Is Little or No Debt a Problem?

by Victoria Slater on April 18, 2017 Credit & Debt

You may already know too much debt is bad, but did you know not enough debt might not be good, either? Read on to find out how having too little debt can impact your credit score and your ability to get a mortgage.

You may already know that having too much debt is a bad thing, but did you know there is such a thing as not enough debt? You need some debt to maintain a good credit score and qualify for a mortgage, but not so much as to overextend yourself. Here, we look at what type and how much debt can be beneficial for your financial well-being.

Not all debt is created equal, and some types of debt are better than others.

When determining if having no debt can be a bad thing, it’s important to know what type of debt is out there.

There is Such a Thing as “Good Debt”

Good debt is an investment that will help you generate income or increase value either in yourself or something you purchase. These types of debt include:

• Student loans – Student loans can help you obtain an education that may give you more value as an employee, allowing you to earn hundreds of thousands of dollars more over the course of your career.
• Home loans – One of the fastest ways to build wealth is to purchase a home. Mortgages provide you with a place to live and will build you equity.
• Small business loans – These can help you start your own business. Not only can you earn a living through your business, but also you can avoid reliance on someone else for your paycheck and live life on your terms.

This type of debt may also be tax deductible as you can claim certain educational costs, mortgage interest payments and insurance off your taxes each year.

There Is Also Bad Debt

On the other hand, there’s bad debt that offers a bad return or no return at all. These include:

• Auto loans – As soon as you drive off the lot, your new car will depreciate. A vehicle may be a necessity to get to work or run errands, so it isn’t necessarily a bad purchase. A car just doesn’t offer a great return on your money, and paying interest on it will make it more expensive than you may think.
• Credit cards – Credit cards have some of the highest interest rates around, so any amount of money left on your card at the end of the month is bad. Most goods and services you’ll put on your credit cards won’t increase in value over time (think of the clothes you just purchased or that vacation you charged). If you don’t pay them off right away, you’ll end up paying significantly more on them than you may have intended.

Too Much Debt Is a Problem

While not all debt is created equal, it’s important to not overextend yourself with too much of any debt, as it negatively impacts several aspects of your financial life. For one, debt costs you money through interest rates. The higher the interest rate, the more you’ll end up paying for products, so in the long run you may end up paying more than the item is worth.

Debt also impacts your credit utilization, which is the second most important factor in determining your credit score. Credit utilization is the amount of debt you have relative to your credit limit or the amount of credit that has been extended to you. To maintain a good score, your credit utilization ratio should be no more than 30%.

If you go higher than 30%, your credit score will be negatively affected, which will impact the interest rates on future loans. More importantly, you may be considered a higher risk to lenders, which can prevent you from borrowing money in the future.

Not Enough Debt Isn’t Great, Either

Conversely, if you have little or no debt, it’s harder for you to prove you’re a responsible borrower to lenders. You haven’t been able to show you can keep up with payments and for lenders, that means you’re an unknown risk.

Once you have debt, whether it is in the form of student loans, credit cards or a mortgage, you can show you’re responsible when given a loan and that can help you borrow in the future.

Having no debt can also impact your credit score, as it could mean you have a shorter or nonexistent credit history. Nearly 15% of your score is based on credit history, so a shorter history can translate into a lower score. Lower credit scores result in higher interest rates when you get a loan and could even make it difficult for you to qualify for a loan or purchase a house in the future.

Everything in Moderation

As it is with most things in life, it’s best to exercise moderation when borrowing money. Having some debt in and of itself can be a good thing. Often what we want is out of our reach without a loan, and we need them to help achieve our dreams of going to college, starting a business, and purchasing a home. The most important thing to remember is to pay your debt on time and in full when it’s due.

There is no formula for the perfect amount of debt you should have. To qualify for a mortgage, lenders typically want to see a debt-to-income ratio of less than 43% to ensure you have the means to pay back the money you’ve borrowed. If you have more than this, paying down your debt before applying for a mortgage or other type of loan can help you qualify.


If you have no debt at all, don’t worry! You can become a co-signer on a loan or take out a credit card to help build your credit history and prove you’re a responsible borrower. This will help prepare you for your next big purchase and qualify for the loan you may need to finance it.

Where Can You Get Affordable Financial Advice?

by Zina Kumok on March 24, 2017 in Saving Money

When I was trying to pay off my student loans in three years, I looked for financial advice in every avenue I could think of. I posted on Reddit forums, asked my parents and talked to my friends.

I really wanted to talk to a professional financial advisor, but I couldn’t justify spending a few hundred dollars on advice. I was trying to be frugal and limit my discretionary spending, and that included financial planning.

Thankfully, I was able to find a lot of free and affordable help. Even now when I have a financial question, I turn to my trusty resources before I pay for someone’s help. Read below to see my favorite picks for free financial resources.

Financial Planning Days

When I was paying off my student loans and struggling to save for retirement, I found help at Financial Planning Days, an annual event that connects financial planners and the general public.

Located in more than a dozen cities around the country, Financial Planning Days recruits planners who volunteer their time for free. They also offer themed lectures, such as “20 Keys to Being a Smarter Investor” and “Planning for the Costs of Higher Education.”

Unfortunately, this event isn’t available in every city. If your town does offer it, make sure to register in advance and bring a list of your specific questions.

United Way

One of the primary goals of United Way is to empower people financially by working with volunteer experts who can offer tips or classes on financial wellness, career training or job hunting in the communities they serve. Many local United Way chapters teach financial education, credit counseling and more. These centers often have resources in both English and Spanish and are low-cost or free.

Library

One of the best places to find free financial resources is the library. Most libraries are stocked with personal finance books written by industry professionals ranging from Dave Ramsey to Farnoosh Torabi. If your library doesn’t have the title you’re looking for, put a request in.

These books can give you a basic financial education and answer everything from how to create a budget to how to pay off debt. You can also find books on complex subjects like how to buy a rental property and how to start investing for your retirement.

Libraries also often have free workshops and seminars. For example, my local branch at the Denver Public Library hosts a Financial Resilience Workshop to discuss Social Security benefits. Many libraries also offer free tax help in the spring.

Personal Finance Blogs

If you’re reading this article, you’ve already discovered one way to improve your financial literacy: reading blogs. There are tons of financial blogs out there that talk about side hustles, starting a business, paying off debt and more. Some cater to particular audiences such as Christian families or single women.

Here are some great resources to find the personal finance blog that’s right for you:

• Rockstar Finance Blog Directory
• Modest Money Top Finance Blogs
• Wise Bread’s 100 Top Personal Finance Blogs

Financial Podcasts

Whether you want to pass time during your daily commute or just prefer listening instead of reading advice, financial podcasts tend to pack a lot of value into their segments with stories and interviews that personalize money matters. Here are some financial podcasts that are worth your time for general advice and information on how evolving technology is improving the finance industry.

What to Know

Most of these resources won’t be able to tell you which investments to choose or how to retire in 10 years. If you truly want your specific questions answered, a financial advisor or coach might be your best resource. But if you’re like me and looking to see what other people are saying, then you should check out what we’ve listed here.


I learned how to budget, pay off my loans and start saving for retirement by utilizing some of the services listed above. Yes, a financial advisor can help you, but if you’re looking for free help, it’s out there, too.

Mortgages - How Is Conditional Approval Different from Preapproval?

by Allison Hendricks on March 22, 2017 in Mortgage Basics

When you inquire about qualifying for a home loan, you’ll likely hear the term “conditionally approved” but might not be sure what that means or how it differs from a preapproval. We’re here to explain so you can be in the know!

A conditionally approved loan is closer to closing than a preapproved one but comes with a few conditions, usually concerning documentation and income, that must be met before a client can be approved to close.

A conditional approval occurs once the client has provided the necessary documentation to get their loan set up, such as supplying the following documentation:

• Employment and income verification
• Pay stubs
• Tax returns
• Bank statements
• Debt obligations (credit cards or loans)
• Utility bills
• Asset statements

This information is required before the loan is completely approved.

Conditional Approval vs. Preapproval

People often confuse conditional approval and preapproval when talking about mortgages.

Loans are preapproved by a Home Loan Expert who has reviewed your income and credit information. Your information must be verified and approved before a decision can be made.

“The preapproval is based on what the client tells the banker and their credit report information,” said Jennifer Davenport, product manager on the Quicken Loans Capital Markets team. “Conditional approval differs from preapproval in that the loan may not have been reviewed by an underwriter when preapproved.”

After your information is reviewed, you’ll receive a preapproval letter stating your eligibility for a loan up to a specified amount.

Conditional approval comes after preapproval and involves going a little deeper. An underwriter conducts a strict documentation review before your loan is conditionally approved.

“This documentation is reviewed by an underwriter, and provided the client’s information matches up with what was initially stated to the mortgage banker, they are conditionally approved,” explained Davenport. “This means that the loan is moving forward but there are or may be additional conditions that will need to be met in order to finalize and close the loan.”

If the conditions aren’t met, the client might not be able to close on the loan.

Conditions on a Conditional Approval

There are a few common conditions attached to a conditional home loan approval.

Additional documentation, such as pay stubs, paperwork for business income, and tax documentation, is often required for final approval.

This might also include written verification of employment from your employer or additional asset statements, depending on what’s needed for your loan.

Conditional approval can also require purchase agreement addendums. Title verification, an appraisal, an inspection and homeowners insurance are usually needed to verify the market price of the home, the loan-to-value ratio and other details.

This can also include confirmation that there are no unexpected liens or judgments on the home.

Denial of a Conditionally Approved Loan

Clients with a conditional approval for a home loan are at risk for denial if they fail to meet any of the conditions laid out by the lender.

Here are a few reasons why a client might be denied:

• The underwriter is unable to verify the data provided by the client
• The home the client is trying to purchase has an unexpected lien
• The client has a judgment on their record
• The home inspection or property appraisal came in with unexpected issues
• The client experienced a decrease in income
• The client had negative entries on their credit report

According to Davenport, conditionally approved loans “may also get denied based on the additional information that comes in. For example, maybe the client does not actually earn as much income as they initially thought or loses their job, or there are not enough assets, or clients open up new debt during the process and now their DTI (debt-to-income ratio) exceeds the product guidelines.”


If you’re looking to get a mortgage, the first step you want to take is to talk with a Home Loan Expert.

How to Eat Healthy on a Budget

by Jeremy Conn on April 7, 2017 in "Saving Money"

Eating healthy is rumored to be more expensive than eating those convenient, oh-so-addicting processed foods that seem to be everywhere you look.

Before you get discouraged and head to the nearest drive-thru to eat your feelings – rest assured. The price of healthy eating isn’t as much as you might think.

A 2013 study by Harvard School of Public Health found that the price difference between eating a healthy diet rich in fruits, vegetables, fish and nuts and eating an unhealthy diet rich in processed foods, meats and refined grains is about $1.50.

An extra $1.50 a day to feel better and prevent future health problems doesn’t seem to be much, but it can add up – especially for larger households.


You can shop smart at key locations with a great shopping strategy to offset this price. We spoke with nutritionist and author of The Strategic Grocery Shopping Guide, Jamie Logie, for a few tips to help you start eating healthier without breaking the bank.

Know Where to Shop

Farmers Market

Depending on where you live, the farmers market may not be available all year round. So take advantage if and when you can.

Not only does the farmers market help to support local famers, but it can also be a great spot for good grocery deals.

Don’t be afraid to try to haggle a price down, or see if you can get a price break if you buy a lot of produce. Unlike at the grocery store, there can be some wiggle room in the prices.

If you’re wary of asking for a price reduction, try haggling on bruised fruit or at the end of the day when the farmer might be more willing to compromise and get rid of their goods.

And the more you shop there, the better your chance for scoring discounted produce, according to Logie. “When you become a regular… you can haggle on price a little, or they just give you a bit better deal.” You could even score some extra items once you build a buyer relationship with the farmers.

ALDI

Logie says ALDI and similar discount stores have great whole foods options like dark leafy greens, tomatoes, bell peppers, broccoli and more. To make a discount even more enticing, ALDI claims to be the “nation’s low-price grocery leader.”

That title shines through in a price comparison conducted by Business Insider in 2015, which found that a shopping trip at ALDI was about 30% cheaper than Walmart.

Originally known mainly for their aforementioned low prices, ALDI is also making an effort to appeal to health-conscious eaters. They recently announced that they’re significantly expanding their fresh produce and organic offerings.

ALDI doesn’t provide shopping bags, so be sure to take your own or budget in purchasing some of their reusable bags at checkout.

Costco

When thinking of Costco, you may imagine things like frozen dinners the size of a dining table or a 55-gallon drum filled with Orange Drink – but this retailer actually offers produce and other healthy foods in addition to their bulk-sized shopping options.

A 2015 article by the Huffington Post confirmed that Costco sold around $4 billion in organic food – that’s more than any other retailer. Yes, even more than Whole Foods.

Logie, recommends shopping at Costco for a couple of healthy-eating essentials, like raw nuts, fish and produce.

But she does push for shoppers to be mindful of their purchases. “Costco can be great but you need to check if the things you are buying in bulk are actually a deal or not.” Make sure you’re actually getting a better price for items in bulk.

Know How to Shop

Look for Clearance

When food items near their expiration or sell-by date, their prices are usually reduced to ensure they sell. Be on the lookout for these priced-to-sell items, which are sometimes marked as “manager specials.”

Since these items are set to go bad, a good tactic is to base your next meal on whatever you find on clearance. Logie recommends timing your clearance shopping: “Clearance foods at grocery stores tend to go up around 7 p.m. That’s a good time to find ready-made meals, soups or things like sushi.”

Wait Until the Time Is Right

Timing is everything, as the cliché goes. This applies to healthy shopping and eating as much as anything else. If you let the seasons help dictate your diet, you can save some green while eating some greens.

“Ideally, you want to eat fruit that is in season and that may save you more money, too.” Logie explains. She compares fruit price differences in winter as an example: “A pint of strawberries will be more expensive at around $3 – $4…while a large naval orange… will only be around 75 cents.”

Personal Finance website The Balance has a month-by-month calendar to see what veggies to buy when.

Use a Coupon App on Your Phone

There’s a good chance your area’s grocery chain offers a phone app that replaces keychain loyalty cards.

These apps offer exclusive coupons and offers to help you save when grocery shopping. While some of the coupons make the latest junk food products look tempting, pay attention to coupons for fresh produce and other healthy options that are even more appealing.

“I think coupon apps are helpful, especially for proteins. So if you see [a] sale on specific proteins, make that your base for that week’s (or next few days’) meal and build the rest of your meal around it,” says Logie.

The Meijer app is currently offering savings on organic milk, cheese, eggs, milk alternatives, organic mushrooms and organic salad through the end of April – and that’s just a few of the 440 coupons listed.