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Our Debt Free Family

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Determining Your Maximum Debt Limit: How Much Debt is Too Much

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<p>When you look back on what you have been able to accomplish in your life, chances are that it was all possible due to debt.</p>::Pexels

When you look back on what you have been able to accomplish in your life, chances are that it was all possible due to debt.

Without a loan, you wouldn’t have owned your first home.

Without a loan, you wouldn’t have driven that first car of yours.

And without a loan, you couldn’t have earned that first degree.

In other words, debt can truly be a good thing. However, according to the old adage, you can have too much of a good thing. If you feel that you have piled up too many loans, there are tips to help you pay off your debt in a smart and efficient way.

So, how much debt is too much? Here is a rundown on how you can determine your maximum debt limit. Let’s get started!

How Much Debt Is Too Much?

A good way to determine how much debt is too much in your situation is to look at your ratio of debt to income.

To get this figure, you should divide your recurring debt each month by your gross income each month. You will then express this figure as a percentage.

Your monthly debt includes anything that you have to pay each month. This includes, for example, your mortgage, credit cards, car payment, and student loan.

Meanwhile, your gross income is the amount of money you bring home prior to paying taxes, Social Security, and insurance.

Example of Debt-to-Income Ratio Calculation

If you have $3,000 in current debt and generate a gross income of $6,000 per month, your debt-to-income ratio comes out to 50%. Unfortunately, this is not a good figure.

Many lenders generally like to see ratios of around 36% maximum. In fact, some financial advisors state that ratios of more than 20% are indicators that consumers are borrowing too much. Still, others say that near 30% is the magic number.

What does this tell us? It tells us that there’s no black-and-white answer for how much debt is too much for you. However, if you find that your disposable income each month seems insufficient, you’re probably carrying more debt than you should.

How to Help Yourself

If you’re wondering whether to get that next loan, ask this question to yourself first. “How much debt is too much?”

There are many different reasons to get a loan. Irrespective of the circumstance, you must eventually pay back the borrowed money. Therefore, it is always advisable to not borrow more than you need and your repayment ability.

When you start feeling the burden of too much debt, consolidating all of them into one can help you simplify your finances. In some cases, you may even be able to reduce the monthly payments.

The next time you decide to get a loan, determine your requirement, check about your ongoing debt payments and figure out how much you need. There are lenders who also help you to determine the ideal loan amount and then design a suitable repayment term for you.

Always find the right fit lender and loan fit for your financial situation.

Image source: Institute for Money and Technology.

Our ‘Skinny’ Christmas

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<p>As the end of the year approaches, we are doing a bit of reflection where our finances are concerned. 2019 definitely threw us for a loop in many ways. We didn't get as much debt paid down as we'd like to because it seemed every time we turned our heads there was something else we needed to spend money on. All of this has led to us deciding we are going to have a "skinny" Christmas this year and focus on what's next for us.</p>::Pexels

As the end of the year approaches, we are doing a bit of reflection where our finances are concerned. 2019 definitely threw us for a loop in many ways. We didn’t get as much debt paid down as we’d like to because it seemed every time we turned our heads there was something else we needed to spend money on. All of this has led to us deciding we are going to have a “skinny” Christmas this year and focus on what’s next for us.

Our Christmas Plans

Initially, we’d planned on visiting our family for Christmas, as most people do. However, both of us were stressing about how exactly we were going to be able to afford to do that. A good rule of thumb is if you’re stressing financially about how to do anything that isn’t necessary, you probably shouldn’t be doing it.

Not only that, but my husband has gotten a new job that starts two days before Christmas! This job should be a game-changer for us in 2020, but asking for time off immediately is never a good look. So, no trip home for Christmas made the most sense for us.

Instead, we will be staying home and I’ll be cooking a small meal for us here Christmas Day. We won’t be doing any large Christmas exchange and will be saving our money for new furniture (which we need terribly) and, of course, paying off more debt.

Looking Forward to a More Prosperous Year

We know two awesome things going into the new year that are helping us look forward to a more prosperous and more successful new year.

  1. My hubby has a new job that will have guaranteed pay. Having a guaranteed weekly minimum paycheck will definitely help us with our budget and plot our road to debt freedom!
  2. We’ve completed paying our security deposit so our rent is going down! This will save us about $200 per month.

Once he’s gotten his first couple paychecks and we have our emergency fund back in order, we will be paying things off as fast as we can. We have three accounts all under $500 right now, which will be paid off soon (how exciting is that?!). For now, we are waiting out the holiday, looking forward to a quiet Christmas at home, and plotting our amazing journey for the new year.

Readers, have you started thinking about what you’d like to accomplish with your finances in the next 12 months? Let me know about your goals in the comments below! 

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Precious Metals Investment, Stocks, and Prices

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<p>One of the main differences between stocks and precious metals is that stocks are classified as equities. This means that stocks give their holders ownership of a portion of the company that the stock is issued for. Precious metals on the other hand do not provide ownership in a company. Rather, the holder of precious metal own physical product.</p>::Pexels

 

One of the main differences between stocks and precious metals is that stocks are classified as equities. This means that stocks give their holders ownership of a portion of the company that the stock is issued for. Precious metals on the other hand do not provide ownership in a company. Rather, the holder of precious metal own physical product.

Make Money from Precious Metals

Investors in precious metals make money from increases in demand of precious metals. As demand increases for precious metals, their value rises. Similarly, lower supply of precious metals can have a positive influence on their prices.

As companies generate more profit and improve their business standing, the value of their shares can rise. This increase in value gives stockholders the opportunity to sell their stocks or even receive dividends at dates specified by the company.

What do precious metal investments, stocks, and prices have in common? A lot. Precious metals have become more desirable as an investment alternative to stocks, highlighting the shifting winds in investor’s approach to implementing strategies that satisfy their risk appetite.

Many believe that stock market investments are better than investments in precious metals because returns from the stock market can be significantly higher. For the past 19 years, an investment in the stock markets has provided returns of 400% while investments in precious metals have provided lower returns.

Stability of Precious Metals

Precious metals, particularly gold, silver, platinum, and palladium, have served as great alternatives in times of economic downturn where stock markets suffer from negative growth. Over the past 19 years many companies (listed) have come and gone as demand for their stocks reduced and prices plummeted. Precious metals, however are still on the scene.

There are risks associated with precious metals which owners of stocks may not be exposed to. There is no guarantee that precious metals will continue to be the safe haven we have come to know them as.

There are dangers of theft that can arise as a result of ownership of precious metals. Even with a safe, one can easily become a target for theft if word gets out that precious metals are stored at one’s home.

For many years, gold has served as the prime safe haven among precious metals. Banks and households around the world continue to bet on gold, investing unfathomable sums every year. To many, investing in gold is not an option but a necessity. The proof is in the pudding as previous economic downturns have shown.

 

Thanksgiving: Debt Update and Planning for the New Year

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<p>It is that time of year again, where many people are making resolutions and ours, yet again, is to pay off our debt. We have had some success this year, and even this month, but we are making aggressive plans for next year to help us become debt-free and plan our future. Here's the latest progress we've seen and what we've decided for next year so far.</p>::Pexels

It is that time of year again, where many people are making resolutions and ours, yet again, is to pay off our debt. We have had some success this year, and even this month, but we are making aggressive plans for next year to help us become debt-free and plan our future. Here’s the latest progress we’ve seen and what we’ve decided for next year so far.

Reviewing the Numbers

These were our debt numbers last month…

  • My Car Amount Owed: $21,302
  • Credit Card Total For Both: $502 (interest is a KILLER, folks)
  • Student Loans: $24,184
  • Matco/Snap-On: $7,449
  • Amount in Collections: $679

We’ve made some progress! Here are the numbers this week…

  • My Car Amount Owed: $20,550
  • Credit Card Total For Both: $490
  • Student Loans: $24,362 (the interest is from having the loan deferred until after the new year)
  • Matco/Snap-On: $7,129
  • Amount in Collections: $679

While it isn’t much, it is another $900+ paid off this month, and we are making big plans for 2020.

Plans for The New year

My husband and I have decided to bite the bullet and buy the Financial Peace University from Dave Ramsey. It is going to be our Christmas gift to one another (plus something else small for each of us). We’ve been listening The Dave Ramsey Show pretty often and believe purchasing the program and following the steps closely will really help us reach our goal of being debt-free.

By following the program, it is quite possible that we will be debt-free year year (or soon after). The idea of having all of our debts paid off and potentially be able to buy a home afterward is the dream for us. We both know it will be a lot of hard work, but it will be so worth it. And I can’t wait to keep you all updated on our progress next year!

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Biggest Slot Wins in US History

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Being the most popularized gambling machine in the world, slots are loved for much more than their over-the-top design, bright lights, and loud sounds. Over the last few decades, slots have become synonymous with huge wins – turning dollars and cents into a lifetime’s paycheck.  [Read more…]

When is Debt Settlement a Good Idea?

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<p>An astounding 15 percent of Americans believe they will be making payments on their credit cards until the day they die. On top of that, one-third of Americans believe it will take up to 20 years to pay off their current debts. Because of the overwhelming amount of debt most people living in the United States carry, many people find themselves wondering when debt settlement might be a viable option.</p>::Pexels

An astounding 15 percent of Americans believe they will be making payments on their credit cards until the day they die. On top of that, one-third of Americans believe it will take up to 20 years to pay off their current debts. Because of the overwhelming amount of debt most people living in the United States carry, many people find themselves wondering when debt settlement might be a viable option.

Dangers of Debt Settlement

While finding a way to settle your debt may be tempting, it isn’t always the best way to handle your finances. Essentially, a debt settlement company will negotiate a payoff amount for your account. You will no longer pay the creditor and, instead, will begin making payments to the settlement company. However, the process of working with these companies can actually hurt you.

During the process of working with the debt settlement group, you will have to cease making payments on your debt. These companies also don’t typically don’t start working with people until their debts have been past due for months. This means that your credit score will likely tank.

It also isn’t as good for your credit score as paying the account off in full. Normally, when an account is settled, it will be noted on your report as “Paid-Settled,” which is good. It doesn’t have as good an impact on your credit as a “Paid in Full” status though.

Additionally, using a debt settlement group can also make you feel like not paying your debts is okay. You aren’t really learning much about changing your habits to improve your long-term financial health.

When is Debt Settlement a Good Idea?

That’s not to say that debt settlement isn’t a good idea for some people. It is a necessary evil in some cases to avoid filing for bankruptcy or going into more debt with neverending interest being tacked onto your accounts.

Instead of settling, you may want to consider getting debt counseling. Contacting someone who is an expert in dealing with debt can help you see a way out of your mess. Sometimes being in debt makes it difficult to see a way out. A counselor can help you come up with a debt management plan and assist you in coming up with a doable plan.

If debt counseling isn’t for you, consider opening up communication with your creditors. Talking to them about your options may open another door for you. Many creditors will allow you a few months off of making payments for hardship. Give them a call and see what you can do.

And, if all else fails, debt settlement can be a good choice. I personally settled a debt with a third-party company recently. It helped me knock that off my credit and received a letter that it was paid in full. It helped my credit score tremendously and put a fire under me to get it paid off. If you’re already behind (like I was) it can be a good option.

Readers, have you ever settled a debt? What was your experience?

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It’s Not Too Early to Start Prepping for the Holidays

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<p>Two years ago, I got on the blog and talked a bit about people "Christmas shaming." Most people moan and groan when you bring up Christmas before Thanksgiving, but in all reality, if you begin prepping for the holidays early it can prevent you from going into debt and help you save money. Here's how we're planning to spend the holidays and a piece of advice for getting ready for your own celebration.</p>::Pexels

Two years ago, I got on the blog and talked a bit about people “Christmas shaming.” Most people moan and groan when you bring up Christmas before Thanksgiving, but in all reality, if you begin prepping for the holidays early it can prevent you from going into debt and help you save money. Here’s how we’re planning to spend the holidays and a piece of advice for getting ready for your own celebration.

Getting in Gear for a Busy Season

Before moving to Atlanta, we would typically travel or host holiday celebrations. Sometimes we’d go to Pennsylvania or Tennessee to visit family. Other times we’d host the holiday events at our home. Last year, we had Thanksgiving at our home and a Christmas celebration there as well. However, this year will be a bit different.

It is our first year away from home during the holidays together. We won’t likely be traveling anywhere to celebrate and our families won’t be traveling here. Instead, we will be starting some of our own traditions here in Georgia. Because I am a fan of establishing our own traditions and prepping for the holidays early, I’ve already begun brainstorming what we will do.

For Thanksgiving, my husband and I will be having a very small, intimate dinner at home. In place of purchasing a full-sized turkey, we will likely buy two small cornish hens. Of course, I’ll also cook up a few things to make sides and a yummy dessert. The total dinner should cost less than $25. We will also probably take the dog to the park and put up the Christmas tree that evening.

Christmas will be a little different. Instead of swapping gifts with everyone, we’ve decided to stay home and attempt to start our own fun holiday tradition. We will do Christmas presents for each other and send out a Christmas letter to our friends and family with a new photo of us and the dog. The letter and photos will cost less than $30 altogether. We will also have a yummy Christmas breakfast and likely a ham dinner on Christmas Eve. All in all, it will be extremely low-cost.

When Should You Start Prepping for the Holidays?

You’re reading this probably thinking, “why would you plan ahead for such a small celebration?” Well, planning ahead is what keeps my husband and me from racking up credit card debt around the holidays. We put caps on how much we will spend, plan out meals, and make things special by spending time with one another instead of placing value on items.

If you’re thinking you’ll spend a bit during the holidays, it is even more important to start prepping ahead of time. Not to mention, there have been studies to show that people who put up their Christmas tree earlier and prepare for the holiday are generally happier. They are also less likely to suffer from things like seasonal depression.

Forty-three percent of Americans begin decorating and preparing for Christmas before Thanksgiving week. You may even find planning ahead puts you in a better mood, overall. While it certainly isn’t necessary, it is a good idea to prep early to keep your finances and mood in check during the busiest time of year.

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What Determines Gold Price Per Ounce?

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Paper notes have risen and fallen over centuries, but the value of gold has always been preserved. Although cultures traditionally revered gold for its elegance, investors are now buying gold to expand their assets, inflation hedges, and to guard against the devaluation of the currency. Gold is a worthy investment, but little is understood on how gold prices are calculated and what determines the gold price per ounce. [Read more…]

Happy Holidays! Here Are Our New Year’s Resolutions

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<p>Christmas was extremely successful in our home this year. We managed to keep everything low-cost where presents were concerned. However, many of them haven't gotten in the mail for our relatives out of town (whoops). Christmas Day we went to the dog park with our baby (Enzo) and made homemade lo mein instead of ordering takeout Chinese. We ended the holiday looking forward to creating a vision board for 2019 and setting some New Year's resolutions.</p>::Pexels

Christmas was extremely successful in our home this year. We managed to keep everything low-cost where presents were concerned. However, many of them haven’t gotten in the mail for our relatives out of town (whoops). Christmas Day we went to the dog park with our baby (Enzo) and made homemade lo mein instead of ordering takeout Chinese. We ended the holiday looking forward to creating a vision board for 2019 and setting some New Year’s resolutions.

Setting Family New Year’s Resolutions

My other half and I have a lot of goals for 2019. This year will be our first year creating a Vision Board together. It will include financial goals, of course, and personal goals for us both. On the personal side of things, we would both like to get married next year. I would also like to train for and run a 5K and lose the last 40 pounds I have to reach my weight goal.

Financially, we both have the same long-term goal: be debt-free. However, to hone in on what we need to do in 2019, we’ve made a list of our debts and plan to snowball it starting January 1. Here’s what we’ve discussed so far…

  1. Pay off “small” debts by March. The other half’s car will be paid off by March. We will also have our credit cards paid off by then and a small medical bill ($242). Having these things paid off in full will leave us room to pay off other debts, including new tax debt.
  2. Focus on tax debt while making minimum payments on other accounts. We owe a little over $9,000 and have established a payment plan with the IRS. With my other half out of work last year, we weren’t able to put taxes aside as we normally do. After we pay down the smaller accounts, we will use all of our extra cash to pay this off. Once it is paid we are also going to begin putting big chunks of cash aside for future tax bills.
  3. After tax debts are paid, we will be making extra payments on remaining accounts. Once the IRS is paid, we will start throwing extra cash at the remaining accounts. We will still have our Conn’s bill (about $2,000 remaining), student loan ($22K), car loan ($20K), and the tool bill ($10K).

Creating a Vision

New Year’s resolutions are overrated for the most part. Many people abandon them by the end of March. For us, creating a Vision Board is more important than resolving to change in the new year. Instead, we are focused on large goals we’d like to reach by the end of the year. Each of the steps above will be part of reaching that vision and creating a life we want to live.

What about you? What are your New Year’s resolutions? Do you create a Vision Board?

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