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In Debt and Pregnant. Now What?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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I got pregnant when my husband and I were nearly $300,000 in debt.

Although it sounds crazy, I did it on purpose (both accumulating debt and getting pregnant that is.)

I wish I could say I had a super fancy Bentley parked in my driveway to have something to show for that high number, but really it’s all in our brains (which have lately been fried due to intense sleep deprivation.) To clarify, what I mean to say is all of our debt is student loan debt.

Sometimes people will say that education debt is “good debt,” and if that’s the case then we have really, really good debt. Our $300,000 student loan debt includes two master’s degrees – one for each of us – and three years of my husband’s medical school tuition. Unfortunately for us, we’ll probably be tacking on another $50,000 to it before he graduates from medical school in 2016, bringing the total number up to $350,000 and possibly even $400,000 since it’s actively accruing interest (fun right?)

Of course, my husband and I don’t actually believe that student loan debt is good debt. For most people, student loan debt cannot be discharged in bankruptcy (although according to U.S. News, in rare cases it actually can.) So, that means most people will have to pay back every penny of their student loans even if they encounter significant hardships. Basically, not only is our $300,000 of student loan debt burdensome, it’s downright scary.

Yet, being in debt didn’t stop me from actively trying to get pregnant, and it shouldn’t stop you if you have the three traits below.

1. Financial Discipline

Even if you have significant debt, I believe it’s fine to make big life choices like buying a house or having a child as long as you have financial discipline. You need to be the type of person who is acutely aware of their debt, not someone who is too scared to look at the number. If you can face your debt head on and have the ability to stick to a detailed financial plan, you can definitely make room for some of life’s biggest changes liking bringing adorable, stinky babies into the world.

Financially disciplined people track spending, create budgets, understand their cash flow, and do not live paycheck to paycheck. Their student loan payments are just another line on their budget that they carefully pay attention to and try to tackle each and every month.

For some people, like Kirsten at Indebted Mom, biology plays a factor into the decision to have children as well. Although Kirsten has significant student loan debt like I do, she was not willing to risk the possibility of not being able to have children due to her age. “It would have been nice to pay off debt first, but if we’d waited to pay off all our student loans, I probably wouldn’t have been able to have children,” says Kirsten. In order to tackle her high student debt, Kirsten remains employed as an aerospace engineer and makes extra money on the side through online writing jobs.

2. Extreme Hustle

When my husband and I decided we wanted to start our family, we knew that we needed to create a large savings account for our baby. Between hospital costs, baby gear, and other necessities, we knew babies were expensive. Thinking of a worst case scenario where would have to reach our $4,000 out of pocket max for our health insurance policy, we decided to save $10,000, which would hopefully leave some money left over to start a college fund.

Of course, with my husband being a student, the only real way to create $10,000 out of thin air was for me to hustle. I was already bringing in extra money from online writing jobs, but I decided to double my efforts. I took on new clients, e-mailed people tirelessly asking if they had work, and spent many, many nights staying up until one or two o’clock in the morning doing extra work. Every time I got a PayPal deposit from one of my new clients, I moved it right over to my Smarty Pig high yield savings account for our future baby.

[You can see the latest high rate savings account deals here]

Of course, the joke was on us. I got pregnant just a few months later, and much to our surprise, we found out we were having twins. We used every penny of that $10,000 savings since both of our children spent time in the NICU. I was so glad I had that savings account; otherwise, we would probably be in credit card debt right now too.

Of course, if you are in debt, there is the obvious option to wait to have children or not have children at all. Many people, like Kali Hawlk of Common Sense Millennial, decided not to have children, saving them hundreds of thousands of dollars in child rearing expenses over the course of two decades. This is certainly something to consider if you are in significant debt and are not equipped with the income or the tools to successfully handle paying off your debt and raising children at the same time.

Kali explains that, “If you can’t take care of yourself financially, you aren’t prepared to adequately provide what a child deserves,” and I agree with her. Children don’t need every toy or baby gadget on the Earth to be happy, but they do need basic necessities like food and a roof over their heads, monthly bills that can come into jeopardy if you are unable to make regular payments on your debt.

3. Ability to Handle Adversity

As anyone will tell you when he or she is dealing with large amounts of debt, there’s no such thing as a nice, linear payoff schedule. Life happens, things come up, and often you have to make hard decisions about just how much debt you want to pay off each and every month.

For us, the biggest shock of course was finding out we were having two babies, not one. To me, at 26 years old, I felt like I could handle one baby. I felt like my income, the funds I saved, and my general life experience meant I could be a good mother to one baby. However, the day I found out there were two, I spent an hour sobbing in the shower that night. Simply put, I was terrified. I was scared of everything like losing one or both of them since the pregnancy automatically became high risk. I was also worried how I was going to afford both of them with my husband still in school, and of course, I had tons of vain thoughts about how my small frame was going to carry two kids as long as possible throughout the pregnancy.

But, like all the other times in my life when I handled unexpected events, I pulled myself together and continued to work on a plan. I knew that if I could just work a little bit harder, not only could I be self-employed but I could also cut out the significant childcare expenses that two children bring by staying home with them myself.

That, of course, is exactly what I did. My boy/girl twins are 7 months old now, and I have been self-employed for almost a year. It hasn’t been without its difficult moments, that’s for sure, but because of hard work, financial discipline, and planning, we’re still on track to pay down our debt and ensure our children have everything they need to grow up happily and healthily.

You Have Nine Months to Prepare

If you are in debt and pregnant, there’s nothing stopping you from using this time to get your finances organized and develop a plan. The best thing you can do is, of course, reduce your expenses and raise your income. Trust me, I know it’s challenging to ask for a raise or take on extra work when you’re hugely pregnant, exhausted, and have to pee all the time. I’ve been there. But, your children are worth it. Their safety and security is worth it.

Essentially, if I can do it, you can do it. Take the steps now to work on developing the three qualities I mentioned above: discipline, hustle, and handling adversity. Luckily for you, children bring immense joy and happiness, and you’ll find having them is the best decision you’ve ever made – with or without your debt.

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Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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A Procrastinator’s Guide to Managing Your Finances

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Many of us fall victim to procrastination from time to time. And when it comes to managing your finances, avoiding or delaying tasks can get expensive very quickly.

“Our lives are busy, and sometimes we don’t want to deal with it,” says Gerri Detweiler, education director at the business credit management website Nav and author of “Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.

In fact, Detweiler remembers the price she paid the year she pushed off renewing her business filings with the state.

“I didn’t get it done right away and paid enormously for it,” she said.

No matter the reason behind your procrastination, it can lead to a financial mess unless you move it to the forefront of your to-do list. Know that it is possible to transform into a doer – even if you’re a habitual procrastinator – by adopting the small changes below to achieve big results down the line.

1. Automate as much as possible

If you’re prone to procrastination, keeping on top of payments can feel overwhelming, especially if you have multiple lenders you need to pay every month. Consider automating your payments so you can avoid late fees and charges. Detweiler advises setting up text or email alerts so you know when payments are due and if there are any changes to the minimum payment amount. You can set up automatic payments with either the lender or through your bank’s bill pay tool; all you have to do is just make sure you have enough money in your account to cover what you owe.

2. Consolidate debt so you have fewer bills to keep track of

The average person has 3.06 bank cards and 2.5 retail cards, according to Experian’s 2018 State of Credit Report. Detweiler advises keeping two credit cards active at any given time: one with a lower interest rate to use for bigger purchases where you can revolve a balance, and a second credit card that is used for everything else, including earning rewards, that you pay off in full at the end of month. Then, put the rest of your cards in a drawer once they’re paid off and use them only occasionally to keep the accounts from being closed by the issuer.

If you have multiple high-interest credit card balances, you may be able to qualify for a balance transfer card offering 0% interest for a specific period of time. While most balance transfer deals charge a 3% balance transfer fee, which is added to the amount you transfer, it may make financial sense to move multiple balances to one card with one payment. Then, devise a repayment plan to knock down that balance as much as possible during the no-interest period as your payments will all be directed toward the principal until the 0% offer has expired.

Another option is to consolidate multiple card balances or other debts with a debt consolidation loan. Depending on how good your credit score is, you may be able to find a lender offering an interest rate lower than what you’re paying on your credit cards. The beauty of a debt consolidation loan is that you can use it to pay off your debts and then have one fixed payment over a specific period of time, generally two to five years. Of course, this will only help if you have the discipline to refrain from adding new debts or purchases to your now-cleared credit cards.

If you’re really struggling and over your head with your finances, consider talking to a credit counselor that can put you on a debt management plan.

3. Turn to technology to help change behavior

If you’re a procrastinator, relying on your willpower can be challenging. Thankfully, technology can help with that. Consider turning to apps or websites to help change any unhealthy behaviors and transform any bad habits.

For instance, you could download a robo-saving app, such as Digit, or enroll in a savings program like Bank of America’s Keep the Change, that help make saving as painless and out-of-mind as possible. Remember that small financial goals (like saving $5 per day versus $150 per month) will seem more achievable and can help lead to big improvements.

Other apps or websites aggregate information about multiple accounts, so you can see what’s due and what’s outstanding on a weekly or monthly basis, can also come in handy. Detweiler suggests Mint, Credit Karma, or the EveryDollar budget app. She also suggests setting reminders so you can remember to log in regularly. When you see the progress you’ve made in a chart or graph, it acts like a reward that is sent to your brain, which is key to long-lasting behavior changes, as journalist Charles Duhigg noted in his book “The Power of Habit.”

Whether your procrastination is the result of being really bad at time management or overly demanding standards that result in unhealthy levels of perfectionism, it helps to be aware of what’s causing any counterproductive, irrational behavior so you can determine how to do better.

For instance, if you’re really bad at estimating how long it’ll take you to finish a task, then make a habit of starting earlier than you normally would. Or, if your overly demanding standards stop you from getting started, then remind yourself before you start the task that “done” is better than perfect and think back to times that procrastination has proven harmful to you.

Changing behaviors, like managing your time better or reducing any anxiety you feel when tackling big tasks (like paying multiple lenders every month), can be challenging, but not impossible. Breaking things down into small, simpler tasks and using technology to help you as much as possible can set you on a fresh path to break unhealthy habits and lead to big improvements on your finances.

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Vivian Giang is a writer at MagnifyMoney. You can email Vivian here

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Got Tax Debt? Here’s What to Do

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Some people are fearful of the IRS. But if you are someone who owes tax debt to the IRS, you need more than a little bit of healthy fear to get you through — you need a plan. Here’s what you can do to pay off tax debt.

7 steps to pay off tax debt

Make an initial payment.

If you can’t pay your tax bill, one strategy — according to the IRS — is to make an initial payment based on how much you can afford, then work to determine a plan for paying down the rest of your debt.

Determine how much you can pay.

When faced with what seems like a staggering tax bill, don’t panic. The important thing is that you don’t ignore the IRS. One of your first steps should be to determine how much of your tax bill you can afford to pay. And keep in mind that whatever you don’t pay will be subject to accruing interest and penalty fees.

Choose a payment option.

Once you have settled on how much of a payment you can make, you have to make that payment. These are the main options for payments: using the electronic federal tax payment system, which is free, but is most suitable for businesses or large payments and requires enrollment; electronic funds withdrawal (which can be done during e-filing) straight from your bank account or from the IRS mobile app, same-day wiring (which may carry bank fees), a check or money order, or cash at a retail partner.

Ask for an installment agreement.

If you know you can’t make your payment in full, you can apply online for a payment plan through the IRS. Your eligibility for a payment option will depend on your individual tax situation.

To apply for an installment agreement, you have to fill out an application online that will include information such as your Social Security number, your most recent tax return filing date and your basic personal information. There are three options for a payment plan: a full payment, a short-term payment plan that will require paying in less than 120 days and a long-term installment agreement to pay over more than 120 days. In general, you are eligible to apply online for the installment agreement if you owe $50,000 or less in combined tax, penalties and interest fees and you have filed all your tax returns. The Federal Trade Commission also notes that the IRS usually can’t deny an installment agreement if you owe less than $10,000.

Ask for an offer in compromise.

Contrary to what you may think, the IRS is willing to work with you if you have tax debt and can’t pay what you owe. According to the IRS, it will consider what it calls an offer in compromise if you can’t pay your bills — and if doing so will cause a financial hardship to you.

An offer in compromise is something that can be considered after you have exhausted other options. It is based on several factors that the IRS will assess, including:

  • Your ability to pay
  • Your current income
  • Your total debt and expense obligation
  • Your assets and equity

If you can put together a reasonable offer in compromise, the IRS notes that it is generally able to accept the offer if it represents the most it can expect to collect within a “reasonable amount of time.”

There are some qualifications that you have to meet to be considered for an offer in compromise, which is detailed on the IRS website. When you submit your offer, you will have to choose one of two payment options to show the IRS your offer is serious: a lump sum or a periodic payment. The lump-sum offer consists of you including 20% of the total offer amount. If the IRS takes your offer, it will keep that 20% payment and you will pay the rest in up to five payments. If you go the periodic payment route, you’ll still submit an initial payment with your offer application, but you’ll make monthly installments while you wait to hear back from the IRS. If it does accept your application, you’ll pay monthly until your offer is paid off.

In some cases, if you meet certain low-income qualifications, your application fee, initial payment and monthly installments will be waived while your offer is considered. While the IRS considers your offer, you are required to make any associated payments with your offer, and any other collection activities will be suspended. If you don’t hear back from the IRS within two years of your offer, it is considered accepted.

Ask for “Currently Not Collectible” status.

Depending on your financial state, the IRS may determine that your account is not collectible at the moment and temporarily pause collection until your status changes. To be eligible for the status, you may have to complete a Collection Information Statement and submit proof of your finances, such as your monthly income and assets. Even if the IRS determines that you are in a not-collectible status, your debt will still be susceptible to penalties and interests until the full amount is paid. To request a delay in the collection process, you have to call the IRS.

Work with a professional.

Although it might seem counterproductive, it may be helpful to hire a tax professional who can help you sort through your options and make a plan. The IRS recommends that if you choose to work with a tax professional, you make sure you vet their credentials. There are certain rules pertaining to debt collection, and you always have the right to work directly with the IRS instead of a debt collector.

What you should know about tax debt

Tax debt can occur in large or small amounts. Essentially, as soon as you fail to pay what you owe the IRS, you have tax debt. Here’s what you should know about tax debt.

IRS collection practices. The official collection practice for tax debt begins after you have received your tax bill from the IRS and failed to make your payment in full. After you receive your first tax bill, the IRS will send you one more bill before enacting collection actions. But, in the meantime, the amount you owe will continue to accrue interest and possible penalties.

Once the IRS has sent your final tax bill, it will move to collection actions, which can range from using any future tax refunds to seizing your property and assets or showing up at your home or business.

Statute of limitations. In general, the statute of limitations on a tax liability for the IRS is 10 years. After the statute of limitations expires, the government no longer has the right to pursue collecting that liability.

Always file your taxes. One of the best ways to be proactive against tax debt is to make sure that you always file your taxes by the IRS deadline and work to make any type of payment that you can. Delaying, either with filing or with debt, never pays off. It’s always best to work with a tax professional to file your return to make sure that you reduce your chance of an error.

Don’t ignore notices from the IRS. As tempting as it may be to think that ignoring notices from the IRS will make them forget about any debt you owe, it doesn’t exactly work that way. In fact, the longer the IRS doesn’t hear from you or is unable to reach you, the more it may increase its efforts. For instance, the IRS could turn to seizing property, your bank account and your possessions, or issuing you a summons.

The bottom line

If you find yourself in a situation where you have tax debt, you have options. You can work directly with the IRS and submit details of your financial status to come up with some sort of payment plan or even temporary deferment depending on your specific situation.

The most important thing you can do is communicate with the IRS and take steps to show it you are serious about making some form of payment.

Advertiser Disclosure: The products that appear on this site may be 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 financial institutions or all products offered available in the marketplace.

Chaunie Brusie
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Chaunie Brusie is a writer at MagnifyMoney. You can email Chaunie here

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