Debt Snowball vs. Debt Avalanche: Which Is Really Best?

snowbird

In the world of personal finance, there are plenty of heated debates. Should you save for an emergency or pay off debt first? Is any debt “good” debt? Are balance transfers an acceptable way to pay off debt more quickly?

And then there’s the classic argument: debt snowball vs. debt avalanche.

Before we launch into the nitty-gritty of the “which is better” argument, let’s talk about what a debt snowball and a debt avalanche are.

Debt Snowball vs. Debt Avalanche

Both of these methods acknowledge a basic fact: you need a plan when it comes time to pay off debt. If you just start throwing a bit extra at debts at random, you’ll likely fail. Your best bet to becoming debt-free is to pay off your debts in a methodical, planned manner.

Snowballs and avalanches are both methods for paying off debt. The only difference between them is in the approach

The debt snowball was popularized largely by personal finance giant Dave Ramsey. The idea is that you start paying off your debts with the smallest balance first. Make all your monthly minimum payments. Then throw any extra funds at that smallest debt balance.

Once that debt is paid off, continue paying the previous minimum payment amount, but put it toward the next-to-smallest balance debt. Each new debt you pay off then essentially rolls into the next one. In this way, you “snowball” your minimum payments, putting more money toward your debts each month until they’re all paid off.

The debt avalanche is similar in that you roll your minimum payments together as you pay off debts. Where it differs is in the order in which you pay off your debts. Instead of starting with the smallest balance, the debt avalanche has you start with the highest-interest debt. Rank your debts by interest rate, and then pay them off in reverse order, following the same “rolling” method as the debt snowball.

Why the Difference? 

Having a plan to pay off your debts is, any way you slice it, a good thing. So why is there so much debate about which plan is best? Ultimately, it comes down to two things: math and psychology. With math, the debt avalanche always wins. But with psychology, the debt snowball usually does.

The Math Behind the Avalanche

If you know much about compounding interest, the mathematically correct way to pay off debts should be obvious to you. Knock out your highest interest rates first and you’ll save money over the long haul.

And this is true. In some instances, the difference could be hundreds or thousands of dollars in interest. You can use an online debt calculator to run the numbers. It’ll show you just how much you’ll save by using a debt avalanche rather than a debt snowball.

The bottom line is that even if it’s just a few bucks, you’ll always save money if you go with the debt avalanche method—that is, as long as you stick to your debt payoff plan. And that’s where the psychology behind the debt snowball comes in.

The Psychology Behind the Snowball

The question of snowball versus avalanche looms so large that social scientists have weighed in with actual studies. Their findings show that the snowball method is more likely to work. One study from Harvard showed that focusing on one debt at a time and knocking out the smallest debt is the best approach. Another study from the Kellogg School of Business concurred. Essentially, consumers who start debt payoff with the smallest debt are more likely to be successful in their debt payoff efforts.

Why is this? Well, psychologists theorize that it has to do with the quick wins you can get with the debt snowball method. If your smallest debt is a few hundred bucks, you can probably pay it off quickly. Then you begin to gain momentum as you move through your debts. By the time you’re tackling that monstrous $30,000 student loan, you have plenty of experience and drive to pay off your debts.

So Which Is Better?

To be honest, neither approach is considered better than the other.

Here’s the deal with this and other personal finance arguments: it’s personal. If you’re motivated by math—as many people are—you may find the debt avalanche is a better fit. If you’re like most consumers, though, the debt snowball is more likely to keep you on track.

One thing to keep in mind, though, is that the savings you get from the avalanche method will depend on a variety of factors. The longer it takes to pay off your debts, in general, and the wider the spread between your highest and lowest interest debts, the more you’ll save with the avalanche.

Of course, you can always take a hybrid approach. Say one of your middle-of-the-road debt balances has a super-high interest rate compared with your other accounts. You might consider paying it off first and then paying off your debts in order of balance and get the benefits of both methods. Or you might get some momentum by knocking out a few smaller debts first, and then start knocking out your higher interest rate accounts.

The goal here is to choose a method and stick with it. If you find yourself losing steam, find a smaller debt to get rid of. Just keep going until you’re finally debt-free.

For more tips on getting free of debt, including ways to change your spending habits, visit Credit.com.

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8 Activities to Plan Now for a Fun and Budget-Friendly Fall Staycation

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Is your kids’ fall break coming up? Plan ahead now to have a great time while also saving money. Over Memorial Day weekend, more Americans traveled than had in the last 12 years, and we spent more on travel, too. If your family spent a lot of money then, you might want to save this fall. Luckily, fall is the perfect time for a family staycation—a vacation where you play tourist in your hometown.

Staycations are great because you can get to know new attractions in your own town, and you don’t have to spend money on accommodations or plane tickets. If you’d like to do fun things as a family without spending a fortune, here are eight staycation ideas to try.

1. Participate in Agritourism

Many sections of the country will be in a harvesting period over fall break. For instance, in my native Indiana, fall break is a great time to pick apples and pumpkins, among other fall-harvested produce.

Check out your state’s agricultural extension to find agritourism destinations in your area. The bonus here is that you often get a fun trip rolled in with a place to eat, which is great!

2. Visit Local Museums and Zoos

Has it been a while since you’ve checked out your local museum or zoo? A staycation is the perfect time to revisit them. You might also try a different type of museum that you’ve never tried before. For instance, some art museum exhibits can be surprisingly kid-friendly.

Or, check online for completely off-the-wall small museums in your area. For instance, my neighborhood has a tiny museum dedicated to Statue of Liberty figurines! These museums can make for a fun experience, even if they are a little cheesy. 

3. Frequent Small Businesses and Restaurants

Have you neglected to check out your area’s local restaurants and small businesses? A fall staycation is a great time to try them out. Local breweries and wineries abound these days, and they often offer kid-friendly menus, as well. You could also visit an area with lots of small businesses. Give your kids a little bit of spending money, and let them go to town.

4. Go Biking or Hiking

Fall is just about the perfect time, in most places, to go biking or hiking. It’s not as hot as summer, and there may be fewer bugs. Check out some new trails and parks on your family vacation. You could even make it a point to check out two or three state parks with your kids during your fall break.

5. Go to the Library

Lots of local libraries offer additional programming during school breaks. Check out your library’s schedule to see what’s going on. Nothing special happening? No worries. Take an afternoon to stock up on books. Then, spend a cozy evening in, drinking hot chocolate and reading aloud as a family.

6. Have a Party

Hosting a party is a great way to get the whole family involved in a big project together. Get everyone to pitch in on making invitations, creating food, and cleaning and decorating your house. Then, have friends and family over for a fun, fall-themed get-together.

7. Make Christmas Gifts 

It’s not too early to start planning for the holidays. Now is a great time to put together handmade holiday gifts. You might try layered jar gifts, such as soup mixes or brownie mixes. Or try making candles, picture frames, or photo gifts. This is a great way to spend time together, while also taking care of some of your holiday planning.

8. Make a Collage 

Chances are you have a smartphone with a decent camera. Spend some time on your staycation driving or walking around your neighborhood, and set the kids loose with that built-in camera. Ask them to find beautiful things to photograph. There’s never a better time for it than fall! At the end of your vacation, print off the photos they’ve taken and create a collage of autumn memories.

If you start planning now, you can save even more money on your fall vacation. The key to saving is recognizing your spending habits. Get a handle on your spending and credit by checking your credit report for free at Credit.com.

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The 5 Things Single Parents Need to Consider about Life Insurance

There are plenty of ways to save at buybuy Baby without cutting your registry and wishlist short.

As a parent, one of the scariest things to think about is what your children will do if something happens to you someday. This can be even scarier if you’re a single parent without a partner to fall back on.

But here’s the thing: you are the sole provider for your children. It’s even more important that you take time to consider all the future possibilities. Here’s what you need to know about life insurance, including how much coverage to get and how much it’s likely to cost.

How Much Coverage Do You Need?

The biggest life insurance question is usually about how much coverage you need. There are all sorts of rules of thumb for this issue. Some say you need seven times your current annual income, while others say more or less.

But how much coverage you need really depends on how the benefit would need to be used if you were to pass away. Ultimately, this depends on a few factors, including the following:

  • How old your children are right now
  • Who would care for them if you were to pass away
  • What that caregiver would need to be able to care for your children
  • How much debt you currently have
  • Whether or not you want to pay for your children’s college costs

Let’s break this down, then, into the five things you’ll need to consider to get the most out of your life insurance policy.

1. Talk to Potential Caregivers

If you don’t already have plans for alternative caregivers for your children, now is the time to make them. Your life insurance decisions will largely hinge on the circumstances of those who would care for your children in the event of your death.

For instance, let’s say you have four kids who would live with your parents if you passed away. If your parents have already downsized into a retirement home, they’d probably need to move to care for your children. In this case, you need to account for their additional moving and housing expenses in your life insurance policy. If they’ve already retired, you may need to consider the other ways that caring for your children would impact their ability to cover their own living expenses.

But what if you have only one child who would move in with family friends if you passed away? If your friends already have a few kids of their own, they may not need to move or add on to their home to accommodate your child. In this case, you may not need quite as much life insurance coverage.

It’s a good idea to have an up-front conversation with potential caregivers. What would they need in order to care for your children appropriately? These are difficult conversations to have, but they’re an essential part of this equation.

2. Think about Your Kids’ Needs

How much insurance you require also depends on your kids’ ages and needs. If you have younger children, you’ll need more coverage—and you’ll need it to last longer. If your kids are older, though, you can probably purchase a shorter policy with less coverage.

Beyond just their ages, you’ll want to consider your kids’ particular needs as well. Are they currently attending a private school that you’d want them to continue attending? Or maybe you have a child with special medical needs. Make sure your policy is large enough to cover those costs.

If you want to fund your children’s college attendance with your death benefit, you’ll need quite a bit more coverage. If you can’t afford to cover college tuition right now, you could also look at college funds as the icing on the cake. In a couple of years, if you’re in a better place, consider upping your policy or adding a second one to cover these costs.

3. Consider Your Current Financial Situation

Even those without children should have enough life insurance coverage to tackle leftover debts and other end-of-life expenses, but it can be even more important for single parents. You’ll want to be sure your children aren’t dealing with a burden of debt while also grieving your loss. If possible, you’ll want to cover the full amount of your debt so they don’t need to.

Keep in mind the costs of end-of-life services, like a funeral service and burial, as well. These can run as much as $10,000 and be a real financial burden if you forget to plan for them yourself.

4. Add It All Up, and See What You Need

Now it’s time to determine how much total life insurance coverage you need. Here’s an example, based on the recommendation that you cover seven times your annual salary.

Sherry is a single mom of a four-year-old and a ten-year-old. She makes about $40,000 per year. If she passed away, her parents would care for the kids, and they’d need to move into a larger home to do so. She has about $25,000 in debt, outside of her mortgage, and she would want to fund both kids’ college funds with her life insurance. Here’s where she stands:

  • Income Replacement: $280,000
  • Additional Housing Costs: $50,000
  • Debt: $25,000
  • End of Life Expenses: $10,000
  • College Funds: $200,000
  • Total Life Insurance Needs: $565,000

That sounds like a lot, right? Before you decide you can’t afford insurance, though, take the next step.

5. Check Out Term Life Insurance Coverage

Over half a million dollars in life insurance coverage seems like a lot, but many people actually overestimate the actual costs of such insurance, especially for healthy, relatively young individuals.

The key is to get term insurance (unless you have a good reason to have more expensive whole life insurance coverage) for only as long as you need it. The longer your term, the more expensive your coverage. Sherry should probably have a 15-year policy, which would cover her until her children are both adults. And if Sherry is in good health, a policy like this could cost well under $50 per month. That’s much better, right?

Once you know how much coverage you need, it’s time to shop around. Plenty of online quoting systems can get you an estimate on your costs in just a few minutes.

These steps aren’t fun to think about. But having an affordable life insurance policy you know will protect your loved ones is worth a bit of discomfort. Check out our Personal Finance Learning Center to ensure you’re on the right track to keep your children safe and secure when you’re no longer here.

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6 Ways to Stop Blowing Your Grocery Budget

Saving money on groceries doesn't need to be difficult and it doesn't always mean cutting back.

If you’re like many Americans, a large chunk of your budget is spent on food — maybe 10% or more. Percentagewise, we spend less on food than we did in the ‘60s, but 10% is not an insignificant portion of your income.That’s why so many money-saving articles focus on groceries as a great place to cut back on spending.

And the truth is that grocery spending is so variable. You could spend $200 per month to feed your family of four, or you could easily spend more than $1,000. With all that variability, it can be easy to blow your budget for groceries. If you find that you’re consistently spending more than you’ve budgeted for groceries, following these tips can help with saving money:

1. Figure out If Your Budget Is Even Reasonable

One issue might be that you have an unreasonably small grocery budget. Maybe your budget is inspired by a few articles from Pinterest about feeding a family of seven for a mere $250 per month. Let’s get real, though. Those families (often the moms!) spend hours meal planning, cooking from scratch, clipping coupons and driving to various grocery stores to snag the best deal.

Their results are amazing but that amount of effort isn’t feasible for everyone. As a working mom in a two-income family, there’s no way I can spend that much time saving money on food.

So if you’ve budgeted $150 per month to spend on groceries, maybe that’s not enough. Here’s how to find out:

a. Break Down Your Spending by Category

First, dig out your grocery store receipts from the past several weeks. If you don’t usually keep receipts, make a point to save them from your next few shopping trips. Shop as you normally would for those trips.

Then, break down your grocery spending by category. For instance, you might divide it into meat, dairy, breads and grains, premade items, veggies and fruits, etc. If you purchase items like cleaning products, cosmetics or toilet paper during your grocery shopping trips, divide those into a separate category as well. Remove everything that’s not actually grocery store spending from this category. Fast food and restaurant spending should be dealt with separately.

Once you’ve got your categories, add up what you spent in each category over the course of a month. This may not be a true average, but it’s a starting place.

b. Set a Reasonable Budget

Finally, you can see what you actually spend on food groceries. Now it’s time to see if that budget is reasonable. A good place to start is with the USDA Food Plans, which average the cost of cooking at home each month. In May 2017, the USDA thrifty plan for a family of four was $561 per month. The liberal plan for a family of four was $1,097 per month.

If your food spending is close to the thrifty end of things, maybe you’re actually not spending too much on food. Maybe you’re just setting your budget too low. But if you’re coming out on the high end of food spending — or if you want to outdo the USDA — use the following steps to trim your spending.

2. Look for Savings in Your Highest Spending Categories

Since you’ve got your spending categorized, you can easily find out where you spent the most money. For instance, if you’re consistently spending half your food budget on meat, it’s time to start cutting back there — perhaps by eating meatless meals a few times a week. Or maybe you’re spending a bunch of money on prepared meals that you could make much more cheaply at home.

Once you know where you spend the most, you can target that category for reducing spending. Some options include clipping coupons for items in that category, shopping manager’s specials, or simply cutting back on eating those types of foods.

3. Look Into Different Local Grocery Stores

There’s a reason Whole Foods is nicknamed “Whole Paycheck.” It’s a great place to find certain specialty items. But if you’re doing all your grocery shopping at high-end stores like these, you will spend more.

Our family saves a fortune just by shopping at Aldi, a discount grocery store that’s becoming more common across the nation. We used to do most of our shopping at a local chain but realized we saved a couple hundred bucks a month just by buying what we can at Aldi.

Chances are you’ve got some cheaper grocery options local to you. For instance, ethnic stores can be a fabulous place to pick up exotic spices and basics like rice and pasta on the cheap. Or you may find that a wholesale store membership saves your family a ton on food staples. Plus, you can use reward credit cards while shopping to earn even more deals. (Before applying, remember that most reward cards require a decent credit score — you can check two of yours for free with Credit.com.)

4. Create a Bank of Easy-Fix Meals

If your family is anything like mine, quick to prepare weeknight meals are a necessity. Without them, you fall back on going out to eat. Pinterest is a great place to find recipes for quick and easy meals that rely on whole, healthy ingredients.

Start trying out these types of meals. If you find a hit, keep the recipe close by. Try to find at least a few of these recipes that use ingredients you tend to keep around.

5. Do Some Freezer Cooking

When you find a great sale on expensive ingredients, pick up extra. Then, double up on your recipe, and put half in the freezer. This is a win-win. You get to save on groceries, and you have a meal ready to go for a busy evening!

For instance, if you find a great deal on ground beef, buy enough to make two lasagnas. Make them both at the same time, and pop one in the freezer. If you get into this habit, you could suddenly find yourself spending less on expensive ingredients, and you’ll have a freezer full of delicious meals to choose from.

6. Cut Back on Waste

How much of your grocery budget goes down the drain the form of wasted food? If you’re like most Americans, it’s a lot!

Start keeping a tally of the foods you throw away after they go bad. Keeping track for a month or two could reveal some interesting information. Maybe you’re over-ambitious when you buy fruits and veggies. You think your family will eat them, but you never get through them all. Or maybe you consistently throw away leftovers. It’s time to freeze those leftovers, pack them for lunch or make smaller servings of your recipes.

Cutting back on waste is an amazing way to save on groceries. Make a point to wait to grocery shop until the fridge is nearly empty. You’ll get more specific with your grocery shopping and more creative with your meal plans.

Even if you’re already saving on groceries, there’s usually room to save more. These tips will help you do just that.

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The Pros & Cons of Sharing Your Finances as a Married Couple

We’ve collected the pros and cons of combining your finances and keeping them separate so you can decide which method will work for you.

For years, the standard financial advice for couples was to combine their finances. All income, debts and expenditures belong to both parties, so why not put them together?

Combining finances makes sense for many reasons, but not everyone wants to take this direction. If you’re preparing to tie the knot, you might wonder which option is best for you. We’ve collected the pros and cons of combining your finances and keeping them separate so you can decide which method will work for you.

The Pros of Combining Your Finances

Combining your finances can be tricky, especially if both parties have their own debts, accounts and assets coming into the marriage. But it might be worth it for the following reasons:

Women May Have Greater Security

Other research shows that women have greater security when they combine finances with their spouses. That might seem counterintuitive, but remember, women are typically more prone to income interruptions, as they may take time off to start families.

It Keeps Things Simple

Splitting finances may work for some couples, but it can also lead to complicated conversations. Who pays which bills? Should you split evenly when there’s income disparity? Who should pick up the check on date night? If all the money is going into and coming out of the same pot, it may help simplify things.

It Allows for More Flexibility

When you can rely on your spouse to foot the bill while you take parental leave, go back to school or start a new business, you may be more likely to take certain career risks. And in the long run, those risks can be good for the couple if they pan out. If, on the other hand, you have to keep paying your share of the bills, you might be less likely to take the leap.

It Creates Shared Goals

When all the money comes from the same place, the couple needs to communicate. That can be a good thing, as couples can thrive on having common financial goals to work toward.

The Cons of Combining Your Finances

Combining finances may not be the solution for everyone. This strategy also has some potential downsides:

Making Debt a Bigger Issue

If one partner comes into the marriage with big financial problems — including hefty debt or terrible credit — that can turn the relationship sour. In these instances, it can sometimes be better to separate accounts while the indebted spouse works on their finances. (You can keep tabs on your finances by viewing two of your credit scores for free on Credit.com.)

You Can Feel Constrained

As an adult, it’s natural to want to spend your money however you see fit. After all, you earned it. When all the money is combined, you may not get to spend on those personal things you have in mind, especially if your spouse has a say in your spending.

It Can Cause Arguments

What if each spouse has a different idea of what financial responsibility looks like? Maybe one spouse prefers to pay down the mortgage, while the other thinks it’s wise to invest. Or maybe one spouse is frugal, while the other’s a spendthrift. In this case, combining finances requires take serious communication and the ability to compromise.

The Pros of Keeping Things Separate

There are plenty of ways to keep your finances separate. Some partners split expenses down the middle while others split them according to who earns more money. Some partners maintain a joint account for overarching expenses like housing but hold separate accounts for everything else. Regardless of how you do it, keeping separate finances can be good for a few reasons:

Keeping Spouses From One Another’s Messes

If you’re going into marriage with a lot of student loan debt or an otherwise complex financial situation, you may want to keep your money — and money problems — to yourself. This can make your spouse more comfortable and shield them from disaster in an emergency.

Giving Both Spouses More Autonomy

Perhaps the main reason couples decide not to combine finances is because they like having autonomy. Having control over your own money may cut down on fights and allow each spouse to meet their own financial goals.

The Cons of Keeping Things Separate

Here are a few reasons to avoid this option:

It Can Devalue a Spouse

Splitting household expenses by income may seem like a good idea, but it can make each spouse feel their value in the marriage is tied to their salary. However, splitting things 50-50 can make things stressful for the spouse who earns less.

It May Diminish Risk-Taking Ability

As we noted above, one of the advantages of a joint financial approach is that it allows for risk taking. When you have your spouse’s income to fall back on, you can go start a business or have a baby. The opposite may be true of couples who split their finances, unless the couple works out a system to allow for such ventures.

For many couples, the best approach to will be somewhere in between. My husband and I, for instance, combine most of our finances. But we each maintain a separate checking account for “fun money.” We can transfer a predetermined amount of money out of the joint checking account each month and spend that money however we wish. This helps us have a bit more autonomy, but ensures we’re still on the same page about our finances.

Whichever approach you choose, keep evaluating what works and what doesn’t. And don’t be afraid to discuss your feelings and change your approach if things aren’t working.

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Here’s Why You Shouldn’t Cut Your Budget to the Bone to Get Out of Debt

Getting out of debt is a lot like dieting. Sure you can stop eating, but that approach isn't sustainable. Here's how to focus on the long term.

So you have some debt that you need to pay off. If you listen to the advice of many get-out-of-debt gurus, you should pay it off as quickly and intensely as possible. They say you should never set foot in a restaurant, go on vacation, or do anything “extra” until the last credit card and student loan are paid off.

This seems like a good approach. If you can just cut out all your extra expenses — and maybe bring in some additional income — you’ll get out of debt much sooner, right?

Well, maybe not.

In fact, becoming debt-free may be quite similar to getting to and maintaining a healthy weight. The intense, fast options may seem like a good idea, but they can actually have negative consequences.

Paying Off Debt & Yo-Yo Dieting

Intense weight loss strategies can often result in what’s called a “yo-yo diet.” It’s when you lose a bunch of weight quickly only to gain it back quickly after your intense efforts are done. Even Biggest Loser contestants aren’t immune to this problem.

If you cut calories dramatically for three weeks before a big event, sure you’ll lose weight. But you haven’t made sustainable changes that will help you stay healthy over the long term.

This is similar to getting out of debt. Sure, you can cut your budget to the absolute bare bones to pay off credit cards in a matter of months. But does this approach really help you build sustainable habits — and a sustainable budget — for the long run? Maybe not.

My husband and I struggled with this early on in our marriage. We wanted to pay off our student loans and car loan desperately. So for a few months, we’d cut everything extra out of our budgets. No restaurants. No fun money. No nothing.

It would work for a bit, and we’d make some progress. But eventually, we’d get to the point where we felt so restricted, we just had to break free. And break free we did. Usually to the tune of a couple hundred dollars or more of “unnecessary” spending.

We went through this cycle for literally years until we learned to take a more measured approach to our “debt diet.” We still keep a close eye on our spending and try not to waste money. But we each have a monthly allowance for things like new clothes, our hobbies, and other personal items. And we have a date night fund so that we can enjoy each other’s company out of the house at least once a month.

This extra spending means we’re not paying off debt as quickly. But it also means that we avoid those splurges that used to throw us completely off track.

You Should Still Enjoy Life

What’s the main point of losing weight on a diet? Sure, you want to look good in a pair of jeans. But you also want to be able to move more freely, have more sustainable energy levels, and just enjoy life more.

What’s the main point of getting out of debt? Sure, you want to stop paying ridiculous interest rates on your credit cards. But you also want to free up money in your budget so that you have more options financially, so that you can enjoy life more.

So what’s the point of dieting or paying off debt if you’re miserable for months or years while you’re doing it?

When you’re dieting, you could cut out everything but salads with dry grilled chicken and probably lose weight very quickly. Or you could learn to make delicious, healthy meals that you love. And you could give yourself tiny splurges once in a while. You might see slower, steadier weight loss progress, but you’ll enjoy life while working towards your goal.

The same applies when paying off debt. You could spend on only the absolute necessities — food, housing, utilities, and transportation — to pay off debt more quickly. Or you could create a reasonable, sustainable budget that allows for frugal vacations, occasional meals out, and entertainment options you love. Again, you’ll see slower, steadier progress, but you’ll actually enjoy life while getting to that debt-free goal.

Your Approach Depends On Your Situation

Are there some times when a quick crash diet may be appropriate? Sure. Bodybuilders who are already in excellent shape will often cut calories dramatically right before an event. They’re just taking their everyday discipline one step further for a few days or weeks.

Similarly, what if you’re generally good at managing your money but just had an unexpected emergency — a broken-down vehicle or a medical emergency, for instance — that bloated your credit card debt? In this case, a few weeks or a couple months’ worth of cutting your budget to the bone to pay off the debt may make sense. Since you’ve already got good money management habits in place, you’re unlikely to rebound into more unnecessary spending.

But if you’re staring down a scale that says you need to lose 50 pounds? Research shows that slow and steady is the way to go.

And if you’re staring at massive amounts of debt? Slow and steady may work better for you, too.

Some Tips & Tricks

So how do you get started with a slower, steadier approach to paying off debt? Here are some tricks we’ve swiped from the diet world:

Make smart swaps on things you eat every day. When you’re trying to cut calories, it’s amazing how much progress you can make just by switching to a lower-calorie salad dressing or sprucing up your breakfast routine. The same goes for your finances. Try refinancing your mortgage or auto loan, renegotiating or even eliminating your cable bill, or revamping your insurance policies for painless ways to save money month after month.

Also keep in mind that your credit can impact how much you pay in mortgage and auto loan interest, and even increase your insurance costs if it isn’t very good. You can keep track of your credit by checking your credit scores regularly right here on Credit.com.

The quality of your calories matters. More and more research is saying that “calories in, calories out” isn’t the end-all-be-all of dieting. High-quality foods, especially healthy proteins and fats, can keep you satisfied for longer, making cutting calories easier. Similarly, not all spending is equally satisfying. If you only have a few extra bucks a month to enjoy life, spend it on what really makes you happy. (Hint: Experiences are usually a better bet than more stuff!)

Track your progress. Weekly weigh-ins are an important part of many weight loss programs. Weighing in often helps keep you motivated — and lets you spot problems quickly so you can correct your course. When paying off debt, keep track of your debts each month. Consider using a line chart to get a visual representation of your debt dropping each month over time.

Budget calories for enjoying. Many successful weight loss programs operate with the idea of a cheat meal, cheat day, or set number of cheat calories per week. This means you know how much and how often you can splurge. Do the same for your budget. Set aside some fun money each month, and you’ll reap the benefits of staying on track without feeling miserable.

Paying off debt isn’t exactly like dieting, of course. But you can draw plenty of parallels. So when you’re trying to get debt-free, think about ways to make your progress steady and sustainable over the long haul.

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How Transferring a Balance Affects Your Credit Score

Are you thinking about taking advantage of a balance transfer offer? They’re awfully tempting and can be an excellent way to efficiently pay off your debt.

Thinking of taking advantage of a balance transfer offer? It can be an excellent way to pay off your debt. But how will transferring a balance affect your credit score? And of what potential pitfalls should you be aware?

It’s impossible to predict exactly how any one financial decision will affect your credit score. We can guess based on what we know about credit-scoring algorithms, and credit score simulators are can show you how a particular choice might affect your score. But so many factors influence your score that an exact effect is difficult to predict.

With that said, we can look at two areas of your credit score a balance transfer will most likely impact: your credit utilization and new credit inquiries.

Balance Transfers & Your Debt-to-Credit Ratio

Your credit utilization, or debt-to-credit ratio, is the second most important piece of your credit score, behind your payment history. It’s essentially a measure of how much you owe versus how much credit you have available.

Say, for instance, you owe $1,000 on a card with a $2,000 limit. In this case, your debt-to-credit ratio is 50%. (You can see how your debt is impacting your credit by viewing two of your scores for free on Credit.com.)

If you’re approved for a new credit card with a balance transfer offer, you’ll wind up with a higher overall credit limit. This could be a good thing, since it will push your debt-to-credit ratio lower.

In the above example, if you’re approved for a new card with a $1,000 limit, your total credit limit will be $3,000. As long as you don’t accrue more debt, your total debt-to-credit ratio will be about 33%. Since that’s better than 50%, your credit score should be fine. Plus, with a lower interest rate, you can presumably pay off the debt quicker. As your debt decreases, so will your debt-to-credit ratio, which means your credit score will climb.

What About New Credit Inquiries?

A balance transfer’s effect on your credit score isn’t all good. To open a new credit card, the card issuer will pull your credit score, which will most likely add an inquiry to your credit file and cause a small but temporary decrease in your score. The impact won’t likely be large unless you apply for several balance transfer cards at once.

The Possible Pitfalls of Balance Transfers

A balance transfer card can be good in some circumstances, but it has potential drawbacks. Here’s what to avoid if you opt for a balance transfer:

Taking on More Debt 

If you’re already dealing with credit card debt because of your spending habits, a balance transfer may be the wrong choice. Opening a new credit card gives you access to more credit, and with that access can come the temptation to spend. If you’re likely to reach your credit limits, a balance transfer card may not be for you.

Paying Too Much in Balance Transfer Fees

Most balance transfer cards come with a one-time fee. This fee may be worth it if it gets you out of paying loads of interest every month. But it might also cost more than you’re willing to pay. Be sure you know what the fee is upfront.

Maxing Out a Credit Card

Scoring algorithms like FICO’s look at both your overall credit utilization and your per-card credit utilization. So maxing out a balance transfer card to take full advantage of a low- or no-interest offer may negatively affect your credit score, even if opening the new card decreases your overall debt-to-credit ratio.

Should You Transfer a Balance?

Is a balance transfer right for you? If transferring a balance helps you save money and pay off debt faster, it’s most likely the right choice. Just be careful if you’re preparing to apply for a larger loan, like a mortgage. Even a small ding at the wrong time can hurt you. Still, transferring a balance and efficiently paying off debt will have great consequences for your credit score over the long term.

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How to Make Summer Camp Fit Your Family’s Budget

Affording summer camp can be a struggle for many working families. Here are a few ways to make camp fit any family budget.

Last summer, the New York Times ran a piece about families who can’t afford summer camp or other programs for their kids. It highlights a problem for many working parents: Summertime care for kids is expensive.

This is especially true if your kids are in public school during the year. You suddenly go from paying nothing to have your kids cared for all day to paying a whole lot of money. Many parents may not have much choice but to find summertime childcare.

If this is the boat you’re in, here are a few ways to find a summer camp for your kid and options that may make it more affordable.

1. Check Online for Summer Camp Options

These days most states and major metropolitan areas have parent blogs or magazines devoted to the local area. In my local Indianapolis, for instance, we have Indy’s Child magazine and IndywithKids.com. Both feature a listing of local summer camp options.

Chances are you can find something similar for your area. If you can’t, there are national resources, too. The American Camp Association has a database for finding day and overnight camps in your area. It leans towards ACA accredited camps, though it will list some not accredited. When I ran it for our area, it turned up some but not all the options I know are available. Still, it could be a place to begin your search for a summer camp.

2. Choose a Less Expensive ‘Base Camp’ Option

One thing that makes summer camp expensive is the specialized options. I’ve seen sports camp, Lego camp, technology camp, horse camp and more. If your kid goes to these specialty camps for the summer, you’ll undoubtedly spend more money.

However, many local YMCAs, schools, daycares, churches and city parks programs offer more traditional summer camps. Our daughter’s daycare, for instance, offers a school-aged summer camp program where they hang out at the daycare for much of the day, but also take trips to local parks, libraries and pools. It’s nothing spectacular, but it’s safe, fun, affordable childcare.

If you can find an option like this, build your summer around it. Then you can splurge on a week or two of more expensive specialty camps for your kid.

Where do you find these less expensive options? Check out the following:

  • YMCA: The Y runs summer camps all over the U.S., and sometimes offers a sliding scale fee to make things more affordable. While they offer more expensive specialty camps, most local Y’s also offer traditional day camp options.
  • Churches and religious centers: Many churches and religious community centers offer summer-long day camp options that are quite affordable.
  • Schools: Local schools with before- and after-care programs may transition those into affordable summer camps with fun activities for kids.
  • Parks and recreation: City and county parks and rec departments also run summer camps, and these tend to be more affordable than other options.
  • Boy Scouts and Girl Scouts: If your child is a scout, look into their summer camp options. These are often overnight options, but they tend to be very affordable.
  • Local businesses: Sometimes local businesses offer summer camp-like programs that are for mentoring older kids who may want to become entrepreneurs. These camps may be based on an application process, so be on the lookout well ahead of time.
  • Local colleges: Often local colleges and universities provide camps as a way to get their own students teaching, leadership and coaching experience.

3. Consider a Nanny Camp

Can’t find any affordable summer camp options in your area? Consider putting together a “nanny camp” with friends or neighbors. This is basically a summer-long nanny sharing program.

You’ll hire a nanny to take care of a reasonable number of kids — say four or five — and the nanny can do some summer-camp activities, like going to local parks and pools. This works best if the kids in the nanny camp are around the same age, and if you can provide the nanny with a safe way to get the kids around town.

4. Ask for Assistance

If you can’t afford even the least expensive camp option on your list, ask for financial assistance. Many summer camps offer scholarships for enrollment fees. Sometimes the information about these options isn’t easy to find, so ask about it. Even if you feel like you make too much money to qualify, it doesn’t hurt to ask.

You should also check for discounts. Some camps offer early registration discounts, and others will give you a reduced rate if you pay for the whole season at once. Tons of summer camps also have sibling discount options, which is why it often makes sense to enroll your kids in the same summer camp.

Making summer camp fit into your family’s budget can be tough, especially if you’re not already used to paying for full-time childcare. But there are plenty of excellent, affordable options out there if you just know where and how to look.

Cards for Camp?

You may be tempted to apply for a credit card to earn rewards for your summer expenses. If you do, be sure to check the terms and conditions so you know what you’re getting into. Also, make sure to check your credit to make sure you’ll qualify. You can check two of your scores on Credit.com.

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10 Tips for Doing Whole30 on a Budget

With proper planning, you can try the Whole30 diet and stick to your grocery budget.

If you’re just now starting on your New Year’s resolution to get healthy, you might find yourself considering the Whole30 program. The latest diet craze, which is meant to be a sort of physical reset button, requires you to cut out grains, sugars, alcohol, processed foods, legumes and dairy for a full 30 days. So basically you feast on meats, veggies, fruits, nuts and eggs.

Lots of people are jumping on the bandwagon, and not without reason. Changing your eating habits in this way can help you find trigger foods that cause you problems. And this kind of structured diet can set you on your way to a true long-term lifestyle change. (Of course, every person’s different and, if you have concerns about changing your diet, you might want to consult a professional before getting started.)

But there’s a big financial catch: The Whole30 diet can be expensive!

My husband and I have been doing a Whole30, and it’s definitely increased our grocery budget. On the one hand, this is fine. I’m OK with paying a little more for food that I know is better for my body. But I don’t want to pay a lot more, especially since we plan to stick with this style of eating for much longer than 30 days.

Doing a Whole30 may increase your grocery budget, but it doesn’t have to blow it out of the water. (That would seriously damage your wallet  —and your credit. You can keep an eye on how your scores are doing for free on Credit.com.) If you decide to try this way of eating, use these tips to keep from spending way too much.

1. Don’t Worry About Going Organic

The Whole30 guide suggests going organic. After all, you want to cut out all the nastiness from the food you put into your body. But if you can’t afford organic meat, fruits and veggies, don’t sweat it. Consider just purchasing organic if your produce is on the “dirty dozen” list of foods most impacted by pesticides. The bottom line: Even conventional fruits and veggies are much better than processed foods. So go with what you can afford.

2. Get Familiar With the Best Prices

Now is a great time to get familiar with different grocery stores in your area. We personally try not to make more than two stops on our Saturday morning shopping trips. You may find it’s worth your while to make three or more stops. Consider shopping outside of the big box stores. Try your local Trader Joe’s for Whole30-approved snacks like plantain chips. We love Aldi for scoring most of our meat and produce at great prices, and local farmer’s markets may have in-season produce for a steal.

3. Keep Emergency Snacks on Hand

The first couple of weeks of Whole30 can be rough, I won’t lie. I was hungry basically all the time and really craved carbs. This is totally normal, but you can push through it. It’s a good idea to keep emergency snacks on hand so you can stick to your eating plan. Some options include nuts (buy in bulk and portion them into small packages), fruit (apples and bananas keep well in the car or a purse), and, in a pinch, certain Larabars (when on sale!). Emergency food can also keep you from dining out, which is confusing, frustrating and even more expensive when you’re on a Whole30.

4. Plan Your Meals

I’ve always been a meal planner, but I’ve gotten even more serious about it since starting the Whole30. Now I know each day what we’ll have for dinner. I plan everything on Saturday before we grocery shop. When you plan your meals, you don’t buy extra food that ends up spoiling. And if you really want to be cheap, you can make just enough extra food to have leftovers for lunch the next day.

5. Don’t Be Afraid of the Freezer Aisle

You might think eating Whole30 would mean all-raw fruits and veggies. But that’s not the case. In fact, oven-roasted veggies drizzled with olive oil and balsamic vinegar are our favorites right now. And those can be made with frozen veggies as easily as fresh ones. You can also save on meats, fish and berries when you buy frozen rather than fresh.

6. Try Some Canned Items

Cheap canned goods aren’t off limits. You’ll want to read labels to make sure nothing weird has been added to your canned veggies or tuna. (Some canned tuna has added sugar.) Once you find brands and types you know are compliant, you can work them into loads of different meals to stretch those savings.

7. Choose Conventional Lean Meats

Organic grass-fed meats are the best option, but they’re also super-expensive. If you can’t afford this type of meat, don’t sweat it. However, you’ll probably want to steer clear of fattier cuts of conventional meats. The worst of the toxins stored in a cut of meat will be in the fat. So just go with leaner cuts while you’re doing your detox.

8. Get Used to Making Eggs

The Whole30 relies heavily on protein and fat to keep you feeling full and satiated without a constant intake of carbohydrates. One way to get both of these macronutrients without spending a load of money is with eggs. Keep hardboiled eggs on hand for an easy snack. Make a sweet potato hash with eggs for breakfast. Serve a frittata for dinner. Just generally get comfortable with making eggs every which way, and they’ll save you money while keeping you on track.

9. Skip Expensive Whole30-fied Products

Yes, you can buy Whole30-fied beef jerky, mayonnaise and salad dressing. But these products can be hard to find and very pricey. If you need to stick to a budget, make them yourself or cut them out of your diet altogether. I discovered in this journey that making mayo is incredibly simple and cost-effective. And homemade mayo makes a delicious chicken salad!

10. Keep it Simple

There are loads of great Whole30 recipes online. Pinterest is chock full of them. Many include a variety of delicious spices, veggies you’ve never heard of and interesting cooking techniques. And this is definitely a good time to expand your palate with some new tastes. However, don’t go crazy with the brand-new recipes, especially those that will require you to buy a bunch of new spices or cooking equipment. Instead, keep things simple. A piece of grilled meat and some roasted veggies will do.

Following this popular eating plan can be tough, but it doesn’t have to be too hard on your wallet. With the proper planning, you can succeed at the Whole30 and stick to your grocery budget, too.

Still looking for ways to chop down your food costs? Check out these tips for how to eat for less than $6 a day

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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Renting Out Your Home? 9 Expenses You Can Write Off

Here are some tax deductions home renters should know about.

Home sharing through sites like Airbnb, VRBO and HomeAway are becoming more and more popular. My family jumped on the Airbnb hosting train recently, and we made a tidy little side income in January renting out our spare room. I won’t have to pay taxes on that income until next tax season, but I’m already wondering what expenses I can write off.

It turns out that lots of Airbnb host expenses are deductible, and those deductions work for other home-sharing services as well.

The Basics of Taxes & Home Sharing

Renting out a part of your home is similar to becoming a landlord for an entire property, and it’s a lot like running a small business. The general IRS rule is that you can deduct expenses that are “both ordinary and necessary” for your business. But you’ll pay taxes on any income that you earn over and above those deductions.

There’s one caveat: the 14-day rule. If you rent part or all of your primary residence to others for less than 15 days out of the year, you don’t have to report that rental income, but you can’t deduct any expenses.

If you really like being a host, though, and rent all or part of your home for 15 days or more, you’ll have to report the income. So you’ll want to take all the deductions you possibly can. When it comes to deductions for rentals, you need to be careful, though. You can only deduct expenses that were spent on your business.

So if you buy new bath towels that your renters just happen to use in your shared bathroom, you can’t deduct the full cost of the bath towels. But if you buy linens just for your Airbnb renters, you can deduct the full cost.

With that in mind, below are some expenses you might deduct.

9 Expenses You Could Deduct

1. Service Fees: Most short-term rental services charge hosts a fee that comes off the top of the rent paid by the guest. Even if this fee comes out of the guest payment before it hits your bank account, you can deduct it as a business expense.

2. Advertising Fees: If you pay for any advertising outside of that offered by the rental company (and, therefore, covered with your service fees), deduct those expenses.

3. Cleaning & Maintenance Fees: If you buy cleaning supplies for your rental room, deduct those. If you pay a professional for cleaning, deduct that expense, too. Any maintenance costs related to the rental property are also deductible. If you pay for whole-house maintenance, such as a furnace tune-up or a roof replacement, a part of that cost will be deductible.

4. Utilities: If you’re only renting part of your home part of the time, you’ll split the utilities — part as a personal expense and part as a business expense that can be deducted.

5. Property Insurance: If you need to pay more insurance on your home because of having renters present, you can deduct the extra cost. Even if your property insurance fees haven’t increased, you can write off part of the expense as a business expense.

6. Property Taxes: The same goes for property taxes: You can write off the portion of your property taxes equal to the portion of your home being rented.

7. Trash Removal Services: Services that you pay the municipality for can be deducted, because they’re both reasonable and necessary.

8. Property Improvements: You can deduct the cost — or the interest paid on a loan, if you don’t pay cash — of improvements made to the property if those apply to the rented area.

9. Furniture, Linens & Food: You presumably provide guests with at least a couch, if not a bed. If you buy new furniture for your guest room, you can deduct that. You can also deduct the cost of linens, curtains, shower supplies, or food that you provide to your guests.

Splitting the Expenses

Unless you’re renting your whole home for the full year, you’ll need to prorate these deductions. In short, you can only deduct these expenses when they actually apply to the rental space while it’s being rented.

As you can see, things can get hairy! If you decide to host through Airbnb or another similar service this year, here’s what you need to do:

  • Keep detailed records. Know exactly when you had renters and for how much. Keep all your receipts related to expenses for the rental, or for improvements or utilities for your whole house.
  • Know your local laws. In some cases, you may have to pay additional local taxes when you do a short-term rental. Get familiar with those laws, which vary by state and locality.
  • Get a professional to help. Because these issues are so complex, it’s best to consult with a tax professional about your rental income, especially if you made a decent amount of money through the year. You want to take all the deductions you can to lower your tax bill. But you also want to make sure you’re doing it legally.

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