Categories
Budgeting & Saving

How to Fix Bad Credit?

Wondering how to fix my credit myself? Or how to fix bad credit? There’s no doubt that living in the modern world requires credit. Yes, you can live without a credit card and survive on cash or cashback debit cards.

I know because I did it for over two years as I paid off credit card debt. But what I really wanted to do was improve my credit score immediately.

However, when you are ready to buy a house, you’ll need to get your credit straightened out. In this post I’ll discuss getting a credit repair service as well as what steps you need to take if you decide you want to fix your credit score yourself. You might even be able to fix your credit in just 6 months.

These steps are so easy. Perfect guide for do it yourself credit repair.

Related articles from our approved partners:

  • Three Tips to Get Approved for Better Loans at Better Rates
  • Free Credit Consultation – Includes Credit Report Summary & Score
  • Save $50 off Credit Repair Service

How Can I Fix Bad Credit Myself? – 6 MonthCredit Repair Guide

First, watch this video from my friend Dominique over at Your Finances Simplified. He’s going to tell you exactly how to fix your credit.

Watched the video? Good.
Feeling overwhelmed at the next steps?
Yep. I understand.
Let’s take this step by step.

Take a deep breath. People think that having bad credit is the worse thing that can happen. But just calm down. You are taking the first steps which puts you on the right track.

Remember, it’s just money.

No one is going to die. Take control and get back in the driver’s seat!

Fix 1: Check Bad Credit

The first thing you’ll need is your creditor information. Get the most recent credit card statements, loan balances, and installment loan reports along with addresses and phone numbers. I recommend printing everything old-school style. It’s going to come in handy later.

Fix 2: Get a Free Credit Report

Then, take a second to get your free credit report from AnnualCreditReport.com. Each year you are able to pull your credit report for free from the three providers Experian, Equifax, and Transunion.

Optional: Get Your Free Credit Score

You can check an approximation of your credit score for free at Credit Sesame one of our approved partners, but if you are trying to fix your credit, you probably already know your credit score looks a little like this….

bad credit personified

But that’s ok. We’re going to put you on the good foot.

Fix 3: Review your credit report for errors (highlight each error).

You’re getting ready to take charge and stop being a victim. Most people don’t even realize what they could get removed from their credit just because of errors.

What should you look for?

Wait a minute. So, you’re telling me you didn’t watch the video above?

Scroll back up for me right quick and you’ll find out exactly what you should look for.

Or keep reading…

Dispute incorrect names, addresses, SSN, and date of birth via the certified mail.

You will need supporting documentation and letters. You will have to write a dispute letter and include the specifics of the inaccuracies. You want to dispute inaccurate, erroneous, outdated, misleading, and unverifiable information in your credit reports.

Tired of being harassed by your creditors? Maybe you’d prefer that someone else handle all of this for you?

In that case, you might was to work with a credit repair company to improve your credit.

Are you ready to…

  • Remove bankruptcies to rebuild credit?
  • Permanently delete foreclosures and repossessions?
  • Erase debts that were in collection?
  • Completely get credit cards under control?
  • Get approved for loans?
  • Get the best financing on cars and homes?

In that case, check out our partner Lexington Law for more details on how they can help you clean up your credit report.

Finally, fixing your credit permanently also means creating good habits and getting out of debt.

How getting out of debt is like the MTV show, I Used to Be Fat.

I used to watch this TV show on MTV called I Used to Be Fat. The show documents young adults, usually high school seniors and high school graduates who want to lose weight before they start college. Each episode features a different teen. I absolutely LOVE this show. I like seeing the determination and perseverance of these kids, they are really focused on their goals. Most of them thought about quitting along the way but each one makes it to the end and they usually reach their goal.

I was thinking the other day about how the TV show is very similar to a battle with debt. When you’re in debt, it can feel like you’re carrying around a second person, experiencing frugal fatigue, or that you have a spare tire of bills around your waist. I know because I’m working on getting out of debt myself. I realized that there are 3 major points we can learn from the MTV show I Used to Be Fat when trying to take control of our debt.
debt

Improve Your Credit Step 1 – Give Yourself a Deadline

Before the teens even begin a weight loss program, their coach/personal trainer gives them a large tear off number calendar to place on their wall. It has the total number of days until their program completion date, and every day they rip off the next number.

It is a good idea, when you are paying off debt, to set a deadline for your debt-free date, like 6 months. Setting a deadline is a way of making your goal specific. Every time you look at that calendar or see that date it will push your brain consciously and subconsciously to make it to your ultimate goal, to reduce spending and get out of debt.

Improve Your Credit Step 2 – Check in Regularly with a Coach

Every week, the kids had a weigh in. Their personal trainer was making sure that they were on track with how much weight they were supposed to be losing at each stage in the process. Sometimes they were attempting to lose one pound a day! I never thought that was possible or healthy, but most of the teens actually accomplished it under the supervision of their coach.

If you really want to prioritize your goal of becoming debt free then you really have to give yourself check points. You can enlist the help of a friend or even a debt counselor to help you along the way. Having a good support system can make all the difference.

Improve Your Credit Step 3 – Get Rid of Old Habits and Create New Ones

When one of the teens was at a restaurant with her friends, she ordered a lean meal instead of the greasy french fries that her friends had. The personal trainer also taught her how to cook healthier meals so that she would be able to maintain her new lifestyle change.

Becoming debt-free is not a one-time goal. It has to be a lifestyle change. When I decided to start getting out of debt, I had to first evaluate why I was in debt in the first place. I had to eliminate my habit of impulse spending and replace that habit with a good habit. Now I impulse buy stocks and my portfolio loves it! It’s not easy to change a habit that took years to cultivate, but with a good support system, it is entirely possible.

Are you ready to make a change?

Some of you may be thinking, I’m still young, so why should I care about my credit score? Lots of people have debt and less than stellar credit, but they’re still enjoying a cushy lifestyle. As long as I’m able to buy the things that I want, why should I be concerned? The answer is simple. Life is easier when you have good credit.

Take a look at it this way. Landlords, employers, and lenders need to determine whether they can trust you, and they look at your credit score as an indicator of your financial reputation. You may not think credit affects you greatly, but it does. When you ruin your financial reputation (a.k.a. credit score), it will take you a long time to restore it.

Poor credit affects your ability to rent, buy a car, get a home loan, and even open up accounts. Creditors don’t want to work with people with bad credit because the risk of not getting paid is very high. How can they trust that you will pay them back if you haven’t even paid others? If you’ve already tarnished your credit, here are some tips to help you fix your credit score and reestablish your life.

Improve Your Credit Step 4 – Make Your Payments on Time

This may sound trivial, but we all know that money can be tight, and skipping payments on one bill can help pay for other expenses. But, timely payments are the biggest factor affecting your credit score. Keep a budget, and make sure you have sufficient funds to make your credit card and loan payments on time.

Improve Your Credit Step 5 – Consider Getting a Secured Credit Card

Obviously, it will be very hard to get a regular credit card if you have bad credit. If you don’t qualify for a credit card, you can get a secured card instead. This is when the bank gives you a credit line equal to the deposit you make. If used wisely, a secured card can help nurse your poor credit to better health.

Improve Your Credit Step 4 – Add an Installment Loan

You can improve your score quickly if you show that you can be responsible for both major kinds of credit: revolving (credit cards) and installment (mortgages, auto, student loans, etc.). If you don’t have an installment loan and feel you are ready to handle one, consider adding a small personal loan. Stay away from expensive finance companies and “teaser” deals, and use a company that reports the loan to all three credit bureaus.

Improve Your Credit Step 5 – Avoid the Minimum Payment Trap

Credit cards come with high interest rates. We all know how our $2,000 computer ended up costing $8,168 because we only made the minimum payments at 20% on our credit card. Ouch, that hurts! Keep constant payments on your credit card (and don’t run them up again) and your balances will drop.

Improve Your Credit Step 6 – Use Your Credit Cards Lightly and Check Your Limits

Even if you pay your bills on time and in full each month, having big balances can hurt your score. Try to limit charges to 30% or less of your card’s limit. Lenders typically like to see a big gap between how much you’re charging and your available credit limit.

Improve Your Credit Step 7 – Keep Old Credit Cards

Don’t close out old credit cards. The longer your credit history, the better. Leave the accounts open but once you pay them off, stop using them. Closed accounts tend to bring down your score.

Improve Your Credit Step 8 – Suspend Credit Inquiries

The more credit inquiries you have, the more your credit score drops. Fix your credit and wait a while before allowing your credit to be pulled again.

Improve Your Credit Step 9 – Get a Goodwill Adjustment

If you have been responsible about paying your credit cards on time, the lender may agree to erase a late payment from your credit history. For more troubled accounts, communicate with your lender about possible options to erase previous delinquencies. If the lender agrees, it will improve your overall record.

Improve Your Credit Step 10 – Check Your Credit Report for Errors

You can check your credit report without negative scoring (once per year, for free) with the three credit bureaus at AnnualCreditReport.com. Make sure to look for any mistakes that could be hurting your score. If you see something wrong, make the effort to have it corrected.

Improve Your Credit Step 11 – Seek Professional Help

If you are overwhelmed with debt and don’t feel you can handle the problem on your own, consider working with a professional debt relief agent. They can help you explore your options and give you guidance on this post

It’s very easy to ruin your credit, but it takes time to build it back up. No matter how bad your credit is, you can take steps to make it better.

Sometimes we mishandle our budget, and we spend more than we should. (You know that you shouldn’t have bought that expensive flat screen TV). And, sometimes we end up in tough financial situations because of things beyond our control. Whether you have experienced job loss, illness, or another type of financial disruption, it’s important to know that you can turn things around.

It may not be easy, but step by step, you will be able to fix your financial situation. Just don’t delay facing the issue. The longer you wait, the harder it is for you to recover.

Categories
Budgeting & Saving

Here’s The Budget One Woman Used Before And After Paying Off $32,000 Of Debt

It was very difficult for me to reveal this information and I tried to be as open as possible without completely eliminating my privacy. Here’s the story on Business Insider about how I budgeted for my debt payoff. 

___

In 2011, LaTisha Styles decided it was time to pay off her $22,000 of credit-card debt and $10,000 auto loan.

The process took her three years and one month.

“In November of [2011], I moved to my own place in the city, single and without children,” she remembers. “I took a job with an investment adviser and slowly began the process of paying off my debt.”

At the time, her debt was delinquent (meaning she hadn’t been making payments), since she had graduated college without a job and went to live with her parents outside of Atlanta, Georgia.

On the day she was offered her new job, she sat down and created a budget, using a basic spreadsheet and working with Clearpoint Credit Counseling Solutions to manage her consumer debt.

Here, she shares an average monthly budget from 2013, when she was furiously paying down her debt, as well as one from 2014, the year she paid it off. Note that these are averages taken from a year’s worth of spending, so a single month isn’t represented, and the budget was created for her after-tax income. Continue reading on Business Insider.

 
Or, watch this video first about my debt payoff strategy.


 

Originally posted 2015-01-07 13:00:09.

Categories
Investing

TradeKing Review Online Trading

There are numerous options for those looking to begin the process of online trading. Few, however, offer the range of features exhibited by discount brokerage firm, TradeKing – and no other site provides these features at such an affordable cost.

Site Overview

TradeKing is an online broker site that specializes in the online trading of stocks, bonds and other options. The site ranks #1 among online brokers for site usability, so it offers a comfortable starting point for trading beginners. With excellent customer service, managed portfolio options and educational resources, the site is comprehensive in its overall features, as well.

Competitive Pricing

Cost is always a deciding factor when choosing the right brokerage site, and TradeKing offers the most competitive price point in the industry. TradeKing charges only $4.95 per trade, a steal when compared to fees at other well-known brokerage sites. Scottrade costs $7 per trade, while OptionsXpress costs $8.95. Both E*Trade and TD Ameritrade charge $9.99 per trade.

TradeKing’s flat-fee trade rate adds to the site’s user-friendliness and simplicity. While regular stock trades cost the flat $4.95, options trades cost $4.95 plus $.65 per contract. The site is not ideal, however, for penny stock traders given than stocks less than $2 per share still cost the flat rate plus a penny per share.

Tools

TradeKing stands out from other sites due to its extensive site features, including research reports, interactive charts and technical analysis tools. The site understandably boasts the fact that Barron’s ranked TradeKing 4 out of 4 stars for a solid eight years in a row in the company’s annual review of online stock and option brokers.

Education Center

TradeKing’s community education center is especially helpful for those starting out in the business of stock trading. Beginners can easily ask questions to more experienced members or choose to scour forum discussions to learn the ropes based on previously posted topics. Either way, a plethora of helpful information and potential mentoring opportunities is found through the site’s forums and available resources.

TradeKing LIVE

TradeKing LIVE is a streaming platform that is readily offered free of charge to TradeKing customers who perform more than one trade per year or maintain a minimum balance of $2,500. The platform features streaming quotes in real time, all customizable to your own unique market preferences.

Customer Service

TradeKing is perhaps best known for two things: affordability and impressive customer service. SmartMoney Magazine even ranked TradeKing #1 for customer service in 2008, 2010, 2011 and 2012. The site also boasts a live chat feature that connects customers immediately with a customer service representative. This feature is available Monday through Friday from 8 A.M. to 6 P.M. Eastern Standard Time. Representatives are also available via email and phone.

Summary of Features

Positives

  • Affordable
  • Flat-rate fees
  • Accessible customer service
  • User-friendly site
  • Resources for beginners
  • Streaming market platform
  • No account minimum

Negatives

  • Penny stock fees
  • Mutual fund fees
  • Limited research options

Overall, TradeKing is an ideal site for newbies in the stock-trading world. With remarkable customer service and lower trade costs than its competitors, TradeKing is a great place to start when venturing into online trades.

Originally posted 2014-12-27 06:00:54.

Categories
Budgeting & Saving

Could You Spend 1 Billion Dollars? You Can’t. Here’s Why.

Is it really possible to spend one billion dollars?

I was listening to the latest GrowthEverywhere podcast (discovered earlier this morning via Growth Hackers) where they interviewed Emerson Spartz, a 27 year old middle school dropout. He homeschooled himself, started the number 1 fan site for Harry Potter fans, and today, across his various media properties, garners 160 million monthly page views.

In the interview, he mentions his financial goal. He wants to earn 1 billion dollars by the time he turns 30.

That’s right, 1 billion dollars.

That made me think. Does he want one billion dollars because he needs the money?

Of course not.

At some point, you earn enough money to support yourself, to give, and to buy a few toys.

I believe that his desire to reach one billion dollars is simply a ‘can I do it?‘ goal.

He likely wants to figure out if he has the mindset and mental capability required to earn one billion dollars. He’s already earned one million.

He has an above average mindset.

The mindset required to earn one million dollars is completely different than the mindset required to earn the average American household income of $51,000.

It has to be.

Otherwise, more Americans would be earning one million dollars, right?

But the mindset required to earn one billion dollars is not much different from the mindset to earn one million dollars.

It is simply a three zero difference.

If you think earning one million is impossible and earning one billion is impossible, then figuring out how to earn either one requires roughly the same mental effort, correct?

Impossible = Impossible

If you disagree then I would challenge you to search and find the definition of impossibler.

Exactly. It’s not a word.

So with that in mind, I tried to figure out what Emerson Spartz would do with one billion dollars.

We’ve already established that no one really needs one billion dollars. Heck, people survive everyday under the poverty level.

My fiancé and I agreed that it is not about the money. He even argued that no one could easily spend one billion dollars without wasting money.

I disagreed, stating that I could spend one billion dollars easily.

So he came up with a challenge.

How Would I Spend One Billion Dollars?

The challenge is this. Spend one billion dollars. Every single cent.

The conditions: I have to spend it on myself. No donating, no buying investments, none of that. I mean, if I made one billion dollars the first time, starting from zero, I could certainly make it again.

Donald Trump is living proof. He has been bankrupt and earned it all back and more.

Richard Pryor’s character in the movie Brewster’s Millions faced a similar challenge. He had to spend a $30 million inheritance in 30 days.

 

 

Faced with this challenge, someone who has never had that much money would find it difficult to figure out how to spend it.

I disagree. I think I could spend one billion.

Once I started looking for ways to spend one billion dollars, I realized that I had to dream big. Really big.

Here’s how I would spend one billion dollars.

1) Purchase a home ($125 million)

Could You Spend 1 Billion Dollars? It's Easier Than You Think. | Young Finances

The Maison de L’Amitie is a home in Palm Beach, Florida. I chose it because it is off the coast of Palm Beach, one of the most beautiful areas in Florida. The garage has space for 50 cars. However, I would only need enough space for one.

2) Purchase a diamond encrusted Mercedes Benz ($4 million)

Could You Spend 1 Billion Dollars? It's Easier Than You Think. | Young Finances
This car was rumored to be the possession of Saudi Prince Alwaleed. An article from Business Insider claims that the car is not his. Well, now that I’ve purchased it, it’s mine.

3) Purchase an island. Two to be exact. ($29.5 million + $43.3 million)

 

Could You Spend 1 Billion Dollars? It's Easier Than You Think. | Young Finances
This is a private island off the coast of Greece. It is non-devloped and only a 30 minute speed boat ride to Athens. The listing price is approximately $43.3 million USD. That seems reasonable.

Could You Spend 1 Billion Dollars? It's Easier Than You Think. | Young Finances
This is a private island in the Caribbean sea. It is also an undeveloped island and a part of the US Virgin Islands. The island is only five miles from Cyril E. King International Airport, making it accessible to commercial and private jet air service from around the world. Which brings me to my next purchase.

4) Purchase a jet ($100 million)

Could You Spend 1 Billion Dollars? It's Easier Than You Think. | Young Finances

This jet is on the more conservative side. I could have spent 600 million on an Airbus but I decided to budget my money for the islands. (budget, ha!) This Boeing 757 jet is one that Donald Trump is selling. Obviously I would have to get a new paint job.

5) Purchase a yacht ($263 million)

Could You Spend 1 Billion Dollars? It's Easier Than You Think. | Young Finances
This yacht is said to be owned by Russian billionaire, Alisher Usmanov. It is one of the largest yachts in the world and requires a crew of 47 people.

Whew! I’m exhausted. But I’ve only spent $564.8 million! It was really hard for me to figure out how to spend the remaining $435.2 million.

But here is how I would do it.

6) Develop two islands. ($36.5 million X 2)

Now that I have two islands, I have to develop them. I need roads and other infrastructure as well as a resort home to live in when I visit. I’ll also build private resort residences for friends or anyone that is willing to rent them out. This may break one of the rules because it would qualify as an investment property. However, as a condition of purchasing Necker Island, Richard Branson was required to develop a resort so I am going to assume that I have to do the same.
Richard Branson paid $10 million dollars to develop Necker Island. That was in 1978. Using this inflation calculator from the US Bureau of Labor Statistics, I calculated that in today’s money, 10 million dollars is equal to roughly 36.5 million.

7) Hire a private pilot for a 10 year contract term. ($2.1 million)

FindaPilot.com is a service matching pilots to job postings. One job posting listed the monthly compensation for a Boeing 757 pilot operator at $17,460. One year’s salary is really just a drop in the bucket so I extended the term over 10 years. This assumes that the entire compensation package is covered by the contract salary.

Ok, I’m almost tapped out by now. At this point, I’m just looking for ways to get rid of the remaining $360 million.

8) Buy a life for 12 million Candy Crush users ($207.8 million)

How many times have you gotten a request from a friend on Facebook asking you to send them a life in Candy Crush?

I’ve heard the game is addicting.

 

Could You Spend 1 Billion Dollars? It's Easier Than You Think | Young Finances
After the first few requests I blocked the app, but maybe I could finally give them a life. The company reports that approximately 12 million users spend an average of $17.32 a month. I’d be willing to buy a life or power up or whatever it’s called for each of them for one month.

9) Fritter away the remaining funds on unnecessary objects ($152.2 million)

Earlier this year, Oprah raised over $600 million auctioning off some of her most prized possessions. She decluttered and went back to the basics. Oprah is a billionaire but for her, less is more.

Now that I have completed this exercise, I can honestly say, I would have a hard time spending a billion dollars.

Yes, my fiancé was right.

Now I challenge you. Could you really spend one billion dollars? How would you do it?

Was it a fun exercise to try to find ways to spend money?

How are you spending the money you have now? Would your spending habits change if you had a billion dollars?

Originally posted 2014-10-12 15:52:33.

Categories
Budgeting & Saving

What Should I Do With My Old 401k?

How long have you been with your employer? And how long do you plan to stay there? As a millennial, you may have a feeling of restlessness. An article from Forbes argues that job hopping is the new normal for millennials. And the most recent data released by the Bureau of Labor Statistics states that employees tend to stay with their current employer an average of 4.6 years.

If you have been with your company for a few years, you are probably thinking of that next step. It is important to continue to grow your career and stretch yourself in the process. You may decide to continue your education and go back to college or start a professional certification. Maybe you are thinking of taking some time off to travel and discover what you truly have a desire to do. It is possible that you’ve realized that you can support yourself with your side hustle and you are ready to become a full time entrepreneur.

Free Money

During your time with your employer you have likely contributed to the retirement plan. If your company offers a match program for retirement contributions, you likely contributed to take advantage of the free money.

Staying with your employer? Click here to watch why free money should make you dance.

Now that you are thinking of leaving, you wonder, “What happens to all of that money in my 401(k)?”

Don’t panic.

It’s your money. And you can take it with you.

And that’s where the Rollover IRA comes in.

The Rollover IRA

As an avid reader of Young Finances, you’ve heard of the Roth IRA and the Traditional IRA. You know that IRA stands for Individual Retirement Account and that it is a savings vehicle designed to help you save for retirement. You know that you will need to designate a beneficiary and that I have a preference when it comes to tax free money.

But I have yet to mention the Rollover IRA.

A Rollover IRA, also known as rollover, is simply a transfer of funds from a retirement account such as a 401 (k) into a Traditional or Roth IRA.

Let’s assume that you have already left your job. Starting a rollover will allow you to move assets from a 401(k) at your old employer into a brand spanking new IRA, Traditional or Roth. In essence, you would contact the administrator that holds your 401(k) and let them know that you want to rollover. They would close out your 401(k), cut you a check and you have 60 days to deposit that into an IRA account that you open.

The Rollover Tax Question

Of course, when dealing with retirement distributions, you have to consider the tax implications. Let’s see what the Internal Revenue Service has to say about it.

Will taxes be withheld from my distribution?

IRAs: IRA distributions paid to you are subject to 10% withholding unless you elect out of withholding or choose to have a different amount withheld. Withholding does not apply if the distribution is paid directly to another IRA trustee.

Retirement plans: A retirement plan distribution paid to you is subject to mandatory withholding of 20%, even if you intend to roll it over later. Withholding does not apply if you roll over the amount directly to another retirement account. A distribution sent to you in the form of a check payable to the receiving plan or IRA is not subject to withholding.

Well there you have it. Directly from Uncle Sam himself.

Tax withholding can be avoided if you roll over the distribution from a retirement plan directly to another retirement account.

You may also be thinking, why should I roll over?

Why not take the distribution, pay the tax penalty and buy a yacht to travel the world?

When you roll over a retirement plan distribution, you generally don’t have to pay tax on it until you withdraw it from the new plan. By rolling over, you are saving for your future and your money continues to grow tax-free.

If you want to allow your money to grow tax-free then a rollover may be right for you.

Ready to Rollover Your IRA?

I’ve discussed Betterment here at Young Finances several times. I have a Roth IRA with them and a few sub accounts dedicated to travel, long term investing and a recent investing challenge. I like them because they provide an easy way to invest with low costs. Betterment portfolios are customized based on your personal preferences and risk tolerance and they work around the clock optimizing returns at every level of risk.

It’s free to roll over 401(k) assets or an IRA to Betterment. There are no trading costs and portfolios contain cost-efficient index funds.

They make things easy.

To transfer your 401(k) assets, the direct rollover method is used which prevents any withholding or tax consequences.

Betterment also provides a rollover concierge to you and they are available to speak to your current 401(k) or IRA provider to make sure the transition of assets is completed smoothly.

Not rolling over? Open a Betterment account today and get a month free.

Something that could take days and tons of paperwork is made easy with Betterment. Instead of an overwhelming, time-consuming process, Betterment takes steps to ensure your money is put to work in an optimized portfolio as soon as possible.


Now that you know how easy it is to roll over, what job will you look for next? Or would you rather take a year to travel the world?

Originally posted 2014-10-06 06:00:58.

Categories
Young Finances

Should I Pay Off Student Loans or Invest?

As a recent college graduate, it’s likely that you have student loan debt. According to the National Center for Education Statistics,

“From academic years 2006-07 to 2010-11, the percentage of first-time, full-time undergraduate students at 4-year degree-granting institutions receiving any financial aid increased from 75 to 85 percent.”

With an average 4-year tuition cost of 21,000 dollars, and more and more students taking on student loan debt; a portion of your salary will go directly to paying of this debt. (Source)

However, if you research investment strategies, you’ll see the same advice over and over again. Start early and use time to your advantage.

Starting early puts the power of compounding on your side. That means more money. That also means that you are faced with a difficult question. Should you pay off student loans first or invest?

Before you can answer that question, you should evaluation your personal situation.

Do you have any other debt?

Do you have any other debt aside from student loans such as credit card debt, car loans, or medical bills? Even though your balance of student loan debt will typically be higher, these types of debt often have a higher interest rate. In order to save money on fees and interest. You should work on paying these off first. In addition, student loans give you more flexibility in terms of deferring payments whereas, waiting to pay credit card debt will most certainly affect your credit score negatively.

How much money do you have saved?

If you lack emergency savings, and you have an unexpected expense, you will cause yourself more stress than necessary. Emergency savings of 2-3 months of expenses as a bare minimum will help you manage most unexpected expenses such as hospital bills or car accidents. Take some time to build up an emergency savings fund first before you consider investing.

If you have all other debts in check and you have already set aside your emergency cash, now you can consider if it is better for you to pay off student loans or invest.

What types of loans do you have?

Typically, government issued loans have a fixed interest rate. If you do not have a fixed interest rate, then it would definitely be much wiser to pay off that loan as much as possible (or entirely) before you consider putting your money into investments. This is because when it comes to finances, figuring out what is certain and what is uncertain will help you determine where to put your efforts.

Are you ready to risk investing?

There is no such thing as a safe investment. The market can crash and businesses can go under at any time. Some investments are safer than others. When investing, there is a trade off between the risk you take and the reward you earn. The higher the risk becomes, more money will be returned on the investment. Only you can determine what types of risks you’re willing to take in your investing.

One final consideration is how you feel about your student debt. If you are the type of person who is uncomfortable with knowing that you owe someone a lot of money, or you have concerns about making that payment every month, then the answer should be obvious. Pay off your student loans.

There were many questions posed in this article. That is because there are many things to consider with a question such as this. You are the only person who can determine which choice is the correct choice. Evaluate your situation carefully, and make a decision that works best for you and causes you the least amount of worry.

This post was originally published as a part of the PNC Achievement Sessions helping you get smarter about money. Click here for more articles.

Originally posted 2014-08-20 06:00:42.