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Most Effective Debt Recovery Solutions

Looking for an effective debt recovery solution?

Collecting money from people who are in debt to your company, is never a fun task. Going after the money you are owed can create unnecessary trouble for you and your business. That’s why there are debt recovery solutions available to take the stress out of retrieving the money owed.

You will find this helpful: 4 Interesting Ways to Spend Your Tax Refund

However, the debt you are collecting is indeed owed to YOU. As a creditor, it is legally your right to attempt to collect the debt after a missed payment. Unfortunately, there is only so far you can go before you move from debt collection into debt recovery.

What Is Debt Recovery?

Debt recovery is when a debt has gone unpaid for a long period of time. As soon as the debt has been unpaid for an extended period, the creditor, or company, hires a non-biased third party to recover the money owed.

Debt recovery is different from debt collection. Debt collection is when you as the creditor attempt to contact the consumer. After the loan, or bill has gone unpaid for an extended amount of time, it is time to bring in the professionals!

Effective Debt Recovery Solutions In the Modern Age

If you are a consumer, ignoring your debt, you no longer live in a world where you can rip up the bill and be done. Maybe you fell for a minimum payment plan, or fell on hard times. Regardless, your debt follows you all over the world!

Digital Footprint debt

As digitizing has made credit scores, as well as recent contact information more available, you simply can’t outrun what you owe!

As a creditor, there are several debt recovery solutions that are extremely effective today. Find a debt collection company that will not only include these strategies but also use all of them in order to close the account!

Finding the Debtors

Collecting up-to-date information on the debtors is vital to debt recovery. However, this information isn’t just about physical addresses!

Here are a few things a good company will uncover about consumers:

  • Phone number
  • E-Mail address
  • Most recent address
  • Commercial Information

Being able to locate, as well as contact a debtor attempting to run out on their debts is one of the most practical and necessary debt recovery solutions!

Creating Debt Recovery Solution Priorities

A good debt recovery solution is finding the right amounts, as well as knowing you can collect them! Altogether, this means that if a debt seems to have the potential to be repaid, industry specialists will likely prioritize collecting this debt first.

Technology allows for this to be done not only with by researching consumer patterns, but also experimenting with new collection strategies. Prioritizing certain collectable debts will not only get you your money faster, but it will also keep the debt recovery company in business!

Digital Collection and Virtual Recovery

All in all, the internet and your digital footprint make it easier and easier for debt collectors to find you. This means that if you are a creditor, you will not only WANT digital debt recovery solutions, but you may NEED them.

Debt Recovery Programs

There are a growing number of programs available to different debt recovery companies. These technological advancements will not only allow for your debt to be collected, but will also help to discover if the debtor is in a better place to pay more on their debt!

Using the information that is practically alive on the internet will be an invaluable way to collect the debts you are owned.

debt recovery solutions company

Debt Recovery Platforms

There are also companies that use digital platforms to collect debt, but also allow consumers to negotiate payment plans, pay back their debt in a timely manner, and do it all online! Using available technology to collect, as well as pay off debt!

The Most Effective Debt Recovery Solutions Are Always Fair

When it comes down to the wire, as a creditor, you want to collect the money you are owed, but you should also be able to keep your company’s hard-earned profile. Finding fair, legal, and effective debt recovery solutions will help to not only get your money to you faster but keep your company in consumer’s good graces!

Find a debt recovery company that will incorporate all of these debt recovery solutions. Avoid the burnout and hire a professional! Because you want the best solution so you can be on your way to getting paid!

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Why Creating Systems Trumps Motivation

I vividly remember the first time I saw Rocky as a kid.  Just a lowly local fighter, Rocky Balboa had to go through so much to get ready for his big fight with the champ Apollo.  After watching the iconic training scenes of him running up the steps of the Philadelphia Museum of Art, punching giant slabs of meat until his hands bled and doing those grueling one handed pushups, I was so pumped to try to be like him.

So the obvious next step for me was to start running up stairs and punch things day and night.  I would be the best boxer this world has ever seen. After 2 or 3 days of this rigorous training, I slowly fell back into my normal routine and completely forgot about becoming the best boxer in the world.

But I didn’t just forget.  I simply lost my initial burst of motivation.  That little spark that got me off of my couch was great for those first few days. But there was no structure or foundation behind it so it quickly fizzled out.

If I seriously wanted to become a real boxer, I would have done found a coach and schedule boxing sessions at a gym regularly throughout the week.  Since a strong training foundation was never built, my initial burst of motivation was destined to fail.

Motivation is Finite

This same phenomena can be found in the world of personal finance.  We’ll watch an intense movie about stock picking or read an inspiring post about someone who paid off massive amounts of debt.  This will get our juices flowing and we’ll just go out there and do some things for a short while. But it will usually fizzle out in the end.

Relying solely on motivation is not the way to get ahead financially.  In fact, I would say that getting motivated and failing over and over will simply get you so depressed about your financial situation that you might just give up on improving.

But it can get better.  And the way it can is by having a framework or system in place that will keep you financially secure without having to constantly draw from your finite well of motivation.

It’s important to realize that this is THE ONLY way to get ahead financially.  Whether you’re looking to build the next billion dollar company, want to increase your investment contributions or just track your finances, you need a system that will make it easy to reach your goal.

And there are so many financial goals out there.  Setting up a budget, saving for retirement or college, starting a successful freelance business, getting a world class education to increase your income.  These are all worthy financial goals that require a systematic approach in order to find success.

Just Get Started

As mentioned before, setting up a systematic method of attack is the best way to achieve your financial goals.  And it’s not even that hard. It just takes a few upfront steps and some experimenting to get your system right.

In fact, setting up systems is much easier than relying on brute force motivation to achieve your financial goals.  It gives you a path to follow and you just plug along day after day.

Here are some basic systems everyone should have for various aspects of their financial life.  These are easy for almost everyone to implement so give them a try if you haven’t already:

Automatic Bill Pay:  We all have the same bills to pay.  Electricity, water, rent/mortgage, tuition, daycare etc.  Keeping all of these bills in order and remembering to pay them off month after month can be a chore.  Having a stack of papers and writing checks and mailing letters is not a difficult task, but it takes up precious time.  You increase your chance of missing a payment this way which can incur fees and possibly ruin your credit.

Instead, take some time out to set up automatic bill pay.  Most companies allow this by entering your checking account info on their website.  If they don’t have that capability, almost all checking accounts have an online bill pay feature which allows you to send a check to any address at no cost.  

Set these up to occur at regular intervals and you will never have to worry about keeping your routine monthly bills in order.

Saving and Investing:  Whether it’s investing for retirement or starting a rainy day fund, most people’s strategy is to just throw whatever they have leftover at the end of the month towards savings.  And considering that more than 75% of Americans are living paycheck to paycheck, this is not going to amount to much.

A much more effective way to save is to have a certain amount of money deducted from your checking account into your investment or savings accounts at regular intervals.  This allows you to grow money at a constant rate and will create a sort of “scarcity mentality” that will not allow you to spend money you don’t have.

This can be done a number of ways.  Almost all employers will automatically deduct 401(k) contributions before your check even hits your account, so that one’s pretty easy.  But if you have your own personal investment or savings account you are in charge of, you can easily set up a direct deposit from your checking account at any interval you choose.

Personally, this systematic approach to saving and investing has had a major impact in my life.  I know myself, and I would never consistently put money into my investment accounts if I had to do it manually.  Automatic investing is so easy to set up and is such a game changer I would recommend it to every single person.

Even if you can only start with $20 per month to contribute to your savings account on a regular basis, I would still recommend it.  It’s better to start somewhere than not begin at all. You can always increase your contributions later.

Tracking your Spending:  Gone are the days of balancing your checkbook to make sure you have the right amount of money in your checking account.  You can do almost everything personal finance related online nowadays, and tracking what you spend is certainly no exception.

Instead, I recommend leveraging the power of technology to set up a system to track your spending.There are so many websites and apps out there that allow you to track what’s coming in and what’s going out.  All you have to basically do is connect your accounts (checking, savings, credit card etc.) to the website and they will usually display your transactions on a nice little dashboard. You can then see exactly where your money is going.

I personally prefer Personal Capital.  You can not only track your spending, income and debt accounts, but it gives you a nice detailed look at your investment accounts as well.  You can see in which sectors you may need to invest more in and if you’re paying too much in fees. It’s pretty much a one stop shop for your finances and they are always improving their product.

Investing in Yourself:  While no one is going to directly pay you to do some yoga, investing in yourself is essential to being financially successful.  Self investment can come in so many forms such as exercise, taking classes, reading and meditation.  You have to find the areas that are important to you and your finances and work on them consistently.

Again, you can use technology to set up systems towards your self improvement.  And it doesn’t take much. You can simply set reminders on your calendar when you want to do some reading or exercise.  Or you can block out a certain time of the day to perform your self improvement tasks.

It’s especially important to set up systems for this.  Self improvement tasks fall under the “Non-Urgent but Important” group of tasks.  This makes it easy to justify taking care of the latest “emergency” before you get to your self investment time.  Don’t fall into this trap that and make investing in yourself a priority by setting up a solid and executable plan of action.

Conclusion

I would argue that not setting up systems for your finances is the true reason people don’t reach their goals.  Most people rely solely on willpower and motivation to try to make their situation better, but that really is a limited resource.  

Setting up systems of action is how giants like Oprah, Steve Jobs and Kobe Bryant became wildly successful.  They found a system that worked for them and kept at it until they got what they want.

The vast majority of Americans are living a paycheck to paycheck life because they don’t know where their money is going and they are not saving or investing enough.  These two huge problems can be solved by setting up systems that make personal finance as easy as a late round Rocky comeback.



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Dancing is Not a Good Investment Strategy

If your investment strategy was a dancer

1/11/2019:  I thought this would be a great time to re-post this, since many people are starting to dance with their investments!  There has been some ups and downs in the stock market the last month or so, and it’s making people do weird things.  

I’ve heard many people say that they are stopping their retirement account contributions or moving some of their stock positions into bonds or money market accounts.  Don’t do these stupid dance moves! 

Making investment decisions for retirement money based on a few weeks activity is almost guaranteeing that you will retire with less money.  Just keep contributing and rebalance as you have been, and you will come out on the other side smelling like a rose.

Investing is a patient man’s game.  This applies to almost any type of investing including real estate and stocks.  In general, if you’re investing for the long term (more than 10 years), the best strategy is to have a great plan and stick to it.

Unfortunately, many impatient men (and women) are investors.  This means many plans never make it past the first big market drop.  That’s usually when panic sets in and investors do something short sighted.

A 2015 study proves exactly this.  The study shows that we are our own worst enemy when it comes to investing.  And no other reason even comes close.

Let me set the stage by showing you the study results and what we can learn from them.

People are Not Good at Investing

I recently wrote why many investors are their own worst enemy when it comes to their investment performance.  While the subject of this post is similar, after reading the results of the aforementioned study I felt a separate post was needed.

The study was conducted in 2015, and at the time the S&P 500 Index had a 30-year annualized gain of 10.53%.  That means that every year for the last 30 years, the S&P gained an average of 10.53% per year.  Some years were way more and some years were way less (think 2008).  But on average, a nice 10% return every year.

What this means is that an investor who simply held an S&P 500 index fund for the last 30 years should have returned 10.53% minus fees.  Let us say this investor had some crazy fees which brought the return down to 8%.  Paying high fees is annoying, but 8% is still not a bad overall return.

According to the study, the average investor didn’t do this well.  In fact, they did a lot worse.  The study found that the average investor returned 1.65%!

1.65%!!!???  They might as well have put all that money into an online savings account and saved themselves the stress of investing.

This means that the average investor is probably not using index funds.  And if they are, they are using the wrong ones or are just going in and out of investments way too much.  I think the latter is the culprit for most investors.

Dancing In and Out of Investments

“Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of “experts,” or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.” -Warren Buffet in his 2012 letter to Berkshire Hathaway shareholders

(The basic game is investing and Charlie refers to Charlie Munger, Buffet’s partner at BH.)

As Mr Buffett explains in this quote, “dancing” in and out of investments is very risky.  I firmly believe this is why the average investor does not even come close to the returns of the S&P 500.

But why does going in and out of investments produce such poor returns?  Shouldn’t we always be looking to get out of our investments when things get bad and find some better places to put our money?

The answer is yes, we should be looking for better places to invest.  But the best place to invest is usually in an index fund that follows the overall market.  And it’s almost impossible to find another group of investments that does better than the overall market on a consistent basis.

And by dancing in and out of investments, most people are actually buying high and selling low.  We should always try to buy low and sell high!  People usually panic and sell investments when things get bad (sell low), and then they try to buy into investments that everybody is saying is “safe” (buy high).

A great example is the recent Brexit vote that will lead to the UK withdrawing from the European Union.  It was expected that the stock market would fall after the vote was yes, and it did just that.  The day after the vote was final, the S&P 500 dropped 66 points, which was about a 3% loss.  Not a huge drop, but pretty decent.

But if you turned on any form of financial news, you would think the Four Horsemen were arriving.  Predictions that the international markets will be in turmoil for years was the theme of the day.  The S&P actually did fall about 1% more the next day, which lead to more doom and gloom.

But about 10 days after the Brexit vote, the S&P 500 was right back to where it was before.  And as of now, 2 months after the vote, the S&P 500 is about 3% higher than it was pre-Brexit!

The Big Takeaway

What this all means is that if you were one of those investors who panicked and sold some stocks after Brexit and then bought more stocks when the market rebounded, you were dancing in and out of the market which means you were selling high and buying low.

And this is why the average investor averages returns a little over 1%.  As the study showed, just owning an S&P 500 index fund for the last 30 years and not doing anything with it would get you a 10% return.

The best course of action for investors who don’t want to make stock picking their full time job is to formulate an index fund strategy that is appropriate to your investing timeline.  Pick the funds.  Rebalance the funds every year so they don’t get too out of wack.  And then leave it alone.

You will be a better investor than the majority of America.

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How to Lose Friends and Scare Away People

red stapler

Many people have read the popular book How to Win Friends and Influence People by Dale Carnegie.  This book came out way back in the 1930’s but is still read by many today.  This book can teach you how to effectively network and connect with people to form meaningful relationships, in both your personal and business interactions.

It’s one of those books that teach you new things every time you read it.

But this post is not about all that syrupy good stuff.  This post is about the exact opposite. I will share a guide that will make sure you stay unhappy and stuck in your dead end job for a very long time, or even lose your job altogether.

It outlines the steps you need to take to ensure that you can effectively alienate both your family and friends while being scorned by co-workers at the same time.  It’s a rare skill to be able to lose friends AND scare away people, but I’ll show you how it’s done.  (This is all sarcasm by the way. Well most of it)

1.  Be late.  For everything.  It is said that time stops for no one.  It’s time to prove them wrong.  There are many places and people that expect you to be on time.  Your boss and your clients.  Mom and dad.  Your spouse.  Even your kids may expect you to be on time so they’re not stranded in front of school in 20 degree weather.

What gives them the right?  Take your time wherever you go and in whatever you do.  Deadlines and panicked phone calls from your children can wait.  You have more important things to do.  Time is a limited resource, so keep as much of it for yourself as you can.  (Reality: Pick your kids up if needed.  Don’t make your wife wait.  Ever.)

2.  Networking is for dweebs.  Who has time to network when there are so many shows to watch on Netflix?  You love your current job, but not that much, so talking to others in your field and keeping current on your skills should be the last thing on your mind.

Besides, who wants to be one of those guys that’s always shaking hands with people and smiling?  Not this guy.  (Reality:  Yes, you should make sincere and strong relationships with those people in your industry who make more than you or know more than you.)

3.  ALWAYS pass the buck.  Don’t be the “go to” guy in your workplace.  People will be asking you to do all kinds of stuff that you frankly don’t feel like doing.

If a client asks you to do an urgent project, first try to convince them that it’s not really that urgent, and if that doesn’t work, ask them to give the project to what’s his name down the hall.  (Reality: Try to be indispensable to your clients and supervisors.  They’ll greatly appreciate it because they’ll have to do less work.)

4.  Read a lot less.  There is this perception out there that successful people read a lot.  While this may be true, it certainly doesn’t sound like fun.  Reading hundreds of pages of material relevant to your field will take the excitement out of everything else in life.

If you know so much about your area of expertise, where are you going to get the rush of possibly making a bad decision?  Leave the reading to the librarians.  (Reality: Keep current on your field by reading relevant blogs or journals.  You’ll at least know when your field will become obsolete.)

5.  React to EVERYTHING.  All those people you work with and those clients you serve are out to get you.  Whether it’s your bobbleheads, awesome desk chair or even your red Swingline stapler, the world wants to see you pay and take your things.

This is why it is very important to react to every little thing.  And react HARD.  Throw objects, swear loudly, storm out of the room and, ideally, all three at the same time.  Every little sideways glance and convoluted comment that could be about you needs to be addressed.  These people will not stop until you’re out on the street.  (Reality:  People don’t have time to worry about you so don’t go crazy about everything.  They’re too busy worrying about themselves.)

These are my top 5 ways of being an anti-Dale Carnegie.  I’m sure there are many, many other ways I could think of to lead you down the path of the social pariah, but all this typing is hurting my fingers.  If you would like to share your own ways of losing friends and scaring away people, please feel free to share in the comments.

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Start Tracking Your Net Worth to Reach Financial Freedom

This post contains affiliate links

Everyone has heard the stat about the high failure rate of New Year’s resolutions:

8% of New Year’s resolutions fail

80% fail by February

Greater than 90% failure rate

So if you’ve made a New Year’s resolution for 2018, your chances of achieving it look grim.

The two most common New Year’s resolution goals are health and money.  Which means that there are a lot of failed financial New Year’s resolutions year after year.

My thought is that many people make very vague resolutions.  Goals like “I need to save more” and “We need to spend less on eating out” sound very nice in theory.  But are very hard to put into practice.

Along with being too vague, many resolutions fail because we don’t have an understanding of where we are.  It’s a cliched example, but you need a destination and a starting point in order to have accurate directions.

Making vague resolutions is like picking out a destination without knowing where the starting point is.  So you have no way of knowing if the direction you’re taking is going towards your goal or completely away from it.

You need to know where you stand financially before you can make an effective goal, let alone reach that goal.  I feel the best way to find your financial starting point is not by seeing how much you have in your checking or savings account.  It’s not the equity you have in your home.  And it’s definitely not how flashy your car is.

The best way is finding your net worth.  With the technology available today, calculating your net worth is very simple.  If this is the only financial resolution you make this year, you will be much better off than you were last year.

Why Net Worth Matters

The net worth calculation is very simple:

Assets-Liabilities=Net Worth

There is always discussion about what is considered a liability or an asset.  Some people consider home value an asset.  Some people don’t consider home value since it takes a lot of work to get money out of a home.  The details are endless.

But in general, as asset is something that adds to your wealth while a liability is something that takes away from it.  Common assets include your checking and savings accounts and retirement accounts.  Liabilities include credit card debt and student loans.

So net worth is basically a snapshot of your financial health.  But just like any snapshot, one picture doesn’t tell the story.

A new medical school graduate has little in savings and hundreds of thousands in student loan debt.  That will give him a large negative net worth.  A high school student probably has some spending money but very few liabilities since he lives with his parents.  So he would have a slightly positive net worth.

Does that mean the high school student is more wealthy than the new doctor?  The answer is no because net worth should be used to measure your financial GROWTH rather than a static number that looks at your wealth.  In 10 years time, the new doctor will likely have a net worth light years ahead of the high school kid.

So the key to wealth creation is to grow your net worth over time and grow it quickly.

My Net Worth Tracking Strategy

(Above is a screenshot of the sleek Personal Capital dashboard.  It gives you a quick glance at your net worth)

There are so many different opinions about how often you should track your net worth.  Some say every month (some people even track it every day!).  While others say once a year is enough.  The key is to find a pace you’re comfortable with and keep it consistent.

Personally, I check my net worth every quarter.  I actually enjoy checking up on my accounts and seeing how they’ve changed.  It also allow me to make sure there’s no fraud or any funny business going on in any of my accounts.

And doing it quarterly is enough time to see if new strategies I’ve implemented are actually making a difference.  Plus, most companies operate in quarterly statements so there must be some wisdom in it.

As far as what high tech tools I use, an Excel spreadsheet and a Word document are my weapons of choice.  I use the Excel document to help me calculate my net worth and I record the values over time in my Word document.  Easy peasy.

But one piece of technology that helps check my work and give me more insight into my net worth and retirement is Personal Capital.  I’ve been using it for years to view my net worth and they have been getting better over time.

All you need to do is connect your various accounts and Personal Capital will monitor them.  They can’t make any transactions so there is no need to worry about security.  They simply monitor your account value and have your net worth displayed nicely in graph form.

Which is great since net worth growth is the true measure of financial wellness.  Physically seeing it as a graph really drives it home.

Other cool features of Personal Capital are the Investment Checkup and Retirement Fee analyzer tools.  They can analyze the holdings in your investment accounts and tell you where you may be over or underweight.  And they will also check the fees in your accounts so you can make sure you’re not paying too much.

And it’s all free.  There is an option to talk to a real financial adviser for a fee but that’s completely up to you.  Most of the powerful features of the program are no cost.

Conclusion

Deciding to grow your net worth is the best thing you can do to turn your financial life around.  Thinking in terms of net worth rather than just making and spending more money will allow you to see your finances in a whole new way.

Suddenly, paying a huge monthly bill for that fancy luxury car when a regular old Toyota will do just fine doesn’t seem that enticing.  A decision like that can keep your net worth from growing the way you would like.  Thinking in terms of net worth rather than just focusing on your checking account is the real way to get wealthy.

Tracking your net worth consistently with Personal Capital is an excellent way to start the journey towards real wealth.

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How Many Credit Cards Should You Have?

 

Credit cards are one financial topic that everyone has an opinion about.  Even people who don’t have much interest in finance will have some sort of take on credit cards.

Some people swear by them.  Other people swear AT them.  Some people use them for every transaction.  While others have never used one in their lives.

Credit cards are an ever present force in our society.  You can’t go on an airplane nowadays without being asked to sign up for the latest and greatest credit card.  Commercials, magazine ads and internet ads with credit card offers inundate us regularly.

And let’s not forget good old snail mail.  Everyone’s mailbox will eventually receive an offer for the latest sign up or balance transfer offer.  It’s inevitable.

I’ve written before about the utility of credit cards.  They are a tool, and just like any tool they can help you or hurt you depending on your use.

Almost all of us have credit cards.  The question is, how many should we have?  Can you have too many?  Or even too few?  Let’s take a look at the factors that will decide how many cards you should have.

1.  Life Experience

Right now, I have 36 credit cards open.  To most people, that may seem like a lot.  But believe it or not, to others that does not seem like that much.  You’ll find out later why that number is just right for me.

I got my first credit card at age 19.  It was a gas station credit card that gave a whopping 2% cash back at BP gas stations.  I didn’t know much about personal finance (or life) at 19, so I thought that card was all I needed.

I would not have been able to handle more than one card at that time, let alone 30+.  I just didn’t know enough about how life worked to be able to handle more.  So life experience is definitely a key ingredient for being able to handle many credit cards.

2.  *****Paying off your balance in full******

Notice the asterisks.  This is THE KEY factor that will determine if you can handle many credit cards, or none at all.  Being able to use credit cards is not a right but a privilege.  And the privilege comes from NOT being the type of person that gets into credit card debt.

Credit card debt is expensive.  It’s one of the most expensive type of debts out there short of owing a loan shark.  And most of Americans have it.

I won’t go all Dave Ramsey on you and say no one should have credit cards.  But if you routinely do not pay off your balances in full, you should not have a credit card.  Period.

Credit card interest rates are insane.  Cards on the “low end” will be about 8%, while many cards can easily approach 30%.  No one should be carrying this type of debt.  So if you carry any type of credit card debt, unless it’s a 0% promotional offer, you need to pay that off ASAP.

And don’t make it worse by racking up more credit card debt.

3.  Credit Score

When it comes to having credit cards, your credit score is a key factor.  If you want to be approved for many credit cards, you need to have a high credit score and a credit history clear of any delinquent activity.  A long history of on time payments helps too.

And contrary to popular belief, having lots of credit cards DOES NOT lower your credit score.  While opening up some new credit will temporarily lower your score by a few points, it will not hurt it in any appreciable way.

The most important factors in one’s credit score are on time payments and credit utilization ratio (this is straight from the people at FICO).  Having many credit cards helps BOTH of these categories.

Having lots of on time payments will help your credit score.  And having lots of cards, but not using most of them, will keep your credit utilization percentage very low.

My credit score has skyrocketed ever since I started applying for credit cards.  And that’s because I always try to pay on time and only use the cards when I need them.

4.  Rewards Chasing

This is the only, and most lucrative, reason anyone should have many credit cards.  As you can tell by just checking your mail once in a while, credit cards love offering sign up bonuses.  Those offers that say something like “Spend $2,000 in 3 months and get 10,000 points”.

These offers are real money makers for credit card companies.  While they are giving up a little in terms of points or cash back, they get that back and then some with swipe fees and interest payments.  And many people don’t even redeem their reward points anyway.  The credit card companies have everything to gain.

But if you’re disciplined enough not to overspend and always pay off your balance in full, the consumer stands to gain a little as well.  There are many really bad sign up offers.  But there are some great ones as well.  The key is to find the great ones, do just enough to meet the sign up offer, and then store the credit card away if it’s not useful for you. (Frequent Miler is my go to resource for this).

Using this method, I’ve been able to take my family on many flights and hotels for almost nothing.  I’ve also gotten a good amount of cash back rewards (which are tax free!).  So reward chasing has definitely been worth it.

But it’s only worth it if you maintain your great credit score and never carry a balance.  Interest rates on rewards credit cards are notoriously high.  If you end up carrying a balance on a rewards card, it will quickly negate any sort of rewards you earn.

5.  Organization

The last important thing you need in order to be able to handle many credit cards is being organized.  This is especially important for rewards cards since they can have annual fees that can be avoided if you close them on time.

A simple spreadsheet will do just fine.  I use one that has the date I applied for the card, the sign up bonus requirements, any annual fees and when I closed the card.  Trying to do all of this in your head will eventually lead to a mistake.

And you need a central place for all of your credit cards.  I currently store them in an old checkbook box.  But I think I may need to upgrade to a shoebox.  Or you can just have a drawer with all of your unused cards.  Just keep them all in one place away from your kids.

So how many cards SHOULD you have?

It depends.  I know, I hate that answer just as much as everybody else.  But it’s true.  There are some people that have no business having more than one card.  Or any cards at all.  People who regularly carry balances fall under this category.

And then there are others who can seamlessly handle 50 cards at any time.  It takes a good understanding of your personal financial system and a lot of organization.

Plus, it has to be worth your while.  And chasing the best of the best rewards can definitely be worth it.  So if you don’t feel you can handle many credit cards, no need to despair.  Just do what you’re comfortable with at the moment but make it a point to learn about the credit card industry and how you can use it to help your finances.

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Pay Off Debt With a Strategy

Debt is a way of life in America.  It’s easy to acquire and everyone has got it.  The vast majority of people buy homes and cars with debt.  It’s almost impossible to go to college with no student loan debt, especially for any type of graduate or professional school.

People are comfortable with debt, even high interest credit card debt.  And that is a problem.  But that’s for another post.

The problem I want to discuss in this post is how people pay off debt.  And the big problem is that many people, even high income professionals, have no debt payoff strategy.  They usually pay the minimum and then maybe (or maybe not) throw some extra money once in a while at the debt.

This is very inefficient since there are certain types of debt that should be paid off first and there are certain debts that are actually okay to have around.  Some debts should take priority in being paid off over others.

Having a clear debt payoff strategy will allow you to get out of debt faster and, most importantly, minimize the stress associated with having debt.  A debt payoff strategy will allow you to know how much you will end up paying in interest payments and how long you will be paying the debt off.

Here are three debt strategies to consider:

Strategy #1:  Pay the minimum and pray

This seems to be the strategy favored by most Americans.  Safe to say I don’t recommend it.

It can be soul crushing to just get by paying the minimum payment while knowing there are decades of debt in your future.  Probably why most people just try to forget their debt even though it’s eroding their wealth.

Let’s just move on to the next method.

Strategy#2:  Snowball method

The snowball method was popularized by Dave Ramsey and is perpetuated by his rabid followers.  I don’t agree with a lot of things Dave says (such as not having credit cards), but the snowball method is one of the good things he’s put forward.

(Quick tangent:  I’m not a big fan of these finance “icons” or “gurus” like Dave Ramsey or Suze Orman.  The reason is that they are not genuine.  They did not get wealthy by doing what they tell their followers.  Things like “save up a $1,000 emergency fund” and “get your 401k match!” is good advice, but it’s not how Dave Ramsey got rich.

He got rich by putting all of his energy into growing his business.  He got rich by selling products and building his empire, not by creating an emergency fund.  And I’m pretty certain he laughs at the idea of an emergency fund.  Same goes for Suze and any other larger than life finance guru.

They’re business people and they got wealthy by focusing on that.  I would respect these guys a lot more if they were sincere in helping people.  But all they do is create books and courses for the “working man” that have the same old advice in a shiny new package.  Rant over.)

I’m on to you Dave…

The snowball method is simply making a list of your debts by balance, and focusing on paying off the one with the lowest balance.  Obviously, you make the minimum payment on the rest of the loans to keep them current and avoid late fees.

But then you throw everything you can at the loan with the lowest balance.  When that is paid off, you roll (like a snowball!) the minimum payment of the paid off loan into the loan with the next lowest balance.  And proceed to obliterate it with all you have.

I used to dismiss the snowball method because technically it’s not the mathematically best way to get out of debt.  But money is so much about psychology that having a system like this that propels you forward is much better than being discouraged by debt and not having a strategy at all.

Seeing those low balance debts disappear does have a positive effect on your psyche and will keep you in the fight.  For debt payoff novices especially, I would recommend the snowball method.  Just put your head down and plug away at the lowest balance debt and move on to the next.

Strategy#3:  Avalanche method

The absolute mathematically quickest way to get out of debt is the Avalanche method.  It’s the method I use and it has saved me tons in interest.  I’m not sure who coined the term, but I like the idea of an avalanche destroying my debt as opposed to a snowball.

With the Avalanche method, you list your debts in order from highest interest rate to lowest.  Every month you would pay the minimum on all your debts, and focus on eliminating the debt with the highest interest rate.  Then you turn that minimum payment around into the debt with the next highest interest rate.

This is the quickest way to get out of debt.  There’s no argument about that.  But it does require some more upfront work with no apparent payoff in the form of more money.  But once you eliminate the first few higher interest debts, the rest will be engulfed in the avalanche in no time.

The best method

Too many people are in denial about their debt.  I see this a lot regarding student loans.  Doctors and lawyers usually have very high student loan debt.  We’re talking six figures easily.  This kind of debt can seem crushing and it would be easy to turn a blind eye and just make the minimum payment month after month.

That’s a surefire way to pay the most interest possible over your lifetime.  Having a debt payoff plan at all would be great progress for a lot of people.  So using either the snowball or avalanche method is fine by me.  But I think the best way to pay off the debt would be a hybrid version of the two.

How this would work is focus on paying off the first couple of low balance debts to get some progress under your belt.  Once you do that, shift your focus to your highest interest debt to really attack that total balance.  So start with the snowball and switch to the avalanche.  It’ll feel much better to be out of debt in a few years rather than a few decades!

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An Easy and Inexpensive Way to File Your Taxes

Most people file their taxes online nowadays.  I have for the past 4 years.  The fact that I actually enjoy doing my own taxes is icing on the cake.

If you have a fairly simple tax return that has a low chance of being audited, filing online is a lot cheaper and easier than going to an accountant.  All you have to do is wait for all of your paperwork to come in, prepare your beverage of choice and take an hour or so to complete your return.

And if you are owed a refund or owe Uncle Sam some money, you can usually take care of that right away online.  In today’s streamlined and app friendly world, filing online is just the most convenient option for most people.

And when there are so many people filing online, competition will increase.  Everyone knows the big players like TurboTax and H&R Block.  How can you not know them since they are advertised everywhere?  I’ve used both TurboTax and H&R Block and both do a great job.  But they are also both on the pricier end of the tax software spectrum.

As technology and software becomes more sophisticated, more players have been appearing on the tax software scene.  Some are pretty bare bones but can offer very competitive pricing (sometimes even free!).  While others are just TurboTax clones that fizzle out after a while.  Time has filtered out some of the weaker companies, so there are a number of good options out there.

This year, I did my taxes with a company called FreeTaxUSA.  It sounds like a spammy company name, but they’ve actually been around for a while and this year they have taken their tax software to the next level.  And their pricing is incredible.

Federal returns are free.  State returns are $12.95.  And this is the case no matter how simple or complex your tax situation is (though if I had a full fledged business as my main income source, I would probably use an accountant.)

Here’s my review of my experience with FreeTaxUSA

Disclaimer:  I have no financial affiliation with FreeTaxUSA (FTU).  I wish I did but maybe next year.  This will actually be one of the few non-biased tax software reviews you will see on the internet.  

Navigation

TurboTax is known for its easy to navigate menus and streamlined interface.  They ask you tax questions interview style and you enter your numbers as you go along.  Ease of navigation is one of the big reasons TurboTax is the most popular tax software out there.  But FTU is very close behind.

There is actually very little difference between TurboTax and FTU when it comes to navigation.  FTU asks very similar style interview questions and will flag you when something doesn’t seem right.  It’s easy to find what number should go into what box on each form and then move on to the next section.

The menu is very clean and easy to navigate as well.  Income, deductions and filing options are clearly separated.  The only restriction I found is that you can’t jump ahead to the next section before completing your current section.  I didn’t find this as a big problem though since it helps keep you on track.  You can jump back to previous sections you have completed of course.

I actually found the interface a little easier and cleaner than TurboTax.  So ease of navigation is a huge plus.

Support

Having customer support is an important part of doing taxes.  When you have your own personal accountant, you can pepper them with as many questions as they have time for.  This support is what causes many people to hesitate doing their taxes with software.

Nowadays, online tax programs really excel in customer support.  You can always email an expert and get an answer, but many companies even have live chat or the option to have your return reviewed by a CPA.  So you’re never alone.

FTU has email support, but unfortunately no live support options.  I can’t comment too much on this because I didn’t really use the support services.  Our return is easy enough and I live and breathe this stuff anyway so I can find my answer pretty quickly if I needed too.  But for those that really value someone being available to help you throughout the filing process, TurboTax and HR Block are better options than FTU.

Pricing

Where FTU really shines among the competition is the pricing.  It’s a flat rate of $0 for your federal return and $12.95 for state.  No matter how complicated your return may be.  If you have out of the ordinary things like foreign accounts or large investment income in your kids name, you may be out of luck.  In cases like that I would want to see an accountant anyway.

But for the vast majority of Americans, the pricing would stand.  And it makes a huge difference.  Since we own a home and have some stock sales, the total with TurboTax would have been $59.99 for federal and about $35 for state.  That’s a total of $94.99 for TurboTax compared to $12.95 with FTU.  That’s a no brainer of a decision to me.

There is one totally free filing service I know of with Credit Karma.  But their interface seems clunky and they haven’t gotten very good reviews.  FTU is a very good product that has gotten great reviews, so $12.95 is an absolute steal.

Conclusion

With technology getting more and more sophisticated and streamlined, filing taxes online has never been easier.  While the big boys like TurboTax and H&R Block are always a great option, it’s worth it to see what other companies are up and coming in the tax software world.

FreeTaxUSA is definitely one of those companies.  I was able to do my taxes with no problem and it was a great experience all around.  I was able to get my refund direct deposited into my checking account very easily as well.  It’s not much different than TurboTax but it is much cheaper.  Very hard to beat $0 for a federal return and $12.95 for a state return.

It may not be the ideal solution for people who need live support or have very complicated returns.  But I believe the vast majority of people could save a lot of money having their taxes done with FTU.

Again, I have no financial affiliation with the company.  Just giving my honest review.  Click here to go to their home page and check it out.

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In-Credible Student Loan Refinancing

Everybody with student loans should consider refinancing.  It might not be the right choice for everybody, but you’ll never know unless you take a look.

At worst, you get some quotes and realize it’s not worth the effort or you don’t want to give up Federal loan perks.  But at best, you can potentially save tens of thousands of dollars worth of interest payments and pay your loans off years earlier.

When you look at it that way, it doesn’t hurt to try now does it?

I’ve written before that my two favorite refinance companies are SoFi and Earnest.  That still stands.  I’ve personally refinanced loans with these companies and had a great experience.  People I’ve referred for refinancing have had great experiences as well.

But as with any industry, new players continue to pop up.  It would be a disservice not to mention quality companies in the student loan refinance arena.

One such company is Credible.  We used them to refinance my wife’s student loans and had a great customer service experience along with a great interest rate.  Plus they gave us a nice little sign up bonus.

If you’re already convinced, sign up here to get some quotes.  If you end up applying for a loan before December 31, you get a sweet $200 bonus sent your way.

Need a little more convincing?  Read on about how Credible provides a fantastic student loan refinance experience.

Choices.  So Many Choices

The thing I like about Credible is that they give you so many more loan choices than other companies.  You can essentially find any combination of interest rate, loan payoff time in a fixed or variable loan product.

This flexibility is amazing because not everyone wants or is able to go with the lowest possible interest rate with the shortest payoff term.  Many people have other goals such as investing for retirement, buying a house or funding a business.

These goals take money, so it’s a good idea to find the most manageable payment you can without sacrificing your other goals.

The dashboard neatly lays out all the different offers available to you.  After checking your credit and asking for some pieces of information, you will quickly be able to see what offers are available and find the best one for you.

Since Credible is more of a clearinghouse than a bank, you will see multiple offers from different institutions.  Most refinance companies will just give you their own rates.  So it’s nice to be able to compare rates from a number of companies.

Once you find the offer that works for you, Credible will do a little more background work and in a week or two the process should be complete.

Potentially huge interest savings and a nice $200 bonus to boot.

The Offer

If you sign up with this link and are approved for a loan by December 31, you will get a $200 bonus.  The normal bonus is $100, so it’s a great opportunity to look into refinancing if you’ve been on the fence.

Like I said before, there is no downside in looking into refinancing your student loans.  You can even get your quotes before your actual credit report is pulled.  So no need to worry about your credit score being dinged.

So check out your rates before the year is up.  There could be huge savings and a $200 bonus waiting for you.

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Dollar Cost Averaging is the Best Way to Invest

Ask the average American or young professional what things SHOULD be doing with their finances.  You’ll get the usual answers like budgeting and saving.  They will also talk about how they need to spend less on things like eating out and clothes.

One other thing you’ll almost always hear about is the desire to invest.  Most people know they need to invest for things like retirement or a future house down payment.

The problem isn’t that we aren’t interested in investing.  Or that we don’t want to invest.

The main problem is that people don’t know HOW to invest their money.  They want to know which types of accounts to open and how to transfer money to keep investments growing.

This post will outline what I think is the most efficient and effective way to invest: Dollar Cost Averaging.

Dollar Cost Averaging: Slow and Steady Wins

There are essentially three ways to invest your hard earned money:

1.  Invest a lump sum all at once:  Mathematically, this is the most efficient way to invest.  Having a large amount of money invested in things like stocks or mutual funds will give your investment growth a turbo boost.

And studies have shown this.  Lump sum investing will give you the highest return over any other method of deploying your money.    And I would agree if you have a large sum of money, put it to work all at once if you intend to invest it.  No need having cash on the sidelines not working for you.

While this is the best way to invest, it’s only applicable a few times in life.  If you get a large sum from an inheritance, selling a business or a large bonus, then you should employ this strategy.

But most people get paid their salary in small intervals throughout the year.  So lump sum investing is not really in the discussion.

2.  Dollar Cost Average (DCA):  We live in a monthly payment kind of world.  Almost all of our bills including mortgage, auto loans and cell phones are debited once a month.  We’re used to being dinged monthly for the services we use.  Why not use that same mindset when it comes to investing our money?

This is why I love DCA and why it is my own preferred investing strategy.  Instead of investing haphazardly or when we hear a hot stock tip from a co-worker, DCA takes the emotion out of investing and lets you stick to your investing plan for the long term.

How does it work?  Let’s use a Roth IRA for example.  You know you need to save a little more for retirement beyond your company 401k, so you would like to set up a Roth IRA to be invested in the stock market.

Once you set up the account and select your investments (my favorite is VTSAX but that’s a story for another post), you will be asked to link your checking account.  Then you select how much you want taken out monthly and set your withdrawal date.  And that’s all there is to it!

You will be dinged monthly just like you would for any other bill.  But this is a good ding since that money will be invested for you retirement instead of being spent on the latest iPhone insurance.

3.  Don’t invest at all:  This is not recommended.  But it seems like it’s the American way since 1 in 3 Americans have no money at all saved for retirement.

Buy Low and Sell High

The best way to make money selling things is buying at a low price and selling at a high price.  That’s the logic behind dumpster diving and being a garage sale vulture.  And that’s also the logic behind making money as an investor.

Being invested in the stock market can literally be a roller coaster ride.  There are going to be ups and downs.  Sometimes really big ups and downs.  But as long as the price of your investments is more than what you paid for it initially, you will make more money.

Buying your investments at a low price and selling at a higher price is what makes investors money.  Many people get spooked and sell their investments when the stock market takes a sharp dive, like it did in 2008.  As a result, they lose a lot of money by buying high and selling low.  This is bad.

The beauty of investing via DCA is that it FORCES you to buy low.  If you decide to invest $100 a month into a mutual fund that costs $10 a share, that $100 investment will get you 10 shares.  If the mutual fund doubles to $20 a share next month, you will end up with only 5 shares.

While that is still more expensive than last month’s investment, DCA allows you to scoop up more investments while the shares are cheap.  Most people will actually do the opposite.  They will put a large amount of money into a “hot” stock or mutual fund while it is expensive.  This is not the way to invest.

DCA keeps the emotion out of investing.  By investing in regular intervals, you will keep your accounts growing while ensuring you are not buying too many shares at inflated prices.  This will set you up for nice investment gains when it comes time to sell.

Conclusion

DCA is the preferred way to invest for young professionals.  Early in your career, you will probably not have a lump sum to invest immediately in the stock market.  So investing as you get your paycheck is the most efficient way to deploy your capital.

DCA can come in many forms.  It can be an automatic deduction from your paycheck into your 401k account every 2 weeks.  Or a monthly withdrawal from your checking account into an IRA.

No matter what form it takes, DCA will keep your investment accounts growing steadily and will allow you to get the most shares at the lowest price.  No need for market timing since it doesn’t work anyway!

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