A HALF-DOZENWAYS TO GET QUICK CASH
Here are six ideas for getting some quick cash, should the need arise.
1. Work part time. Moonlighting if you already have a job or working part time if you’re between jobs is perhaps the best way for many people to augment their income. Despite the flagging economy, there are still plenty of part-time jobs in many locales. Many employers are effectively utilizing part-time em ployees and, in order to attract them, offer flexible working arrangements and working hours.
2. Tap your home equity. While obtaining a home equity loan is a lot tougher now, if you already have a home equity line of credit (and your lender hasn’t frozen it because of declining home values), you can tap into it for needed cash.
3. Borrow from your retirement plan at work. Most workplace retirement plans allow you to borrow up to one-half of your balance up to a maximum of $50,000. While the loan repayments can be stretched out, the loan is due if you leave your job, so this may not be a good way to raise money if you’re worried about losing your job.
4. Withdraw from your Roth IRA. If you have a Roth IRA, you can withdraw your contributions (but not any earnings on your contributions) without having to pay taxes or penalties.
5. Tap into your life insurance cash value. If you have whole life insurance or similar policies that build up cash values, you can borrow up to the full cash value of the policy.
6. Sell investments. You can also get your hands on money by selling some investments that you hold in any nonretirement account. If you sell losing investments, and most of us have plenty of those thanks to plummeting stock prices, you won’t owe any capital gains taxes, and you can use up to $3,000 of losses per year to offset your other income.
GETTING YOUR DEBTS UNDER CONTROL
I think it’s time I start reducing my debts, rather than seeing them creep up every month. It’s not that there’s a problem or anything, although the amounts I pay on the credit card balances seem to be increasing. If this economy gets any worse, the last thing I want to have are a lot of debts to worry about.
Reviewing your loans and getting your debts under control are always good ideas, but in the face of this long economic slowdown, it is doubly impor tant. It’s impossible to determine how bad this crisis will become or how long it will last. At a minimum, you don’t want your debts to get out of control. Ideally,
you can work to reduce them so that you will be better prepared for any burdens this recession may dish out to you. The following will help you evaluate your current debt situation and plan to take better control of your indebtedness.
FIND OUTWHAT YOU OWE
The worksheet that follows will help you summarize your current loans. Don’t forget to include all of them. People have a tendency to omit some of their obligations especially their credit card debt.
DETERMINE WHERE YOU STAND
Once you have summarized your loans, you may want to figure out where you stand in relation to various guidelines that indicate whether you have or are approaching a debt level that is too high. Two such guidelines follow.
1. Exclusive of your home mortgage or rent, the total amount of your installment debt should be not more than 20 percent of your yearly after-tax income, and not more than one-third of your discretionary income for one year in other words, the amount you have left over after housing, food, clothing, and taxes.
2. Another sign that you may be approaching a debt level that is too high is if you are unable to save regularly or you find that the amount you are able to save on a regular basis is decreasing.
AVOID ADDING TO YOUR DEBT
Once you find out how much you owe, you need to do two things. First, promise yourself that you will not increase any of your current loan balances. Second, keep your promise.
This is a two-step process because it’s easy to make these kinds of commitments to yourself, but it’s a lot harder to keep them particularly when you look around at all the conspicuous consumption, mostly by people who can ill afford their profligacy. It’s easy to get into the debt trap when, over the past several years, you’ve been able to rely on a steadily rising income to meet your steadily rising loan payments.
However, many people are about to enter a period where they won’t be able to rely on raises every year to meet rising living expenses. If so, something has to give, and all too often it means falling behind on loan payments or worse. So don’t complicate mat ters any more than they are now by adding to your debt.
DELEVERAGE, IF YOU CAN
Deleveraging is the unpleasant task of reducing debt. This is what the big corporate lenders have been doing, and the pain is reflected in their minuscule stock prices.
Preparing a plan to reduce your loans now, if you can, will be beneficial even if you don’t experience any problems as families struggle to keep their finances intact until the crisis subsides.
It’s never easy to reduce your debts because, with the exception of a home mortgage, you probably have to pay them off with after-tax dollars. For example, to make a $400 car payment, you will have to earn about $600 in order to have $400 left over after taxes are taken out to make the payment.
2. Tap your home equity. While obtaining a home equity loan is a lot tougher now, if you already have a home equity line of credit (and your lender hasn’t frozen it because of declining home values), you can tap into it for needed cash.
3. Borrow from your retirement plan at work. Most workplace retirement plans allow you to borrow up to one-half of your balance up to a maximum of $50,000. While the loan repayments can be stretched out, the loan is due if you leave your job, so this may not be a good way to raise money if you’re worried about losing your job.
4. Withdraw from your Roth IRA. If you have a Roth IRA, you can withdraw your contributions (but not any earnings on your contributions) without having to pay taxes or penalties.
5. Tap into your life insurance cash value. If you have whole life insurance or similar policies that build up cash values, you can borrow up to the full cash value of the policy.
6. Sell investments. You can also get your hands on money by selling some investments that you hold in any nonretirement account. If you sell losing investments, and most of us have plenty of those thanks to plummeting stock prices, you won’t owe any capital gains taxes, and you can use up to $3,000 of losses per year to offset your other income.
GETTING YOUR DEBTS UNDER CONTROL
I think it’s time I start reducing my debts, rather than seeing them creep up every month. It’s not that there’s a problem or anything, although the amounts I pay on the credit card balances seem to be increasing. If this economy gets any worse, the last thing I want to have are a lot of debts to worry about.
Reviewing your loans and getting your debts under control are always good ideas, but in the face of this long economic slowdown, it is doubly impor tant. It’s impossible to determine how bad this crisis will become or how long it will last. At a minimum, you don’t want your debts to get out of control. Ideally,
you can work to reduce them so that you will be better prepared for any burdens this recession may dish out to you. The following will help you evaluate your current debt situation and plan to take better control of your indebtedness.
FIND OUTWHAT YOU OWE
The worksheet that follows will help you summarize your current loans. Don’t forget to include all of them. People have a tendency to omit some of their obligations especially their credit card debt.
DETERMINE WHERE YOU STAND
Once you have summarized your loans, you may want to figure out where you stand in relation to various guidelines that indicate whether you have or are approaching a debt level that is too high. Two such guidelines follow.
1. Exclusive of your home mortgage or rent, the total amount of your installment debt should be not more than 20 percent of your yearly after-tax income, and not more than one-third of your discretionary income for one year in other words, the amount you have left over after housing, food, clothing, and taxes.
2. Another sign that you may be approaching a debt level that is too high is if you are unable to save regularly or you find that the amount you are able to save on a regular basis is decreasing.
AVOID ADDING TO YOUR DEBT
Once you find out how much you owe, you need to do two things. First, promise yourself that you will not increase any of your current loan balances. Second, keep your promise.
This is a two-step process because it’s easy to make these kinds of commitments to yourself, but it’s a lot harder to keep them particularly when you look around at all the conspicuous consumption, mostly by people who can ill afford their profligacy. It’s easy to get into the debt trap when, over the past several years, you’ve been able to rely on a steadily rising income to meet your steadily rising loan payments.
However, many people are about to enter a period where they won’t be able to rely on raises every year to meet rising living expenses. If so, something has to give, and all too often it means falling behind on loan payments or worse. So don’t complicate mat ters any more than they are now by adding to your debt.
DELEVERAGE, IF YOU CAN
Deleveraging is the unpleasant task of reducing debt. This is what the big corporate lenders have been doing, and the pain is reflected in their minuscule stock prices.
Preparing a plan to reduce your loans now, if you can, will be beneficial even if you don’t experience any problems as families struggle to keep their finances intact until the crisis subsides.
It’s never easy to reduce your debts because, with the exception of a home mortgage, you probably have to pay them off with after-tax dollars. For example, to make a $400 car payment, you will have to earn about $600 in order to have $400 left over after taxes are taken out to make the payment.