HealthyLife Articles

Tag: debt

  • Debt-To-Income Ratio: Faqs

    FINANCIAL HEALTH

    Young couple looking over bills together.

    A healthy debt-to-income ratio is an indicator of financial stability. Just as the term implies, this ratio compares the amount of money you pay toward debt against your income.

    A stable debt-to-income ratio is anything 43% and lower. Someone with a higher percentage may struggle to make ends meet and keep up with their payments.

    When applying for a mortgage, lenders will use this number as a determining factor, so it’s essential to know where you stand. In most cases, you must have a debt-to-income ratio under 43% to get a qualified mortgage when buying a home.

    Calculate debt-to-income ratio

    The equation looks like this: Total monthly debt payments ÷ monthly gross income (before taxes) = debt-to-income ratio

    Here’s an example: Let’s say you make $6000 each month before taxes, and you have an $1800 mortgage, $300 car payment, $150 student loans, and $50 credit card payment.

    ($1800 + $300 + $150 + $50) ÷ $6000 = debt-to-income ratio

    $2300 ÷ $6000 = 0.38

    Your debt to income ratio is 38%.

    Bills as debt

    *  Monthly rent or house payment

    *  Auto, student, or other monthly loan payments

    *  Monthly alimony or child support

    *  Monthly credit card payment

    *  Any other debt

    © American Institute for Preventive Medicine

  • Deal With Debt

    Financial Health

    Get out of debt on your own or with help.

    Whether it’s from living above your means, expensive medical bills, a job loss, or supporting your parents, you can eliminate debt. The first step is to avoid getting deeper in debt. Limit spending to essentials and follow a plan to pay down the debt.

    On your own:

    *  Cut up credit cards or put them away until they are paid off.

    *  Rank order what needs to be paid off – student and other loans, credit cards, etc.

    *  Contact your creditors right away to work out payment plans that you can manage. Do this before debt collectors get involved. If you can’t work out a plan with your mortgage company, contact the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency near you.

    *  Bring in more income from a part time job and selling household items you no longer need at a garage sale or online site, such as Ebay. Consider selling some of your gold and silver jewelry for cash.

    Get professional help from:

    *  A professional financial planner through work

    *  The Financial Planning Association (FPA) at 800.647.6340 orwww.fpanet.org

    *  The National Foundation for Credit Counseling at 800.388.2227 orwww.nfcc.org/FirstStep/firststep_03.cfm.

    Beware of any debt relief service that*:

    *  Charges any fees before it settles your debts

    *  Pressures you to make “voluntary contributions,” another name for fees

    *  Touts a “new government program” to bail out personal credit card debt

    *  Guarantees it can make your debt go away

    *  Tells you it can stop all debt collection calls and lawsuits

    *  Guarantees that your credit card and any other debt not tied to an asset, such as your house, can be paid off for just pennies on the dollar

    *  Offers to enroll you in a debt management program (DMP) without teaching you skills to budget and manage your money

    *  Adapted fromwww.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm

    Action Step

    Pay off the credit card or other debt with the lowest balance first. After this is paid in full, pay down the next debt with the lowest balance.

    Ways to Well-Being book by the American Institute for Preventive Medicine. www.HealthyLife.com. All rights reserved.

    © American Institute for Preventive Medicine

  • Declare Your Independence From Credit Card Overuse

    Financial Health

    Credit cards fanned out on table.

    *  Limit your number of credit cards.

    *  Use 1 or 2 major credit cards that have low interest rates. Individual store and gas cards have very high interest rates.

    *  Only charge what you can pay in full when you get the bill. Or, aim to keep the balance to less than 25 percent of the total amount you can charge.

    *  Pay with cash. If you are an impulse buyer, leave your credit cards at home when you shop. Avoid or limit shopping online and through TV shopping channels.

    Dos

    *  Make payments on time to avoid late fees and a possible increase in your interest rate.

    *  Make more than the minimum payment.

    Don’ts

    *  Don’t open new credit cards to save 10 or more percent. For each new card you open, your credit score could go down 10 points.

    *  Don’t use your credit cards for cash advances.

    ays to Well-Being book by the American Institute for Preventive Medicine. www.HealthyLife.com. All rights reserved.

    © American Institute for Preventive Medicine

  • Stop The Spending Cycle

    WELL-BEING

    Image of colorful shopping bags.

    Going overboard on one shopping trip, especially around the holidays, does not mean you have a shopping addiction. It’s normal to overdo it once in a while. And, everyone buys things that aren’t truly needed at times.

    But, if you think you or a loved one might have a shopping addiction, there is help. Often times, a shopping addiction is the result of another health issue like depression. Talk with your doctor about your feelings and symptoms. Antidepressants or other medications may be helpful.

    Or, you may wish to talk with a counselor about things that are bothering you. Sometimes, emotional burdens or troubles can make you look for happiness in things like shopping. If you are able to deal with those problems, you may not feel the need to shop as much.

    There are also support groups for people with a variety of addictions. Debtors Anonymous can help people who have gone into debt from too much spending.

    Don’t be afraid to seek help. The sooner you can address the problem, the sooner you can get your life back on track.

    © American Institute for Preventive Medicine

  • Using This Credit Card May Be Bad For Your Health

    WELL-BEING

    Image of young women cutting up a credit card.

    High levels of credit card debt and the stress of having debt may be bad for your health, a study in Social Science & Medicine suggests. People who reported higher levels of stress about their debt showed higher levels of physical impairment and reported worse health than those with lower levels of debt.

    In the study, researchers asked people to rate their own health on a scale of very poor to very good. They rated how much they worried about their total debt. Researchers also asked how difficult it was for survey participants to do everyday activities such as climbing stairs and carrying groceries. Participants also reported how many credit cards they have and whether they carry a balance from month to month.

    But it didn’t matter how many credit cards a person had, the big stress factor related to health was the ratio of credit card debt to their total family income-in other words, how much you owe compared with what you earn.

    “The stress of owing money, and knowledge that we’re paying high interest rates, may lead to increased stress resulting in worsening health,” said the director of Ohio State’s Center for Survey Research. Credit counseling is one way to reverse debt-stress.

    © American Institute for Preventive Medicine

  • 4 Money Mistakes To Avoid

    FINANCIAL HEALTH

    Image of 3 friends.

    Little everyday choices can have a big impact on your finances. If you want to save more or spend less, think about whether you’re making any of these mistakes.

    Mistake #1: You put off saving money.

    Do you think that you can wait a few more months or even years before you need to save for retirement, your kids’ college or other future needs? Even if you can only put away a few dollars each week, start now. It can add up over time and the sooner you start, the more money you’ll have later.

    Mistake #2: You spend too much on “treats.”

    We all like to treat ourselves once in a while. But, if you’re spending money on treats often, such as going to the movies or buying yourself a new item, you could be creating money problems. Look for low-cost or free ways to reward yourself. Set aside some time with a friend, take a hot bath, watch a favorite movie at home or check out free museums and concerts.

    Mistake #3: You get lots of coupons in your mail and email.

    If you get catalogs in the mail and your inbox is filled with coupons and deals, this could be wrecking your money goals. After all, you may not need the items that are advertised. But, they look like such a good deal that you decide to buy them anyway. Do you really need another sweater or pair of jeans, or are you buying them because of the sale? Unsubscribe from email coupons and newsletters, and throw catalogs in the recycling bin. This can help lower the temptation to shop.

    Mistake #4: You don’t know how much money you really have.

    If you are struggling financially, it can be hard to look at your bank account balances. But, it’s better to know what you can afford than to go deeper into debt. Make a budget of what you have and what you can spend each month after bills are paid. Try to stick to your budget and find ways to cut out unnecessary items.

    © American Institute for Preventive Medicine

  • Avoid Dubious Debt Collectors

    FINANCIAL HEALTH

    Wife on phone while husband sits besides her.

    Have you ever received a call from a debt collector that did not seem quite right? Perhaps it was for a debt you already paid or for one you did not recognize. Either way, the call may have given you a moment’s hesitation, wondering if they had the right person or if the call was legitimate. Scams like this are on the rise across the nation, and it is important for you to protect yourself from any debt collection scam.

    Ask who is calling

    Ask for the collector’s name, the company’s name, its address and phone number. If they cannot answer any of that information, hang up.

    Keep personal information to yourself

    If the collector asks for you to confirm personal information, do not correct them if they give out wrong information. Do not volunteer any additional personal information.

    Demand a validation notice

    Collectors must provide a validation notice and tell them you will not discuss the debt until you have received it. This notice will tell you how much money you owe, the name of the creditor and what to do if you don’t think you owe the money. The debt should also appear on a free, annual credit report.

    Do not respond to threats

    If the collector threatens to have you arrested or take away your driver’s license, hang up and report the collector to the FTC atftc.gov/complaint.

    Do detective work

    Contact the original creditor yourself to get to the bottom of it. They should be able to confirm whether the debt is legitimate.

    Dispute the debt

    If you do not think you should owe anything, even if you got validation information, dispute it with the collector by mail or online.

    Source: Federal Trade Commission

    © American Institute for Preventive Medicine