In this article, we’ll discuss why it’s important to pay credit card bills on time, when the best time to pay your credit card bill is, and the benefits that can come along with paying off your credit card bill early.

• Why is it Important to Pay Credit Card Bills On Time?
• How Do You Know When to Pay Off Your Credit Card?
• Is It Better to Pay Your Credit Card Before the Due Date?
  • Helps Reduce Your Credit Utilization
  • May Help Increase Your Credit Score
  • Helps Reduce Your Interest Charges
• Get an Avant Credit Card Today
• Explore More Financial Support Resources

Why is it Important to Pay Credit Card Bills On Time?

Paying your credit card bills on time is extremely important for maintaining a good credit score. Late payments can have a negative impact on your credit history and lower your credit score, making it more difficult to get approved for loans or credit cards in the future. In addition to this, late payments could result in late fees, which can add up quickly and could increase your overall debt. If you repeatedly make late payments, your credit card issuer may lower your credit limit and/or could increase your interest rate, which could cause you to pay more in interest charges over time. 

Additionally, some credit card issuers may report late payments to credit bureaus, which could also affect your credit score. Late payments could have a domino effect that can spiral out of control which may have long-term consequences on creditworthiness.

How Do You Know When to Pay Off Your Credit Card?

The first step is to understand your monthly credit card billing cycle. This is the period of time between when your credit card statement is generated and the payment due date for that statement. The minimum payment is the minimum amount you are required to pay by the due date to avoid late fees and keep your account in good standing.

To avoid interest charges, you should aim to pay off your credit card statement balance before the due date. The statement balance is different from the current balance, as the current balance typically reflects the total amount that you owe at any given moment. Generally, you should prioritize paying off your statement balance, which, if paid in full by the due date, will help you to avoid paying interest changes. If you can’t pay the full balance, you can minimize the interest charges by paying as much as possible above the minimum payment. 

A tool that you could leverage to pay off your credit card bill without needing to remember the due date is automatic payments for the full amount.  Most credit card issuers, like Avant, offer this convenient option so you don’t have to worry about forgetting to pay off your credit card bill or making a payment.  If you choose to go the more manual route, you could also consider setting up reminders on your phone or writing them down. 

Is It Better to Pay Your Credit Card Before the Due Date?

Paying off your credit card bill early could be a great way to avoid interest charges and help better manage your debt. It could also help you avoid late fees and may improve your credit score by showing that you are responsible with your credit. And, there are some extra benefits you might see when you pay your bill early.

Helps Reduce Your Credit Utilization

Paying off your credit card bill early could help reduce your credit utilization, which is a key factor that affects your credit score. Credit utilization is the ratio of how much credit you are using to how much credit you have available. The lower your credit utilization, the better it  could be for your credit score. When you pay off your credit card bill early, you reduce the amount of credit you are using, which in turn lowers your credit utilization ratio. This could help improve your credit score and may make it easier for you to get approved for loans and credit cards in the future.

May Help Increase Your Credit Score

Paying your credit card bill early may increase your credit score for a few reasons:

1. Payment History: One of the most important factors that affects your credit score is your payment history. When you pay your credit card bill early, you demonstrate that you are responsible and reliable when it comes to paying your debts. This could help improve your credit score by showing that you are a lower-risk borrower.
2. Credit Utilization: As mentioned earlier, credit utilization is the ratio of how much credit you are using to how much credit you have available. When you pay off your credit card bill early, you reduce the amount of credit you are using, which may help lower your credit utilization ratio and could improve your credit score.
3. Avoiding Late Fees: Late payments could have a negative impact on your credit score. By paying your credit card bill early, you may avoid late fees and the negative impact they could have on your credit score.
4. Showing Financial Responsibility: Paying your credit card bill early shows lenders and credit bureaus that you have the financial discipline to manage your credit and pay your bills on time. This could help establish a positive credit history and increase your credit score.

Helps Reduce Your Interest Charges

Paying your credit card bill early may help reduce interest charges in a few ways:

1. Interest is calculated based on the outstanding balance: Credit card interest is calculated based on the outstanding balance on your card. When you pay off your credit card bill early, you reduce the outstanding balance, which in turn may reduce the amount of interest you will be charged.
2. Avoiding Interest Accumulation: Most credit card issuers charge interest on a daily basis, so the longer you carry a balance, the more interest you may be charged. By paying off your credit card bill early, you can avoid interest accumulation and save money in the long run.
3. Reducing the length of time you pay interest: Interest is also calculated based on the length of time you carry a balance. By paying off your credit card bill early, you reduce the length of time that you pay interest on your card, which may help you save money.
4. Avoiding penalty interest rates: Some credit card issuers may increase your interest rate if you repeatedly make late payments. By paying off your credit card bill early, you may avoid penalty interest rates which could help keep your interest rate low.

Get an Avant Credit Card Today

With an Avant Credit Card, you could get the buying power you want and take steps toward building your credit at the same time with responsible use. Applying is easy and seeing if you qualify will not impact your credit score. Just fill out Avant’s simple application and you’ll get a decision as soon as possible.

Explore More Financial Support Resources

Paying off your credit card bill on time and in full may help you avoid interest charges, maintain a good credit score and save you money in the long run. It’s important to understand your monthly billing cycle, minimum payments, and to set reminders to pay on time or early. To learn more about making Avant Credit Card payments, check out our Help Center, contact our customer support team, or review your credit card statement for more information.

Avant also offers access to additional financial resources through our partnership with SpringFour to help you move financially forward. Learn more about options available to you.

Avant branded credit products are issued by WebBank.

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

222 W Merchandise Mart Plaza, Suite 900, Chicago, IL 60654

Avant branded credit products are issued by WebBank.

Connecticut consumers: all marketing efforts are associated with Avant, LLC, Small Loan Company License #SLC-1246731

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post When to Pay Off Your Credit Card Bill appeared first on The Avant Blog.

It is important not to panic if you find yourself in this situation. Rather, take a moment to understand how debt collection works, what rights you have, and what options are available to you. Here is what you need to know to move financially forward.

What is Collections?

Debt collections happen when an unpaid debt gets assigned to a debt collector. Debt collectors are often third-party companies or agencies that work on behalf of another company to collect debts. If working for the original creditor, the debt collector will receive a percentage of the debt collected. Otherwise, the debt can be sold to a debt collection agency for pennies on the dollar after you fail to pay back the debt to the original creditor. The agency will then pursue you for the debt.

When Does an Account Go to Collections?

There is no ‘set rule’ on how long it takes for your debt to go to collections. The only thing for certain is that the clock starts ticking on the debt being turned over to a collections agency the moment you don’t pay a bill. It also depends on the type of loan. Generally, credit card debt that remains unpaid longer than 30 days is turned over to a collection agency. Foreclosures or unpaid mortgages can take much longer and are dependent on laws in the state they were issued.

In most cases, lenders will try to collect the debt themselves before resorting to writing it off and passing the collection to another party. The debt is then reported to the credit bureaus as a “charge off,” meaning the original creditor has ceased efforts to recover the debt. After a debt is canceled, the creditor may send you a Form 1099-C, Cancellation of Debt showing the amount of cancellation of debt and the date of cancellation, among other things. Be sure to have this form handy when you are filing your taxes.

How Collections Works: What Happens When You Get Sent to Collections

Debt collection might vary slightly based on the company that’s collecting a debt. However, the process is basically the same. If you have unpaid past-due debt, your original creditor will typically notify you through written notices and phone calls. If you have a credit card that you stopped paying, your lender will make an attempt to contact you to get the amount current. If they are unsuccessful in getting you to pay what you owe, it will eventually stop. That’s usually when the debt transfers to collections.

The debt collection agency will then use the information on file to contact you. They may use your current address, your phone numbers and even contact information for your relatives. Personal banking information, including savings and investment accounts, may also be used to determine if you have the money to repay a debt. Some states allow wage garnishment to collect old debts.

Reputable Debt Collection Agencies vs. Scammers

Be very careful if you are ever contacted by someone who claims to be from a debt collection agency. Some scammers are known to masquerade as debt collectors. Never rush to make payments to any debt collector if you don’t recognize the debt they’re trying to collect. If you suspect you’re being scammed, ask for a company name and contact number. Then check with your original creditor to see if they have assigned the debt to a collection agency.

Reputable debt collection agencies will send letters to the address you gave your creditors. If there’s a way to see that you’ve moved, agencies can send letters to your new address in an attempt to collect a debt. Whether agencies send you letters or call, they’re required to give you specific details about your debt, including:

• The name of the original creditor.
• The amount you owe (including late fees and other charges).
• Your ability to dispute the debt in question, along with any stipulations.

The collector must also inform you that you have 30 days to dispute the debt in writing. They need to tell you the name and address of the original creditor if you request it. If you don’t dispute the debt within 30 days, the agency will consider your debt valid, and they can contact you to collect the amount owed.

Companies that follow the rules will work within the statute of limitations, based on the type of debt you owe and the state you live in. They will contact you only between 8am and 9pm, although you might get many calls in one day.

When collections agencies operate the right way you should not experience any harassment or threats. It is important to know, if a company threatens you with a police arrest, or if they tell you that someone is coming after you, then they are not acting lawfully.

How Does Collections Affect Your Credit Score?

If you have an unpaid debt in collections, your creditor can report it to credit bureaus, which can cause a major blow to your credit score. It is hard to predict exactly how much a credit note will impact a credit score because credit scores are unique and determined using a number of factors. However, a debt in collections is one of the most serious negative items that can appear on credit reports. That’s why working hard to get current before an account enters collections could help your credit recover faster.

How Long Do Collections Stay on Your Credit Report?

Generally, an account in collection will remain on your credit reports for seven years from the first delinquent date. If it hasn’t fallen off your credit report after that time, you can file a dispute with the credit bureau in question and have it removed. However, just because a debt in collections eventually gets removed from your credit score, does not mean you should ignore it or not pay it. You risk adversely impacting your credit score which could lead to being sued by the collector if you don’t pay your debt. Few experts would recommend ignoring your debt in collections. You’re always far better off negotiating a settlement plan if available.

Do Collections Ever Go Away?

Collections don’t usually just go away. However, there is a limited amount of time that debt collectors can sue you to collect on a debt. This is called the “statute of limitations” and it usually starts when you first fail to pay your debt. When the statute of limitations runs out, your unpaid debt becomes “time-barred” and a debt collector can no longer sue you to collect it.

How long does the statute of limitations last? It depends on what kind of debt it is and the law in your state — or the state specified in your credit contract or agreement creating the debt. Some states will also reset the clock and begin a new statute of limitations period if you ever make a payment or acknowledge the debt in writing.

What To Do If a Bill Goes to Collections

Once you are notified that your debt has entered into collections, there are three things you should do to begin getting out of collections:

1. Confirm that the debt is yours. Before you pay anything, debt collection agencies are required by the Fair Debt Collection Practices Act (FDCPA) to send you a debt validation letter. This is an important step because it confirms if the debt belongs to you. The letter will also list how much is owed, the type of debt owed and details about the creditor. If there are any errors, you have 30 days to dispute the debt.
2. Consider your payment options. You’ll typically have two repayment options. Either you will pay off your debt in a lump sum or according to a repayment plan. The option you choose will depend on your budget and the amount of debt owed.
3. Begin making payments. Be sure to ask your debt collector for a written agreement before making a payment. Review the agreement carefully for accuracy and then start making payments. Make sure the collector confirms receipt of your payment and documents every single payment you make for your future records.

Don’t Forget You Have Rights in Debt Collection

A federal law known as the Fair Debt Collection Practices Act gives you rights and protection when it comes to how companies can conduct debt collection. The act protects consumers from “abusive, deceptive and unfair debt collection practices”. It limits debt collection calls before evening hours. It disallows incessant calling or communication via postcard and it prohibits the use of violence or intimidating language from the debt collector.

Remember you have the right to stop the debt collectors from contacting you if you’re being harassed for a debt that doesn’t belong to you. To stop the contact, you need to go through the same steps as if the debt was yours. Ask the collector to verify the debt, and then dispute it in writing. If the collector continues you are entitled to send a cease and desist letter, and then file complaints with the FTC.

What Happens If You Don’t Pay Collections

Ignoring and not paying debt collectors can lead to serious consequences. It is something you shouldn’t do when getting out of debt. The collection process typically becomes more aggressive the more you ignore it. Debt collectors can sue you if you ignore their calls and letters. They may win by default if you ignore the lawsuit. In that case, you may end up paying the debt as well as the collector’s attorney and collection fees. The debt collector can collect on this judgment by garnishing your wages or by placing a lien on any property you own.

Your credit score will also suffer greatly if you do not pay your debts. Unpaid debt can negatively impact your credit score for up to seven years, even if debt collectors stop contacting you. 

The Bottom Line on Debt Collections

Collections are a legal way for creditors and debt collection agencies to collect money that is owed to them. You owe it to companies to pay back your debts. Otherwise, you could face a barrage of calls and letters from debt collectors trying to collect a debt.

But even if you owe money, you still have rights. You are protected against deceptive or abusive behavior. There are actions you can take if someone is harassing you to collect a debt. For example, you can file a complaint with federal agencies or your state attorney.

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

222 W Merchandise Mart Plaza, Suite 900, Chicago, IL 60654

Avant branded credit products are issued by WebBank.

Connecticut consumers: all marketing efforts are associated with Avant, LLC, Small Loan Company License #SLC-1246731

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post What Happens When Debt Goes to Collections? appeared first on The Avant Blog.

What is a Recession?

As mentioned, a recession is a significant decline in economic activity that lasts for months or even years. A recession is typically declared when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time. 

Recessions are considered an unavoidable part of the business cycle. They’re part of the regular cadence and contraction that occur in a nation’s economy. The most common examples of a recession are the global recession of the 2008 financial crisis and the Great Depression of the 1930s. The COVID-19 pandemic caused an economic downturn, which sparked fears of a recession.

What Causes a Recession?

A loss of business and consumer confidence causes recessions. Demand decreases in line with consumer confidence. Recessions occur because the US economy is cyclical. Generally speaking, economic growth continues until it reaches a peak of performance. That’s when the expansion becomes contraction resulting in a recession. Then activity gradually begins to expand again. 

What Happens in a Recession?

A recession can impact you and your family’s daily life in a number of ways. Some common ways people are impacted include:

Cost of living increases

During a recession, household essentials such as groceries, gasoline and clothes are more expensive. Higher prices make it harder to make ends meet. This calls for strict budgets and cuts in discretionary spending.

Job losses

During a recession, companies often reduce their staffing levels to save money. You may risk losing your job or experience a reduction in hours. Competition for the few open roles gets tougher and it can take longer to find a job.

Health consequences

Job losses not only impact an individual’s employment and earnings, but also their health insurance coverage, retirement savings contributions, financial security, and health-related behaviors and outcomes. Those who lose their job are more likely to receive government “safety net” assistance, like disability insurance and supplemental security income benefits, even after the recession has ended.

Student loans

Younger adults may find it difficult finding or keeping a job during a recession. Higher levels of student loan debt can compound these recession-related challenges.  

Opportunities

If you own or work in a business that provides goods and services that people need regardless of the economy, then count yourself lucky. Your business is considered recession proof and you won’t suffer as much during the downturn.

How to Prepare for a Recession

While there’s no way of preventing recessions from happening, there are practical steps you can take to weather the storm and prepare for the future. Here are five ways you can plan during uncertain times. 

Reassess your budget

Become clear about where you stand financially. Make sure you have enough money to pay your bills and cover your essential spending. If your finances are looking tight, search for areas to cut back spending, bills that can be eliminated or loans refinanced.

Increase your savings

Put as much money as you can into your savings.  As a rule of thumb, you should have three months’ worth of bills or $3,000 saved for an emergency, whichever is greater. A recession is a good time to get more aggressive and save for six months’ worth of bills or $6,000, whichever is greater. Keep your savings accessible and not invested to avoid the potential of loss from market fluctuations.

Pay off current debt

If you lose income during a recession you may not be able to pay every bill on time or in full every month. And that will have a direct impact on your credit scores. Therefore, you should prioritize how you pay your bills, so your available cash covers as many debts as you’re able. For example, pay your rent or mortgage on time to avoid eviction or foreclosure. Make your car payment on time too – especially if you need your car to get to work. Then focus on paying off your other debts like credit cards and student loans.

Continue with your contributions

Remember that investing is a long game where you benefit most by sticking it out over the bumps. It is important to continue contributing to your retirement fund and other important investments during a recession. Don’t give up just because the current environment looks bleak.

Consider alternate ways to make money

If you’re struggling to make ends meet or are worried about being laid off during a recession, it may be beneficial to pick up a side gig such as freelancing or working for a rideshare application. Having an extra stream of income can not only help in the event of a layoff but can make it easier to build your emergency savings while you’re still employed.

What Not to Do During a Recession

During a recession, it is important that you prepare for emergencies and do not put your finances at risk. Here are some things you do not want to do during an economic downturn.

Panic

Whatever you do, don’t panic. If your anxiety is triggered by sudden changes, see if there’s an upswing shortly after, or talk with a financial advisor.

Increase your debt

While it may be tempting to take on more debt during a recession when the interest rate on loans is typically lower, it is better to focus on paying off any debt you already have.

Become a cosigner

As a cosigner you risk taking on more debt. If the primary debt holder isn’t able to make a payment, you will be held responsible. Stay away from cosigning.

Take your job for granted

Always showcase your skills, regardless of whether you want to stay at your job a while or not. Highlight these skills during a recession and put off quitting until you have another opportunity lined up.

Not build an emergency fund

Build up your emergency fund so you can cover at least three to six months of your expenses.

Explore More Recession Resources

When times are tough, practicing these healthy financial strategies can help you stay afloat. They can show you how to stop living paycheck to paycheck, and give you a good idea of what to do if your expenses exceed your income. Start implementing healthy budgeting habits to prepare for any financial opportunities or emergencies.

Need financial advice or counseling? Looking to spend less on food? Out of work or underemployed? Find ways to save with SpringFour.

Recession FAQs

Can a recession be a good thing?

Even if it stings in the process, a recession can have a good impact on you and the economy as a whole. Some businesses, like maintenance services and grocery stores thrive during recessions. Inefficient companies must jettison excess inventory and cut their overheads during downturns, which improves efficiency overall. Recessions also balance everyday costs by resetting prices to manageable levels. 

What is an example of a recession?

The most common examples of a recession are the global recession of the 2008 financial crisis and the Great Depression of the 1930s. The Gulf War Recession (July 1990 to March 1991) was partly caused by spiking oil prices during the First Gulf War.

What does a recession do to the average person?

During a recession, people may need to adjust their budgets to survive on less take-home pay. They may also have trouble finding new employment or second jobs because companies are hiring less people. Those fortunate enough to find new work often end up in jobs for which they are overqualified and underpaid. However, there are resources available to help you navigate through the impacts of a recession.

What happens to your money in the bank during a recession?

One of the safest places to keep your money during a recession is in an FDIC-insured bank account. You are likely already protected if you have checking and savings accounts with a traditional or online bank. If you’re unsure whether your accounts are FDIC-insured, you can check with your institution or look it up on the FDIC’s BankFind database.

Who benefits in a recession?

Industries that are considered relatively inelastic such as healthcare, food, consumer staples and basic transportation can all perform well in a recession. Rental agents, landlords, and property management companies can thrive during a recession due to the fact that renting is likely to become a more appealing option, if not the only one available.

Do prices rise or fall in a recession?

As the recession weakens the demand for things like cars, you may see a fall in prices accordingly. Stock prices typically plummet during a recession. The flight to safety can cause some investors to pull their money out of the stock market entirely.

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

222 W Merchandise Mart Plaza, Suite 900, Chicago, IL 60654

Avant branded credit products are issued by WebBank.

Connecticut consumers: all marketing efforts are associated with Avant, LLC, Small Loan Company License #SLC-1246731

Avant of Washington, LLC DBA Avant is a wholly-owned and operated subsidiary of Avant, LLC Nationwide Multistate Licensing System #1440089.

Avant, LLC Nationwide Multistate Licensing System #1243761.

THIS IS A LOAN SOLICITATION ONLY. AVANT, LLC IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS.

The post 5 Ways to Prepare for a Recession appeared first on The Avant Blog.

An emergency fund is an easily accessible pool of money set aside in case of an urgent or unforeseen financial situation. Financial ups and downs occur naturally, so it pays to be prepared for the unexpected with an emergency fund. Your emergency fund should not be considered a nest egg or calculated as part of a long-term savings plan for college tuition, a new car, or a vacation. Instead, treat this fund as a safety net, only to be tapped when an emergency occurs.

How Much Should You Have in an Emergency Fund?

A number of different factors will determine the size of your emergency fund. These include your lifestyle, monthly costs, income and dependents. However, the general rule of thumb is that you should have enough saved to cover at least three to six months’ worth of expenses. If that seems like a daunting goal to you, then perhaps try putting away a small amount each week or two until you achieve it. Your family needs, bill obligations, job stability and other factors will also come into play when determining how much money you should save.

Where to Keep Your Emergency Savings

Just as emergencies can happen without warning, you need to be able to access your emergency savings quickly and without cost. For that reason, emergency savings may be best placed in an interest-bearing bank account like money market or interest-bearing savings accounts, which can be accessed easily without taxes or penalties. You could risk losing too much money if you need to withdraw money quickly from mutual funds, stocks or other assets, which may lose value as a result. You could also incur early-withdrawal penalties if you ever needed quick access to emergency savings kept in an account such as a certificate of deposit (CD) or Individual Retirement Account (IRA).

When Should I Use an Emergency Fund?

Your emergency fund should be reserved exclusively for financial emergencies. Any event that causes an unforeseen expense, like a car repair or a medical bill, qualifies as a financial emergency. Be sure to use your emergency fund only when you need it. Then always make sure to continue replenishing your emergency savings once things improve.

Avant branded products are issued by WebBank. 

The information provided on this website does not, and is not intended to, constitute legal, financial, or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal, financial, tax or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Avant does not recommend or endorse the contents of the third-party sites.

The post How Much Money Should Be In My Emergency Fund? appeared first on The Avant Blog.

Having a dedicated fund for emergencies helps you cope when something happens, giving you a buffer that protects your savings. Knowing that things are paid for during an emergency saves you from having to worry about money and lets you focus on getting your life back on track. 

Start by putting away a little every month and aim for a fund of $1,000 to start with. From there, you can work on building up toward three or even six months of expenses so that you won’t have to turn to credit cards if you’re out of work or have an unexpected emergency.

Unemployment

Sudden job loss can leave you without income for weeks or potentially months. When you’re not working, your monthly expenses won’t stop—you’ll still have to pay all your bills and take care of your health. Average household expenses in the U.S. are approximately $5,000 each month, and you’ll need to have that much set aside for each month that you’re out of work. 

Medical emergencies

Having an unexpected accident or illness will bring costly hospital bills, with or without insurance. If you get injured and need emergency care, an ER visit can cost you hundreds and possibly thousands of dollars, and any follow-ups or medication prescribed would add more on top of that. If an accident happens while you’re traveling out of network, you could be facing significantly steeper costs than at home. And if you have to take time off from work to recover, you’ve got even less income to deal with the new financial burden.

Cost of living increases

Spikes in rent or the price of gas can easily rock your financial stability. If you’ve got a pretty tight budget and know what you can and can’t spend, a sudden increase in living costs can be significant. Average rent prices in the U.S. rose by 2.5% in 2019, and if your rent goes up you might have to scramble to come up with the balance moving forward. 

Sudden moves or travel costs

Having to travel or move for work or personal reasons can sometimes leave you paying out of pocket. Whether you’re packing up and moving cross-country or some place nearby, you’ll incur plenty of unexpected costs, from moving supplies to truck rental. If you’re moving locally, expenses can range from $800 to $2,000 for a four bedroom house. Moving across country or out of state is even more expenses, averaging about $1,000 per room. Similarly, if you start a new job with a longer commute, you might need extra funds to cover a bigger gas bill each month.

Car repairs

If you use a car to get around, repairs and maintenance can add up. Taking good care of your vehicle means regular maintenance—oil changes, headlight replacements, transmission fluid, which you should be able to factor into your budget in advance. But an unexpected windshield crack or popped tire could cost a few hundred dollars out of pocket. And more serious repairs or part replacements like a new suspension or transmission could set you back thousands before you can get your car back on the road.

Start Building Your Emergency Fund 

Having an emergency expense fund can protect you from scrambling when unexpected situations arise. Once it’s in place, you’ll have peace of mind knowing that you’ve got a plan to deal with whatever may come your way.

The post Prepare for the Unexpected with an Emergency Fund appeared first on The Avant Blog.

Ultimately, it’s your decision. But before writing a check or pulling out cash, seriously consider whether this is the right move. Lending money can change your relationship with the other person, and you have to acknowledge possible consequences of this action.

Here’s a look at six reasons why you shouldn’t lend money to anyone.

1. You Could Lose Your Money

This might be obvious, but it needs to be said. The person borrowing the money may promise to repay the cash within the next few days, weeks, or months. But the truth of the matter is there’s no way to know with certainty whether this person will actually return the money. If he’s having financial hardship today, who’s to say these challenges won’t continue into the near or distant future. A good rule of thumb: don’t lend money unless you’re prepared to lose it.

2. You Don’t Like Confrontation

Take into account your personality when deciding whether to lend money to someone. If you’re the kind of person who likes to keep the peace and you don’t like confrontation, chances are you won’t approach the person or bring up the loan if they don’t repay as promised. This can lead to pent up frustration or anger, which might strain your relationship.

3. They May Request More Money

If you give someone money, the person may come back for more. She may think you have a lot of disposable income, or that you’re in a position to help in times of need. And if she runs into problems again, you might be the first person that comes to mind. Some people are habitual borrowers, and one act of generosity can start a pattern. But if you turn down a money request the first time someone approaches, they won’t think of you as a money source and they’ll look elsewhere.

4. They May Tell Others About Your Generosity

It’s awkward enough to deal with one person who repeatedly asks for money. The last thing you need is the borrower sharing details about your loan with others. Some people can’t keep anything to themselves. If you give them a loan, they might tell others how you helped with their situation. An innocent mention of your assistance might give others the idea that they can come to you if they experience a similar hardship. So, if you’re going to lend money, make sure the borrower understands that this is a confidential agreement, and you would prefer if he didn’t tell others about the arrangement.

5. You May Need the Money

Never lend money that you’ll need in the immediate future. For example, if your friend needs $200, but the only cash available is for your rent or mortgage that’s due in the next couple of weeks, you’re better off telling the person you can’t help. There’s no guarantee this person will repay the money before you need it, which can complicate your finances. You might deal with late fees, or have to seek a loan for yourself.

6. It Can Create Issues in the Relationship

If you have a solid relationship with someone, don’t ruin it with money. You’re trusting this individual to repay the money as promised, and if they never return your money, this may always be in the back of your mind and lead to trust issues. If you confront the person and ask for your money on more than one occasion, she may become defensive and upset with you. It’s a no-win.

If you decide to help someone financially, it might be better to simply “give” them the money, if you can afford to. If you don’t have any expectations regarding repayment, and if the other person doesn’t feel pressure to pay you back, the money won’t come in between the relationship.

The post 6 Reasons You Should Never Lend Money to Anyone appeared first on The Avant Blog.

First of all, figure out what’s important to you. Then stop spending money on everything else. This requires that you determine your own values and priorities.

Once you decide what’s important to you, and you stop spending on the unimportant things — no matter how small an expense it seems to be — you’ll be surprised at how much more money you have available to you. You might be surprised to discover how much you’re spending on things you really don’t care about. Stop, and the money will add up over time.

Invest a Set Amount Each Month

Take advantage of compound interest by investing. The younger you are when you start investing, the better off you’ll be in the long run, even if you can’t invest a lot. If you set aside $200 a month starting at 20, and do so until you are 60 years old, you can accomplish almost as much as if you set aside $400 a month from age 30 to 60 (assuming a 6 percent annualized return, compounded annually). Start 10 years earlier, and you can accomplish nearly the same thing, but with half the monthly financial outlay. Wait until you’re 40, and $800 a month won’t be enough to build the same nest egg.

The longer you have to take advantage of compound interest, the better off you’ll be. The seemingly-small change associated with investing any amount of money can pay off more than you expect over time.

Of course, it makes sense to increase what you set aside as your income rises. Boost your investment over time to keep pace with your income, and you will be even better prepared.

Have a Plan for Your Money

Figure out what you want your money to accomplish for you. Some folks like to “give every dollar a job” so that they know where it all goes. The key is to have an idea of what you want your money to do for you, whether it’s ensuring a comfortable retirement, sending your kids to college, getting rid of debt, or allowing you time to travel.

Part of this plan also includes paying attention to timing with your finances. It may seem like a small thing, but knowing when your money is coming in and when the bills are due matters. Timing can mean the difference between paying what you owe and being hit with an expensive late fee.

Make it a point to pay attention to your money and have a plan for it. Over time, it will add up to better financial security.

The post Small Financial Decisions You Can Make Today to Secure Your Future appeared first on The Avant Blog.

Are you overpaying for your cable, cell phone, pest control or any other recurring service? Reach out to the service provider to inquire about more cost-efficient options that may be available to you. If the customer service representative is unable to assist, ask to speak to a manager or kindly threaten to take your business elsewhere.

2. Energy Audit

Tired of forking over an excessive amount of cash each month on energy expenses? Give your utility provider a call to request an energy audit. These are typically offered at no cost to customers and you could even qualify for a small statement credit.

Another option: a do-it-yourself energy audit, which can be done using these instructions from Energy.gov.

3. Reassess Your Insurance Deductible

The higher the deductible, the lower the premiums. Increasing your deductible may save you money on your monthly payment, however you’ll want to make sure there will always be enough cash in your emergency fund to cover the deductible should you ever need to file a claim.

4. Portion Control

Do you typically cook or order way more food than you can you actually consume in one sitting? Unless you’re a fan of leftovers, doing so is costing you hundreds, if not thousands annually that could otherwise be saved or spent elsewhere.

According to the National Resources Defense Council:

The average American throws away between $28 and $43 in the form of about 20 pounds of food each month. If we wasted just 15 percent less food, it would be enough to feed 25 million Americans.

5. Generics

Before you completely dismiss this option, bear in mind that there are several generic options for all sorts of items that are very comparable, if not better, to their name-brand counterparts. Wondering which generics made the cut? Take a look at this comprehensive list from CBS MoneyWatch.

6. Eliminate Pricey Gym Memberships

If you have a gym membership, take a moment to divide rate by the number of times you actually visit each month. So, if you visit five times a month and pay $50 for the membership, you’re spending a whopping $10 per visit.

Consider investing in a modest set of home gym equipment. Also, if classes are your thing, there are a lot of options for on-demand streaming classes out there, in pretty much every variety you can imagine, and those are often much cheaper than memberships.

7. Sell Some Stuff

Do you have valuable items lying around that you never intend to use? If so, visit the local pawn shop or sell them online using eBay or Craigslist. For the less valuable items, a yard sale or the flea market will suffice.

The post 7 Effortless Ways to Save Money appeared first on The Avant Blog.

Even if you already have your college degree in hand, you likely gained very little financial knowledge from all of those textbooks you spent so many hours poring over.

The key is to learn about things before you need to know them. For instance, you may not be in the market for a house, but knowing a few general facts about the process and preparation involved will help you be fully ready when you decide it’s time.

You don’t need to read complicated textbooks, simply spend five minutes a day gathering knowledge. It will come in handy.

2: Figure out where your money is going.

Money has a way of disappearing when we aren’t paying attention. Instead of reaching a point month after month where you wonder why your account balance is so low, start tracking it. You’d be shocked to see how much you spend on things that simply don’t matter.

Once you have this knowledge in hand, figure out where it should be going instead. If you need an app to help, there are plenty out there.

3: Stop living paycheck to paycheck.

When you’re just starting out, it’s easy to become accustomed to living the paycheck-to-paycheck lifestyle. Then, once you start making more, it’s far easier to spend the monthly buffer on happy hour and trips to the mall.

Stop. Eventually your luck will run out, and you will need that buffer for something like a major car repair or trip to the doctor.

Instead of waiting for that fateful day, start preparing now. Create an emergency fund that will actually carry you through the tough times, and pay your savings account just like any other bill. Just because money is in your account, doesn’t mean you should be spending it.

4: Decide what your priorities are.

With the right planning and money management, a lot is possible. But not everything is possible all at once. Spending money in one area often requires taking it from another area, so it’s essential to know what your financial priorities are.

If, for instance, travel is important to you, consider finding housing with lower monthly costs. Or, cut back on those costly dinners with friends. Whatever it is, find what gives you fulfillment, and slash the rest.

5: Figure out what you want your retirement to look like.

Planning for retirement may be complicated, but most people skip one of the steps that is the easiest to execute – figuring out what you actually want your retirement to look like. You don’t need to get extremely specific, but you should know the type of lifestyle you’re shooting for. Then, you can create a money goal and work back from there to determine how much you should be saving now.

Not only will this help you with the dollars and cents aspect of planning, but it will give you something to shoot for that is actually appealing – not just the age-old retirement stereotype of sitting on the couch all day.

6: Strive for financial independence.

It’s easy to go from your parents supporting you to sharing expenses with a significant other, but there’s something to be said for reaching a point in your life where you know that no matter what happens with those around you, or what the state of your relationship is, you can fully support yourself.

Whether it’s creating an emergency fund large enough to know you’re covered if things change, or earning enough to cover all expenses on your own, find a way to make this happen. Not only is it empowering, but it lessens the stress on your personal relationships as well.

Now is the time to make it happen. Where will you start?

If you think you need vast amounts of money in order to start taking your finances seriously, think again. Regardless of the amount you have, plan now  — when time is on your side and you don’t have anywhere to go but up.

Plus, mom and dad will be so proud.

The post 6 Unconventional Money Moves to Make in Your 20s appeared first on The Avant Blog.

Beef up your emergency fund

An emergency fund is your biggest line of defense in terms of preventing unnecessary debt. If you have cash in the bank, a car repair or medical bill won’t require you to use a credit card that you are unable to pay off, resulting in incurred interest that sets you back financially. First and foremost, make sure that you have plenty of cash savings to cover you in case of an emergency.

Get rid of debt

If your emergency fund is in good shape, you can start to turn your attention to other uses. The quickest and easiest way to improve your finances is to pay off debt. Even if you have a lot of debt in comparison to your refund amount, that little bit can start to make a difference by reducing the amount of principal you owe on your loans. For example, suppose you have a $2,000 refund but $20,000 of debt ($13,000 car loan + $5,000 personal loan + $1,500 credit card bill + $500 medical bill). That $2,000 can wipe out both your credit card and medical bills, leaving you with fewer bills each month and a lower total minimum payment on your debt, freeing up some cash each month that can be used for other things (like paying down more debt).

Replace broken things

If you have a leaky fridge, a broken washing machine or an unreliable car, now is a great time to think about replacing them. Malfunctioning appliances can cost a lot of money in repairs and start to add up. You will need to determine if replacing what you own will actually save you money. However, purchasing a new car or appliance requires quite a bit of cash. That’s where money from your tax refund can come in handy. You can purchase your new appliance without incurring debt and save money over the course of the year by reducing your repair costs.

Invest

Cash savings and debt reduction should come first but once you feel that you have other parts of your financial life under control, you’ll want to consider investing your money. Compounding interest allows your money to earn money (interest) and then that interest continues to grow your investment each year, adding up in a big way. This is especially important when you are considering saving for something that’s in the future, such as retirement or your child’s education. If you don’t understand investing, do your best to read up on some basics, either online or at your local library, and then meet with a financial advisor (get a recommendation from someone you trust) to help you put into place an investment plan.

The post Four Ways to Put Your Tax Refund to Good Use appeared first on The Avant Blog.

Use your emergency fund

There’s no question that the best way to cover your expenses is with cash. Bills are expensive enough as it is and if you pay cash, you’ll avoid having to pay interest on top of the original expense. In addition, some places (think auto repair shops, hospitals, contractors, etc.) may offer you a better price if you pay with cash rather than credit because it means they don’t have to pay a credit card fee on the transaction, saving you even more money. Having an emergency fund will give you great peace of mind in these types of situations. Just remember to replenish your emergency fund with more cash once you’ve had to tap it.

Borrow from family or friends

Though it’s not an ideal situation to have to borrow money from family or friends and many people advise against it, if you are confident you can pay them back and you know you won’t set them back financially by borrowing money, you may be able to get more favorable loan terms from people you know than you would be able to get from a traditional bank. You may also be able to access the money more quickly since you won’t have to apply. Just make sure you think long and hard about whether this is a good decision for your relationship before going this route.

Apply for a personal loan

Many lenders offer unsecured loans with loan amounts and interest rates that depend on your credit profile and state-by-state rules. Many online lending platforms, for example, offer loans in amounts from $1,000 to $35,000 with a simple online loan application process to assess creditworthiness. With a personal loan, you’ll agree to the terms of the loan at the start and receive the money you need upfront. Then you will be required to repay the loan in fixed installment payments each month.

Use short-term credit

Another option is to use a credit card to cover your expense. When used properly credit cards are useful tools, but if you are unable to pay them back quickly or on time, the fees and interest can add up fast. Access to a line of credit on a credit card can be another way to handle an emergency. If you already have the credit card open you have access to the funds immediately, however it is important to make sure it is a priority to repay this bill as soon as possible.

The post How to Handle a Financial Emergency appeared first on The Avant Blog.

For some, a large refund could be the difference between making a credit card payment or bill on time. The average refund is nearly $3,000 which adds up to about $250 in extra taxes each month – cash that may make the difference between missing a car payment or bouncing a rent check for many lower-income Americans.

Since a large portion of the American population has more credit card debt than savings, it would be beneficial to manage debt with on-time payments and receive more money per paycheck rather than wait for a refund. It is important to remember that your tax refund is money that accrues no interest while your debt continues to accrue interest.  Translation: your debt is getting bigger, but the amount you’re overpaying in taxes is not.

So what should you do to make the most of your finances come next tax-day? If you’d prefer to avoid a big tax refund, take a look at the W-4 form that you filled out on your first day of work. Chances are that things may have changed in your life since then and it may be time to adjust your withholdings to avoid over-paying. Big life events – marriage, divorce, buying a home or having a baby can all have an impact on the amount that is taxable from your paycheck. Use the IRS’s handy tax withholding calculator to check in on your withholdings.

You can also get ahead and prepare for next year’s tax season by putting your refund amount towards your IRA’s annual maximum for this year. Here’s why: Contributing to an IRA now just might help you with next year’s taxes, as you may be able to claim a deduction.  Once you adjust your tax withholdings, you may want to consider increasing the amount you invest in your employer’s 401(k) plan, especially if they offer a match. That’s free money from your employer. Don’t leave it on the table.

The post Is a Big Tax Refund a Bad Thing? appeared first on The Avant Blog.