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 Meetup.com. 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?


How to Invest in Yourself (Without Spending a Lot of Money)

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No matter your current stage of life, there are always opportunities to spend money on bettering yourself. These include things like continued education, vocational qualifications, or professional certifications. We pursue these despite the (often high) costs — through careful planning and smart student lending — in hopes that the money spent will pay dividends in the long run.

However, it’s important to remember that cash is not the only resource at your disposal when it comes to self-development. You don’t need to spend a ton of money in order to “invest” in yourself. In fact, any action you take that will result in better health, happiness, or financial well-being is an investment in your future self. Whether your focus is on eating well, increasing activity, organizing your home, or getting smart about your spending, it’s all beneficial.


One impactful area to consider is your future career. You can also make great gains here for free, or at a low cost. If you’re looking for ideas to help you invest in your future career, without spending a bunch of cash, here are a few to start.

Know yourself

Do you handle stress by simply avoiding your approaching deadlines, browsing Facebook or YouTube pages endlessly? Procrastinating eats valuable time like nothing else, and recognizing that you have a problem allows you to begin fixing it. Perhaps you’re miserable in your job, but the fear of jumping into something new keeps you from even exploring your options. If you only knew what you could be good at doing, you might make that leap — advancing your career and your happiness.

Really, truly getting to know yourself is a valuable way to plot your course to self improvement. By understanding your strengths and weaknesses, your preferences, and the environments in which you work best, you can make sure that you’re on the right course professionally.

The great news is that getting to know yourself is completely free. Aside from “real world” opportunities, there are a number of ways you can use the internet to gather ideas and make some informed decisions about what your future career options might be.

The investment:

  • Get to know yourself better with an online tool, such as 16 Personalities or Predictive Index.
  • Check out what you think you know about yourself by actively seeking feedback from others.
  • Use a tool like My Next Move to generate ideas about how your personal interests might overlay into your working life.
  • If a new career is a real consideration, try an online assessment to see what might work for you.

Expect good things to happen

It might sound a bit abstract, but would you behave any differently if you really, truly expected to get a lucky break in your career sometime soon?

If you don’t think good things are going to happen to you in your career, then chances are, even if they do, you won’t be ready to take the initiative. In the world of work, success tends to attract success. So being ready to grab the chances that come up is a great outlook. Plus, it’s an investment in yourself that you can manage with zero outlay.

Imagine you meet your dream job’s boss at a party. Or you discover a friend of a friend is the manager at a company you love. You’re itching to find out more about their work, maybe even ask outright if they would consider you for a job. Would you be ready to introduce yourself in a way that creates a great impression and lays the foundation for you to ask for what you want?

The investment:

Read more

The benefits of reading include stronger analytical skills, improved concentration, a better memory, and a broader vocabulary. Since you’re here reading this article, though, you probably know that already.

Reading is one of the best investments you can make in yourself, bringing direct benefits and reducing stress. Even better news is that this applies across the board, regardless of the type of reading matter you choose. Devote just a little time to reading about the professional topics that interest you, and you ramp up the impact.

Related: The Top Personal Finance Books

What’s more, you can read in your “dead time,” which would otherwise be wasted, using a tool like Instapaper. Simply bookmark interesting articles to read later, and tackle them when you would otherwise be idling, such as standing in line at the grocery store or sitting on the train to work.

The investment:

  • Visit your local library to (literally) check out ways to stretch your mind.
  • Read online issues of quality magazines covering topics like world politics, economics, personal finance, and business.
  • Access condensed versions of non-fiction books with Blinkist or Four Minute Books.
  • Follow people who inspire you, as well as the key voices in your industry on platforms like Twitter and Medium.

Learn online

The internet is good for a lot of things, but the ease of access to ideas and information make it a perfect place to learn.

Whether you want to speak a new language, crochet a scarf, or pick up a new professional skill or qualification, you’re going to find what you need. In many cases, the courses you want will even be free, as long as you know where to look.

Learning new things can be a direct benefit to your professional career if you choose courses that apply to your field. But even if you feel like tackling something just for fun, the simple act of challenging yourself to develop a new skill is good for your brain.

The investment:

  • Listen to podcasts or watch TED talks online to broaden your horizons from your own home.
  • Get clued up on coding with nothing more than your home computer with Codecademy.
  • If you’re interested in managing your money better, try Learnvest courses or listen to podcasts like those from Dough Roller.
  • Learn like you’re at MIT with their free online courses covering topics such as business and entrepreneurship.

Network with purpose

To get the most from this investment, learn to network with purpose. (With that said, remember to occasionally connect with others without any end goal, too!)

Networking with purpose means making it a priority to seek out and contact people who share your interests and ideas, or are working in areas which you aspire to join. You do not need to ask them for anything in particular, other than to share their experiences over a coffee.

You would be surprised how flattered people can get from receiving an email or a call — especially from a stranger — simply saying, “I think what you do is really interesting, and I would love to hear more about it.” If you are open and honest, people are likely to respond well to your requests. Even if they don’t make time to see you, you know you have made their day by asking. But you miss 100% of the shots you don’t take, so at least give it a chance.

The investment:

  • Find local Meetup groups, community gatherings, and industry associations that are relevant to you. Go along and make new friends.
  • Try to find a mentor in your professional field or the one to which you aspire to move.
  • Consider volunteering to improve your network, either in a local business organization (such as a chamber of commerce) or a charity operating in your industry.
  • Remember to really listen to others. The purpose of networking isn’t to get people to do things for you but to learn from them and build a community.

Find your creative outlet

Happy people have a creative outlet. Getting creative is known to help balance stress and improve overall wellbeing, leading to a better quality of life and maybe even lower healthcare costs.

Learn More: How to Easily Save Money on Healthcare Costs

Of course, happy people are also more productive. So finding a way to get creative is also a great investment in yourself.

If you happen to have a craft or creative skill you can then use to build a side hustle, you can double down on the impact of this investment. You’re not only bettering yourself with an outlet, but selling your products will give your finances a boost. Think about craft fairs and online outlets like Etsy, or use your personal network to gift and sell your crafts to others.

The investment:

  • Use YouTube to challenge yourself to learn something new or further develop an existing, crafty skill.
  • Ask friends who attend creative classes or clubs to take you along to sample their activities (something which is usually free).
  • Think about ways you can use your creations — sell, donate, or use as gifts for friends and family, among others.
  • Reflect on how you feel during and after creative activities. Does it help to clear your mind and relax you? Are you then more productive with work and in the home or happier with your family?

Get a time management system

Finally, the investment that might actually be the most valuable of all.

Time is — as we know — our only truly finite resource. And yet, it can feel like you actually have more of it by putting in place a time management system that works.

Remember: the disciplines that work for one person will not necessarily fit the needs of another. Getting the perfect time management process for you can take some adjustment. But once you have it in place, it has a multiplying effect on all the other strategies above.

Simply put, you will have more time to implement any of the other ideas you like. Therefore, you’ll increase your overall return on investment.

The investment:

  • Use an app like Wunderlist to keep track of the “To-Do List.”
  • Be realistic about what you can achieve every day. Set an intention in the morning to do no more than three or five key activities, and then do them well.
  • An app like 24 Me is the online equivalent of a personal assistant, reminding you about key dates, activities, and even bills you need to pay. It has the ability to win you back hours over the course of the week.
  • Look for slivers of “dead time” you can use better, such as your daily commute.

Now, Put It All to Work

For many of us, the hardest part is starting. It can be difficult to invest time into coming up with the tools and habits that promote good time management. However, putting this in place is the key to unlocking all of the other personal development ideas above.

There are plenty of ways to seek personal and professional growth without breaking the bank. Plus, when the payoff can come in the form of better balance, a more satisfying job, a healthier paycheck, and stronger all-around well being? Well, there’s every reason to give it a go.

Try these ideas as a starter, and let us know your own tips in the comments.


Tax Day is Here! Now, What Should You Do With That Money?

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Well, April 18 has finally arrived, which means that we should all have our taxes filed, signed, and sealed by midnight tonight (unless, of course, you’ve filed for an extension). Whew! What a relief to have that done, right?

While there’s quite a bit to be said for adjusting your withholdings to avoid a tax return altogether (goodbye to the government’s 0% interest loan on your money each year!), many folks are grinning ear-to-ear as they eagerly await that direct deposit in their checking accounts. So, what should they do with all that money?

tax day2

This wouldn’t be a personal finance website if we didn’t at least encourage you to think very carefully about your plans for that windfall. With the average American receiving about $3,000 back from the IRS each year, there are a number of options for your tax season cash boost. Plus, it’s not like it’s “bonus money” anyway… that cash was yours all along. The government has just been holding onto it all year – interest-free, of course – so you should really make the best possible use of it now.

Related: What to Do About a Tax Bill You Can’t Afford?

Here are a few of our favorite ideas, and reasons why you should choose one of them before going on a shopping spree or buying a new car:

Build (or boost) your emergency fund

Another statistic for you: more than half of Americans don’t have enough cash on hand to cover an unexpected $500 expense. A whopping 63% of them said that they would have to take out a loan, charge to credit cards, or significantly cut back on spending if their car broke down or the dryer went kaput.tax day save

What does this really mean? Not only does it say that most Americans are only one broken arm or blown transmission away from digging a debt hole, but it is clear that less than half have a solid emergency fund.

Taking your IRS refund check and putting it into a high-yield savings account is one of the smartest things you can do. Aim first at tucking away $1,000 for emergencies. If you can save more, do it… but try to get at least a grand in that account, in case of the unexpected. Then, only dip into it when something is a true emergency!

Related: How to Save for One-Off Expenses (Hint: They’re Not Emergency Fund-Worthy)

Save up a few months’ expenses

Once you have that emergency account funded, it’s time to think a bit bigger. In case of a really big circumstance – such as losing your job or getting ill – you’ll want to save up a few months of expenses. The end goal is to have between three and six months’ worth saved up, which will give you a nice buffer in case of the truly unexpected.

If you already have an emergency fund in place, it’s time to start thinking about funding this account.

Learn More: Where to Put Your Emergency Fund

Pay off credit card or student loan debt

Debt-free. It’s something we all should strive for but many Americans can’t comprehend. Considering that the average household carries over $16,000 in credit card debt alone, it’s easy to see why the black cloud of debt hangs so thick. There is a way out, and it starts with a single dollar (or IRS refund check, as the case may be).

tax day ccIf you have credit card or private student loan debt, the next place you should be putting your money (after the aforementioned emergency fund) is toward paying down these account balances.

The average private student loan balance carried with it an interest rate between 9-12%. Credit cards are considerably higher, with an average of 16.2%. Throw in a late payment or two, and these rates can shoot up closer to 30%.

If you were to put your tax return to good use and pay off a credit card with an average 16% APR, you would not only be improving your credit score, building your net worth, and working toward a debt-free life…. You would essentially be “earning” a 16% return on that cash this year versus letting it sit in your checking account. And that’s one guaranteed investment that you should definitely jump on.

Fund your IRA or 401(k)

If you don’t have any high-interest debt and have a solid emergency fund, it’s time to start looking at retirement options for your IRS refund.

No matter how much you think you need to save for your latter years, taking full advantage of your retirement accounts is a smart move. Traditional IRAs and 401(k)s are tax-advantaged, meaning that as long as you stay within your annual contribution limits, these pre-tax dollars will work for you now. Your Roth IRA, on the other hand (assuming your income qualifies), will work for you later, especially if you are in a higher tax bracket further down the line.

Related: What to Do When Your Employer’s Retirement Plan Sucks

Take that tax return, and use the extra cash to increase your work-sponsored 401(k) – especially if you have an employer match – or IRA contributions. Or, do what I did: front-load your Roth IRA, up to the $5,500 maximum, and don’t worry about it for the rest of the year.

Invest it!

Only go the investment route if you’ve already taken care of your debt priorities, have an emergency cushion in place, and are on track to max out your retirement accounts for the year. But if those are in place, look into investing that windfall.tax return invest

Regardless of your asset allocation, you can generally plan to earn around 7% on your investment each year. (Of course, this varies greatly, but that’s a general rule of thumb.) This means that if you take your $3,000 average tax return and invest it, you could expect to end up with about $3,200 come next tax season.

Of course, investments have varying degrees of risk and return involved. You could wind up with a 0.25% return or a 40% return this year… that’s the name of the game. However, adding to your portfolio when you can is a great idea, especially if you’re in for the long game.

Pay down your mortgage

One of the more important ideas for a successful retirement is the elimination of your monthly mortgage payment. This not only builds your net worth with a substantial asset, but it also minimizes your monthly expenses and allows for a home equity line of credit, which can be called upon if ever needed.

tax day houseUse your tax return to make an extra mortgage payment this year, and every year thereafter, and and watch the principal dwindle. For example: on a $200,000 home with a 30-year fixed mortgage at 5%, you are paying $186,512 in interest over the life of the loan. Well, that’s if you’re making 12 monthly payments a year.

Take your IRS check, and use it to pay a 13th payment each year, then watch the interest tower crumble. Imagine that you make just one extra monthly payment every 12 months on that same mortgage loan. You’ll instead pay off the home in only 26 years and you’ll only be paying $153,813 in interest over the life of the loan. That’s a substantial savings of  $32,699!

What could you do with an extra $33k in retirement?

Contribute to the kids’ education fund

College isn’t cheap, and student loans aren’t something most of us want to see our children struggle with. If you’re able to set money aside now for your kids’ future education expenses, you’ll be grateful down the line.tax day education

Whether putting the cash in a 529 account or starting an IRA, you are able to save up cash tax-free. Not only does this save you as much as 35% (depending on your tax bracket), but it will also grow and earn interest over the years. Plus, of course, you won’t be hit with a tuition bill tens of thousands of dollars high. When your high schooler comes home with applications to a private university, you’ll be thankful you thought ahead.

Schedule a consultation with a CPA

Do you feel like you’re in a good place with your finances? Maybe you don’t have children and your home is paid off – where would your money be best served?

Take part of that tax return and put it to good use by scheduling a consultation with a financial advisor. They can take an objective look at your money situation and let you know exactly where you stand, as well as whether you’re on the right track to financial freedom. They will have suggestions as to where you should focus your efforts first, especially if you are aiming for a higher goal, like early retirement.

Donate to charity

tax day charityTax return time is a great opportunity to give back to your community through causes you support. You could donate canned goods to your local food bank, take bags of kibble to an animal shelter, clear out the closet for Goodwill, or add a little extra to your church tithe. No matter where your heart and passions lie, having a tax refund boost can allow you to do a little more without feeling the usual pinch.

Be sure to save your receipts on charitable contributions, too, for when next tax season comes along!

How will you be putting your tax return to work this year? Let us know how smart you’re being with your money below.


Get a Better Mortgage Rate Without Refinancing

This website receives compensation for products or services you obtain through the links on this site.

For several years before 2017, mortgage interest rates just kept falling. Just when you thought they couldn’t go any lower, they did. But with the Fed’s recent announcement of an increased benchmark rate, banks are bumping up their prime lending rates.

Even still, rates are quite low. Freddie Mac puts the average mortgage rate for 30-year mortgages at 4.17% in February of this year, and banks aren’t likely to majorly hike that number immediately. Even with numbers beginning to climb, many homeowners are considering refinancing while the rates are still so low.

mortgage wo refi2

Are you thinking about refinancing your mortgage? It’s not terribly difficult, but it is enough of a hassle that some people don’t even bother. While you should at least consider running the numbers to see how much a refinance could save you, there are other money-saving options available.

Option 1: Ask for a Lower Rate

One potential option is simply asking your lender for a better mortgage rate. This doesn’t involve all the cost and paperwork of a full-scale refinance, but could still lead to a lower percentage. Of course, a better rate means that you can reduce your mortgage payment and/or pay it off even faster.

Don’t believe me? One blogger at NoCreditNeeded did this, and shaved 1.525% off the rate on his 15-year mortgage. Here’s how it went down:

NCN and his wife had been considering a refinance, as rates are significantly lower than they were three years before when they bought their home. However, they didn’t want to deal with all the paperwork. They also didn’t want to start over with a new 15-year mortgage, and they didn’t want to pay a bunch of closing costs.

Related: How to Save on Closing Costs When Buying a Home

Inspired by our earlier article on recasting your mortgage, he decided to contact his lender and ask if they could reduce his rate without changing the other terms of his mortgage. Amazingly, they agreed, and he had a new offer shortly thereafter.

I’ve heard of this happening quite often with distressed loans (wherein the rate is adjusted to help the borrower stay afloat). However, it’s less common for borrowers who are in good standing. Apparently, the lender decided it was better to give up a bit of interest income in order to retain NCN as a reliable customer.

The change required filling out just a few documents, and, while there was a processing fee involved, they’ll earn that money back on interest savings within just seven months. Going forward, they’ll continue making their “old” payment, with the difference being applied as an extra payment toward principal.

While you may only be able to pull this off if your loan servicer actually owns your mortgage (and many don’t), it can’t hurt to ask. The worst they can do is say “no.” On the upside, you might just wind up saving a ton.

Note that you might still be better off with a refinance. That way, you can play the field and get the best mortgage rates available — perhaps lower than your current lender will offer (assuming they’re willing to play ball). But if you’d rather not go to that trouble, you should at least consider asking your lender for a better deal.

Option 2: Prepay Your Mortgage

If your goal with refinancing isn’t necessarily to cut your monthly payment, prepaying your mortgage can help you save money over the life of your loan. Paying just a little bit extra each month can seriously reduce the amount of interest you pay over the life of your loan.

Prepayment can be particularly helpful if you have only a few years left on your mortgage, or if you have a relatively small mortgage. In this case, refinancing could cost more than it’s worth. This calculator can help you determine how much prepayment can save you.

Option 3: Get Rid of PMI

If you’re paying PMI — or Private Mortgage Insurance — on your mortgage, you could seriously reduce your monthly payments by getting rid of this extra payment. PMI can cost several hundred dollars a month. You’re entitled to get rid of PMI as soon as you have an 80% loan-to-value ratio.

What does that actually mean? If you originally bought a house worth $100,000 with a $90,000 mortgage, you can get rid of PMI after you pay off $10,000 of mortgage principal. Or, let’s say real estate explodes in your area, and your home’s value increases to $105,000 while you pay off $6,000 in principal. In either case, you have at least an 80% loan-to-value ratio, so you can get rid of PMI.

Getting rid of PMI involves some of the steps of refinancing your mortgage. You may need to pay for an appraisal if your loan-to-value ratio hinges on an increase in real estate prices. But it’s not nearly as expensive, since you don’t have to pay closing costs. Paying for an appraisal will likely cost less than paying for a few months’ worth of PMI, so it’s definitely worth the cost.

When you get rid of the PMI, you have a couple of different options. You can reduce your monthly mortgage payment and devote the saved cash to something else. Or you can continue paying the same payment, but pay down the principal more quickly.

Option 4: Try a Streamline Refinance

If you have an FHA-insured mortgage currently, you can take advantage of lower interest rates with a streamline refinance. Some banks also offer streamline refinances on conventional mortgages. Streamline refinances don’t necessarily reduce the costs of a refinance, but they do reduce the paperwork and hassle. If you have enough money to pay closing costs on a refinance but want to avoid the additional paperwork, check out streamline refinance options.

Learn More About FHA Streamline Refinancing

Option 5: Just Refinance, Already

These options are all great, and can make your life easier while saving you some money. But refinancing your mortgage can save you some serious cash.

If you’re planning to stay in your house for a while, you should at least run the numbers to see how much a refinance could save you. Do it today — before those interest rates start climbing!

How to Request an IRS Income Tax Extension

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It’s that time of year again… taxes are due in two weeks! So if you haven’t finished your returns yet, it’s time to get cracking.

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But what if you realize that you’re not going to make it in time? Well, I have good news and bad news for you. The good news is that you can request a six month extension, which is automatically granted. The bad news? You still have to pay whatever is due by April 18th.

Said another way: if you don’t want to run the risk of a late payment penalty, you still have to essentially work through your return by the 18th. That way, you’ll know what (if anything) to pay.

A few facts about income tax extensions:

  1. To request an extension, you should use IRS Form 4868. Any tax prep software worth its salt will be able to handle this, as will any professional tax preparer.
  2. Even if you request an extension, you still have to pay the amount due no later than April 18, 2017 to avoid penalties.
  3. After filing an extension request, your new deadline for filing your electronic income tax return will be October 16, 2017. (After that date, you’ll need to file a paper return.)

Assuming that you don’t live in an income tax-free state, you’ll also need to consider requesting a state filing extension. The process is similar, though you’ll need to get the details for your particular state.

Related: Standard Deduction or Itemize?

How to Request an IRS Income Tax Extension

If you choose to file an extension, you should claim credit for your payment on the appropriate line of your return:

  • Form 1040, line 68
  • Form 1040A, line 41
  • Form 1040EZ, line 9
  • Form 1040NR, line 64
  • Form 1040NR-EZ, line 21
  • Form 1040-PR, line 10
  • Form 1040-SS, line 10

That’s it. Happy filing!

How to Motivate Yourself to Reduce Debt

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Today is Friday the 31st. We are just around the corner from a brand new week and a brand new month. It’s a new opportunity to “start fresh,” especially with your finances. So, with that said, I have just one goal today: to motivate you to attack and reduce your debts.

Debt really sucks!

For some of us, this simple statement is all the encouragement we need. We’re fed up with our situation and are ready to spring into action. Personally, I could just stop writing now, having already motivated myself to continue my passionate and fiery Debt-Free Adventure.

What about you, though? Are you properly motivated to get rid of your debt? If not, what will it take? Here are a few things to think about, which will (hopefully) kick start your motivation. They will also help you establish and maintain a proper relationship with your debt.

How much interest are you paying?

Have you ever sat down to calculate your interest payments, to determine precisely how much you pay in interest each month? If not, I encourage you to do so. You might be in for a dreadful surprise — and hopefully some powerful motivation.

Related: The Power of Compound Interest

Simply calculating how much interest I was paying has been the single most powerful source of motivation in my quest to get out of debt. I added up the interest paid each month on my mortgages, student loans, auto loans, and credit cards. And I was disgusted to realize that I was paying out nearly $1, 300/month in interest alone!

How much are you paying?

Debt is not a game

Lenders spend billions of dollars in research and marketing to figure out the best way to separate you from your money. They’re throwing everything they can at us in an attempt to suck our money right out of our pockets.

Are you fighting back? Are you even prepared to fight? Many people are handing their money over faster than they can earn it! To be successful, we need to be equipped with the whole armor of personal finance. Even when we intentionally go into debt for what we deem to be necessary expenses (mortgage loans, student loans, etc.), we need to know exactly how much it will cost us in the long run… and whether the cost will be worth the impact.

Do you really need hundreds of channels?

Sure, TV can be useful, but let’s be brutally honest with ourselves: TV is an enormous waste of time. Does knowing who won “The Biggest Loser” or “The Amazing Race” help you achieve anything or better yourself in any way? No, absolutely not.

I’m not saying that these things aren’t entertaining, or that you don’t deserve to relax with some mindless television (or a sports game) every once in a while. I’m simply challenging you to spend your time — and money — doing things that are more productive. Things that can improve your situation. Things that will make you a better person. Do you really need to pay $100+ every month (or over $1,200 a year) for TV service? Is it worth that to you?

“The average millionaire can’t tell you who got thrown off the island last night.” -Dave Ramsey

Learn the power of simplicity

Remember back to when you didn’t have a pot to… well, you get the idea.

For me, those days were partly nice and partly burdensome. I wanted more money to buy more things, but I also remember the freedom of not being beholden to anyone for anything!

For some reason, right or wrong, our culture drives us down a certain path — go to college, get a job, get married, buy a house, buy a bunch of stuff, etc. My wife and I followed that path for the first few years of our marriage. While that lifestyle afforded us some nice stuff, it also resulted in a mountain of debt.

More recently, we’ve learned the power of simplicity. One day, we stopped to consider our possessions now versus our possessions as college students. Sure, our stuff is nicer now, and we have more of it, but… We’re also in debt! Simplifying life not only saves money, but it makes us happier, as well.

Less debt equals more freedom

The amount of money you owe to others is directly correlated with the amount of time that you HAVE to devote to earning more money. This is especially true if you’re unhappy working a job that you dislike, in order to pay for things that you don’t really want.

Well, wake up — you don’t have to do it anymore! Start making changes. Sell some stuffget rid of a carreduce your housing expenses, and attack your debt. While you might enjoy your job, wouldn’t it be nice to work because you want to, instead of working because you have to?

Simplifying your life, living frugally, and spending less than you earn are three things you can do RIGHT NOW to reduce your debt and regain some of that freedom and independence that you used to enjoy. Always remember that Debt = Slavery. No, you’re not bound in chains and forced to work in a labor camp, but your options are definitely limited when you’re in debt.

Do you own your house? Do you own your car(s)? Do you own your education? Do you own all of the clothes in your closet? Do you own your wedding? Do you own your toys? Do you own the gas in your car?

If you’re carrying any sort of debt, then the answer to at least some of those questions is “no.” So tell me… Are you truly free when you’re beholden to others in this way? Take some time to re-evaluate your debt and ask yourself if the burden you are carrying is worth the benefit of whatever got you into debt. Then, make some changes.

7 Illegal Questions Potential Employers Often Ask In an Interview

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It’s worth being educated about your rights if you’re looking for a new job. With luck, you won’t need to worry; if you’re asked a question in an interview that makes you feel uncomfortable, though, it can be helpful to know whether your potential new boss just overstepped the mark. That way, you can respond accordingly.

illegal qs2

We have all heard the stories of interviewers asking questions so screamingly wrong, they make you wince. These often involve asking a female candidate whether she’s planning on having more children, or whether her kids are regularly sick and require her to stay home with them.

However, there are plenty of other subtle ways an unethical employer can get the information he or she wants. That’s why it’s a good idea to understand the principles around what you can — and cannot — legally be quizzed about in your interview.

What the Law Says

Most often, certain areas are out of bounds in an interview setting simply because of the risk of actual (or perceived) discrimination. Of course, most businesses just want the best employees they can find, regardless of race, gender, or age. The sad truth, though, is that some bosses — consciously or subconsciously — recruit according to their unfair personal bias. That’s why anti-discrimination laws are in place in many countries, reassuring job seekers that decisions will ultimately be made solely based on their ability to perform the role.

The exact details of the legislation, and how it is put into practice, vary from place to place. In America, there are anti-discrimination laws at both federal and state levels. In the UK, the Equality Act covers most aspects of workplace discrimination. However, the basic principles of the law are similar, in the US as well as the UK, Europe, and many other developed nations.

US Federal law describes protected classes, which essentially means that workplace decisions can not be made based on characteristics such as race, color, religion, or gender. Other areas covered include your country of origin, what citizenship you hold, your age, and any disabilities you may have. The US Equal Employment Opportunity Commission details the full list of protected classes, although it’s worth noting that, in most cases, the rules apply only to employers with 15 employees or more.

Many experienced managers will interview following a more standardized process, avoiding any pitfalls gracefully and asking only the questions that are relevant to the job. But every now and again, a question might come up which makes you feel a bit uncomfortable. Maybe you think that the employer is fishing for an incriminating answer or prying a little too much into your personal life.

Related: How to Answer These 10 Tricky Interview Questions

Let’s talk about some questions that get asked all too frequently, but really shouldn’t be asked at all.

Questions to Watch Out For

1. Are you married?

It’s a fairly common question, and might even come up in small talk as you walk to the elevator with your interviewer. However, it is also a way for an unethical boss to try and figure out your sexual orientation, and to guess if you have (or may eventually have) kids.

If you’re asked about your marital status in an interview, you need to make a personal call about what you are willing to share. If you’re wearing a wedding ring, or bring up your recent engagement on your own, then your interviewer is probably genuinely trying to build rapport, and follow your cues. However, if you’re not happy with the context of the question, you could shrug it off with humor. Responding, “Why, are you asking?” with a smile should do the trick.

2. Do you have any kids?

This is another wholly natural question, in typical context. Unfortunately, it can also be used to try to figure out if you will be able to work overtime or travel, for example. Your gut will be the best measure of whether this query comes from a simple desire to chat about common ground, or something more sinister.

If you’re asked this and it feels off-kilter, it may be because there are specific job requirements which the interviewer is concerned a parent might not be able (or willing) to fulfill. These include international travel or late night/weekend hours, for instance.

You could probe the interviewer about why the question was asked. Start with a clarifying question such as, “Is it important for the role?” If there’s a genuine reason for inquiring based on the needs of the job, you can just confirm that you understand the requirements and will be able to deliver.

3. What country are you originally from?

An interviewer might pick up on a slight accent, or make an assumption about your cultural heritage based on your name, appearance, or dress. But asking about your nationality or citizenship is not actually allowed.

What employers can ask about is your right to work in the country. In fact, it’s their legal duty to do so before a contract is offered. So, if you’re asked about your nationality, but don’t want to share, don’t be defensive. You can simply say that you have the right to live and work in this country, and that should suffice.

4. How old are you?

While few employers will outright ask your age in interview, they might use variants like asking when you graduated, when you expect to retire, or how long you’ve been working.

Related: How to Write An Eye-Catching Cover Letter (and Why It Matters)

If you think the interviewer is trying to figure out your age because they might refuse to take on someone based on this detail, then be wary. Luckily, most questions of this type can be sidestepped with grace.

If you’re asked how long you have been working, for example, you can focus on the relevant experience you hold rather than overall working history. Respond by saying something like, “I have ten years of active engagement in this industry.” It’s useful to know that anti-age discrimination rules typically give more protection to people over forty.

5. How will you get to work?

This is a somewhat ambiguous question, as the intent of the employer (in most cases) will be good. Of course, they’re concerned that you have thought about the commute to your new job — maybe they would even be able to support you by suggesting a carpool.

However, this is a question that can put an employer on shaky ground if they appear to be fishing for details of your socioeconomic status, like whether or not you own a car. This might trigger some unconscious bias in the recruiter (typically, people prefer to recruit others “like them”), or be based on discriminatory practice. It would be unethical — and in many places illegal — if, for example, an employer insists on you owning a car. This is especially true if the job role doesn’t actually call for it, but is simply due to the perception of wealth and class associated with owning your own wheels.

Resource: How to Use Your Commute to Further Your Career

So, what if this question comes up and you’re uncomfortable about the motivation? You can just answer that you are confident in your ability to fulfil the job requirements, and that you have reliable transportation (only you need to know whether that’s a personal vehicle, bicycle, or even the bus).

6. Did you ever get arrested when you were younger?

The key detail here is that getting arrested is not the same as being convicted. In the unlikely event you’re asked about any arrest history, you can decline politely to answer. In some cases, however, you might need to declare actual convictions. The law varies from place to place, so make sure you read up in advance if you think this question might affect you.

In the UK, for example, it varies. Some convictions always have to be declared, some just for a defined period of time, while others do not ever have to be shared with a prospective boss. Either way, an employer is still bound to make a recruitment decision based on your actual ability to do the job now, rather than any misdemeanors in the past.

If you know your new job will require you to have a background check, which will turn up any criminal activity, it might be in your interests to talk about it upfront, anyway.

7. Are you financially solvent?

This is a question which can be legitimate, if it matters for the specific role. So, for example, if you’re looking to work in financial services and have previously declared bankruptcy, this might be a problem. However, in the vast majority of cases, this is not a material issue which impacts your ability to do the job. Feel free to avoid the question, or dig deeper with the interviewer to try to understand why this matters to the role in hand.

What if you’re asked something you shouldn’t be?

These are just a few examples of common questions that may make you wary. Of course, there are many different ways to say the same thing.

If any question you’re asked doesn’t feel right, you should stop and think a moment before answering. There are many somewhat-suspect questions which may simply be intended as small talk, or to get to know you on a more personal level. The real issue is the motivation behind the inquiry. If you believe that the answer might be used in a way that feels unfair, then you might want to avoid answering, or ask for clarification on why it’s important to the role.

In the vast majority of cases, your interviewer is probably not trying to do anything illegal. They might be inexperienced or unaware of the rules — they’re only human, too, and are usually just trying to do a good job.

The best tactic is to trust your gut. If a question seems odd or out of place, smile and ask politely for more details about what the interviewer means. You might receive a completely satisfactory answer.

Ultimately, however, if you think that a recruitment decision is made on grounds that would be deemed illegal, then take professional advice and be prepared to fight your corner. There’s a reason the laws exist, after all.

Have you ever been asked inappropriate or unacceptable questions in an interview? Tell us below, and whether it had an impact on getting the job.

6 Ways to Bounce Back from a Business Failure

This website receives compensation for products or services you obtain through the links on this site.

Losing your job, for any reason, is an immensely stressful experience. Whether it comes due to the collapse of your employer, or if you’re being forced to wind down an enterprise of your own, the pressure can certainly pile up.


But business failure isn’t an unusual scenario, particularly with the global economic volatility we have become accustomed to over the past decade. Many people — including some with well-known success stories — have experienced business failure and then bounced back stronger than ever.

Henry Ford and Colonel Sanders are good examples, just to name a couple. Both of these men failed in their first attempts at business, before tweaking their approach and making it big. In fact, failure can be fertile ground, allowing you to assess and adjust course before moving on to bigger and better things.

Here are some ways to move forward if you’re caught up in a collapsing business:

1. Discover your coping strategy

If you’re in the middle of a failing business, whether your own or your employer’s, it can feel like there aren’t enough hours in the day to deal with the range of demands placed in you. You will be called on to support colleagues and customers, answer questions from friends and family, and come up with an onward plan for yourself. There are few situations more overwhelming. Despite the frantic pace, though, you must find the best way to find a little calm for yourself among the chaos.

You might already have a coping strategy for when times get tough — going to the gym, listening to your favorite music, or offloading on a sympathetic friend. But if you don’t already have a healthy way to unwind, now is the time to find one. Firstly, this will help you to cope in the moment, keeping your mind clear and your stress levels low(er). Plus, this resilience is exactly what will help you bounce back from the experience and flourish, no matter what life throws at you down the line.

2. Be your own resume

If you’re closing down your own business or working for a company through liquidation, it can be tempting to give it all up as a done deal. But it’s good to remember that throughout the process, you are your own resume… more so than your LinkedIn profile or paper CV could ever be.

How you behave throughout this unsettling and upsetting experience will be noted by potential employers. Keep your chin up, continue to treat customers well, and work with pride. If you work in a business with a physical presence, like a store or restaurant, keep everything well-maintained until the end. And if you work for yourself, let your customers, employees, and suppliers know what’s happening in a balanced way. You want them to feel fairly treated, too. Any one of them might open the door to your next opportunity — and they will be watching how you perform under pressure.

3. Embrace the skills you’re learning

It can be exceptionally difficult to see it clearly at the time, but the experience of business failure is rich in learning opportunities. Not only do you learn to manage your own emotional responses and resilience, but you will also be working in unfamiliar territory, making the best out of an ever-changing situation.

There’s a reason there are so many famous successes, many of whom are almost just as famous for hitting brick walls early in their career. Think about Edison’s thousand failed attempts to make a light bulb, or Walt Disney being fired for having “no imagination.” These experiences, although painful, proved formative.

Resource: Job Hunting in the Social Media Age — Why Your Online Footprint Matters

Try to stop every now and again to see the skills and competencies you’re gathering, which you can put to good use in future. This promotes a much more optimistic view of your situation and can help you bounce back after everything is resolved.

4. Articulate your career story, positively

Whatever the details of your situation, you will be called upon to explain it to prospective employers down the line. You might be tempted to speak ill of your old employer if the business went under due to management errors, or downplay the experience if it was your own enterprise that tanked. But doing this misses the chance to share your experiences and can make you come off as bitter.

Learn More: How to Answer These Tricky Interview Questions

You own the career story you tell, and you can choose how you articulate your experience of a layoff or business failure in your own way. However, I recommend that you focus on the positives. Talk about how you learned to cope with the ambiguous and challenging situation, and state the negatives in simple, objective terms.

5. Build and use your network

Today, many — if not most — new opportunities are found through word of mouth rather than open advertisement. Having a strong network is essential for us all, and never more so than during a challenging time like business failure. Don’t be afraid (or too proud) to talk to your colleagues, bosses, or business partners (current and previous) about what’s happening.

Be clear about what they can offer you, such as helping you hook up with people in a specific company who might be able to offer work, or looking over your resume. At some point or another, we all have employment issues, and most people will go out of their way to help in the unhappy event that you’re caught up in a failing business.

If you don’t have a great network now, use the experience of business failure to get one. It’s a perfect time to connect with your colleagues and business contacts — such as suppliers — both through online means, like LinkedIn, and in real life. With a business being dissolved, you can be sure that your current workmates will find their way into a whole range of new businesses, creating a ready-made and well-distributed network for you to build upon.

6. Find the opportunities — and plan creatively

There’s never a good time to be involved in a business that’s going under. In my case, I was laid off while pregnant and immediately after being promoted into the role I thought was my perfect fit. Oh, and all of this in the midst of the global financial crisis. I had never been more confident about what my career path would look like, and the abrupt and unexpected bankruptcy of my employer came as something of a shock.

In hindsight, I can see that my career plan at the time was unhealthily rigid and based on the assumption there would be no real change in my company. Being made redundant forced me to think more flexibly. I took opportunities that I never before would have considered, which subsequently opened doors I had never dreamed of.

Related: How to Explain a Unique Career History

If you’re in a failing business, try to keep as many options open as possible. Think about the variables you could be open to, such as work in different industries or geographic areas, taking on contract or part-time work, or grabbing freelance opportunities as part of the gig economy. By casting your net as widely as you possibly can, you have more chance of finding something that fits you and lets you bounce back better than ever from your experience.

However tough things are right now, remember this will pass, and things will improve for you down the line. Being involved in a business failure does not make you a failure. In fact, it could give you the experience you need to come back stronger than ever.


Take a Hard Look at Your Financial Habits — Are They Sustainable?

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Sustainability has become a key concept in environmental and resource management circles. Of course, it’s also a good goal for your own financial practices.


I’m sure it once seemed as if the world contained an endless reservoir of oil. By the end of the 20th century, though, it was clear that we were wrong. Some basic concepts were recognized: when people draw on a resource faster than it can be replenished, eventually shortages will occur. Similarly, there are some common financial practices that may seem harmless from week-to-week, but will back you into a troublesome corner over the long haul.

The test for your personal finances, then, is whether or not your habits are sustainable. If you project those habits out into the future, do they result in the building of your wealth… or lead you closer toward bankruptcy?

Here are several ways in which you should consider the sustainability of your personal finances:

1. Is your debt level rising or falling?

Controlling debt isn’t simply a matter of paying minimum monthly payments, or avoiding your maximum credit limits. If your debt is rising month to month, it is only a matter of time before it becomes unaffordable and/or no one will extend you additional credit. Sure, there are times when it is necessary to take on debt. For the most part, though, a fundamental goal of personal financial management should be to pay off any debt that isn’t backed by an asset of equal or greater value.

2. What will happen to your monthly payments if interest rates increase?

A common complaint of people with credit problems is that their credit card rates increased, making it nearly impossible to effectively pay down their debts. In 2009, the Credit CARD Act limited the ability of credit card companies to raise rates on existing debts. However, if you depend on credit to make ends meet, any increase in rates will squeeze your budget by making subsequent purchases more expensive. Remember, the deeper in debt you get, the more likely it is that credit card companies will increase your rates. (What an opportunistic business model, huh?)

3. Have you stabilized your housing costs?

Credit card rates aren’t the only form of interest that can rise. From 2007 to 2012, mortgage rates dropped by over 3 percent before starting to rise again in 2013. They have been heading upward ever since and show no signs of stopping. If you haven’t locked into a fixed-rate mortgage by now, you should do it soon. Also, if you face a balloon mortgage payment, do you have a realistic plan for meeting it?

Finally, renters should realize that they also face the risk of fast-rising housing costs, which should be a factor in any rent-versus-own decision.

4. What kind of shape is your car in?

Cars are not only expensive, but for many people they are indispensable. Living in a metropolitan area gives you the option of utilizing public transport. For everyone else, though, getting kids to and from school, traveling to work, and running basic errands requires a personal vehicle. If yours is somewhat the worse for wear and tear, you had better start planning on how you will afford a replacement.

Plan Ahead for One-Off Expenses (Like Car Repairs)

5. How secure is your job?

The economy in recent years has been slowly improving, but we’ve still seen the elimination of large parts of the workforce in various industries… many of which once paid very well. Never take your job for granted. Always keep tabs on what is happening in your industry, and make sure you keep your skills marketable. Having a flexible career plan in place is also very helpful in case an unexpected or unconventional switch is necessary.

6. How close to the edge is your budget?

Between spreadsheets and budgeting tools, people can track their money with a great degree of precision. This has the unfortunate effect of leading them to believe it’s an exact science.

It isn’t. A variety of unexpected setbacks can await, so a good budget isn’t one that is planned down to the last cent. The best budget is one that leaves plenty of cushion for the unexpected.

How to Rebuild Your Savings After an Unexpected Expense

7. What will happen to your income when you retire?

Retirement isn’t some sort of finish line for personal financial planning. In fact, it is the phase when sustainability becomes most important because your future earning ability is limited. Retirement planning should include figuring out what kind of income you’ll need in order to meet inflation-adjusted expenses and how long you can expect to sustain that income.

8. Are you burning up your assets?

One risk that is common in both retirement also occurs pre-retirement for many folks: the risk of burning through assets to meet short-term expenses. If you are relying on past savings or any sort of windfall to meet regular expenses, you need to figure out how long you can continue at your current burn rate.

This can be subtle, too. For example, people who take a home-equity loan to make ends meet have just diminished a very important asset. And they did so to cover expenses that may very well outlast that asset. Try to figure out as many other strategies as possible (cutting expenses, saving more money, bringing in extra cash with a side hustle, etc.) before making your way through your assets.

Here Are 8 Strategies for Stressing Less About Retirement

As with energy and environmental policies, sustainability in financial habits can be tough to attain after years of damaging practices. However, the starting point is to put yourself on a course leading toward sustainability, even if it’s a slow process at first. If you are not at least heading in that direction, you are heading for trouble.