The sooner you and your spouse can agree on where the family money goes, the better. The best time to figure out finances is before you’re married when both of your money is separate.

I’m getting married in November. The shared finances discussion has begun. It will continue for the next few months until we’ve covered all of the ground rules. These premarital financial discussions should minimize the fights while we’re married.

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Paying the minimum payments on your credit card is what the credit card companies want you to do. They get more money from interest that way. Pay more than the minimum monthly payments or you’ll pay double or triple of what you owed.

$12,000 credit card debt will take you 400 months (30+ years) to pay off if you make the minimum payments each month. You will pay almost $20,000 in interest. The minimum payment gets lower as you pay off the balance. You’ll end up paying for a long time thanks to compounding interest.

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What does this have to do with paying high debt first? They jumped high and they’re high-fiving. Yeah it’s a stretch but I got nothing else.

Debt with the higher rate charge the most interest per dollar. The way to get out of debt most efficiently is to pay off the debt with the highest balance first. After that, tackle the next highest debt next and so on.

A lot of people will say to attack the lowest balance first but the numbers side with paying off the highest interest debt first. The reason people pay the lowest balance debt first is because one less bill makes them feel less burdened. You lose less money to interest by paying the highest rate debt first.

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Reduce your credit card interest rate in one easy step - call your credit card provider and ask nicely. Just make a phone call saying you’ve gotten some better offers from other credit card companies and you’re going to close your account if your rates aren’t lowered. The majority of the time your credit card company will give in to your demands, simply because the credit card industry has a lot of competition and it’s a whole lot easier to retain an existing customer than to acquire a new one.

So if you want to lower your credit card interest rate, give it a shot. At worst, they’ll refuse and you’ll only lose a few minutes of your time. At best, you could get a major reduction in your interest rate.

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Student Loans: Not As Fun As Advertised.

A lot of student loan companies offer incentives for people who setup automatic payments for their monthly payments. People with automatic deductions from their paycheck or bank account are less likely to default on payments. Auto-pay your monthly student loan payments to knock off some percentage points from your interest rate.

For my automatic student loan deduction, I get .25% (that’s point two five) off of my student loan interest which saves me a few hundred dollars per year. The added bonus is that the student loan payments are paid every month without me having to think about it.

Check with your specific lender if they offer such incentives.

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1. What is a home equity loan?

A home equity loan is a loan that is borrowed using your home’s equity as collateral. The amount of equity you have in your home can be calculated by taking your home’s value and subtracting off how much money you still owe on your mortgage. Since you are using this equity as collateral, if you fail to pay back the loan, your creditor can sell your house to get its money back.

2. How much money can I borrow?

Well, that depends on several factors, including your credit history and current income, but usually lenders will let you borrow until you reach a loan-to-value (LTV) ratio of 80%. The LTV ratio is is simply how much money you are borrowing (original mortgage + home equity loan) divided by your home’s value. For example: if your home is worth $100,000 and you owe $50,000 on your mortgage, your LTV ratio is 50%. So you will be able to borrow $30,000 for your home equity loan and your total loans ($50,000+$30,000 = $80,000) divided by your house’s value ($100,000) will be at the 80% LTV ratio.

3. Why do people usually take out home equity loans?

The most common reasons people take out home equity loans are for paying off high interest credit card debt, major home repairs, college tuition expenses, medical bills, or even just to buy a car or boat.

4. What are the advantages of a home equity loan?

• Lower interest rate than other types of loans
• Ability to get a relatively large amount of money (depending on the amount of equity you have in your home, of course)
• Payments are often tax-deductible

5. What are the disadvantages of a home equity loan?

There are none! Go get a home equity loan right now!

Only kidding. The main disadvantage is that you’re putting yourself in jeopardy of losing your house if you can’t pay back the loan. So if you’re confident in your ability to pay back the loan, or if you just don’t mind losing your home and living on the street, then there aren’t too many downsides to taking out a home equity loan.

6. What is the difference between a home equity loan and a home equity line of credit (HELOC)?

A home equity line of credit is just that - a line of credit. You get approved for a certain credit line, you can borrow up to that amount, and you only pay back what you’ve borrowed. A regular home equity loan is just a lump sum loan that must be payed back in a certain amount of time.

7. Is a home equity loan right for me?

It all depends. See what kind of rates are available. If you’re currently paying off some high-interest credit cards, a home equity loan might save you some money.

8. Where can i find the best rates for home equity loans?

Bankrate has a nice feature than lets you compare home equity rates in your area.

9. What is the airspeed velocity of an unladen swallow?

What do you mean? An African or European Swallow?

10. How many stockbrokers does it take to change a light bulb?

Dear God! It burnt out!! Sell all my GE stock NOW!!!!

(Ok, so that was only 8 real questions about home equity loans, but 10 is just so much nicer than 8.)

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Best way to apply for a loan: Make a picket sign.

For anyone looking for a loan, watch out. Wikipedia points out an important fact about secured loans.

A secured loan is a loan in which the borrower pledges some asset (e.g. a car) as collateral for the loan.

This means that they can take and sell whatever you pledged if you slip up and can’t make a loan payment. The only thing the lender can do if you have unsecured debt is make a black mark on your credit history. Bad credit still sucks but losing your stuff sucks more.

Related links: Unsecured UK loans

Secured Loan [Wikipedia]
Unsecured Loan [Wikipedia]
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How to get rich. Step 1) Earn lots of money. Step 2) Save lots of money.

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Money $mart Life has a good article on how college kids can save money on spring break. From personal experience, I thought the best piece of advice was:

“5) Pack the Room
Same principal as pack the car. The more people you can fit into a room, the cheaper it is per person. We could only fit 5 guys into a Cavalier on the way to Ft. Lauderdale but we met up with a few friends down there and filled our hotel room to the brim. Obviously with just two double beds there’s not enough bed space for everyone so be sure to bring a sleeping bag for nights when you get floor duty.”

The last spring break I went on, we had 7 people sleeping in one hotel room. Sure, the sleeping arrangements weren’t exactly ideal (our buddy Stavi slept out on the balcony), but I simply viewed the cramped conditions as extra incentive to find a nice young lady to spend the night with (nudge, nudge, wink, wink). Apparently it wasn’t incentive enough, as I had little success in that regard and had to spend the week sharing a bed with Henry.

Article [via Money $mart Life]

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I was chatting with some fellow personal finance bloggers about why the U.S. savings rate is next to nothing. Here’s what came of it.

Henry @ Binary Dollar: I don’t even know what the savings rate is
Jeremy @ GenXFinance: I think it comes down to a lack of financial education. There is big shift in how the last few generations view finances.
Henry @ Binary Dollar: I just know it’s ridiculously low
Tricia @ Blogging Away Debt: I believe it’s in the negative at the moment.
Henry @ Binary Dollar: I don’t think it’s financial education
Jeremy @ GenXFinance: most of our parents (baby boomers) grew up with cash only parents
Jeremy @ GenXFinance: only later in life they were exposed to credit and disappearing pensions
Henry @ Binary Dollar: heh. I have no idea why people don’t save.
Henry @ Binary Dollar: everyone KNOWS what they need to know already
Tricia @ Blogging Away Debt: I think there is a general attitude of wanting things now. With the increased media presense, we see more things that we “could” have.
Jeremy @ GenXFinance: we’ve moved from generations who didn’t need to save because of the financial security they were entitled to via social security
Jeremy @ GenXFinance: and pensions
Jeremy @ GenXFinance: oh there is, for sure
Jeremy @ GenXFinance: everyone wants wants wants, and will do whatever they can to get it
Tricia @ Blogging Away Debt: I am not counting on social security, that’s for sure.
Henry @ Binary Dollar: me neither
Henry @ Binary Dollar: I want things too but that’s why I’m saving
Henry @ Binary Dollar: so I can BUY all that crap
Tricia @ Blogging Away Debt: But it’s so much easier to put it on credit and have it now.
Tricia @ Blogging Away Debt: <– guilty of that
Jeremy @ GenXFinance: but I think the root of the problem comes from the major shift from the current retired generation who are living on the government or their employer’s dime
Jeremy @ GenXFinance: to one where it is up to us to fend for ourselves….
Jeremy @ GenXFinance: we haven’t bridged the gap yet
Henry @ Binary Dollar: and it’s not just retirement
Henry @ Binary Dollar: people don’t even save for their splurges. they buy motorcyles on loans and stuff.
Jeremy @ GenXFinance: no it isn’t, but that is the most important and basic need that should be considered when saving
Jeremy @ GenXFinance: that’s true
Henry @ Binary Dollar: when did you finally realize that you better start getting out of debt and saving trish?
Henry @ Binary Dollar: call the hospital. she might have fainted or something
Tricia @ Blogging Away Debt: When my credit cards were almost maxed out. Very fortunate for us, I found a new job that paid more right before I used all available credit.
Tricia @ Blogging Away Debt: We kept living the way we were, and had a surplus. All extra money goes towards the debt.
Tricia @ Blogging Away Debt: Now, I’m not so sure we can save at the same rate that we are paying off debt.
Tricia @ Blogging Away Debt: It is going to be harder to do.
Tricia @ Blogging Away Debt: I can already feel the need to “spend” and “live life a little” once our debt is paid off.
Henry @ Binary Dollar: okay I just looked it up
Henry @ Binary Dollar: Personal savings drop to a 73-year low
Jeremy @ GenXFinance: that is a sad picture
Henry @ Binary Dollar: I know
Henry @ Binary Dollar: dangit I hate gaim
Henry @ Binary Dollar: it changes my font sometimes
Jeremy @ GenXFinance: make sure you publish that
Tricia @ Blogging Away Debt: LOL
Henry @ Binary Dollar: okay. final thoughts on fixing the united states savings rate
Tricia @ Blogging Away Debt: Education.
Tricia @ Blogging Away Debt: Start young.
Jeremy @ GenXFinance: as adults, all we can do is address our debt first and then focus on savings. For our kids, teaching them to operate on a pay-as-you-go system
Jeremy @ GenXFinance: and lead by example
Henry @ Binary Dollar: I’d make a credit card harder to get.
Jeremy @ GenXFinance: I agree, unfortunately that is out of our control for the most part
Jeremy @ GenXFinance: that would be the best solution

We talked about some other topics that I’ll post in the future. If you want to chat and show up in future posts, add my name on AIM: bickbot.

Hat tip to Blogging Away Debt and GenXFinance.

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