. For instance, if a state is 20% more expensive than the score of 100, that state would have a score of 120.

This information was derived from Wikipedia, USA Today, CheatSheet, and Investopedia.

Let’s begin!


This southern state is the most affordable state in the US which is 14 percent cheaper than the national average. Here are some facts:

  • Cost of living: 86
  • Housing index: 68.4
  • Grocery index: 94.1
  • Utilities index: 89.6
  • Health index: 89.9
  • Transportation index: 93.1
  • Miscellaneous: 93.2

The homes are 30 percent cheaper than the national average and we all know how expensive owning a house can be. The median value of a house is around $112,000 while the median rent is around $1,050. Transportation is 6.9 percent cheaper while groceries are 5.4 percent cheaper.

Apart from this, Mississippi is exempt from military, federal, and in-state pension burdens. People pay the least amount of property taxes. All retirement related income, including 401k and IRA earnings, is exempt.

On top of this, there are probably more murders in one weekend in Chicago than the entire state of Mississippi for the entire year.


The rent is slightly cheaper in Indiana at $1,000 while the median cost of a house in the state is $139,000. Transportation in the country is 8.4 percent cheaper while groceries are 7.6 percent cheaper.

Here is a look at the index:

  • Cost of living: 87.9
  • Housing index: 75.8
  • Grocery index: 92.4
  • Utilities index: 91.1
  • Health index: 94.9
  • Transportation index: 91.6
  • Miscellaneous: 92.9


The third spot goes to Michigan. It is particularly cheap when it comes to groceries at 10.4 percent lower than the average, however, housing is also comparatively cheap here. The median listed price is about $147,000 while the rent is $1,000. Michigan is also exempt from military, federal, and in-state pension burdens. Here is the index:

  • Cost of living: 88.2
  • Housing index: 77.1
  • Grocery index: 89.6
  • Utilities index: 95.5
  • Health index: 93.3
  • Transportation index: 97.6
  • Miscellaneous: 91

Just be careful about some parts of Detroit you go into. You may want to avoid them. The fantastic movies Four Brothers and 8 Mile have warned us about this.


Arkansas is particularly cheap in the area of transportation and health bills. The median housing price is $150,000 while the rent is $1,000. Groceries are 7.3 percent cheaper while transportation is 10.9 percent. Here is the index:

  • Cost of living: 88.5
  • Housing index: 77.7
  • Grocery index: 92.7
  • Utilities index: 97.1
  • Health index: 87.8
  • Transportation index: 89.1
  • Miscellaneous: 92.8


Consumers are paying up to 23 percent less for their houses here than the national average with the median home value being at $114,800 and average rent being $995.

Transportation when compared to the national average is 11.9 percent cheaper and groceries are seven percent. Experts on the other hand believe that the cost is going to increase in the near future (problem because this is an energy rich state). Here is the index:

  • Cost of living: 88.6
  • Housing index: 76.7
  • Grocery index: 93
  • Utilities index: 94.9
  • Health index: 93.6
  • Transportation index: 88.1
  • Miscellaneous: 94.1

As just mentioned, Oklahoma is going wild in oil shale which is bringing high paying and more jobs to this outstanding state. This means less money going to the Middle East and more money remains in America to do the same: allow us to have access to the energy we need. Unlike California and New York which have some of highest numbers of unemployment and people on welfare, Oklahoma does not shirk its responsibility by keeping its energy offline.


While the prices of houses are on the rise, Idaho is still one of the cheapest states to live in with several categories that are less than 10 percent of the national average. Groceries are 14.6 percent cheaper while transportation is 6.1 percent. The median home value is $249,000. Here is the index:

  • Cost of living: 89.6
  • Housing index: 77.8
  • Grocery index: 85.4
  • Utilities index: 89.0
  • Health index: 101.9
  • Transportation index: 106.1
  • Miscellaneous: 94.8

Idaho is loaded with fresh crisp air as well. If you love the outdoors, it is hard to beat this state.


Tennessee, also known as the Volunteer State, has the lowest housing index in the country at 77.5. Transportation facilities and health care is also less costly compared to the national average. Groceries are 7.3 percent cheaper while transportation is 10.1 percent.

The median listing for house is $175,000 while the rent is $1,195. Local and state tax is about 7.6 percent which is the sixth lowest in the country. There is no income tax but only interest income and tax dividend.

  • Cost of living: 89.8
  • Housing index: 77.5
  • Grocery index: 92.7
  • Utilities index: 91.8
  • Health index: 90
  • Transportation index: 89.9
  • Miscellaneous: 97.5


Kansas is another state where the median cost is about 10 percent below the national average making it a favorable destination for people looking to settle there. Media rent is about $1,050 while the houses are priced at $124,400. Groceries are 6.4 percent cheaper while transportation is 7.5 percent. Here is the index:

  • Cost of living: 90.4
  • Housing index: 77.4
  • Grocery index: 93.6
  • Utilities index: 97.3
  • Health index: 97.1
  • Transportation index: 92.5
  • Miscellaneous: 96.1

Yes, these states may not be as glamorous as living in San Francisco, LA, or New York but you will also not have to worry as much about seeing homeless people defecate in public which is what happens in San Francisco all the time. If you want to be accosted by a homeless person and smell urine all the time all the while spending massive amounts of money on living costs and taxes, San Francisco is your place.

San Francisco is also in the midst of a properties crimes epidemic. LA and NYC are violent, expensive, and chaotic. Perhaps nice places to visit once in a while but not to live. You may see someone get mugged or shot though. If that is the environment you want to live in while being mistreated by the tax policies in those cities, it is your decision.

How to Stop Living Paycheck to Paycheck and Start Saving

Are aware that around 38 million American households live paycheck to paycheck? And no, these are not low-income families. Families even with salaries above $100K per year are caught in this vicious lifecycle. The moment the paycheck arrives, most of it goes in settling the bills and couple of days of respite followed by a zero bank balance.

This is not impressive and it does help that electrical prices rose higher in the years from 2009 to 2016 which is another reason household income growth did not rise at all in those same years as well. Hopefully that changes in the next couple of years. This will mean less people will be living paycheck to paycheck.

So why even are wealthy people failing to save money or take control of their finances? Irrespective of the income bracket that you are in, there is always a way to save some portion of your income for investment and savings, you just need to start somewhere.

Prepare a Budget

The first and most vital aspect that needs to be done to improve your finances is to understand how you are spending your money. Start whenever you want, but religiously track every penny you spend for a month. Ideally, it should be the start of the month when all your bills are due.

This will help you in covering the entire month and track your expenses accurately. If you do not have time to do expense tracking at the micro level, smartphone apps can make this job easier. Remember, the first thing to do is to understand the root cause of the problem, which in this case are unchecked expenditures.

Find Expenses that You can Cut

Tracking your expenses will enable you to identify the expenses that you can do away with. For example, the expensive cable plan you have subscribed to can be trimmed down to a bare minimum (do you really Direct TV for instance?). Switch to online streaming service providers. Scourge the Internet for discount coupons while buying anything, you may be surprised how much money you can save this way.

Check your credit card bill for subscriptions and memberships you no longer use or do without (how often do you attend that gym; can you not exercise in your home or run around the block a few times?). There is no need to walk into Starbucks every day for that caffeine dose either. Stop or cut down going to fancy restaurants or restaurants at all. You can buy TGI Friday’s frozen food at supermarkets, for example. You would be surprised how making these small changes to your spending habits can help you save money.

Do you really need life insurance? You know that is one of the biggest scams in America. Well, unless you are afraid of dying broke and we here are trying to get you in a better financial place so that does not happen.

Moreover, the savings then can be channelized towards investments or savings. That is making those spending decisions compound for you. If you are a smoker, cut down on those cancer sticks (that is what they are!). Not only you will be healthier, but also save hundreds of dollars a year.

Do Side Gigs

The Internet has made it easier to find side gigs that pay well or pay something. There are numerous dedicated platforms out there which you can use to find gigs such a web design, online accounting work, virtual assisting, consulting, research work, and so on. If you are not proficient in any of these, try something simpler like dog walking. Your home is full of things you don’t need or do not use any longer. Sell these on Craigslist or eBay. Extra cash you earn this way can be utilized in a productive way.

Consolidate Debt

If your debts are unmanageable and that is one of the primary reasons you live paycheck to paycheck, it’s time to think about debt consolidation.

In debt consolidation, all your debts are paid off by a debt consolidation firm. Then you have a single payment to make towards your debt that is optimized based on your financial profile. Though it may be an extreme measure, nevertheless it’s a percipient and prudent strategy to get out of debt trap and start fresh.

Create an Emergency Fund 

Life is full of uncertainties and you should be prepared for anything that life throws yours way. Research indicates that you need at least six months of expenditures saved up just in case the you know what hits the fan. The emergency fund should be sufficient enough cover all your bills for six months should you be out of work or in bed due to an accident or an illness.

The emergency fund should be impenetrable so do not dip your hands into it (have more discipline than most politicians!). If your emergency fund is piled up high, simply channelize it towards other purposes that are vital, such as a nice mutual fund. And no, going out to Pizza Hut is not wise. Do not sink back into bad habits!