How to Analyze Your Financial Upbringing

07.29.2021 by Harry //

Studies have shown that most of our financial habits and money decisions that affect our financial health are largely influenced by our upbringing. Your parents largely influence the way you save, spend, or view money.

A quick look at your finances can help reveal your financial health. Your financial health considers your net worth, debt, retirement plans, emergency funds, and several other financial implications.

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Why You Need to Evaluate Your Financial Health

It is not out of place to see a doctor for a physical check-up. In the same way, a routine fiscal check is good for your financial health. It will help you make the necessary economic adjustments.

Here are Three of the Most Popular Ways to Assess your Financial Health

#1. Figuring Out Your Net Worth

Determining your net worth is the first step in assessing where you stand financially. You can do this by adding all your assets and subtracting your liabilities.

Don’t beat yourself up. It’s completely okay to have a negative balance now. The goal is to write it down and work towards increasing your assets.

Action plan

Your net worth serves as a personal measuring tool that should spur you to take action. Focus on increasing your net worth by 5% to 10% every year. Your net worth is personal so remember never to compare yourself with someone else.

#2. Take a Closer Look at Your Income to Debt Ratio

After figuring out your net worth, the next step is to calculate your income-to-debt ratio. Calculating your debt-to-income ratio helps you keep your debt under control.

You can get this by dividing your income by the total amount of debt you have. For example, if your monthly gross income is $6,000 and you have a total debt payment of $2,000, your debt-to-income ratio is 30%.

Action plan

A high debt to income ratio means you need to exercise caution. Experts advise you keep the ratio to 20% or lower. You could pick on a side hustle or take on another job to help you pay up your debts. But most importantly, work on reducing your expenditure.

Identifying how you were raised could help you put things in perspective and set you on track for the future.

#3. Take Budgeting Seriously

If you aren’t tracking where your money is going, you need to start now. It is not enough to save. Make sure you know where every single penny comes from and goes to.

What to Do After My Emergency Fund Is Fully Funded?

Action plan

Create a budget and stick to it. This might seem time-consuming, but there are lots of platforms offering automated solutions.

3 Common Financial Upbringings | How They Affect Your Money Habits as an Adult

After evaluating your financial health, it is important to consider your financial upbringing. Growing up, it is natural to look up to your parents and immediate family and want to be like them.

So, it is not unusual for you to pick up the money habits of your parents or guardians. It is also possible to be negatively affected by their money habits.

#1. Little Financial Education

Some parents never saw the need to educate their children about financial literacy and good money behavior. This could be because their parents also never taught them.

Effects

Adults who grew up with zero financial education end up not knowing how to strike the right balance. They could develop unhealthy financial habits like overspending and undersaving. Others hoard money and live miserly.

Solution

Seek to acquire financial knowledge. You could enroll in finance courses, read investment books, or enlist the help of a portfolio manager to help you best manage your finances.

32. Frugal Upbringing

A lot of families fall within the low to middle-income bracket. This means prioritizing the family’s needs over luxuries. It’s not uncommon for kids from such homes to have their requests for expensive gadgets denied or replaced with a cheaper alternative.

Effects

If you are from a frugal family, you might splurge on wants rather than needs to compensate for childhood luxuries you never had. You might end up accumulating debts to fund this lifestyle. On the other hand, you could also choose to emulate your parents’ financial discipline.

Solution

Analyze your money habits. Are you embracing unhealthy money habits just to make up for your childhood? If you are, you could draw up a savings and investment goal.

You could also get an accountability coach to keep you in check or join groups of like-minded individuals.

#3. Luxurious Childhood

If you grew up in rich homes, it is easy to emulate your parents’ lavish lifestyle. You even grow up with a sense of entitlement, expecting things to be easily handed to you.

Effects

If you are from a well-to-do upbringing, there is a temptation to live above your means. You might want to match the luxury you enjoyed while living with your parents. If you are not careful, this could you lead you into debt, especially if your financial situation changes.

Solution

Keep a distance from friends and environments that cause you to overspend. Reduce the urge to splurge; rather, Indulge yourself occasionally.

Final Thoughts

Tracing your financial upbringing may help you improve your future. Take a holistic look at how you were raised, identify harmful money habits you have picked up, and work on replacing them with healthy financial habits.

Image Credit: [Thiago Matos]

How to Manage Financial Stress and Anxiety

07.07.2021 by Harry //

To manage financial stress and anxiety, there are several things you can do to take care of yourself and your emotions.

Using your money wisely and taking it day by day is a good start, finding ways that you can consolidate your financial burdens, and start taking care of them little by little.

It may sound easier said than done but, you’ll be back to yourself in no time.

What Causes Financial Stress?

Many things can cause financial stress. Sometimes unexpected things happen that take us by surprise and other times we just don’t make enough to make ends meet. In some cases, you may lose your job or suffer from an injury that keeps you from working.

Whatever the case, the inability to maintain your necessities can cause stress. This stress leads to anxiety, making you feel nervous and anxious. Anxiety and stress can affect everything in your life, making you feel uneasy, unconfident, and restless.

Over time, if you don’t address these issues, you’ll have bigger issues and could develop panic attacks and general anxiety disorder.

6 Ways to Combat Financial Anxiety and Stress

When you start to feel anxious about your paychecks, you may be suffering from financial stress. A good place to start is to assess your financial situation, looking for the root cause.

Getting to the bottom of what’s causing your anxiety is a good way to start taking care of it, getting your life back, and taking charge of your emotions. You can also tackle your financial stress with these 6 tips.

1. Stay Positive

First and foremost, you should stay positive. We are not perfect and sometimes things happen that are out of our control. Admitting that your finances are in turmoil, you can start taking the first steps to fix them.

Try and keep a positive mindset and realize that you just have to take things day by day. Your financial stresses won’t be around forever, and you can start working on them.

2. Start with the Most Important

When tackling a debt, start with the most important first. Whatever collects the most interest or weighs you down the most is where you should start, jumping on a payment plan when you can.

You can start by taking a look at your credit report and making phone calls if you need to ask questions about totals.

Once you have that in place, start taking steps to plan how you’re going to pay.

3. Be Real

When you have financial stress, the last thing you want to do is be unrealistic. Don’t be afraid to face the total that you owe, coming to terms with your debt. In this way, you can truly see what you have to work on and avoid thinking you owe much less than you do.

If you need to, work with an attorney, a financial advisor, or even a friend to talk it out and make sense of it all.

4. Use Your Money Wisely

Just because you’ve come to terms with the amount you owe doesn’t mean that you should start to blow your money. It means quite the opposite. Take care of your money and don’t spend it on unnecessary things.

It can help to get on a strict budget, one where you know exactly where your money is going. Try writing out your monthly income and setting aside the amount you need for essentials like food, gas, and utilities.

5. Take Small Steps to Success

When you’re trying to relieve your financial stress and anxiety, try and keep from overwhelming yourself. That means taking small steps instead of overthinking and trying to tackle too much at a time.

When you take small steps, you start to realize that you are hitting smaller milestones that get you closer to your final goal. In the end, you can use those small successes to build yourself up and put a dent in your debts to start feeling relieved fast.

6. Be Honest with Yourself

There is nothing worse than underestimating the amount of financial burden you feel. Not being honest with yourself could lead to more stress as you start to realize how far in debt you are.

Start by finding out what you owe and then, take steps to eliminate it.

How to Tackle Financial Stress

Dealing with financial stress is not easy but, with the right attitude and small steps, you can get yourself on the right road to becoming debt-free and more at ease with yourself.

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If you have financial stress, here are three things to look into.

1. Consolidation

Consolidation is one loan that you can use to combine all of your debts into one place. Most of the time, those who have debts benefit from consolidation, able to reduce the interest and pay only one payment per month.

2. Bankruptcy

Bankruptcy is another option but, it comes with a few consequences. Your credit will show bankruptcies for up to 7 years, something that could affect your ability to buy things like a house or vehicle. Before filing bankruptcy, it’s best to check all of your options and save that for last.

There’s No Better Day Than Today

Sometimes, it’s easy to put off paying for your debts. Instead of waiting, start taking control of your finances to reduce your stress and anxieties.

There is no better day than today to start taking control over your life and start living more freely. Remember to check your debts, be honest with yourself, and find options that work for you.

Help is out there and there are more options than you might think. From attorneys to credit cards, you have a number to choose from. Whether it’s contracting an attorney or creating a budget yourself, you can do it, and your start living a worry-free and debt-free life.

Image credit:[KAROLINA GRABOWSKA]

When to Refinance Student Loans

06.29.2021 by Harry //

Refinancing student loans can be a great idea, but it is not the best option for everyone. Refinancing student loans allows you to pay a lower interest rate while merging your payments into one.

You should not refinance your loans if you need to take advantage of federal student loan protections.

It may be a good idea to refinance student loans if you are a private student loan borrower, but it is generally not a good idea if you are a federal borrower.

This article describes refinancing student loans, when it is a good idea, and the pros and cons of refinancing student loans.

What Does It Mean to Refinance Student Loans?

To refinance student loans is to take out a new loan that replaces an old loan (or more than one loan).

By taking out a new loan, your old loans will be paid off, but you still have to make payments towards your new loans.

The new loan will give you new terms, a new lender (sometimes), and most importantly, a new interest rate.

Should I Refinance My Student Loans?

When deciding whether or not to refinance student loans, take into account the following factors:

Your current loan interest rate. High-interest private student loans can be a challenge to pay off. If you want to lower your interest rates, and thus lower your monthly payments and your total loan amount, you should consider refinancing.
How much money you would save. You should only refinance if it allows you to save money on your interest rate, monthly payments, and overall loan payment.
Your credit score. A solid credit score will make you more eligible for student loan refinancing. It should at least be above 670. The higher your credit score, the more likely lenders will work with you and offer you lower rates. You also need a solid credit score because new credit applications will trigger a hard credit inquiry, which will limit your ability to apply for other types of credit such as credit cards, auto loans, and mortgages.
If you need a co-signer. Some lenders will allow you to have a co-signer. Having a co-signer can help you qualify for student loan refinancing. It is a good idea to opt for a loan that will release the co-signer after a certain number of on-time payments.
Your payment history. Lenders will look at your payment history. This is the determining factor in your credit score. Lenders may not allow you to take out a new loan if you are having trouble affording your current student loans.

Who Qualifies to Refinance Student Loans?

To qualify to refinance your student loans, you must have a good credit score. A credit score is the determining factor to get approved for student loan refinancing.

Lenders need to know how likely you are to repay your loans, and they get this information from your credit score.

You also need a steady income to refinance student loans. When you take out a loan, you must prove you earn enough money to repay it. If you have a reliable income, you are showing that you will eventually repay your loan and that you won’t fall behind on payments, even if financial emergencies happen.

To qualify for student loan refinancing, you must also have a low debt-to-income ratio.

A debt-to-income ratio represents how much debt you have compared to how much money you earn. You want this ratio to be low, so lenders trust that you can comfortably pay off the loan.

Private Student Loans vs. Federal Student Loans

The majority of borrowers are federal student loan borrowers – about 92% of borrowers. Private student loan borrowers make up the rest.

When it comes to refinancing your student loans, which type of borrower you are will determine whether or not it is a good idea.

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Student Loan Refinancing Guide

Both federal and private student loan borrowers can refinance their loans, but federal loan borrowers have payments on freeze right now because of the pandemic. Federal loan borrowers would lose this benefit if they refinanced.

Until September 2021, federal student loan borrowers are not charged monthly payments and their interest rate is set to zero. Since the only reason to refinance is to get lower interest rates, it is not a good idea for federal borrowers to refinance at this time.

Federal loans also come with other benefits such as income-driven repayment plans that can lower monthly payments and Public Service Loan Forgiveness for working at non-profits, government agencies, etc.

If you refinance federal loans, you lose these benefits. Even when payments resume for federal loans, you should only refinance federal loans if you don’t think you will ever use the other benefits offered.

If you believe your income will be stable throughout your loan payments and you won’t qualify to be forgiven, then you can refinance your federal student loans.

Another aspect to consider when refinancing federal loans is President Biden’s plan to cancel student loan debt.

While no plan has been passed yet, federal student loans could be forgiven at least in part. If you refinance your loans, you will no longer be eligible for forgiveness.

On the other side, it is a good idea for private loan borrowers to refinance right now to take advantage of low interest rates. If you have taken out private student loans and are paying too high of an interest rate, it may be a good time to take advantage of low interest rates from private lenders.

Private student loan borrowers who want to refinance should choose a lender that offers fixed APRs. This will lock in your low interest rate.

Refinancing student loans may help you get a lower interest rate and reduce your monthly payments. However, it may not be the best way to get out of debt. Refinancing is not the best idea for every borrower.

WHEN TO REFINANCE YOUR STUDENT LOANS:

You should refinance if you want to pay off your loan sooner. You can pay off your loans quicker by lowering your interest rates.

You should consider refinancing if you are not making progress in paying off your loans. If you are struggling to keep up with monthly payments and interest, refinancing can help you start to make more progress each month.

You should only refinance your student loans if your income and credit are good. These factors are necessary to qualify for student loan refinancing and will help you qualify for lower interest rates.

Another great reason to refinance is that market interest rates are at a historic low. Private student loan borrowers can take advantage of low market interest rates by refinancing

Image credit:[KAROLINA GRABOWSKA]