Five Primary Reasons Why Your Credit Card Application Was Declined

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I try to take advantage of promotional credit card offers as much as possible.

When big bonuses come around, I apply. When great cash back reward programs are offered, I’m immediately figuring out how much money I can save by using a new card instead of an old one.

But sometimes all these new credit cards and their spending requirements can get me into a bit of a bind. One of those binds happened last month.

In February, I signed up for a Chase Sapphire Reserve credit card. It offered 100,000 bonus points if I spent $4,000 in the first 4 months of account ownership. Well, my spending on that card was awfully light for the first few months. I’m not a heavy traveler, anyway. And I was grounded for a few months after the birth of my second child.

However, an opportunity arose to spend on the card with the purchase of a new vehicle. The dealership where I purchased a used 2015 Toyota Highlander let me put a down payment on my credit card. I jumped at the chance, put down a $15,000 deposit, and BAM! I had met my spend hurdle while earning another 15,000 Chase Ultimate Rewards points.

The plan was to simply take the funds I had set aside for the deposit and pay off the credit card. But then an investment opportunity came around just a few days later, and I jumped at the chance. I now had a $15,000 debt on my credit card and no immediate funds to pay the balance down to zero. Ugh, why do I do these things?!

This didn’t phase me, though. I knew my credit score was in the low 700s, so I planned to simply open a new credit card and transfer the balance at 0%. And I did just that.

I chose the Barclaycard Ring MasterCard because there was also no balance transfer fee. Over 15 months, I could pay the debt down to zero, without worrying about a penny of interest. There was a big surprise, however, after completing my application. I received the dreaded letter in the mail letting me know I was declined.

So, now I have two choices. I can decide to apply for a different card (which would again slightly lower my credit score). Or, I can sit back and be stuck with credit card interest I don’t want.

Five Reasons Why Your Credit Card Application Was Declined

Credit card issuers use a fair amount of logic when deciding whether or not they want you as a client. And if you apply and are declined for a credit card, there’s generally a very good reason (although I’ll argue against that for the reason I was declined shortly).  Let’s take a look at the five most common reasons why you would be declined. Then we’ll talk about how you could improve in those areas.

1. Too Many Negative Credit Accounts

The greatest fear for a credit card issuer is having to write off your debt. When you consider how an issuer makes money, their biggest risk is lending credit that is never paid back.

Accounts in charge-off status or collections can drop a credit score like an anchor. And having more than one negative account on your credit score nixes your chances of acquiring a credit line with a respectable interest rate.

Negative credit accounts can stay on your credit history for seven years, so they can do lasting damage. Before succumbing to the idea of a collecting agency calling you at all hours of the night, work with your lender as much as you can to avoid that outcome. Many will make a payment schedule because they too do not want to sell your debt for pennies on the dollar. Take advantage, and do your best to never let an account fall into the negative category.

Related: Using Goodwill Letters to Remove Negative Accounts

2. Revolving Account Balance is Too High

This was the only reason listed for why I was declined for the new balance transfer credit card (letter image below). With a credit score of 721, I was told I could not receive my Barclaycard Ring Card because the balances on my revolving accounts were too high.

Full disclosure: I currently have eight credit card accounts and carry balances on two of them. One of those balances is the $15,000 on the Chase Sapphire Reserve, and the other is our normal $3,000 – $4,000 balance on our everyday spending card. We use that credit card to buy everything: gas, groceries, utilities, health insurance, etc. So, at a certain point every month, most of our monthly charges are on one card, which we then pay off. I assume that at the time of my application, we had two cards with a balance.

My debt-to-credit ratio was still well below 30%, and there were no other reasons listed on my denial letter. So, I’m still shocked that a 721 credit score would be declined for a balance transfer credit card. After all, it’s a balance transfer credit card. I wouldn’t be applying unless I had a balance to transfer! What a novel idea.

Nevertheless, credit card issuers appreciate a low debt level for every individual account, and carrying even a few balances can be problematic. If you get denied for this reason, pay down some account balances before you apply again.

Related: What Is Your Debt-to-Income Ratio and Why Should You Care?

3. Job Related Income is Too Low

In order to be approved for a line of credit, you must show the ability to pay it back. So all credit card applications include a section on your job and income level. If your credit score is not excellent, an income of $20,000 or less annually is a red flag.

One way to boost your income level in the eyes of a credit card issuer is by including the income earned annually from your spouse as well. Most credit card applications are unspecific when asking for this information, and if your application goes into the secondary pending stage, you’ll likely be given a chance to provide proof of income for both you and your spouse. Featuring a high income level lets an issuer know you have a steady employment and the ability to pay back the money you spend on your credit card over time.

4. Too Many Hard Inquiries

Inquiries are one of the more unique aspects to your credit profile, because it doesn’t matter whether you’ve opened a new credit line or not. The mere attempt to do so is an alert to credit issuers that you are in the market for credit. The lower the number of inquires you have, the higher your credit score. And the more confident a lender is in approving your application because it signals that you don’t need credit at every turn.

On the contrary, when you’ve opened up a lot of inquires, it signals you need money. While the occasional inquiry has it’s merits, a barrage of them in a short period makes issuers reconsider. Your credit history stores inquiries for two years, and not all inquiries are equal.

For example, a consumer with a mortgage loan inquiry, car loan inquiry, and credit card inquiry would likely have a stronger credit profile and higher credit score (as related directly to inquires) than someone with three credit card inquiries.

Pay careful attention to this part of your credit profile before applying for your next line of credit. The application itself is enough to lower your credit score for two long years.

5. Debt-to-Credit Ratio is Too High

When issuers evaluate your credit profile, they look for a healthy credit history. This means keeping balances low so issuers are more comfortable lending you money. When an issuer sees you have plenty of credit available and are instead choosing to open a new credit card with them, they’re eager to approve you and compete for your business. If the issuer notices a high debt ratio and maxed out accounts, they aren’t likely to extend you more credit.

Learn More About Credit Utilization and How It Affects You

Credit card issuers rarely give credit when you most need it, so take advantage of good credit lines when you have a great credit score. Especially as interest rates continue to rise, locking in a fee-free line of credit with excellent terms now can serve you well in the case of emergency. Should life take a turn for the worst, you don’t want to look back and wonder what you could have done with a 775 credit score while trying to figure out what you need to do now with a 600 credit score.

How to Ask for a Promotion (and Get It)

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If you want to build a meaningful and lucrative career, you’re going to have to learn how to feel confident talking to your boss about your ambitions and asking for the support you need to progress. No matter how necessary, though, that conversation can make even the most outgoing of us feel a little weak in the knees. After all, tooting your own horn isn’t hugely comfortable.

It’s true that asking for a promotion is quite nerve-wracking. However, you have to put yourself “out there” to have a chance at progressing. In today’s competitive job market, the chances of someone tapping you on the shoulder and giving your career an unsolicited boost are slim.

The good news is that great managers know how important it is to have a team interested in growing and developing. Employees who aren’t passionate about or challenged by their jobs don’t make for the happiest, most productive workers. A good upper level team recognizes the power satisfied employees can have in a company. And they want to keep everyone motivated. For this reason, you might just make your boss’s day by asking him or her to push you into a new role within your team.

With that said, here’s how to ask for that deserved promotion… and actually get it.

1. Know your reasons

Although your primary driver for wanting a promotion is probably money, you should be able to articulate other reasons, too.

Related: Want to Make More? First, Try Spending Less

Your manager will want to know why you are the perfect person for the new role. That answer is more about what you’ll bring to the party rather than what a promotion will do for you personally. By explaining how you can contribute to the business, and how the position fits into your overall career game plan, you paint a picture of how your professional development can help grow the business and vice versa.

For example:

  • How does the role support your career plan?
  • What skills and experience do you bring to the new role, and what gaps are there in your development to-date?
  • What is the big picture? Where would you like to be in five or ten years, and how does this position support that?
  • What skills does it help you develop, both ‘hard’ business skills and ‘soft’ behavioral traits?
  • What unique attributes set you up for success in this position?

Think about questions like these in advance. It will enable you to make a far more convincing pitch to your boss when the time comes.

2. Plan your timing

This might be a very simple step. Do you already have an annual review, where you can talk to your boss about a possible promotion? If so, that’s the perfect time to have a broad discussion about the career options open to you and any specific roles which might be worth considering.

If, however, you can’t take advantage of a regular meeting with your manager, then it’s worth booking a conversation in advance. This is better than taking the boss by surprise as you pass in the hallway! It’s a good idea to explain by email in advance that you want to discover your career plans, so your manager can be prepared.

Have ideas, questions, and an open mind. As well as any roles which are advertised right now, think about other changes in the company and team. Do opportunities naturally arise due to movement of other people, for example? By planting the seeds of an idea early, you’ll be at the front of management’s mind when the jobs actually become vacant.

Related: How to Answer These 10 Tricky Interview Questions

3. Record your achievements

If you’re talking to your manager about promotion, think about setting out a business case. Keep a record of your achievements — on a weekly or monthly basis — to help you articulate them when needed. Not only does this serve as a useful prompt for conversations with your boss, it’s a great confidence boost to look back and remember all you’ve achieved at work.

When you’re recording things, think about what you’ve done but also the impact you’ve had. Providing numbers-driven business metrics is a very powerful argument.

Think about how you can present your achievements most effectively. For example, you could give a percent increase in team productivity due to implementing ideas you suggested. Or show how your proposals have added dollars to the profitability of your department. If you work in a customer-facing role, showing a reduction in complaints or an increase in speed of issue resolution is another great angle.

Learn More: Your Career and Social Media — Why Your Online Footprint Matters

If you have objectives agreed upon with your manager on a periodic or annual basis, these are a great place to start. Record all the steps you take toward hitting your targets, so you can explain later what you did (and how).

4. Present a proposal, if you can

Along with a business case showing your impact on the business, you should also give suggestions about how your promotion could work in practice.

If there’s an obvious vacant position, that’s a great place to start. However, your boss will be conscious of the domino effect this might have on your team. You can help smooth the way by suggesting who might backfill your current role, were you to move up, or provide temporary support during the transition.

If you know there will be skill gaps that need to be tackled, for either you or your successor, present ideas about how you could do that in a way that helps everyone succeed.

Even if there isn’t an obvious position vacant for you to be promoted into right now, it can be a healthy discussion to have with your boss. It’s a great way to make sure he’s clear on your ambitions. You could talk through what role or roles could be a good fit for you to grow into. You might brainstorm together who your successors could be, and how you can help them to be ready to take your role when you’re promoted out.

Read Up: Use Your Commute to Further Your Career

It’s smart to ask how you can plug any skill or experience gaps to make yourself ready for promotion. Ask, for example, what extra out-of-role experience you can get prior to promotion, such as working with other teams or taking on project work. Finally, think about what your network can do to support you, and ask your contacts directly for their help.

5. Know your market value

Once you’re in the position of negotiating a promotion, you need to get an idea of a fair salary and package for the role. Your business might have transparent salary scales which you can refer to, or an openly advertised position could give a salary banding as part of the ad. If you can’t find details of the salary, you’ll have to ask as part of your conversation with your boss. Compare this with market information from a site such as to know if it’s a fair remuneration for the role type.

If you feel you need to push the salary up as part of the negotiations, remember that as well as base pay, you could ask for better terms such as increased vacation, flexible working or a second, deferred raise based on your performance in the new position.

6. Be flexible

When you’re thinking about promotion, it pays to keep an open mind. Careers are seldom linear. A direct promotion isn’t always the only way to keep working towards fulfilling your dreams.

Sometimes opportunities to step up aren’t obvious. Maybe the next natural role isn’t available, but there’s an interesting lateral move or a project that stretches and develops you. In that case, it’s often worth taking the chance and grabbing some extra experience, even if it’s not a linear promotion.

One thing can lead to another, and you never know where it’ll end up. Plus, any new skills or experience show you’re willing to stretch yourself and able to flexibly support the business.

7. Follow up

Once you’ve had an initial conversation with your manager about promotion, it’s important to agree on the next steps. Write down details of your conversation and determine when you’ll follow up with your boss. This might be a check-in after a defined period of time, or after you’ve completed a certain agreed step towards advancement.

The first conversation is likely to be the most tricky. After that, you could find that informal chats are enough to help you stay on your boss’ radar, so they’re helping you keep a look out for a new job. Nonetheless, it’s valuable to agree on a review meeting. Three months is a good place to start if there’s no obvious role on the horizon. That way, you have a date to work to and can continue to push your own personal development over that time.

Related: 5 Smart Ways to Help You Negotiate a Raise

In an ideal world, your boss would automatically recognize hard work and competence. It’s seldom that simple, though.

The truth is that if you want a promotion, you’re going to have to ask. Plus, your manager isn’t a mind reader. Although a good boss will have your best interests in mind, being explicit about the fact you want to progress within the business is the only way to make sure you’re on the same page.

How have you dealt with the discomfort of asking for a raise or a promotion? What was the outcome?

The Hidden Savings In a Rent Payment

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The scene was a sidewalk café on Chicago’s northwest side, one summery evening around 2006. I’d been joined for dinner by a couple of friends, Grant and Kate, and between bites of chicken Vesuvio — or was it a chopped salad? — was enjoying the witty, intelligent repartee of my two companions.

There was a lull in the conversation, and then Kate turned to Grant, the only renter among the three of us. “So, when are you going to join us among the ranks of homeowners?” she asked, in a tone of innocent inquisitiveness.

I expected Grant to offer a timetable for a home purchase. But he instead responded as if Kate had impugned his ethnicity or scorned his mother’s good name. It was clear he was very sensitive about his renter status.

His deeply wounded reaction was a reflection of the era. That was the day and age when folks from teenagers on up were jumping at the chance to scoop up homes, put within reach by zero-down payments and teaser-rate mortgages. Some felt if you were still renting in such an environment, you weren’t part of the club. You were an outcast, a pariah… seemingly, one of life’s most pathetic sad sacks.

Judging from his response, I think Grant himself held that view.

Related: Should You Buy or Rent?

But, as events were soon to show, Grant was actually ahead of the times. Just a year or two later, the mortgage meltdown would throw many overextended new homeowners into foreclosure. Suddenly, renting became not just acceptable, but the hip, trendy, now thing to do. By shunning the temptation to join the home-buying binge, Grant had been crazy like a fox.

Renters by choice

Now, the housing crisis is over and mortgages are once again easy to obtain. (Well, maybe not as easy as they were a few years ago. But still, pretty easy.)

However, millions of Americans still rent, and apartment buildings and other multi-family houses are popping up all over the place. In fact, according to the National Multifamily Housing Council, 37% of American households are occupied by renters. And if you’re in the under-50 crowd, you’re even more likely to rent!

Sure, people may rent because they can’t save up the capital to buy a home. But others rent because that’s really what they want to do. They believe you can’t enjoy life the same way when you’re tied to your own money pit… ahem, home. And renting can give opportunities that homeowners just can’t enjoy.

There are, of course, the obvious benefits: leaving the major maintenance to the landlord, being able to move more easily to pursue a new job or opportunity, or just living in a large building nearby to friends.

Should Your Next Place Have an HOA?

But beyond these renting advantages, there are a slew of economies that await the shrewd renter who selects the right property. A partial list of such money savers looks something like this:

Apartment building fitness centers. Joining a health club can set you back plenty. At a great number of apartment communities, though (particularly newer ones), the chance to work out comes on the house, so to speak. With your club just a few floors or in-complex streets away, you’re saving gas and wear and tear on a vehicle, too. Apartment communities lacking in-house fitness centers often give residents complimentary memberships at nearby facilities. “Gym memberships can cost upwards of $100 a month, so having your gym included with your rent is a significant savings, ” says Diana Pittro, executive vice-president of RMK Management Corp., which manages dozens of Chicago area communities.

Business centersOutfit a home office, and you’ll shell out big bucks for a computer, printer, Internet access, desk, office supplies and far more. But at many apartment communities, a welcoming business center offers residents all those necessities at no extra cost. Moreover, home-based entrepreneurs who need to meet clients in a business-like setting appreciate the conference rooms available to residents in many apartment community business centers.

Says Barbara J. Geffen, Co-CEO of Northbrook, Ill.-based Prime Property Investors, owner of two Northeast Illinois apartment communities: “Our business centers are appreciated by a variety of our residents, from casual online browsers to professionals who work from home.”

Swimming pool. Imagine the expense of installing your own in-ground swimming pool, then furnishing it with deck chairs, cabanas, and pool cover. Oh, and not to mention a summer’s supply of chlorine and pool chemicals. Now, think of the time you’d spend keeping the pool in ship shape. It would be like a second job.

But many rental properties give residents access to well-maintained pools with all the above extras. Some of the more spectacular ones sparkle like jewels on high-rise rooftops, and the awesome view comes at no additional charge.

Grilling stations. At many apartment communities, there’s no need to invest in a grill, propane, or charcoal. The grilling station on premise is open to residents who need only show up with their favorite foods, grill, and open wide. As many renters will attest, grilling is even more tasty when it’s free.

More ways to save. These are just the start of the money savers you’ll find at a large number of newer apartment communities. Additional ones include free dog washes, car washes, on-site community rooms, party rooms and theater rooms, discounts at area stores and restaurants, cooking classes, dancing lessons, wine-and-cheese get-togethers, catered holiday parties,  discounted food deliveries, and low-price premium cable packages, to name a few of the ways to economize.

Cut the Cord On Your Cable Bill

As I mentioned up top, I’m a homeowner myself. But I get a bit envious when I tour one of the amenity-laden apartment communities being opened to today’s renters. As tempting as all the above economies seem, it’s the simple, joyful, carefree lifestyle renters enjoy that is so undeniably attractive.

No wonder many people returning to renting report they feel as if they haven’t just taken on a new lease, but a new lease on life.

How to Budget Without Regular Paychecks

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Successful budgeting tends to depend on two things: careful planning and a steady income. The first, anyone can do. The second may not be so simple.

If you’re self-employed, you might be asking yourself, “But I don’t have a regular paycheck coming in — can I even set up a budget? Should I bother?”

You can. And, yes, you definitely should.

A budget is simply a way of figuring out how much money you need to go about your daily life, and arranging things so that you don’t exceed that number. Whether you track every penny and every expense, or just keep on eye on a few problem areas, a budget helps you succeed financially.

Budgeting when your income isn’t predictable can be tough. But, actually, it’s especially important if you have an irregular income. Who might have an irregular income? If you fit into one of these categories, I’m talking to you:

  • freelancers,
  • temp workers,
  • consultants,
  • artists,
  • permanent employees with fluctuating hours,
  • commissioned salespeople,
  • those doing seasonal work,
  • people will tip-dependent income,
  • owners of a small or startup business,
  • on-call employees,
  • or simply odd-jobbers.

If any of the above apply, this article is for you. Keeping track of your incoming funds and knowing where your money then goes are incredibly important to maintaining financial security when you don’t get a predictable paycheck from your 9-to-5. Below is one three-step method to creating a budget when your income isn’t predictable.

Related: Managing Your Cash Flow With Google Docs

Step One: Know Your Baseline

When you have a steady paycheck and a predictable income, can make a zero-based budget by allocating spending categories within that predictable limit. But those with unpredictable incomes must work backward — starting with the amount of money you’ll spend, in order to figure out how much you need. If your income is unstable, then it is your expenditures that must be stable, predictable, and repeatable. According to the 50/20/30 rule, there are three categories of expenditures: Essentials, Priorities, and Lifestyle.

Your baseline expenditures are those in the Essentials category — those that must be paid every month, without which you can’t live. Of these, the first costs you’ll want to estimate are:

1. Groceries

For your baseline, include the lowest food cost that is reasonable for your circumstances. Plan your grocery expenditures without any extras, like restaurants, coffee shops (unless you must use them to have business meetings or to avoid paying for internet at home), wine, or fast-food pit stops. If you’ll be couponing and cutting back your food costs, take that into account. However, if you know you won’t actually clip a single square, be realistic about your cost estimates. One of the best ways to get an estimate is to track your spending for a few weeks to get an idea of how much you spend.

Read More: Your Spending Reflects Your Priorities

2. Housing and utilities

For almost everyone, essential expenses include rent or mortgage. If you’re responsible for either — even if you house-share, live rent-free, or have a sliding rent arrangement — include your minimum monthly housing cost in your baseline. Make sure to include the monthly amount for homeowner’s or renter’s insurance and property tax bills in your total.

If you live in a geographic region in which heating or air conditioning is essential, include these average monthly bills in your baseline. In moderate regions, utility costs are a lifestyle choice. But heat isn’t optional in January in Vermont!

The same goes for internet and phone costs. If you work from home, they’re most likely a necessity and should be included in your housing and utility estimate.

Cut the Cord: Reducing Your Costs for Cable and Cell Phone Services

3. Medical costs

A note about health insurance: The number-one reason people go bankrupt is because of medical costs, so it could not be more important that you have some form of health insurance. You should include these costs in your baseline estimate, as well as payments for any outstanding medical bills. Also, look at how much your basic medical care, including annual check ups and standing prescriptions, cost on an annual basis. Divide that out by 12, and you’ll see how much you should add to your monthly medical costs.

4. Transportation

Do you need to include transportation to work in your baseline? If you rely on a car or even the public bus system to get you to and from work, you definitely do. Consider the lowest possible transportation cost given your job or jobs. Do you absolutely need a car, auto insurance, maintenance, garaging costs, and gas expenses? Or is there great public transportation in your city? Can you walk to work? Telecommute? Can you infrequently taxi, Uber, ride-share, Zipcar, or call for delivery?

Again: Be realistic with your estimate. If you’re actually going to drive your SUV alone, round-trip, every day, factor that into the costs.

5. Childcare

This expense is rather like transportation. If you must have childcare to be able to work, then you need to factor it into your budget. If you can work without having childcare (like if you can work from home on a flexible schedule), you may not need to budget for full-time childcare — or any childcare at all. Again, be realistic with this figure, though.

For instance, maybe you run your own business and could get away without paying for childcare if you had to. But if you stopped paying for your part-time slot at a local daycare, you’d lose your spot. Then you’d risk paying much more for childcare, or, worse, not being able to find a quality replacement, when your business picks up. In this case, the minimum you pay for part-time childcare should be part of your baseline budget.

How to Save Money On Childcare Costs (Our 32 Favorite Ways!)

Add up the baseline numbers, and you have the amount of the essential monthly “paycheck” you’ll write to yourself.

Step Two: Set Your Income Target

This step is easy (well… sort of). Once you know your monthly baseline expenditures — and thus the paycheck you’ll have write to yourself each month — use an online tax calculator to get a rough idea of how much you’ll owe in taxes.

Your base income plus taxes makes up your bare-bones monthly income requirement. The tricky part, of course, is guaranteeing you have enough income to meet your expenses.

Anything above this bare-bones income target goes to your financial priorities: first savings and/or paying off debt, and then additional lifestyle costs.

Step Three: Set Up Separate Bank Accounts

To make this plan most effective, you’ll want to set up separate bank accounts. Most banks will let you have as many accounts as you need, and you can often get these accounts without fees. Or ask your bank about its policy for maintaining a combined minimum account balance in order to avoid fees.

Related: The Four Accounts Types That Everyone Needs to Have

If your current bank won’t waive fees, consider switching banks to one that offers free checking and savings accounts. Otherwise you could have to add a hefty amount of bank fees to your monthly baseline budget, which is not a good thing.

1. Business checking

Here, you’ll have your checks auto-deposited. You’ll plunk your daily cash from tips, if you get them, and you’ll deposit your invoice payments from clients. You’ll make only three transfers from this account each month: one to each of the below accounts.

2. Personal checking

From this account, you’ll pay all your bills — essentials, priorities, and lifestyle — but you won’t spend more than you’ve paid yourself any month. This account will also receive any monthly “bonus” you might want to pay yourself when your income exceeds your target, and you have money left to spend beyond your savings (which is technically a fourth transfer).

3. Emergency savings

Every month, after you’ve paid yourself your baseline and transferred amounts for financial priorities, you’ll put money into your emergency fund.

You should be aiming to save at least six months’ worth of expenses in this account, to be used in the following situations only:

  1. You’ve lost your job and need to continue paying rent, bills, and other living expenses.
  2. You have a medical or dental emergency.
  3. Your car breaks down, and it’s your primary form of transportation.
  4. You have emergency home expenses — e.g., your AC breaks down in 100°F-plus weather, your roof is leaking, your basement is flooded, your toilet is overflowing, etc.
  5. You have bereavement-related expenses, like travel costs for a family funeral.

Related: How to Determine If an Expense Is Emergency Fund-Worthy

4. Priority savings

This account holds money for annual or semiannual payments (income taxes, property taxes, home insurance) and for important goals — payments on student loans, the down payment for a house, contributions to your retirement accounts, or college savings for your child.

Learn More About Renter’s Insurance… and Whether You Need It

That’s it! You now have a basic budget, your income target, and where exactly your money should go… no matter how it comes in.

This isn’t the only way to budget if your income is variable, especially if you have a steady paycheck plus an unsteady income from a side gig. But this is one way to make sure that your basic expenses are covered, and that you don’t out-spend your earnings when you have an unsteady income.

Do any of these methods work for you? What’s your biggest financial struggle with unsteady paychecks?

Should You Spend Less or Make More?

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The most sound financial advice you’ll ever read is also the most basic: Spend less than you make.

Sure, a successful financial life is a bit more complicated than that. After all, you have to decide just how to make that extra money work for you. But it all starts with this basic principle. If your outlay is greater than your income each month, you’ll dig yourself into an impossible financial hole. But if you’re spending even $10 less than you make each month, you’ve got a place to start for saving, investing, and becoming financially free.

But there’s another saying that applies here: There’s more than one way to skin a cat.

In other words, there’s more than one way to do what you need to get done. In the case of staying out of the red each month, you’ve got two options: spend less money or earn more money.

But which is best? Which should you focus on first? As with most things in the world of personal finance, the answer is less straightforward than you might hope!

The Pros and Cons of Spending Less

Spending less is the tack many of today’s personal finance blogs take. Just look for money-related pins on Pinterest, and you’ll find thousands (maybe millions!) of frugal living posts focused on how you can spend less money.

Cutting your expenses is great. But, at the same time, it can only take you so far. Here’s what you need to consider when strategizing to spend less:


  • Its effects are immediate. You can start spending less right now and immediately feel an impact on your financial situation. Every dollar you don’t spend is a dollar that can be dedicated to another financial goal, like getting out of debt.
  • It creates discipline and ingenuity. Just take a look at those aforementioned posts on Pinterest, and you’ll see all the discipline and ingenuity that can be a product of learning to spend less.
  • It simplifies your life. Spending less money often results in having less stuff, which reduces clutter in your life. Plus, if you become organized enough to spend less, that organization is likely to flow into other areas of your life, as well.
  • It magnifies your efforts to earn more. We’ll talk more in a moment about combining spending less with earning more. For now, remember that when you get into frugal habits, you’re much less likely to succumb to hedonic adaptation, or the tendency to adjust your lifestyle upwards as you increase your income.


  • It’s limited. Many of us could find ways to cut a lot out of the monthly budget. Depending on your current expenses, you may be able to cut your spending by 50% or more. That’s powerful, but it’s also limited. At some point, you won’t be able to cut your spending any further. You have to meet your basic needs, after all.
  • It can go too far. Being frugal is great. But if you become a miser who never enjoys life, you completely miss the point of money management. If you end up so obsessed with frugality that you don’t take advantage of your financial freedom, you’re doing it wrong.
  • It may not be enough. There are plenty of powerful stories of families who paid off massive amounts of debt and now live comfortably on a relatively low income. But let’s be honest: in some cases, cutting expenses may not be enough. This is especially true when you’re trying to snowball your debt, but your monthly minimum payments are almost more than you can handle. Even after trimming the fat from your budget, you may need more money to start your snowball.

The Pros and Cons of Earning More

For every finance blog that focuses on spending less, there’s probably a counterpart that focuses on earning more. Side gigs. Career development. Blogging for income. These are all great ways to earn more money, which can also solve the problem of spending less than you make.

But, like spending less, earning more has its upsides and downsides.


  • It’s practically limitless. Once you start finding creative ways to earn more money, your earning potential is basically limitless. It may not feel that way at times, but there’s truly nothing holding you back if you’re willing to hustle.
  • It creates discipline and ingenuity. Working a side gig when you have a full-time job takes discipline (just ask me how I know!). And finding new ways to earn money takes ingenuity. Just like spending less, learning to earn more can create healthy habits of mind and time management that you keep for life.
  • It’s more effective over the long run. Because you can only cut your spending to a certain basic level, the impact of spending less will be less over time. But if you earn more, especially if you continue leveraging your efforts to earn even more, the long-term effects will multiply.
  • It can be fun. Most people don’t like cutting spending (though for some people this can be an exciting exercise). But earning more money — especially if you’re able to earn it doing something you love —  is almost always enjoyable. Plus, let’s be honest, seeing those bigger numbers hitting your bank account every month is a rush!


  • It usually takes time to get started. Despite the plethora of blogs-on-blogging that say you can earn thousands overnight, that’s usually not the case. Starting a side gig or reaching your day job’s earning potential usually takes time and effort. You may not notice an impact on your finances for several months.
  • It takes work. Yes, living frugally does take some work. But many people have systems in place that allow them to keep saving without spending loads of time clipping coupons. Earning more, on the other hand, takes time. Whether you earn hourly with a regular side gig or spend a ton of time up front creating a passive income stream, you have to put work into earning more money.
  • It can go too far. Anything taken to an extreme can be bad. This is true of working harder to earn more money, too. If too much work is damaging your family or personal life, you may need to cut back.

Related: How to Make Money With Your Blog

So, Which is Best?

Is it better to earn more or spend less? It really depends on your situation.

For instance, let’s say you’re in dire financial straits right now. You’re drowning in debt. Or you just lost a job. Maybe you have zero emergency savings.

In these instances, spending less will likely serve you better. As I mentioned above, spending less can have immediate effects, which is important if you’re in a financial emergency. Cut back on your expenses right away, and use what you save to stabilize your situation.

Another instance where saving more would probably be most helpful: if you’re already a high income-earner. If you’re making six figures but still feeling the crunch every month, where could you cut back? Are you eating out multiple times a week? Living in a house that’s bigger than you need? Driving a nice car with a huge monthly payment? Cutting back on these types of expenses could seriously boost your ability to save.

Learn More: So, You Want to Buy a Car from the Dealership…

But what if you’re already living fairly modestly? Maybe you have a few extra expenses you could cut back on, but you’d really rather not. In this case, you might focus on earning more to throw more money into savings or investments. Especially if you can find a side gig you love, or can develop your current career to earn more.

Or what if you’re already on a stripped-to-the-bone budget because your income is very low? In this case, focusing on earning more is almost essential. If you want to build wealth and work towards financial freedom, adding a side hustle or stepping into a higher-earning career may be essential.

Of course, for many of those with average financial circumstances, the right key will be both of these things working in tandem. Cut expenses where it makes sense, and find a way to get a raise or start a side hustle. Pulling both levers at the same time can make a huge difference in your personal finances.

If you decide to pull both of these financial levers at once, you’ll have to find a good balance. Sometimes in order to make money, you’ll have to spend money. For instance, I have a small monthly coffee shop budget. Do I really need to spend money at coffee shops? No. But with two small children at home, sometimes spending $5 on a Saturday morning at a local coffee shop nets me my most productive hours all week!

This goes the other way, too. If you get yourself so busy trying to earn extra money that you don’t have time to cook at home, you may wind up spending more dining out. If meals at home are important to you — and saves you significant amounts of money — it might be better to cut back a few hours a week so you can enjoy cooking in your own kitchen.

Related: 8 Ways to Save Money When Dining Out

As you can see, this is a complicated issue that doesn’t have a single straightforward answer. Whether you decide to spend less or earn more may even change during different seasons of your life. The key is to consider how you can have the most financial impact while still enjoying your life and making progress financially.

So, which do you choose? Spend less? Earn more? A little of both? Tell us in the comments!

How Automation Has Helped Me Reduce Debt and Save

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Readers often e-mail me for tips on how to keep their finances manageable. There are so many options out there that it can be overwhelming. I was speaking with my mom about this some time ago, and she felt the same way.

My mom has been responsible with her money over the years, but she felt that she could be doing better. After chatting with her, we decided that she should switch banks and automate some of her bills. It would free up some of her time and take a few things off of the to-do list… wins all around. I was talking with her the other week, after she had implemented the new system, and she said she’s really happy with her decision. She has saved both time and money with her new bank and online bill pay.

Why do I love automating my finances? Well, why wouldn’t I? Automating your finances can be a wonderful process, if done correctly. For one thing, it puts me in control of my bills without having to deal with paper, stamps, envelopes, and checks. But there are plenty of other reasons to love automating my finances, too. Here are my favorites.

I don’t pay late fees

I used to occasionally lose bills or forgot to send checks whenever I had a very busy week. Late fees definitely add up, and can be as high as $29 to $39 for credit cards! Sometimes I can pay my credit card accounts online for a same-day payment, but if I’m a day late, I may still get a fee imposed.

With online bill pay, you don’t have to worry about late fees because your bills will get paid on time every month, without any added work on your end. We’ll talk more below about different options for setting up automatic bill pay. But for now, just know that in exchange for a little effort up front, you can reap the benefits of avoiding late payments… forever.

Late payments don’t hurt my credit score

Getting rid of late payments isn’t just good for saving money by avoiding late fees. It also helps keep my credit score high. Payment history makes up the lion’s share of most credit scoring algorithms, and even a single late payment can quickly tank an otherwise excellent credit score.

Again, there are several options available for automating payments. But any of these options can keep you from having late payments recorded on your credit file, which helps you build your credit score or keep it high.

Resource: How to Check Your Credit for Free (and Avoid the Scams Out There)

I’m saving money, and I barely notice

In the past, I would save money for a few weeks and then have an emergency. After getting through the trouble, I’d neglect to re-start my savings. This cycle would repeat over and over. I felt like I couldn’t possibly save more money without cutting my budget to the bone.

How did I fix this issue? Automation, of course!

Now, I have a portion of my pay automatically transferred to a high-yield savings account each time my check hits my account. The trick to making this work is to make sure the transfer happens before you can even check your account balance on payday. It’s hard to miss money that you never had a chance to see!

But don’t be a hero. Start out with just a small transfer. Then, as you get used to that slightly thinner paycheck, increase the amount slowly over time. Just be sure you’re transferring those funds to a savings account with as decent a yield as you can find.

Retirement savings is a cinch

I started saving for retirement early on, while still in college. Unfortunately, I got distracted, and my savings became sporadic as I got into debt. Getting back on the wagon was tougher than I thought.

Saving for retirement automatically is easiest if you have an employer-sponsored retirement plan. But you can do it even if you primarily invest in an IRA or another individual account.

If you have an employer-sponsored plan, call your company’s Human Resources department and sign up to have 401(k) contributions automatically deducted from your account. You should especially do this if your company offers matching contributions. Even if you’re trying to get out of debt, contribute at least enough to maximize that matching contribution. Otherwise you’re just leaving free money on the table!

Related: How Much Should You Have Saved, Based On Your Income?

Want to increase your investments even more? Consider sending a small portion of your paycheck to a traditional or Roth IRA.

My bank account stays steadier

If you have plenty of padding in your checking account, this may not matter. But if you’re living paycheck-to-paycheck or just a bit beyond that, it can be a boon. By making automatic payments around payday, I keep my checking account balance from skyrocketing and then plummeting.

In fact, you can smooth things out even more by paying some of your larger bills twice a month if you’re paid bi-weekly.

Pay half the mortgage with your first paycheck, and half with your second paycheck. This keeps your account from taking a big hit when you pay the full mortgage. And it has the added bonus of paying off your mortgage more quickly, since you’ll make an extra full payment by the end of the year.

This doesn’t just work with your mortgage, though. Bi-weekly payments can smooth out your bank account balance and pay off just about any debt more quickly and efficiently — without making it feel like you’re paying extra.

Read More: How to Use the Debt Snowball to Pay Off Balances

Some drawbacks to automation

Even though I love automating my finances and the effect that this strategy has had, it’s not the be all, end all of budgeting and financial management. It does have some drawbacks to consider, including:

  • Possible overdrafts — If you’re on a tight budget or have an unsteady paycheck, you run the risk of having a payment drafted when you don’t have enough money in your account to cover it. Overdraft fees can be even worse than late fees! If your cash flow is really tight, you may want to find some breathing room (by cutting expenses, paying down debts, etc.) before you automate all of your finances.
  • Time to set up — Automation does take some significant time to set up on the front end. However, once it’s set up, you’re good to go unless you need to tweak something — which doesn’t take much time.
  • Missing problems with your bills — It’s much easier to miss being over-billed for certain services if you’re automating the payment. One way to avoid this is to only automate those bills that don’t change, like your mortgage or car payment. Or you can use a platform that gives you advance notice of the amount that will come out of your account. If you notice a bill is suddenly much higher than it should be, you can look into the issue as needed.

How to automate

There are loads of ways now to automate everything from bills to savings to retirement investments. Here are a few options you might consider:

  • Paycheck deductions — For accounts like your employer-sponsored 401(k) or HSA, your easiest option is probably to set up automatic paycheck deductions. Talk to your HR department to get this done.
  • Bank bill payment — Many banks offer automatic bill payment services where they’ll cut a check or send an wireless transfer to cover your bills. You can normally set this service up online through your bank account management tool.
  • Third party services — Services like offer automatic bill payment that works similarly to your bank’s service.
  • Through the creditor or utility’s website — You can often set up automatic payments through your creditor’s or utility’s website. Log into your account, and set up automatic payments to recur on a set day of each month. Often times, new creditors, insurance policies, or other entities give you the option to set up automatic payments when you first open your account.
  • Automatic transfers — For automatic savings or investing, you can often set up automatic transfers from one bank account to another bank account or investment account. This is super simple when you’re transferring money from a checking account to a savings account at the same bank. But it’s not difficult to set up automatic ACH transfers to accounts at another bank, either.

Learn More: 15 Ways to Supercharge Your Finances This Year

How about you? Do you automate your finances? Let us know what works for you, and how it has improved your day-to-day finances, in the comments!


Unpaid Internships: A Graduate’s Dream… or a Nightmare?

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It’s the ultimate catch-22: in order to get a job after graduation, you’ll need experience. In order to get experience? Well, you need a job.

The solution for many students is to look for intern experience, which can be made to fit in around a demanding college schedule. This might mean working through summer or winter breaks, even for several years. But it’s definitely worth it in the end, to gain the variety of exposure needed in a competitive job market… right?

Employers do demand that graduate applicants have more on their resume than a strong GPA, but the truth is, not all internships are made equal. You have to be clear on what experience you will get from the work being offered. Especially when it comes to internships that don’t offer any remuneration, check the small print very closely.

Read More: When It Makes Sense to Work for Free

So when considering an unpaid internship, even with the company of your dreams, should you really donate your time? To help you decide, here are some common arguments for–and against–taking the job:

The arguments against unpaid internships

As expected, there are quite a few reasons to turn down a non-paying job, even beyond the hit to your bank account.

Unpaid internships are elitist

Not all students can afford to work without pay. This is especially true if money is tight and you don’t want to rack up more student loam debt. In that case, working over the winter and summer breaks — which add up to several months — is a great way to put some cash in the bank.

Turning down these periods of money-earning opportunity in favor of working for free is a difficult decision for many. This leads to the accusation that the entire concept is elitist.

How to Make Extra Cash With a Side Hustle

Employing interns for free limits paid opportunities

A further challenge to the concept of unpaid internships is that employing students for free effectively reduces the number of paid jobs being offered on the market. Unethical companies may even take advantage of the situation. They could effectively bring down their overheads by taking on more free workers, without even having the intention of offering permanent positions at the end of the internship program. As long as people seek to trade their time for experience, these questionable companies have no incentive to change their practices, either.

Having people work for free might not be strictly legal

Finally, among the high-level challenges to the concept of unpaid internships is the issue that they might fall afoul of the law. In regions where there is minimum wage legislation, employers have to pay careful attention to the way intern programs are structured. That way, they can ensure that they are in line with the rules.

Should You Be a Full-Time Employee or a Freelancer?

The arguments for unpaid internships

Though there are many reasons to avoid taking on an unpaid internship, there are also plenty of reasons to consider one.

There are valuable, non-monetary benefits of an internship

Getting paid for your internship is the optimal outcome. However, don’t forget that there are a huge number of non-financial benefits to be had from an internship, too.

Certainly, you will gain great skills and experience. You could get access to training which others may only be able to access for a fee. You get to meet people working in the field you’re interested in moving into and can begin building an enviable network. And in the case of many unpaid or voluntary internships, you might also be offered other benefits which are not direct pay. These could include free food, lodging, or even travel.

Related: How to Budget Without a Regular Paycheck

Employers expect grads to have work experience

In the US and most of Europe, graduate recruiters want to see that their candidates have had hands-on experience of some sort. Over 30% of recruiters who took part in the High Fliers 2017 research (a look into the UK graduate market) said that those who had no previous work experience at all were unlikely to be selected for their organizations’ graduate programs.

That unpaid internship might mean you have to turn down a few weeks of minimum wage work elsewhere, but it might be enough to get your foot in the door in your dream job.

In a competitive field, specific experience is invaluable

An internship doesn’t just look good on your resume, though. You might even be able to convert it directly into a job offer at the same employer. According to NACE, in 2016, 72.7% of people who completed an internship were subsequently offered a position with that company upon graduation. That’s pretty compelling! Of course, keep in mind that there are always variations in stats (and other reports have shown that unpaid internships are significantly less likely to convert to job offers than paid intern opportunities).

Thinking About Those Student Loans: Why You Should Remove Your Cosigners ASAP

Make your internship work for you

If you have been offered an unpaid internship, it’s worth taking a long, hard look. However, don’t dismiss it off the bat.

Each situation is unique, and in some hyper-competitive fields — such as fashion or journalism — unpaid internships are absolutely the norm. Really evaluate the opportunity at hand and ask how you can make the experience pay back for you… even if there’s no cash in the offer.

  • Be clear what you can get out of the opportunity. Think through how the internship can work for you. Ask the manager what support is offered, including on-the-job training and professional development in both ‘hard’ and ‘soft’ skills.
  • Build your contact book, and ask for help. Any internship, paid or unpaid, is a golden chance to build your network. With so many jobs being filled before they’re even advertised, who you know might be the key to getting your perfect job.
  • Record your achievements and build your resume. If you’re writing your first resume, you need to really sell your skills and experience. Write down what you do as you do it, and you will also find it much easier to articulate your achievements in an interview later.
  • Develop your soft skills, in addition to gaining business experience. Use this chance to push yourself a bit on ‘soft’ skills. Volunteer to lead a project. Make proposals for changes that might improve the business. Ask others for feedback as you go. These are all things which feel uncomfortable, but which will be expected of you throughout your future career.
  • Find a mentor, and develop an ongoing relationship. Ask your boss if he or she would consider mentoring you after the internship has ended. If you don’t hit it off with your direct manager, think about who else might play that role and would also retain a real interest in your progress after you return to school.
  • Use the opportunities for reflection. There’s a chance you will hate some, or all, of your internship (whether paid or unpaid). Think carefully about what worked for you and what did not — the boost in self-awareness will serve you well.

Related: 5 Personal Finance Resources Every College Grad Should Read

Unpaid internships are controversial. On one hand, they offer invaluable experience to students in a competitive job market. Having one on your resume can really make the difference between getting that next interview or not. On the other hand, unscrupulous employers might use unpaid internships to simply avoid offering paid roles. This results in no benefit to the student and reduces the number of paying jobs out there.

If you’re considering taking an unpaid internship, proceed with your eyes open to the risks. Use these ideas as a starting point to make sure you get the most from the experience. Think about what you want to gain from the internship and be prepared to negotiate a little — with the right approach, even an unpaid opportunity can really give you a great return on your investment!

Have you ever worked for free, in exchange for the experience? How did it benefit you and the career path that followed?

How to Remove a Cosigner from a Student Loan

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Adding a cosigner to a student loan has become common practice. After all, very few students can qualify for a loan based on their own income and credit profile. A cosigner is usually needed in order to get the loan approved, particularly with private student loans.

But given that student loan repayments can run as long as 25 years, does it make sense to keep your cosigner on the loan for the entire duration of the term? There are risks to your cosigner, and that’s why you should remove them from your student loan as soon as possible.

Why You Should Remove Your Cosigner

Cosigning a loan isn’t a casual arrangement. There are implications for the cosigner, which could affect his or her credit standing. It could even impair their overall financial situation.

For example, your payment history on the loan will affect your cosigner’s credit. If you make any late payments, they will show up as derogatory entries on your cosigner’s credit report, in addition to yours. Naturally, should you default on the loan, your cosigner will be called upon to satisfy the obligation. That can cause serious distress to your cosigner, particularly since student loans are typically large.

Read More: How to Refinance Your Student Loans

There’s one other factor that’s seldom considered in regard to cosigner arrangements. When your cosigner applies for a loan for themselves, the cosigned student loan will likely show up on their credit report. Most lenders will consider this an obligation of your cosigner. That being the case, it’s possible that your cosigner will be declined for their own loan application, even if you have assumed full responsibility for your student loan’s repayment. When adding the student loan payment to their other obligations, the new lender may decide that your cosigner’s total debt ratio is too high to justify approval.

When you remove a cosigner from a student loan, you not only protect their credit, but you also free them up to borrow for their own purposes in the future. For that reason, you should actively pursue a cosigner release as soon as you are eligible.

Federal Student Loans

Most federal student loans will enable you to qualify even without a cosigner. Federal student loan programs recognize that you are in fact a student and lack the income and credit profile typically required to support the loan. Repayment is based on your securing employment after graduation.

However, there is one federal student loan type, a Direct PLUS Loan, that does permit cosigners. This is because Direct PLUS Loans require credit qualification, and very few students can qualify on their own. However, the news in regards to cosigner release is all bad: Federal student loans do not provide for cosigner release. Your cosigner will remain on the loan until it is fully paid.

If you’re dealing with a federal Direct PLUS Loan, your only option for removing the cosigner is to refinance the loan. Refinancing can be a good option for reasons beyond removing the cosigner, too. So if this is your situation, consider refinancing your loans and removing your cosigner in the process.

Related: Should You Consolidate Your Federal Student Loans?

Private Student Loans

Fortunately, most private student loan lenders do permit cosigner release. There are certain requirements, however, in order for it to happen… which is to say that the release is not automatic.

Lenders who permit cosigner release typically require that you have made on-time payments for certain amount of time. In addition, you will also be required to document that you are capable of making the payments out of your own financial resources.

Related: Best Budget Resources

For the most part, this process is similar to reapplying for the loan. You have to make a formal application for cosigner release, and then provide documentation that supports your ability to pay. This will usually include an acceptable credit history and sufficient income to carry the student loan debt, as well as your other financial obligations, on your own.

However, not all private student loan lenders permit cosigner release. For example, Discover Student Loans stopped permitting cosigner release back in February 2012. For this reason, you need to be aware if a lender does or does not permit cosigner release before accepting the loan. Once you accept the loan, there is no way to add the release provision after the fact.

On-Time Payment Requirement

This is a virtually universal requirement for cosigner release on all private student loan lenders that permit them. The on-time payment requirement usually ranges between 24 and 48 months.

For example, Wells Fargo will allow a cosigner release after the most recent 24 consecutive monthly payments have been made on time, including the first required payment. If the first required payment was not made on time, then you must make the most recent 48 consecutive on-time monthly payments. In addition, the loan cannot have involved any forbearances or modifications for hardship reasons during the required repayment term.

Citizens Bank allows your cosigner to be released after 36 on-time monthly payments. If you have exercised either the deferment or the forbearance options, you will need to show 36 on-time monthly payments from that time on.

DCU Credit Union requires that you make 48 consecutive on-time monthly payments in order to qualify for cosigner release. Only after you have made those payments will the lender consider the release.

Though none of the lenders specifically indicate this, it is highly likely that they will require that you personally have made the payments on your student loan… not the cosigner.

Evidence that You are Able to Qualify for the Loan on Your Own Credit and Income

Once you have made the consecutive on-time monthly payments, you will likely qualify for a cosigner release. But you’ll still have to meet the other requirements, which typically include:

  • Complete a cosigner release application, which is essentially an application for the loan in your own name and including your own financial resources
  • Be a US citizen or a permanent resident alien
  • Show a history of stable employment
  • Provide an acceptable credit history
  • Have an income that supports repayment of the student loan debt, which will sometimes require a certain minimum dollar amount of income
  • Meet acceptable debt-to-income ratio requirements, indicating that you are able to meet all of your fixed financial obligations on the income that you have

In the event that your initial application is denied, some lenders will allow you to reapply for the cosigner release after the passing of a certain amount of time. Oftentimes, this is a period of one year.

Related: 3 Lesser-Known Ways to Improve Your Credit

What if You’re Denied?

If you’re denied your application to remove the cosigner from your own, or if you don’t have the option to take this step, what’s next? As mentioned above with certain federal loans, refinancing is another option. Refinancing can have strict requirements as well, though. If you have the option to remove a cosigner on your private student loan but don’t quality, it’s likely you won’t qualify for refinancing, either.

But if you’re in good financial shape and simply don’t have the option to remove the cosigner from your current loan, consider refinancing without a cosigner. This could get you a better interest rate and get your parents or other cosigner off of your student loan!

If you are using a cosigner to get a student loan, be sure that you investigate whether or not that lender permits a cosigner release. And if they do, you should actively pursue the release as soon as you are in a financial position to do so.

Extra Cash? How to Decide Whether to Pay Off Debt or Invest

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If you have extra cash or come into a sudden windfall, is it smarter to pay off your debts or invest the money?

A woman came into my office the other day wondering this exact thing. Well, she didn’t ask the actual question… I did.

She had a mound of credit card debt, clicking away at 12% interest. What surprised me, though, was that she already had the $50,000 needed to clear out the credit card debt. Interestingly enough, she didn’t plan on using any of it to pay off the card! She wanted to invest the money instead. She estimated that she could earn much more than the 12% she was paying on the credit card, so she concluded that paying it off was a silly thing to do. Her money was best served elsewhere.

It turns out that this woman was in debt all over town, even though she had substantial assets. Never mind that her credit score was in the dumpster, she wanted to invest. I had to convince her to reconsider.

Could She Have Been Right?

To you and me, the answer in the above woman’s case might be a no-brainer. But other situations aren’t so clear-cut. In order to really address this issue, you have to understand all the components of the question.

First, there’s the basic financial question, which is rather simple. Ask yourself which number is greater, the return on your investment or the interest you are paying. If you’re paying more interest than you could earn, pay down that debt!

For example: assume you owe $10,000 on a credit card. Let’s say that you actually have the $10,000 in the bank, which you could use today to get out of debt completely. The credit card interest rate is 10%, and the bank is paying you 1%. At first, this seems like a slam dunk. Pay off the credit card. Right? Not so fast…

Assume that you also have an opportunity to invest $10,000 in your brother’s “can’t lose” vending machine business. He tells you investments are earning 30%, which is quite a bit more than the 10% you’d save paying off the credit card. Now the choice becomes more complicated.

If you pay off the credit card, you’ll make a guaranteed 10% return. Why? Because that’s money that you’ll keep in your pocket rather than sending it off to Visa or Mastercard.

If you invest in the vending machine business, you’re guaranteed nothing. You might earn 30%… or even more! But you could also lose everything. It’s happened once or twice in the past when people invest in small businesses.

So, which is greater? A guaranteed 10% or a possible 30%? The only way to approach this is to estimate the likelihood of earning that 30% on your investment. If the chances are high, you might go for it. If not, you might pass.

But there are other scenarios. What if the cost of that credit card debt was only 5%, and your alternative to paying it off is to invest in some mutual funds? What if your timeframe was 5 years for those mutual funds? Assume you estimate that the average return of the funds over that period of time will be at least 8%. Now, which do you choose?

While you still have to do the above calculation of estimating the likelihood of achieving those results, you have the added element of time to consider. What is the expected return of the alternatives over the given time horizon?

This is also especially true with mortgages. If you come into a sudden windfall, you could theoretically pay off your home loan early, clearing up a very large debt. But is that (likely) 3-5% interest rate really your best option, given that you could invest that cash and earn a 7-8%+ return? You need to ask yourself some big questions.

What Other Value Does That Money Hold?

So, from a financial standpoint, you must consider all the alternatives: the cost of the debt, the likelihood of potential alternatives coming about, and the downside risks over a given time frame. It’s a lot to consider.

Beyond these financial considerations, though, there are also the emotional points. How would you feel if you paid off the debt? How would you feel if you don’t invest? How would you feel if the investment doesn’t work out?

Related: Sweat In Up Markets So You Don’t Bleed In Down Markets

I have found that these emotional questions are just as important as the financial questions. What good is it to make an otherwise smart financial decision if, at the end of the day, you are left feeling miserable?

In most cases, you can simply ask yourself a few questions and come up with a really solid decision. This should allow you to address both the financial and the emotional issues:

1. What happens if you pay off the debt and the other investment does well?

Your answer will be unique depending on the situation. If the investment turns out great, how might it change your life? Are you giving up your chance of a lifetime? Or are the upsides of the investment actually very limited? What are you giving up in order to pay off the debt? Does it make sense to make that decision?

2. What happens if you pay off the debt and the other investment does poorly?

If this happens, you’ll probably feel like a genius. No problem here. (My apologies to your brother on his vending machines, though.)

3. What happens if you don’t pay off the debt, make the investment, and it turns out well?

What is a reasonable expectation for a “good” outcome, and what does that look like? Can your money double? Triple? Or is the upside, even in the best case, so limited that it just isn’t worth it? What is a reasonable expectation?

4. What happens if you hold the debt, make the investment and it turns out badly?

Can you afford to lose the money and be stuck with the debt?

A man I know borrowed money to invest in the stock market. Not only that, but he invested very aggressively and lost 30% in 3 months. At the end of the day, he was $150,000 underwater and needed to pay 10% to his lender. This bad decision forced him to sell his business and declare bankruptcy. Clearly, he never thought about the downside before choosing the investment over staying out of debt. He was an optimist who never considered the risk.

Read More: Rebuilding Your Credit After Bankruptcy

I have found that by asking myself these four big questions (and really thinking about the answers), I make better financial decisions between two competing alternatives.The answer isn’t always as cut and dry as it was for the woman in the beginning example, but that doesn’t mean you can’t still figure out the best, smartest option for your money.

So, how do YOU decide between paying down debt or investing?

Can You Take Time Off to Raise a Family Without Ruining Your Career?

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In an ideal world, you would really be able to “have it all.” You know, the perfect parent with a model career, which fits neatly alongside family life.

The reality is, though, parents often feel like they’re under pressure from all directions. Naturally, you want to do the best for your children and support your family unit. Oftentimes, this means one parent taking a break from their career, dedicating their time instead to raising a family. Many of us worry about the impact this decision will have on our long term career, and whether we’ll ever be able to pick up where we left off.

Taking time out for family doesn’t have to negatively affect your career path. But there are some considerations–and some smart steps to take–to ensure that you can still access the roles you want when you’re ready to reenter the workforce.

Here are some ideas to get you thinking:

Plan your time out or risk resenting it

There are pros and cons to taking time out of your career to raise your family. You might worry about slowing your career progression, but it’s also common to find yourself missing adult company when you’re at home with tiny humans most of the day. Of course, that’s without even considering the financial impact of losing pay, pension contributions, and other benefits.

Whatever you do, time out will have some impact on your career. For many people, the benefits of spending time at home far outweigh the potential pitfalls. However, it’s a big decision and more likely to pay off if you plan for the time in advance.

You should think through the financial impacts. Also plan how you’ll balance your varied roles as a parent, a partner, and an adult in your own right. Keep a flexible mindset if you can. Each individual and family unit will have a unique way of organizing life. If you decide to take time off work, but ultimately the arrangement doesn’t suit you, have a backup plan so you don’t feel trapped.

Prepare for the Unexpected With a Flexible Career Plan

You risk long-term damage–not only of your career, but of your personal confidence–if you end up resenting your time spent out of the workforce.

Avoid missing professional development opportunities

Time out of work can cause you to fall behind your peers in terms of professional development or lose track of the latest changes in your field of work. As well as making it more difficult to reintegrate into your previous job, this can damage your confidence… you may feel like the world is moving on without you.

However, it’s not inevitable. You can still take advantage of professional development opportunities when you’re staying home if you plan carefully. In some cases, you might be able to formally arrange to spend some time in the office to maintain relationships and undergo any necessary training. In the UK, these (paid) days are known as “keep in touch” days. However, even if there is no formal arrangement for doing this, it’s worth talking to your boss about setting something similar up if you can afford to take the time away from your child.

Related: How to Decide If Your Salary Is Worth the Cost of Childcare

If that’s impossible, keep up by reading industry news or taking online courses. Follow your business and its competitors on Twitter and Facebook to get the latest updates. Listen to podcasts presented by industry insiders. If you enjoy writing, you could even consider contributing to industry press, which has the added benefit of giving you an online footprint during your time off.

You’re building new (marketable!) career skills

Don’t underestimate the skills you’re building while you’re out of the workforce. The “soft” skills of parenthood can be hugely valuable, and deserve a place on your resume. Parents who return to work tend to have developed better prioritization and planning skills–of course, these are needed to ensure you can deliver at work while still holding home life together. Working parents also have strong drive and resilience. Their renewed focus can make for a big leap in productivity, which is an asset for management.

Periodically review your resume and update the skills section to remind yourself of how you’re developing as an individual and reflect your growing list of transferable skills.

Aside from better organization and planning, it’s also common to have more empathy (and find that you’re better at building relationships), once you return to work from having a family. Having kids is a life experience many people share. You can make this shared experience a way to build new and deepen existing, relationships, taking your work connections to another level.

Isolation can damage your confidence

Being home with children can be an isolating experience if you’ve always been part of a strong work team. You can easily go from being with other people day in and day out–those you know well, and with whom you share goals and purpose–to rarely seeing other adults outside of family. While this is inevitable to a degree, especially with very young children, it’s important to find ways to be involved with other adults. Isolation has a way of denting your confidence.

Related: Can You Afford to Stay Home With Your Kids?

With parenthood, your friendship groups might naturally change. Get to know other parents by joining local groups and clubs, but also keep in touch with work colleagues when possible. Simply meeting colleagues on a social basis is an important link to your professional life.

Even better, if you are able, is to find opportunities through a site like That way, you can get to know other professionals and grow your network, even while you’re out of work. If you really can’t make time to get out and meet people face to face, try joining professional groups on LinkedIn. There, you can get involved in discussions and stay up-to-date with industry developments.

Feel free to think ‘outside the box’ if adjusting your goals

Although taking time out of the workforce might impact the long-term future of your career, becoming a parent will also make a significant difference. You may even find that your ambitions change. This is actually very common; having family commitments could be the catalyst that makes you think creatively about your working future. While you might choose to adjust your career goals, though, you certainly don’t need to ditch them.

Maybe you decide you don’t want to work full time after taking a period of time off. Think differently: how about part-time, flex, contract, or even online work? You might stay at your current workplace but ask to work from home or to take on more family-friendly hours. You could also set up your own business or exploit a hobby in order to make some cash. A side hustle has the ability to not only bring in additional income, but also be a segue into a career you didn’t even realize you wanted. The increased autonomy and flexibility may be just what your new family needs, too!

Making a dramatic career pivot is fairly common these days, as the popularity of online/remote working has brought with it many new opportunities. Taking time to reassess your career options when a baby comes along can make you see ideas you never thought existed.

Extra Income: Could Airbnb Pay Your Family’s Mortgage?

Although taking time out of the workforce to raise a family might signal the start of a new chapter in your career, there is no need for it to be the beginning of the end. Combining your new skills as a parent with your professional experience can give your career a real boost. You never know… it might even be the springboard to starting something new and incredibly rewarding.

What’s something you (or your spouse) learned from taking time away from a career to focus on family? Would you choose the same path if you could do it all over again?