Getting to Financial Freedom: Why Extreme Finance isn’t a Good fit for Everyone

Getting to Financial Freedom - Jason Aaron Bragg

Most people have seem the headlines, no doubt. A couple pays off $200,000 in student loans in two years. A Millennial woman packs up her van and travels on the money she earns from online gigs. An extreme coupon fanatic gets $1,000 worth of groceries for 10 cents.

All of these lifestyles hold some appeal. Otherwise, there wouldn’t be TV shows and books dedicated to them. However, there are many downsides to trying to live this kind of lifestyle, many of which don’t get mentioned by the people who live them.

There is a downside to all these seemingly perfect lifestyles that the people who live them don’t mention. Ignoring them puts new practitioners at risk, often leaving worse off financially than they were before.

 

It’s Not Sustainable

According to the U.S. News and World Report, extreme budgeting rarely works in the long-term. This is due in part to how extreme these lifestyles tend to be.

However, it’s also due to the fact that many promises that these extreme finance lifestyles promise aren’t sustainable. For example, most people would not be able to live in an RV and work at odd jobs they’ve found on a mobile app. This is a piecemeal existence that most people just aren’t ready for.

Additionally, people who live these lifestyles often put themselves in a precarious position. Take those who do extreme budgeting to pay off a large amount of debt. If their finances take a big hit like them suddenly getting sick and being unable to work, they won’t have any money saved. They’ll have put it all toward debt, without giving a thought to how they’d handle such an emergency.

 

Budget Burnout is Real

Additionally, TIME points out that extreme budgeting and financial lifestyles lead to burnout. People who are burned out will fail eventually.

It’s better to introduce a planned splurge to the family budget and to change up a family’s budgeting system from time to time to keep long-term financial plans sustainable.

Taking steps like these allow most people to work toward a more balanced and realistic financial plan. It’s one that would allow them to to save for emergencies like a job loss and plan for retirement.

 

Change the Root Problem

Finally, the people who adopt these kinds of extreme financial lifestyles don’t get to the root of the problem.

For example, the couple that has decided to pay off $40,000 worth of student loans and credit card bills in a year and a half on a $20,000 income will not be able to do it without a significant adjustment to their income. This means they’ll either have to get a second job or get help from relatives to make this plan happen.

 

Worst yet, the people who embark on such a plan usually don’t get to the root of the problem. Until they figure out why they have so much debt and until they change the behaviors that caused them to be in their current financial predicament, it’s only a matter of time before they’ll be back in debt again. All of the scrimping and saving they did in order to pay off their large debts will have been for naught.

 

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What is Synthetic Identity Theft and How to Protect Yourself From It

What is Synthetic Identity Theft - Jason Aaron Bragg

Synthetic identity theft is the use of a false identity based on information from a real or made-up person. Identity thieves use this synthetic information to apply for credit cards, open bank accounts or request identity cards. Both individuals and companies need to identify the signs of theft and work toward protecting their assets.

 

Signs of Abuse

Preventing identity theft starts with identifying the warning signs when they appear. These signs include a credit card bill or monthly bank statement that seems bigger than usual. The first step is to review all monthly statements and look for unusual activities. If a problem is found, it must be reported to the bank immediately.

Most banks give options for their account holders to receive alerts whenever certain activities happen. So, every account holder should sign up for automatic email or text message alerts. Without alerts, any thief can pretend to be someone else, open up new credit cards and ruin the person’s credit in a short period of time.

 

Credit Reports

A credit report shows a complete history of a person’s financial status. It starts when the person opens up a first bank account, and it continues through the borrowing of student loans, the long-term payments of mortgages, etc. Every major financial event shows up on this report, whether it’s a bankruptcy or a delinquent loan. The report can be mostly positive or negative, depending on his or her actions.

 

Trust

Some websites, such as online payday lenders, cannot be trusted with sensitive personal information. Even if the company is trustworthy, there could be a hacking incident that causes large amounts of important data to be stolen. It’s necessary to be cautious when working with any website that requests and stores personal information.

Hackers can steal identities online, but many thefts occur in person. People should not allow others to use their personal belongings. They should carry as few credit cards and identification numbers in their wallet as possible. To protect customers and employees, companies should shred discarded documents and require passwords on their accounts.

 

Synthetic identity theft is the use of real and fictional information to create a new, fraudulent identity. It’s a common crime, but many people are learning how to protect their assets. They are using strong passwords on their bank accounts or checking personal credit reports. Getting insurance for identity theft is one option, but the best option is to prevent it from happening.

What Are the Consequences of Filing for Bankruptcy?

What are the Consequences of Bankruptcy - Jason Aaron Bragg

Some might think that filing for bankruptcy is taking the easy way out when in fact it is a very lengthy, complicated process. Filing for bankruptcy is usually a last resort for a person or company that is in a dire financial situation.

 

Types of Bankruptcy

There are several types of bankruptcies, but Chapter 7, Chapter 11, and Chapter 13 are the most common. Chapter 7 involves selling off certain assets in order to pay off a portion of the debt. While companies may file for Chapter 7, this is typically favored by individuals. There are also strict income requirements with Chapter 7.

 

Chapter 11 is usually reserved for companies since it involves restructuring of the business. The company must come up with a plan to pay off their debts within a certain amount of time. They get to keep their assets, but there are strict requirements pertaining to the amount of debt the company has. Chapter 13 is similar to Chapter 11, except that individuals are also able to file for it.

 

The Bankruptcy Process

The filing process can take as little as a few months or up to five years. Chapter 7 is usually the quickest since most debts are paid off by liquidating assets. Chapter 13 takes the longest because it involves paying off debts over a period of time.

 

While a lawyer isn’t required, it is recommended since the process can be quite detailed. There is a filing fee which ranges from a few hundred dollars up to a few thousand. Once bankruptcy has been filed, an individual or company gets an automatic stay which prevents creditors from trying to collect a debt.

 

Individuals are required to take credit counseling classes prior to filing. They will also need to attend a court meeting with the creditors involved in the bankruptcy case.

 

What Happens After Bankruptcy

Filing for bankruptcy will result in a lower credit score. The bankruptcy will remain on a credit report for up to ten years. Many debts are discharged following a bankruptcy, except for student loans, tax debts, child support and other specific debts. While filing for bankruptcy will initially have a negative impact on an individual or company’s credit, it typically results in positive changes overall.

How to Lend Money to Friends and Family Without Regrets

saving money - Jason Aaron Bragg

Lending money to friends and family is always a dangerous proposition. You want to help out your loved ones, but you also don’t want to live to regret the decision to loan them money–especially if you’re dealing with someone who tends to be unreliable. If you want to be able to lend money to friends and family members without regrets, there are several key things you should keep in mind.

 

Step One: View It As a Gift

When you loan money to a friend or family member, the last thing you want is for it to get in the way of your relationship. 15% of friend and family member lenders assume that they won’t get the money back when they loan it to a loved one. Going into it with a different mindset could result in a destroyed relationship–exactly the opposite of what you want. If you are paid back, then you’ll be pleasantly surprised. If you aren’t, then you won’t be as disappointed.

 

Step Two: Be Realistic

Individuals who need to turn to family members for loans–either short-term or long-term–typically do so because they don’t want to incur the high interest rates or potential credit hits associated with traditional bank loans. In many cases, it’s also because they’re afraid they won’t be able to pay that money back. If you give a loan to a loved one, be realistic about your expectations. This includes:

  • Setting a realistic timeline for repayment. Assume that it’s going to take more time for your loved one to pay you back than it would take them to pay back a traditional bank loan.
  • How often you’re willing to lend. Has your family member approached you for a loan in the past? What happened the last time?
  • Understanding the amount you’re willing to lend. If it’s going to put you in a financial bind, it’s not realistic!

 

Step Three: Know Their Plans

If you’re loaning money to a loved one, you have a right to ask where that money is going. What are they planning to buy with it? You may find, for example, that you’re more willing to offer a loan to help pay for groceries or to help cover rent than for an expensive television or a vacation. That doesn’t mean you should make an emotional decision, but it does mean you should carefully evaluate how you’re going to feel about offering a loan for that purpose.

 

Lending money to friends and family doesn’t have to come with hefty regrets. By carefully considering the loan ahead of time, you can make a better decision that is less likely to leave you with a frown on your face and a destroyed relationship.