Should You Pay Off High Balance or Low Balance Debt First?

Tips For Paying Off High Balances or Low Balances First

First Published Date : May 13, 2012 ADawnJournal.com

Paying off debts involve making plans and sticking to them vigorously to get rid of all debts. One simple question always comes to mind while making debt payment plans, whether to start paying off low balances or high balances, low interest or high interest debts first. Today, I will discuss which strategies to pick and what to consider in terms of getting rid of your debts.

Let me tell you right up front that there is no best right answer. Paying off high balances and paying off low balances – both strategies have positive and negative sides. I personally like starting with low balances without looking at interest rates.

Pros and Cons of Paying Off Low Balances Without Looking At Interest Rates

– If you start with paying off lower balances, seeing those smaller debts evaporate will keep you motivated to stay on your debt management plan.

– Easier to manage your finances, as you are reducing smaller debts one-by-one.

– This strategy can cost you more money in the end, as you may be carrying higher balances with higher interest longer.

– Makes your life stress free, as you are dealing with less debt accounts day-by-day.

Pros and Cons of Paying Off High-Interest Debts Without Looking At Balances

– Best strategy to save money on interest charges

– You may get discouraged to stay on debt management plan seeing debts not going away soon enough.

– If you have higher balances with lower interest charge, this strategy does not make managing your finances simpler, as you are dragging the low interest debts longer.

Last Word

Which strategy is best to follow? It depends on your situations and objectives. Before deciding on anything, look at the pluses and minuses for both of the strategies and pick the one that makes sense for you. And yes, don’t forget to stop taking on new debts. No debt management plans will work if you don’t stop accumulating new debts first.

5 Tips To Financial Minimalism

What Is Financial Minimalism?

Published Date: July 2, 2012 ADawnJournal.com

Financial minimalism can translate to different things to different minds – depending on how you interpret it. My own basic interpretation of financial minimalism would be to get rid of financial clutter that you don’t need to make life simpler and stress free financially.

5 Things You Can Do Right Now To Be A Financial Minimalistic

Get Rid of Bank Accounts You Never Use – Most of us keep 3 to 4 bank accounts, but we usually use only one on a day-to-day basis. Identify the bank account you can’t live without and close all other bank accounts. Better yet, if you need to keep a chequing and a savings account, keep it with the same bank and it will be like keeping one bank account without dealing with two banks.

Keep Credit Cards To A Minimum – There is no reason to keep 5 to 10 credit cards you never use. Keep only 2-3 credit cards and maintain these cards at zero balances by paying the amounts you charge in full every month.

Automate All Your Bill Payments – Arrange all your monthly bills such as electricity, water, telephone, Internet, mortgage, etc. to come out of your bank account or credit card automatically every month so you don’t need to spend time paying these bills again. Better yet, if you have a reward credit card, use it to pay your bills and collect reward points.

Keep Investments Minimal – Holding 20 stocks, 15 mutual funds, and numerous other investment products in your portfolio makes life complicated. The time and hassle you will go through to maintain all these investment products are not worth it, and having limitless products will not make you rich. Read reputable financial sites regularly to get ideas on how to make your financial life simpler and a better one.
 
Get Rid of Debts – Get rid of all your bad debts and keep only good debts. Bad debts are those which are costing money and making no money for you such as credit card debts, car loan debts, vacation loan debts, etc. Good debts are those which are giving you more returns after subtracting interest payments such as investment loans, mortgage, education loans, etc.

These are only some, but not all of the tips that can get you on your way to financial minimalism. There are so many other steps you can take to become a financial minimalist. The art is to find out which steps work for you and apply them one-by-one to live a clutter and stress free rich life.

Advantages and Disadvantages of Electronic or Online Statements (eStatements)

Advantages and Disadvantages of Electronic or Online Statements (eStatements)

First Published Date: July 15, 2012 ADawnJournal.com

Financial institutions and all other institutions, whoever needs to send you a statement monthly, quarterly, or annually, are moving towards eliminating paper statements and encouraging customers to subscribe or access statements online. Some banks will charge you if you still want to have paper statements. I am slowly switching from paper statements to online statements. Today, I will discuss some advantages and disadvantages of having statements delivered online.

Advantages of Electronic or Online Statements

– When I moved in the past, I was always scared that my paper statements would arrive after I had moved and it would go to the wrong hands. With online statements, this is not possible as you will have access to it anywhere on earth 24/7 – regardless how many times you move or wherever you go.

– Easy to manage and keep organised. With paper statements, I always had statements piling up and sometimes I missed deadlines because some statements went missing or were underneath so many other statements. Online statements make your life a lot easier and never miss a payment again if you know how to keep your email organised and tidy.

– No more waiting for the mail to arrive. Better yet, no need to worry if your mail goes missing. Electronic statements are available and accessible instantly as soon as your institutions release them.

– Saves trees and saves money. Feel good about yourself knowing you are doing your part to protect the environment.

Disadvantages of Electronic or Online Statements

I don’t think there are really any disadvantages using online statements. Some may argue that online statements are not secure, lots of hassle to access, and lacking the ability to have physical records. All these disadvantages are actually depend on how you handle it. If you are knowledgeable enough to secure your digital life, online statements are actually more secure than paper statements. And if you still like to have paper records, online statements give you the option to print it off to file it for your records. I recommend you go through some articles I wrote regarding Internet security here: Internet & Investment Fraud and Scams

NB – Online or electronic statements may also be known by other names such as electronic or online documents (eDocuments or eDoc), electronic or online invoices (eInvoices),electronic or online billings (eBillings), and so on.

Canada New Mortgage Rules

Changes to Canada’s Mortgage Rules

First Published Date: July 22, 2012 ADawnJournal.com

To tame the Canadian housing market, new mortgage rules kicked in starting June 9, 2012 for government insured mortgages. Here is what you need to know briefly:

– The maximum amortization period is now 25 years (down from 30 years).

– Borrowers now can refinance mortgages using 80 percent of the home value (down from 85 percent).

– Homes costing less than 1 million are eligible for mortgage.

– GDS (gross debt service ratio) ratio and TDS (total debt service ratio) are limited to 39 percent and 44 percent. GDS tells you the percentage of gross annual income you need to cover mortgage and housing related payments such as mortgage payments, property tax, 50% condo fees, etc. TDS tells you percentage of gross annual income you need to cover housing related payments and other debts such as credit cards, car loans, etc. So, TDS = GDS + other debts.

A point worth mentioning is that until these new changes, the acceptable GDS and TDS ratios for mortgages usually have been 32 percent and 40 percent. Also, lenders would relax GDS ratio for borrowers with higher credit scores.

Should You Pay to Read The Globe and Mail?

TheGlobeandMail.com and GlobeInvestor.com Are No Longer Free

First Published Date: November 7, 2012 ADawnJournal.com

Blaming its declining ad revenues, Globe and Mail recently started charging online readers accessing more than 10 articles per month for $19.99 monthly. I have been a religious Globe and Mail reader for a long time and have been contemplating whether to pay for online access or not – and I am sure the majority of online readers are in the same boat as me. Today, I will discuss whether to pay or not to pay to read Globe and Mail online.

Free access to information or knowledge is a basic human right. Free access to information serves as the basic foundation to develop and build a better society – a society better in every aspect: economically, culturally, and technologically. The Internet opens up endless possibilities to access free information across the globe. However, in the name of declining revenues, free access to information has severely been compromised by publishers around the globe. And the recent Canadian version is the Globe and Mail’s restriction.

Now let’s come to the question of whether you should pay or not to read the Globe and Mail online? Unfortunately, there is no straightforward answer. The answer lies in how you value the Globe and Mail content. If you feel it is worth it to pay $20 a month to have full access, you can pay to read. If you think there are still so many other sites available for free and there is no point paying $20 per month, you know what to do.

$20 per month may not seem like a lot of money. However, if you consider the gross amount you need to earn to spend $20 per month annually (considering you are in a 40 percent tax bracket), it comes to $400 gross amount per year. Are you willing to spend $400 gross yearly to read one site? I am not. When I first heard the news that the Globe and Mail will be a paid site and the figures were not published yet, I thought to myself that if it’s $10 a month, I am willing to pay. If not, I won’t.  

There are many other sites you can still read for free. I am mentioning a few of them here. Search online for more and I am sure you will come up with at least one or two that you would like to read instead of the paid Globe and Mail.