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Strategies to Save

How I Plan to Triple My Income in 2015

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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I have a tendency to go for big goals. In 2013 it was running the New York City Marathon. In 2014 it was writing a book. In 2015 it’s tripling my income.

Despite the fact that I’m no stranger to intimidating goals, this new one has me a bit unnerved. You see my passion for conquering bucket list challenges was initially born out of immense frustration- the frustration of having so much of my life seemingly dictated by factors outside of my own control, particularly in respect to my career and income.

By using tangible goals like the marathon to rediscover my own power, I was able to overcome a lot of that frustration and create a great deal of success and forward momentum in my life. While my capacity for earning and career success is certainly within my control to a degree, it’s still the largest goal with the most external factors influencing my ability to conquer it that I’ve set out to achieve.

By previously practicing with more tangible goals however, I’ve developed a strategy for achieving this year’s resolution of tripling my income without letting doubt or defeat take over. I know it’s only January, but the progress has already proven measurable and every day is a step closer to increased wealth.

Here’s how I’m tripling my income in 2015.

Taking Inventory

 A map isn’t particularly helpful without points of reference. In addition to my end objective- increased wealth- I have to know exactly what my “you are here” location is to successfully carve the path from A to B.

I’ve remained vigilant about tracking my income to account for every penny that flows through my fingers. With the sum of my current income streams subtracted from my goal, I can clearly measure the distance between where I am and where I need to be. From there, I’m breaking down that distance even further with concrete interim income objectives.

Re-Evaluating

Tracking my income also allows me to clearly weigh my current earnings against my current value. As a freelancer, I find it frighteningly easy to get so caught up in the day to day chaos of managing my own business and meeting deadlines, that I fail to take the time to reflect on whether I’m really charging what I’m worth.

In late 2013 I was writing articles for as little as $30, as of the end of 2014, I’ve been paid as much as $370 for one post. While that may have been an extreme case, it was also a wake up call to re-evaluate and realize my worth. It was not just a matter of undervaluing my work, but also one of failing to keep the price of my work current with its’ value.

Re-Negotiating

This gross undervaluation of my work has meant a lot of renegotiation in the last few weeks. In many cases I was asking for more than a 100% raise to bring my prices in line with my current value and build bridges toward my new income goal. While admittedly a daunting request, I was not met with any hostility or surprise in response to my carefully crafted raise pitch. In fact, I was able to secure every pay raise I requested.

Using this tactic of re-negotiation rather than starting from scratch with brand new projects and simply adding to my already overwhelming workload, allowed me to leverage my time for increased earnings to work smarter rather than harder.

Saying No

In addition to freelancing, I generate revenue from advertising on my own website. Every day my inbox is inundated with requests. If any seem relevant and align with the message of my work, I’ll respond with my respective prices. More often than not I receive some form of the following response, “That’s too high, can you do… instead?”

As someone seeking to triple her income you may call me crazy for turning down easy earnings, but I’ve found that knowing when to say “no” is just as much a part of my future prosperity as saying “yes”. I’m not looking to attract every customer, I’m looking to attract the right customer, and the right customer is happy to pay what I know my platform is worth.

Pitching

While holding out for the right price and renegotiating past contracts has helped bridge some of the deficit between my current and desired income, there’s admittedly a lot more ground I have to cover to reach my new goal. As such, I am pitching like crazy. As much as meeting my current commitments is part of my daily routine, so is seeking out and pitching new possibilities.

Thankfully, I’m not easily deterred by silence or rejection. I consider every pitch, regardless of the response, or lack thereof, the planting of a seed that will eventually yield wealth- if not today, then tomorrow, and if not then, maybe several years down the line. With constant groundwork being laid, I know my success is simply a numbers game. I’m willing to face as many rejections as necessary to get the right amount of yeses.

Diversifying

I read recently that the average millionaire has an average of seven streams of income. I may be looking to triple my income today, but I’m certainly not limiting myself to that amount, nor will I limit my potential sources of earnings. As I look ahead to build a solid and sustainable financial future I know never to become too reliant on one stream of income. After experiencing first hand how quickly things change, I’m preparing for such future instances by increasing my income through continually evolving and innovative means, today and in the future.

Keep updated with more great news and tips from MagnifyMoney by following us on Twitter (@Magnify_Money) and subscribing to our Price Checker Newsletter

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Stefanie O
Stefanie O'Connell |

Stefanie O'Connell is a writer at MagnifyMoney. You can email Stefanie at stefani@magnifymoney.com

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Fine Print Alert

Fine Print Alert: $500 Bonus Offer from Ally, Free FICO Scores and Overdraft Caution

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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In our weekly Fine Print Alert we call out any good news from the financial community and shine a spotlight on any sneaky changes in the fine print. We also share our favorite reads from the week.

FINE PRINT ALERT

Thinking about rolling over an IRA…?

Ally is offering up to a $500 bonus for making a qualifying rollover or transfer from outside Ally Bank to a new or existing Ally IRA CD or IRA Online Savings Account. The bonus is a tiered structure ranging from $100 – $500 depending on the amount of qualifying deposits, which range from $25,000 to $200,000+.”

Deposits must be made before May 31, 2015 in order to be eligible for this offer.

For more details about how to take advantage of this bonus offer, read our full blog post here.

Get your free FICO (not FAKO) score…

Five more banks and a credit union will be offering customers access to a free FICO score this year. This is indeed different than the ‘FAKO’ score you get on free credit sites. These are the actual scores each bank uses when making credit decisions.

  • Citibank: You’ll get your Equifax version of your FICO score if you hold any Citibank branded card starting later this month. Non branded cards issued by Citibank like Sears and Best Buy cards won’t get the free score.
  • Bank of America: Sometime later this year. Bank of America pulls from all 3 bureaus so it’s not clear which version of the FICO score they will offer.
  • USAA: Starting in March all credit card holders will get the Experian Vantage version of their FICO score.
  • State Employees Credit Union of North Carolina: Sometime later this year all members with credit cards will get their FICO scores. They generally use the Equifax version of the score.
  • Ally: If you have an auto loan with Ally you’ll get your score by this summer. They generally use the Transunion version of the FICO score for decisions.

Read more on our blog post.

A word of caution to TD Bank customers…

Don’t go overdraft! Don’t get even close.

TD Bank loves overdraft fees so much it’s willing to pay fines.

Courthouse News Service reports New York resident John Kashgarian has filed a class action lawsuit against TD Bank claiming egregious overdraft fees.

Specifically, he’s claiming the fees TD and other banks charged since 2010 are unreasonable and manipulative, and reordering of those fees to make accounts that are in otherwise good standing go overdraft is the biggest problem.

TD’s ‘Simple Checking’ account fee schedule says you will be hit with a $35 fee for each item overdrawn, and will let up to 5 items be overdrawn each business day. That’s $175 in fees a day. The bank is also known to participate in transaction re-ordering.

Read more about TD Bank’s history with overdraft fees on our blog.

MAGNIFYMONEY IN THE NEWS

FAVORITE READS FROM AROUND THE WEB

What Your Bank Owes You: Clarity – For example, banks ought to be required to show through third-party random sample testing that when customers trigger overdraft protection, they know what it is and what fee they will be charged. Investment brokerages ought to produce data on what proportion of their retail clients know the fees they will incur on each investment, and brokerages with low numbers penalized. A great look into whether financial literacy is worth our efforts and focus in this LA Times op-ed by Lauren E. Willis and Theresa Amato.

Where are they now? The most inspiring personal finance stories of 2014Five years since the recession officially ended, more and more stories of families overcoming insurmountable financial obstacles have begun to emerge. We’ve taken a look back at 2014 and picked our top five most inspiring personal finance stories of the year. These personal finance heroes have tackled six-figure debt, redefined the idea of retirement and turned their lifestyles upside down. Mandi Woodruff shares these five stories of financial triumph on Yahoo! Finance.

Most Americans feel they are falling behind – Forget getting ahead. Most Americans say their income isn’t even keeping up with the cost of living. Some 55% say they are falling behind, according to a new Pew Research Center study. That’s the case even though most of those polled feel the economy is recovering. Tami Luhby shares the recent data on CNN Money.

My Darkest Financial Secret – I bought my first home in July 2013. I funded the renovation with a 203k loan, but went over and had to raid my savings account to finish the project. Having no savings cushion then led me to lean on my credit cards for “emergencies” in the Fall of 2013 and by NYE 2014, I was 8,432.16 in debt. L Bee shares her story of amassing debt while she was focusing on paying it down on her site, L Bee and The Money Tree.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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News

The Big Banks Announce Earnings

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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The US banking scene is dominated by four mega-banks: Bank of America, Citibank, Chase and Wells Fargo. On January 14th and 15th, these banks reported their earnings. At MagnifyMoney, we look closely at the results of the credit card and retail banking divisions to see what they can tell us about the state of the American consumer, the cost of credit and the trends in savings account rates.

The headlines talked about disappointing earnings, and compressing net interest margins due to a low rate environment. But the mega-banks include consumer banking, as well as corporate and investment banking. If you peel the onion and look at the consumer business, you will see that banks are maintaining (or even expanding) their spreads in the consumer business to counter-act declining margins elsewhere. Although there have been massive settlements and penalties, banks are using low interest rates on savings accounts and high interest rates on credit cards to cover the costs of those settlements. So, while middle class America may feel good about seeing the headline settlement costs, they are in fact funding those settlements through their banking relationships.

Here is a quick summary of what we found

  • Banks continue to make outsized returns in their consumer banking and lending franchises: The Return on Equity of the consumer businesses remains high. Chase generated a 31% ROE. Bank of America generated a return of 26% (with a 36% return from the consumer lending business). Most banks have a target return of 10% – 12%, and their investment banks tend to be below the target return.

In the credit card industry:

  • Consumer spending is increasing: People made more purchases on credit in the last 3 months of 2014 than they did during the same time in 2013. Depending upon the bank, spend increased from 3% to 10%.
  • And people are paying their bills: The percent of people who are 30 days (or more) late on their credit card bills continue to decrease across all of the major issuers. Delinquency ratios were down 10% – 18%.
  • Credit card businesses continue to generate impressive yields: Borrowing on credit cards is expensive, and (despite all-time-low interest rates) banks continue to defend margins. The largest lender, Chase, saw its yield increase from 9.1% to 9.2%. Note: That number looks a lot lower than the interest rate paid by credit card borrowers, because people who pay their balance in full pay no interest. In addition, banks have promotional offers (for example, 0% interest rates), which bring down the blended yield. Our review of credit card interest rates show that, for borrowers, they can expect to pay 15% or higher if they do not have a promotional rate.

Savings Q4

Credit card companies make money in the following ways:

  • Interchange on spending: Every time you make a purchase on a credit card, the bank typically receives about 2%. Spending is increasing, so interchange revenue should be increasing.
  • Interest charged on borrowing: As people spend more, you can expect that they will revolve more. And, given that interest rates are being held firm despite low rates, this is an area of strength for banks.
  • The main costs for a credit card business are:
    • Operating expenses: the cost of people, equipment, marketing, and other similar expenses.
    • Credit costs: when people do not pay back, the balance is written off at 180 days past due.
    • Funding costs: banks just borrow the money from someone else in order to lend to consumers.
    • Credit and funding costs are still at cyclical lows.

All of the key drivers of credit card profitability remain strong. Don’t let the building and release of reserves confuses the situation. Because credit card businesses are growing, they will have to build reserves. But that does not mean that the business is doing worse – it is just a tax for growth. The underlying businesses have been strong, and delinquency remains low. However, future growth will come from expanding into higher risk segments. Expect to see more credit available in the next 12 months – especially to people who are higher risk. You can also expect to see delinquency start to deteriorate over an 18-24 months time frame, as these newer booking vintages begin to season.

delinquency Q4

Interest on deposits remains shockingly low

If you are looking to save money, the biggest banks are the worst place to keep your money. There is a war being waged online for deposits, with the best rates now reaching 1.25% for large balances. However, the interest rates paid on deposits at large banks remains shockingly low.

  • If you wanted to open a savings account today, Citi, Chase, Wells Fargo and Bank of America all pay 01% on a traditional savings account.
  • Wells Fargo bragged that the average cost of deposits declined to 0.09%, which is 2 bps lower than a year ago. And total deposits were up 8% Year-over-Year.
  • Bank of America bragged that the “rate paid on deposits declined to 0.05% in Q4 2014.”

What does this all mean?

  • Banks continue to get away with overcharging and underpaying retail banking consumers (a.k.a the middle class). The returns in the consumer business remain incredibly high.
  • If you are looking to borrow, don’t expect the near-0% interest rates to be reflected in your credit card interest rate. Banks continue to defend their top line interest rates, and credit cards for the mega-banks remain incredibly expensive ways to borrow.
  • If you are looking to save, the mega-banks have ignored the price war that is happening online. Yet, for some reason, we continue to give them money. Interest rates continue to decline, and banks continue to brag about it.

There is one upside to all of this: banks want more credit card debt. So, you can expect more aggressive 0% offers to lure customers. For savvy debt surfers, this means you will have more option to cut the cost of your interest and reduce the time that it takes to pay back your debt. We have just seen that in early January with Citizens Bank launching a 0% balance transfer offer for 15 months, with no fee.

Otherwise, the financial results just reaffirm our belief: your basic banking and borrowing should not be with the giant mega-banks.

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Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Pay Down My Debt, Strategies to Save

The Secret to Setting Financial Goals You’ll Actually Keep

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Geeting advice on future investments

With the start of a new year comes an intense focus on setting goals and resolutions. Everyone wants to kick things off with big ideas and dreams on how they’ll make this year their best year yet, or improve their lives in ways they’ve never been able to before.

There’s nothing wrong with setting big goals and going after them. Goals keep you on track and can help hold you accountable as you work on your personal finances. And there’s lots of advice out there that can help you set smart ones for your money: goals that are specific, measurable, actionable, realistic, and time-bound.

The Problem with Most Money Goals

But even the “smartest” goals can set you up for failure. Money experts and gurus may pen articles about what you should do or spew long monologues on their shows, but following their advice blindly can lead you absolutely nowhere. Their advice can helpful for generating ideas, but randomly selecting a goal off the list is a good way to ensure it’s forgotten before the end of February.

The problem with many financial goals is a lack of personalization. People hear an expert say to contribute to an emergency fund or dig out of debt quickly or contribute to an HAS/IRA/401(k) – but if the goal isn’t linked to a personal aspiration (like retiring at 45) or goal (taking an annual family trip abroad) it’s much easier to give up a few weeks or months in.

Choosing a milestone to reach that someone else set might mean you’re left with one that doesn’t mean much to you.

The Real Secret to Financial Goals That Stick 

If you want to actually keep your financial goals in 2015, you need to create ones that you care about. You need to understand why you’re working so hard over time to achieve a specific action.

Because that’s what makes the financial resolutions you set difficult to keep: they require lots of hard work over time, and you won’t see progress immediately. Many small actions over a long period of time are what get results, but it’s hard to stick it out when you can’t see the immediate payoff.

The real secret to financial goals that stick is determining what matters to you, and understanding why the continued work is worth it.

Figure out what your motivation is. Maybe you’re tired of paying $500 per month to various debts and you’re ready to use that money to save for your dream trip around the world. Repaying all your debt is the goal. The ability to travel is your motivation.

Or perhaps you want to reach financial independence at a certain age. Investing 50% or more of your income each month might be your goal. The motivation is knowing that you’ll be free from the obligation of earning a paycheck by age 35 or 40.

Don’t worry about what’s popular or what other people believe is a good goal. Only you can determine what financial goals you should work on, because only you know why you’re striving to achieve them.

Determine why. Discover your motivation. Use both to fuel you forward so you can actually keep your resolutions this year.

[Trying to eliminate debt in 2015? Then download our free debt guide!]

 

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Strategies for Maintaining Motivation 

If understanding your unique motivations is the secret to successful goal-setting for a financially better 2015, you also need to understand how to maintain that valuable motivation. And it’s not easy.

As Zig Ziglar said, “People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.”

That’s what it takes to stay on track. You need to motivate yourself on a regular basis so you can keep the drive to take those thousands upon thousands of baby steps that will get you to financial success.

Here are some ideas to try:

Write It Down: Don’t just write down what it is you’re working to, but write down your “whys,” too. List the reasons that you’re taking action to make progress with your finances. Then place this list in a place where you can see it every day.

Try a Vision Board: You can also express your motivations by making them visual. If you want to take a trip, print out photos of the places you want to see for yourself. If you’re saving for a down payment on your dream home, draw the home you’d love to purchase. Get creative and express yourself freely.

Appreciate Every Step: Your motivation will be easier to maintain if you break your goal down into bite-sized pieces and enjoy each part of the process. Don’t forget to celebrate your progress and reward small victories along the way.

Don’t Fear Failure: If things don’t go according to plan, remember that there’s always a Plan B, and Plan C, and Plan D…. Failing once is not the end of the line, and you can’t fear mistakes or missteps. It’s okay if you get off track or if you mess up somewhere along the line. What’s important is that you learn to view these failures as learning experiences, and get right back to your goal as soon as possible.

Practice Positive Thinking: It may sound “new age”, but it does work. Positive thinking helps keep you open for new ideas, opportunities, and solutions. Motivation takes enough work to maintain on its own. Don’t make the process harder on yourself by allowing negative thoughts to distract you from what you’re trying to achieve.

Good luck on your New Year’s resolutions and don’t be afraid to reach out to the MagnifyMoney team for help. Find us on Twitter @Magnify_Money or via email (info@magnifymoney.com).

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Kali Hawlk
Kali Hawlk |

Kali Hawlk is a writer at MagnifyMoney. You can email Kali at Kali@magnifymoney.com

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Bargains and Deals

Get Up to $500 By Switching Your IRA to Ally

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Please note: this article was originally published on January 15, 2015 and this offer is no longer available.

Leaving a job in the next five months? Fed up with your current IRA provider? Or do you just love a bonus offer? Then Ally may have an enticing proposal for you

For the next five months (1/1/15 – 5/31/15), Ally Bank is offering up to $500 in bonus money for making a qualifying rollover or transfer from outside Ally Bank to a new or existing Ally IRA CD or IRA Online Savings Account.

A qualifying deposit includes rollovers, trustee-to-trustee transfers and contributions. Just remember, you can only make a maximum contribution of $5,500 ($6,500 if your 50 or older) into a Traditional or Roth IRA in 2015. You won’t be able to earn the bonus offer if you simply open and contribute to an Ally IRA.

If you have a SEP-IRA through an employee or due to self-employment, you can contribute 25 percent of compensation with a limit of $265,000 or $53,000. This will make you eligible for part the bonus. Although, the contribution does not have to be made all at once, the cut off date to earn the bonus is May 31, 2015.

The bonus offer has a tiered structure:

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Unless you’re able to contribute $53,000 into a SEP-IRA, the only way to take advantage of this bonus will likely be from a rollover. Rollovers can take weeks to complete, so if you want to get this offer, be sure to start making moves by mid-March.

This isn’t quick money. Eligible account holders will receive the bonus on July 31, 2015. Ally states it will be deposited into “into the Ally IRA Online Savings Account or IRA CD that received the last transaction to reach the deposit requirement.”

 Find a deal you think we need to cover? Let us know on Twitter @Magnify_Money or via email (info@magnifymoney.com)

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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Consumer Watchdog, News

How You May Never Need an ATM Card Again

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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An ATM card can be more of a liability than it’s worth.

Why you should use a credit card

Credit cards offer better protection when you make purchases, so it doesn’t make sense to use your debit ATM card for purchases.

And at ATMs your information can easily be stolen by a skimming device, especially if you’re in a crunch and using an ATM in a low traffic, unfamiliar location.

So what if you could get cash from an ATM without ever needing to insert a card?

It’s been a reality in other parts of the world.

In India, cardless ATMs simply send a text message with a code that’s then entered into the ATM to verify your identity, and dispense the cash. Australia’s CommBank has a similar function enabled from its mobile app, and it lets you send money to friends and relatives. There’s a maximum $200 withdrawal limit for cardless transactions.

And some African banks have had the feature for several years.

But the U.S. has been slower to adopt, and only now is a bank widely rolling out the feature.

The Chicago Tribune reports Chicago’s Wintrust will roll out cardless ATM withdrawals via its mobile app to 190 machines by the end of February at its affiliated banks, which include Hinsdale Bank and Trust and Lake Forest Bank and Trust.

29 machines have been in operation since late last year.

This version offers an added layer of protection over that used by many banks abroad. Instead of getting a text message code and typing it into the ATM, you simply use your phone’s camera to take a picture of a QR code that appears on the ATM screen.

That code is then transmitted by the app to the processing system, which authorizes the ATM to dispense cash.

The code and account information is never stored on your phone, so losing your phone won’t expose your account data.

Though if someone who steals your phone knows your mobile app login, then fraud is possible. But that person would have to use a Wintrust ATM to get cash, which would be easily monitored and photographed.

The transaction is fast – less than half the time a typical ATM transaction takes. You only press one button on the ATM to bring up the QR code.

There are no PINs to type that thieves can watch, and no card to swipe that can be intercepted by a skimmer.

The company behind Wintrust’s technology, FIS, says 10 to 20 other banks are in line to roll out the technology, but no timeframes have been revealed. City National Bank in Los Angeles started testing in 2013, while Wintrust spent about two years testing before this rollout.

Follow us on Twitter @Magnify_Money and send us questions to info@magnifymoney.com. 

 

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brian Karimzad
Brian Karimzad |

Brian Karimzad is a writer at MagnifyMoney. You can email Brian at brian@magnifymoney.com

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News, Strategies to Save

How Today’s Price of Oil Impacts Your Long-Term Finances

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Gas in car_lg

If you own a car, like I do, I have no doubt that you are rejoicing at the current low price of fuel. It’s evident that you’re saving a significant amount at the pump of late and it appears that it may remain this way for some time to come.

Yet the fact that crude oil is presently below $50 per barrel can and will impact your finances in a myriad of ways.

Your Money in the Market

It’s a given that any funds you have invested in the stock market is subject to fluctuations and sometimes drastic highs and lows in a given week. The first full week of January 2015 saw upheaval in part due to the current situation of the price of oil

Seeing your portfolio value go down by hundreds if not thousands of dollars in a single day or several days in a row can be quite unsettling. See it instead as an opportunity to capitalize on the situation and buy more of the market while it’s “on sale”. Prices will rebound and increase and you will eventually recoup any short-term losses.

Avoid knee-jerk reactive measures such as sell-offs. Instead stay the course and remind yourself of your investment goals.

Potential Increases in Gas Taxes

The economic growth and energy production of the US plays an integral part in the significant dip in crude oil since early June 2014. Along with the oversupply of oil in the world market by OPEC members, other countries are also posting economic gains which results in an overall lower demand for oil worldwide.

Whereas consumers are benefitting from falling price of oil by keeping more money in their pocket, the US federal government along with several states are contemplating measures to make up for the resulting financial shortfall in their coffers.

At the federal level, the Senate is considering an increase in the federal gas tax from the current $0.18/gallon. This increase would be used to fund highway infrastructure projects. I for one wouldn’t mind the gas tax increase, as highway safety is important. As a resident of New York City, I see evidence of major repairs of the local bridges and highways, yet it’s a process that seemingly occurs at a snail’s pace

As reported by AAA, the current price of gas has fallen under $2.00/gallon in several states including Ohio, Kansas and Colorado. States across the country, especially those dependent on oil and gas revenue, are feeling the adverse effects. Based on data released in December 2014, by the federal Bureau of Labor Statistics, 2,300 oil and gas jobs in October and November of 2014 were lost in Texas. US states are actively reviewing their budgets and several may decide to increase the state tax on gas. As a result, some Americans will likely see an increase in the overall cost of fuel per gallon over the long term.

Increases in Consumer Purchasing Power

Spending less on gas means that you will have more disposable income that can translate into spending more on other consumables. You can decide whether to redirect that surplus of money to pay off debt, increase savings and purchase investments, or benefit from potentially lower costs of some goods and services such as air travel.

When purchasing a plane ticket, you may pay what’s called a fuel surcharge depending on the airline carrier and whether the destination is domestic or international. As many airlines purchase their fuel months ahead in order to mitigate price fluctuations, consumers may not see any reduction in the immediate but can expect to see slightly lower fares and fuel surcharges in the months to come.

This era of cheap oil is not one to be quickly discounted as a temporary fluctuation or “blip”. The effects of oil prices signal long-term and consequential changes on a number of levels. In terms of your personal finances, be aware that as you profit by paying less at the pump, every surplus dollar that you save or spend as a result impacts your financial well-being.

Follow us on Twitter @Magnify_Money for regular updates in personal finance

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Kassandra Dasent |

Kassandra Dasent is a writer at MagnifyMoney. You can email Kassandra at kassandra@magnifymoney.com

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College Students and Recent Grads, Pay Down My Debt

You Need to Understand How Interest Impacts Your Student Loan Payments

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

mortar board cash

If you’re a recent college graduate who has never had any debt besides the student loans you graduated with, you might not fully understand how interest works when it comes to your loans.

How payments are applied can be a little confusing to someone who has never had to deal with it before.

If that’s the case for you, then you should read on, as we’re looking at how payments go toward the interest of your loans first, and explaining how you can reduce the interest you’re paying on your student loans.

This information can save you thousands of dollars over the life of your loan if you apply it correctly.

How Are Payments Applied to my Loans?

For most student loans, your payment is going to be applied to interest first, and then to principal. If you have any fees associated with your loans (such as a late fee), then your payment will go toward paying your fees first, then interest, and then principal.

If you’re repaying your loans under an Income-Based Repayment Plan, then your payment will be applied to interest first, then fees, and then the principal.

How Is Interest Calculated?

Interest accrues daily on your student loans, so if you check on your balance a few times throughout the week, you’ll see the amount owed increasing. Student loans use a formula of simplified daily interest, which means interest is only accrued on the principal balance.

Let’s take a look at this in action using an example. Feel free to follow along by plugging in your specific loan numbers.

This is the example we’ll be using: student loan balance of $8,000 at a 6% interest rate on a 10-year term, with a minimum payment of $88.82.

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To calculate your daily interest amount, use this formula: (Current Principal Balance x Interest Rate) / 365.25

Using our example: (8,000 x .06) / 365.25 = $1.314168377823409 in interest accrues daily.

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If you want the monthly interest amount, use this formula: (Daily Interest Amount x Number of Days in Month)

Using our example: $1.3141 x 30 = $39.42 in interest accrues monthly.

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Some student loan providers use the “interest rate factor” instead, which is essentially the same thing – the amount of interest that accrues on your loan.

To calculate the interest rate factor, divide the interest rate of your loan by 365.25.

Using our example: .06 / 365.25 = .0001642710472279261.

The formula for the monthly interest rate using the interest rate factor will yield the same results – (Number of Days Since Last Payment) x (Principal Outstanding Balance) x (Interest Rate Factor).

Using our example: 30 x 8,000 x .0001642710472279261= $39.42 in interest accruing monthly.

Takeaway

What you should take away from this is that of your $88.82 monthly payment, $39.42 is going toward interest. Ouch!

[Read more about how to handle student loans here.]

What Can I Do To Lower How Much Interest I’m Paying?

Seeing how much of your payments go toward interest can be painful. By paying extra toward your student loans, you can accelerate your debt payoff date and pay less overall.

This is because every time you make a payment over the minimum amount due, more of your payment is applied toward the principal balance. Remember, when the principal balance goes down, the amount of interest accrued does as well.

We know that a 6% interest rate on our $8,000 loan means $39.42 of interest accrues monthly. However, 6% interest on a $6,000 loan is $29.57. It makes quite a difference!

Let’s take our original example from above. If you simply pay $88.82 for the entire 10 years, you’ll have your loan paid off on time, but you’ll actually end up paying $10,657.97. That’s $2,657.97 more than you signed up for, due to interest!

If you add just $100 more onto your monthly payment so that you’re paying $188.82/month, your loan will be paid off in 4 years, and you’ll have saved $1,619 off your total bill (paying a total of $9,038.97).

Alternatively, if you can’t afford to pay more in one chunk, you can make extra payments when possible, such as paying $20/week, every week, toward your loans.

What Does It Mean When Interest Capitalizes?

It’s important to know what this term means – this is something you only have to be concerned about once, and only if you have unsubsidized loans.

Let’s quickly cover the difference between federally subsidized loans and unsubsidized loans. With federally subsidized loans, the government pays the interest for you while you’re in college. With federally unsubsidized loans, the interest starts accruing as soon as the loan is disbursed to you.

If you don’t make any payments to your unsubsidized loan while you’re in college, then all of the interest accrued while you attended will capitalize when your loan enters repayment status (right after your grace period ends).

If you’re still in college, it’s recommended that you at least try to cover the monthly interest payments while in school. It will save you more money down the road! If you’re in your grace period, there’s no harm in starting to pay early. Take advantage of being able to pay down your interest while you can.

Look At Your Payment Schedule

Most student loan servicers provide you with a payment schedule so that you can see how your loan will be paid off. This might help you visualize and understand exactly where your payments are going.

If you don’t see an option for this, try using a loan calculator.

Continue Paying, Even If You’re Paid Ahead

If you do start paying extra toward your student loans, you might notice that the status of your loans says “paid ahead”.

While that means you’re making great progress, it doesn’t mean you need to stop paying your loans. Interest is still accruing! If you take a break and don’t pay, your hard work will be eaten away by interest.

Read the Fine Print

When it comes to paying any loan back, you should be fully aware of the terms of the loan and how it functions. You’re responsible for paying your loans back according to the terms you agreed to.

It’s extremely important to know how your payments are being applied to your student loans. If you have a different type of student loan and aren’t sure how interest is being calculated (or how your payments are being applied) then call your student loan servicer. Many of them have helpful resources on their website that will help you understand how payments are applied, but it’s always worth giving them a call for clarification.

If you only take away two points, let it be these: when you make a payment toward your student loans, your money is going toward the interest on your loan first, and then on the principal. To reduce the amount of interest you pay over the life of your loan, make extra payments when possible.

Follow us on Twitter @Magnify_Money and send questions to info@magnifymoney.com 

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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News

Comparing Mortgage Rates Just Got Easier

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

ChexSystems Big

Today the CFPB has launched a mortgage price comparison tool on its website, alongside the shocking results of a survey. At MagnifyMoney, we applaud both.

The survey (of mortgages taken out during 2013) showed that 50% of borrowers only consider a single lender or broker before deciding where to apply for their mortgage. This is largely the result of an over-reliance upon their real estate agent, local bank branch or mortgage broker to make the decision for them. This can have expensive consequences for the borrowers, because CFPB data shows that shopping around could save up to 0.5%, on average. For a typical $200,000 conforming mortgage, that could be $3,500 over the first five years of the mortgage.

Why do real estate agents and brokers get it wrong? Their interests are not aligned. Real estate agents want to minimize the chance of the home being sold to someone else, and maximize the amount that their client can borrow. So they are solving primarily for speed. If a particular mortgage company is consistently the fastest, they will tend to send their business that way, even if it may be a bit more expensive. In addition, real estate agents who have spent their career working in a particular neighborhood form relationships with certain banks and lenders. Out of no ill will, they may “always” send their business to that particular bank, even if the rates are not always the best.

Brokers, on the other hand, still have an incentive system that conflicts with borrowers. They live on commission, and the mortgage bank or brokerage willing to pay the highest commission in the shortest period of time will likely get the business of the broker.

If a consumer wants to make sure they have the best deal, they need to take shopping into their own hands. And the deals can be excellent.

A New Tool

The CFPB has just launched a new tool. You just enter a few pieces of information (your credit score, your state, your house price and your down payment), and it will provide you with the typical mortgage rates in your market. It will also show you the highest rate you should be paying. Here is a screen shot of an example:

Screen Shot 2015-01-13 at 7.02.04 AM

Although they will not provide the names of the lenders where you can get the lowest rates, they will help you set your expectations. And the tool makes it very easy to see if you are being ripped off.

We recommend that everyone should take the 2 minutes to input data into this tool before deciding upon whether or not they are getting a good deal. And, if you see better interest rates than what you have been quoted, it is time to shop around.

If you have excellent credit and are making a good down payment, we still have yet to see much lower rates than Pentagon Federal Credit Union (https://www.penfed.org/) and encourage people to use both the CFPB tool and the visit the PenFed mortgage page to get a good indication of the rates available. And then, don’t be afraid to shop around for the best deals. The FICO score does not punish multiple mortgage applications, and the savings can be significant.

At MagnifyMoney, we believe that more transparency into pricing can only help consumers. For most people, their home is the biggest single purchase they will make, and their mortgage is the biggest debt they will take out. We should no longer rely upon the desire of a real estate agent or broker to make a commission, and this CFPB tool helps to make that a reality.

For regular updates, follow us on Twitter @Magnify_Money

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Pay Down My Debt

MagnifyMoney Launches Get Debt Free Campaign

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Screen Shot 2015-02-03 at 1.30.44 PMDigging out of debt and getting a better grasp on finances is the second most common New Year’s resolution – coming in behind weight loss. Last week, MagnifyMoney launched our #getdebtfree campaign to help Americans drop their debt in 2015. To kick off our campaign, we debuted a free guide to becoming debt free forever.

Our 45-page guide offers information about:

  • How to slash your interest rates
  • How to boost your credit score
  • How to negotiate hard with creditors
  • How to become debt-free fast and forever
  • And simple, step-by-step instructions

We know digging out of debt can feel overwhelming and our guide can serve as a blue print to get the process started and help people keep their resolutions longer than the third week of January.

Download the free debt free forever guide here

In addition to launching our guide, co-founder Nick Clements took to the airwaves to share get debt free strategies. His segments are currently airing on local TV and radio stations around the country. If you’re struggling to get debt free, be sure to take five minutes to watch a segment and download the debt free guide.

On air photo

Don’t forget to share your #getdebtfree journey with us on Twitter @Magnify_Money and email info@magnifymoney.com to set up a free, 30 minute consultation to discuss how to reach your financial goals.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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