Companies Seek New Retirement Savings Options for Employees

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With seven out of ten Americans not being able to build a good financial safety cushion, many finance experts are sounding the alarm, fearing a possibility of an emergency-savings collapse. Statistically, almost 70% of Americans have difficulty saving the modest $1,000. Meanwhile, the percentage of those who had to tap into their emergency savings at least once over the past year is approaching 50%. Many even have to tap into their 401(k) retirement accounts.

This puts a great deal of strain on employees, which makes things even worse, as it robs them of all motivation and energy to work. Happily, employers in the USA are increasingly aware of the problem and are taking steps to solve it. This fact is recognized by many experts. Not infrequently, employees simply have no choice but to tap into their 401(k) plans, as many of them use different types of loans, including extortionate payday loans. This puts their retirement in dire straits and poses a threat of financial devastation. According to statistics, about 29% of employees have tapped into their retirement plans to cover emergency expenses.

To ease employees’ financial lives, employers come up with emergency-saving plans and implement them to create an extra opportunity for their workers. Surveys have shown employees’ readiness to join these plans, as three in four say they’d agree to go for it.

However, there is no universal mechanism of implementation for this initiative, because there are administrative, legal and financial hindrances. Most likely, each employer would have to develop and implement an individual pattern, because enterprises’ budgets and accounting schemes vary greatly. Some of them are offering so called sidecar, do-it-yourself and ‘cookie jar’ plans. The former is attached to the 401(k) retirement program.


Sidecar

Some corporations have chosen to rely on sidecar accounts. They are made up of after-tax money accrued to them as an employer continues to work. As the balance reaches what an employee can define as his/her comfort level, he/she can arrange for deductions and save them as part of his/her emergency savings. An individual can monitor the account’s level and rebuild it in case it falls below the comfort level due to withdrawals.

One reason why such accounts are funded by after-tax money is the ERISA act of 1974, which prohibits pretax funding of such accounts. Companies use this strategy just to avoid breaches of the law. Auto-enrollment is not allowed either. It should be noted that the D. Trump administration is moving an act, which should correct the inconveniences.


DIY

There are companies (mostly smaller ones), who have chosen a simpler and less expensive way of helping their employees save money. The pattern implies that an employee starts an account at a bank, and the company contributes the same or smaller sums on a regular basis. Employees may arrange with their employers for auto-depositing or, based on their income, discuss individual transfers to their emergency-savings accounts with banking institutions.


Cookie Jar

This is a kind of pilot project involving companies headquartered in Wisconsin and Iowa. It implies that an employer contributes $3 per employee on a monthly basis. SafetyNet, which is enrolled in the project, rounds up employees’ debit card dollar purchases and directs the change into an employee’s “cookie jar”, thus helping him/her build an emergency-savings account. Employers can also make matching contributions.

Student Loans: What Reforms Trump Administration Has Up Its Sleeve

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Student loans are designed to help those who are eager to hit the books to find the funds to actually do it. Nowadays, over 44 million students repay the loans they took out at some point of their studying. Given the upcoming merger of two Departments into a single Department of Education and the Workforce, there is no doubt that students will be the target audience of new amendments that may follow.

With so many people involved in the system, it is clear that the changes that the Trump administration has made to the tax system and is planning to make are a matter of great concern to most Americans.


How has the student loan system already been altered?

In January 2018, a new law regulating taxes went into effect. It is a document called Tax Cuts and Jobs Act of 2017, which rendered the old practice of putting a tax on forgiven loans in case of death or TPD, which is an abbreviation for total and permanent disability, invalid.

The other one–and there have been only two major changes to students loans recently–is the withdrawal of the ability to deduct fees and tuition, as far as itemized tax returns are concerned. Claiming AOTC on taxes is still possible, which can save you as much as $2,500 per year during the first four years, but the change can be a warning sign.


What awaits students?

As to the changes that may be on the cards, it is not that easy to figure out what particular amendments can be made to the current law and policy. As is the case with many other things political, it is not a very stable field.

There are several tendencies regarding the possible changes to student loans, and these include the following:

  • Possible PSLF program elimination
  • Career and technical education funding is increasing
  • Conversely, the funds allocated for the Department of Education are being reduced
  • Judging from the public records available, it is clear that the White House is considering introduction of a repayment option that would be income-driven and, perhaps most importantly, single

Goodbye to PSLF?

The abbreviation stands for a federal program that enables those working in the public or non-for-profit sector have their federal loans forgiven, provided they have made 120 payments in due time within the framework of their repayment plan that qualifies.

It may seem to be unreasonable to expect the program to be eliminated, since its funding has recently been increased by $350 million, but it is the Trump administration itself that has made it clear it would support its abolition.

In their proposed budget for 2019, it is stated that PSLF can be discontinued and thus unavailable for new borrowers. Such a move would make jobs in the public sector or the government less attractive, as nowadays many people are driven to join them by the alluring opportunity to use the debt forgiveness program.


Restructuring of repayment options

The Trump administration is considering a substitution for the current repayment programs (which now amount to eight options) that would be income-driven and single. The proposal implies capping monthly installments at 12.5% of a person’s discretionary income. Those borrowers who are undergraduate students will be forgiven their debt if 15 years of repayment have passed. For graduate school debts, the figure is increased to 30 years. As of this moment, the conditions are different: depending on what plan it is, a loan is forgiven after either 20 or 25 years.

Some changes may also be made to discharging loans during bankruptcy. It is the definition of “undue hardships” that is expected to be reevaluated, as it is now not clearly defined, which makes discharging loan debts quite challenging.

Since many proposals are still hanging in the balance, it is advised to choose the plans currently available and consult professionals should any changes be made to the legislation regulating student loans in the future.

Increasing Obsession with Credit Scores in the USA

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Following the most recent statistics, an increasing number of Americans get concerned about rising amounts of credit card debt and the scores they have. Over 85% of consumers track their credit-related standing, regularly checking their scores, limits and other issues. According to the new survey by Discover Financial Services, credit awareness has jumped 12% this year. Moreover, a considerable number of people are working hard on improving their scores.

What is the reason for such a tendency? Researchers have discovered that the average credit debt of an American household is around $5,700, and it considers credit cards only. The combined data collected from the Federal Reserve and the U.S. Census Bureau give an opportunity to learn some key facts about the importance and significance of credit for the U.S. population:

  • The average household debt reaches around $5,700;
  • The total U.S. consumer equals $3.9 trillion;
  • Over 41.2% of households carry minor or significant credit debt;
  • Households, which have the lowest net worth, have around $10,300 debt.

The above-mentioned proves the fact that credit is a vital part of the American life. The tendency of borrowing money for minor and big deals is growing, so the significance of credit scores increases rapidly as well.


Benefits Associated with Good Credit Scores

The importance of a high or at least average credit score can be explained by the benefits provided for customers, such as the following:

  • Low-interest rates. When you borrow money, an interest rate is what matters the most. At this point, it is necessary to mind the tight relation between the interest rate and your credit score;
  • Better chance for loan or credit card approval. Lenders usually consider a group of factors before approving the borrower. The income rate, debt and credit score matter much;
  • Higher limits available. Customers with high credit scores are considered to be reliable borrowers, who pay back before the due date and in full amount. Those with poor credit history may qualify for a loan, but with a considerable limit.

In addition, people with high scores can expect better car insurance rates, more negotiating power, easy approval for renting apartments or houses, bragging rights and many other advantages.


Good and Bad Credit Score: How to Achieve the Desired Preferences?

Before getting concerned about your credit history and score, you need to learn the rates and classifications. The rates might vary depending on the lender, but on average, the scale is as follows (according to the credit health survey by Discover conducted in 2018):

  • Exceptional – 800-850;
  • Very good – 740-799;
  • Good – 670-739;
  • Fair – 580-669;
  • Poor – 300-579.

The results of this survey show that over 61% of customers look for effective ways to increase their scores. Greg McBride, the Chief Analyst at Bankrate.com, specifies the following ways to enhance credit history and improve the score:

  • Timely payment of bills;
  • Keeping the debt modest;
  • Getting the annual report from TransUnion, Experian or Equifax;
  • Staying up-to-date with your credit standing.

These are simple but important tips on how to improve your credit score. Learning the report will not help directly, but it is a beneficial way to check all the information and exclude any errors. On the other hand, bringing down your debt is a dependable way to enhance the credit score. When you take less than 30% of available credit, the loan doesn’t count negatively. When you decrease the rate to 10%, you start contributing to the improvement of your credit score.

A Payday Loan Scammer Is Going to Prison

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One of the biggest cases of the decade is officially over. Richard Moseley was charged with multiple crimes including stealing over $200 million from over 600 thousand Americans who trusted the company. As a punishment, he will spend 10 years behind steel bars and pay a hefty $49 million fine. The scammer managed to overcharge his client with massive interest rates way above reasonable amounts with some loans reaching 700% annually.


The Issue

Short-term loans are a normal practice for modern economies. As many people either cannot afford to take out credits or get denied by banks, the only option to pay bills on time and get some cash for unexpected expenses is to go to payday lenders. In some cases, the desperation makes people irresponsible and they will take money regardless of possible consequences. Moseley used said desperation against his clients and charged them with abnormal interest rates.

These interest rates were way above standards set by the government of the United States. Moseley operated mostly in Kansas City, Missouri. However, complaints and testimonials from clients of Hydra Lenders (Moseley’s company) were ignored for quite a long time. After he was accused, Moseley pointed at the fact that his company was legally registered in an offshore zone in New Zealand where US regulations are not applied.


The Case

The FBI had to conduct a lengthy investigation and interview clients and employees of the company in order to find enough evidence that the company and its owner indeed broke the law and operated legally and physically on the territory of the US.

The investigation showed that for over a decade from 2004 to 2014, Hydra Lenders used various deceptive tactics to charge clients with enormous interest rates and fees without ever informing them about the existence of hidden payments. Most victims were forced into debt and lots their livelihoods due to immoral and illegal actions of Moseley and co.

The saddest thing is that people such as Moseley often prey on those who already have a burden of debt. People with families, retirees, and even disabled who struggle to make ends meet often have to rely on short-term loans. Many cannot even stand up to unfair terms and conditions. The vast majority of victims did not receive any compensation. Another problem is that most clients of companies such as Hydra Lenders are those without bank accounts and credit cards.

The vast majority of debtors are Hispanics or African Americans. Caucasians and Asians tend to get into financial problems way less often. About 10% of income of debtors go to pockets of shady lenders. An average client of a payday lender pays up to $400 in fees and interest.

Moseley enjoyed a lavish life purchasing property outside of the US and driving luxurious cars. However, his beautiful life did not last for long. In 2017, he was charged with fraud and racket. Now, he is facing a prospect of spending next 10 years in prison.


Conclusion

The whole last decade was all about fighting against immoral practices in the payday lending industry. While many companies work responsibly and follow the law to the letter, there are people like Moseley who disrespect laws and morality.

If you do not want to get into a huge debt and fall victim to yet another loophole in regulations, you should always use decent services. Find a payday lender that has better ratings and reviews. You don’t have to take out unfair overly expensive loans. There is always a choice.

5 Tips How to Save a Surprise Ton of Money

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There are various ways in which you can obtain a fortune. You may sell a big business or receive a sudden chunk of money after a lucky set of numbers coincided with numbers that you chose for your lottery ticket. A big pile of cash surely seems to be quite useful and many want to spend money right away.

One of the first things that anyone should do if they came into possession of a large sum of money is to adjust their financial plan. Rethinking your approach to spending in general is also a very important part of money management. The general advice is to allow the news of getting rich settle in. You won’t make rushed emotional purchases that can be detrimental to your financial well-being.

There are several ways to preserve your capital from evaporating.

#1. Invest in retirement

If you have enough money to contribute enough to match the full employer contribution, you should definitely do just that. You can easily secure your retirement preemptively and reduce the “leakage” in your budget.

One of the best thing about this move is that it provides you with several important advantages including a serious tax benefit. A contribution to your 401(k) will not be taxed due to coming from your own pocket. This is a very good long term commitment. Remember that extracting funds from your 401(k) will not be taxed as well.


#2. Get of rid of your debt

There are various really annoying and limiting debts that may hinder your financial mobility and significantly reduce the very quality of your life. Getting rid of them as quickly as possible should be amongst your top priorities. The main advice will be to pay off the biggest debts with highest interest rates first and then aim for smaller less menacing debts.

Payday loans should be covered immediately. While there is a ton of various options to get a payday loan or an installment loan from private providers, you should always remember that they provide a fast and convenient service for a high price. You will have to deal with high interest rates that may go up to 400% per year. Paying them off on time is imperative.

Researches show that the vast majority of Americans with debt struggle to pay back their loans on time meaning that they often fall into a debt hole that does not always have a clear exit.


#3. Save your money

Creating a conserved emergency fund is a good idea. This will ensure a more stable overall financial situation since you will have a backup fund that can be utilized when you have some troubles. Most experts suggest that you should have enough money to allow you last comfortably for at least 3 months. The optimal size of your emergency fund should be around a sum that will help you to get by without any income for at least 6 months.

There are various factors that may determine how much money you need to have in your secret jar. Your total debt, current income, and some other factors may contribute to your calculations.


#4. Spend on Yourself

There is a big difference between mindlessly spending money of clothes and new devices and spending your money on yourself and self-development. You can invest your money in education, a new skill or a hobby. Something that can be both enjoyable and useful. Consider spending money on something really important for you or your family.

Get your second degree, invest in a trust fund for your children or give money to your spouse so that they could return back to school. You can avoid taxes by spending money on tuition (any sum under $10 000 will not be subjected to taxation if spent on education).


#5. Don’t forget about charities

While it is quite a good feeling to give and support s valuable social cause, but there are other interesting benefits to donating. For example, you can count on a deduction if you make a donation of $12 thousand (for single people) or $24 thousand (for married couples). Remember that you cannot give your money to friends or relatives, this will never help you to achieve better deductions.

High Interest Loans Are the Biggest Money Makers for Payday Lenders

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One of the recent trends in the payday lending business was that it was growing rapidly and seemingly without any limits. However, some experts say that this is due to the changing nature of payday lenders who are stepping out of their normal boundaries.

The Consumer Lending Index includes the best performing companies and the best one is Enova. The next in the rating is Curo Group Holdings. Both grew by a substantial amount with the former demonstrating a respectable 64% growth.

One of the core reasons of their top performances is the growing popularity of short term credits that are high interest products that have slightly modified parameters such as length, structure, and size. This makes them less of payday loans and more like a standard long term bank credit but with an ultra-high interest rate.

Obviously, companies do want to diversify their product lines and offer their clients as many various offers as possible. This makes it easier for customers to pick something that suits their needs. For example, the list of available products from payday lenders at UStarcash showcases a wide assortment of financial products that target different audiences.

New products with increased length and size quickly gained enormous popularity amongst customers who prefer new offerings over short terms and much smaller loans that they had to choose before. Special new lines of credit from Enova are now competing with a diversified product line from Curo which incorporated money transferring and some gold trading.

The prevalence of installment credits is what makes it very interesting for many customers. Most payday loans are structured in such ways that borrowers have to bring back the whole sum in order to avoid problems. This was not convenient for some clients and most lenders had to restructure their approach. This was also due to the tightening grip of the government on this issue. With more and more legislations being aimed at payday lenders, they had to diversify and offer more flexible products.

The peak of the industry in 2012 was due to the massive amount of loans that were taken by people as payday loans. The total volume of contracts reached a whooping $9.2 billion in 2012. However, over the course of 4 years, there was a steady decline to a less frightening $6 billion. Despite the decline, most companies showed a good growth that was mostly due to the shift from regular loans to installment lending. From 2012 to 2016, the industry showed an increase from $4.3 billion to a much more convincing $6.5 billion.

At the moment, most companies have fewer payday loans. For example, the share of installment lending contracts in the overall balance of Curo was about 60%. This company collects less than 30% of its revenue in good old payday loans. This means that audiences also shift towards the installment scheme.


Be Careful with Debt

This is exciting news, but there are some pitfalls that many Americans simply refuse to notice and keep getting into financial holes that do not have a clear exit. The situation can be scary for some uninformed borrowers who make rather questionable financial decisions. Some experts call the new scheme “predatory” and “unforgiving”, but the reality, just as always, is that people often do not read between the lines and fall victims to companies that do try to squeeze out as much revenue as they can.

Payday loans and short term installment credits can be very useful to a large amount of citizens who need temporary financial aid. However, all potential borrowers must know about the specifics of the industry.

For example, Enova’s loans can have an APR of 450% annually. These are numbers from so-called subprime options. If you can get above this level, you may count on much less aggressive interest rates in the range from 34% to 179%. Note that most industry leaders offer loans with very high interests with percentages going up to triple digits. The same situation can be observed all across the industry.

There is a new legislation in development that will somewhat cripple many installment credit products. This will be a good move on behalf of the government. While many people simply cannot survive without payday loans, the regulation of the industry is still subpar and could use some improvement.

The CFPB wants to improve the environment and put some pressure on payday lenders in order to change the playing field and level it for customers. Most Americans do need protection from their own responsibility.


The Main Takeaway

Lenders with diversified products perform much better compared to lenders who offer only payday options. At first, the diversification was a smart move to avoid strict regulations, but new installment products gained so much popularity that modern payday lenders rely on them even more than on actual payday products.

How You Can Improve Your Finance Management

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Taxes are paid and most bills are dealt with. This means that you have a pretty good understanding of your current finances meaning that it is the best time to pay attention to things that have been largely ignored during the tax season.

Analyze Your Taxes

Tax withholdings is something that you must inspect carefully. Due to slight changes in standard deductions and better tax brackets some may believe that they do not have to do much, but it is imperative to take a closer look at your withholding.

There is a relatively simple way to adjust them according to your income. However, you must also keep in mind the overall income of the household. Your spouse’s income should also be incorporated in overall considerations. Various credits and deductions should be accounted for as well. Note that you should always keep track of your credit. The best way to do it is to take manage your loans and take them with an assistance from specialists or at least get help from a single source like UStarCash.

A simple way of adjusting withholdings mentioned above is a special calculator provided by the IRS. Use this tool to estimate the optimal range of withholdings.


Don’t Get Scammed

There are lots of frauds related to tax refund and you should make sure that your tax returns are happening according to appropriate procedures. Scammers are active all the time, but when you are expecting to get back your money, you are most vulnerable to various fraudulent actions. Be careful.

There will be some really suspicious requests and people asking for your personal information such as Social Security number. If you receive such a request from a website or a phone, do not give anything away.

Regardless of what people on the other end of the communication channel are telling you, just don’t listen and call the IRS directly to receive proper consultations. The number of the IRS support is 800 829 1040.


Don’t Keep Old Documents

This can be a source of information for people who can get their hands on your documents. Do not just store it for no reason and dispose them as soon as your do not need them. Some governmental offices have special days when you can come and dispose of your old paperwork.

Another important thing is your own so-called “personal computer”. Make sure to carefully delete all digital data that contain any personal info. There is no reason to keep it all on your PC especially in our days when digital data is so vulnerable.

Loan documents should be stored until you pay off the debt while various receipts must be kept for 9-12 months. Tax documents should be archived and kept for several years (up to 7 years).


Manage Your Period Payments

We all notice that we spend way too much on things and services that we do not necessarily require anymore. Long forgotten information services and other recurring payments may seem small and irrelevant to your overall financial situation but they do pile up and create undesirable burden that can be easily avoided.

Review your subscriptions and decisively remove all unnecessary ones. This will dramatically reduce your overall expenses and help to stabilize your financial situation especially if you are experiencing difficulties with making ends meet.


Buy Construction Materials When They Are Cheap

If you have some renovation planned for summer, get all necessary materials right now in the end of May or in the very beginning of June. This is the period when prices are not yet inflated by the demand and you can still find a nice deal to save a couple of bucks here and there. You can optimize your renovation budget with proper scheduling and preemptive buying of various materials.

Can Financial Literacy Save America?

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The variety of forms and methods of managing personal finances becomes enormous with more and more complex systems being implemented. Managing credit and debt, paying for education, trying to save for retirement, and many other aspects of modern economy do not make our lives easier. We need to learn a bunch of things before we can start approaching the issue of personal finances.

Modern financial products are not simple. Even payday loans evolved to something very complicated. It is one of the simplest and most convenient forms of credit, but many people have problems even with payday loans. Imagine how hard it is to fully understand how credit cards with all their neat little details and hidden fees work!

Other aspects of personal finance management also complicate things. There are all those 401K, 529, 1040, and many other documents that you must fill out perfectly or else you will not only screw your wallet, but may also get in prison! With all that variety of responsibilities, bills, and credit options, managing finances seems like an overwhelmingly overcomplicated puzzle.

While many people including some federal officials claim that it is simply a question of financial literacy, the vast majority of modern scholars believe that being financially literate has nothing to do with being able to manage personal finances well enough. However, it is definitely much better for people to know how to handle the contents of their wallets.


Financial Literacy Rate Is Low

Most Americans struggle with filling out simple forms let alone understanding complex economic issues and complicated financial products. Less than 30% of surveyed people over 50 managed to answer just 3 simple basic questions about interest, inflation, and diversifying risks. Some may think that the situation is different with younger people, and some will be wrong. In fact, the youth is just as informed on the matter as elders. Over 40% of all students is on the lowest end of the financial literacy spectrum.

Uneducated people, minorities, and female citizens show the least level of knowledge in finance handling. Only 19% of people who has high school education only have enough skills and knowledge to manage their finances on their own.

Another concerning demographic is Hispanic and African Americans who usually score very low in financial concepts. It is unsurprising that they more often become debtors since the very concept of it is often not grasped by the fullest extent. Men usually answer questions related to finances much better than women.

The problem is that financial illiteracy can cost you dearly as shown in many researches that demonstrate how many people are making decisions that result in higher fees when handling credit cards. It is often the problem of lacking knowledge about financial products and debt in general. The same can be applied to users of payday loans who often do not read the conditions of the loan properly.

There is also a very important correlation between the level of education and income and financial literacy. People with less income and worse education usually have correspondingly lower level of money management skills.


Being Financially Smart Is Beneficial

As all of the above suggests, being a smarter has significant advantages. People with better financial literacy follow well-structured retirement plans, invest smartly, and correctly utilize credit in order to avoid falling in debt. People who know their finances usually do not make mistakes like borrowing money while harming 401(k).

The problem is that the vast majority of financially literate people come from white wealthy families. Their parents usually have their retirement plans set up and can teach about managing finances.

One of the most famous researchers about this topic is Annamaria Lusardi from the G.W. University. She is a very capable scientists and decided to conduct a thorough research to find gaps in financial education between different demographics. Her findings suggest that financial literacy is poorly distributed in general and that this is one of the core factors driving the inequality. Her estimates suggest that about a third of inequality in wealth is a result of poor financial management on behalf of less rich people.


What Can Be Done?

Teaching financial literacy is what should be on top priorities. Basics of money management, taxation, debt management, and some other aspects of modern life should be delivered to consciousness of all Americans. The level of awareness and responsibility must increase dramatically in order for Americans to live better lives.

The main reason why education must be the main priority is that it is nearly impossible to change the financial framework in which we live. However, we can not only try to re-distribute financial literacy but also focus on providing better advice by expanding responsibilities and services from professionals in the personal financial management area.

There are also experts who argue that we must make sure that the very structure of the economy is capable of providing a healthy environment for regular people. While professionals and financially literate people usually can avoid various pitfalls, the amount of citizens who will become victims of debt is quite frightening.

Highschoolers Must Know More About Managing Personal Finances

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Nowadays, kids do not receive as much interesting and important information about the adult world. They are growing up unprepared for various inconveniences and difficulties of modern society. One of the biggest pivots is managing personal finances which is hard for some adults let alone children who suddenly become adults.

Most schools seem to offer diverse sets of courses and teachers are professionals, but the vast majority of schools simply do not have anything to offer when it comes to teaching children to control how they spend money, manage their budgets, and avoid debt. The latter is a pivotal topic since surviving and living a comfortable life in modern life depends on making debt and getting rid of it in a timely manner.

For example, payday loans can help you to pay bills and purchase something very important, but taking them without understanding consequences is a path to negative debt that can snowball out of control without proper management.

Modern kids must learn about credits, credit scores, budget management, paying bills and taxes, and the importance of avoiding debt. These are crucial knowledge bits that actually help to survive in the adult world.

The situation is changing. The process is very slow. WE can and should make it faster. About two decades ago, only Illinois required its schools to teach children about taxes and personal finances in general. In 2017, the amount of states demanding schools to offer such lessons was increased to 17.


Is It Really Important?

For some reason, many people believe that personal finance is not a pivotal core class that should be taken by every single high school student. It is hard to argue that it is just as critical for a student as mathematics, language, physics, chemistry, and history. There should not be personal finance exams, but the importance of such knowledge should not be underestimated as well.

Over 85% of school teachers consider personal finance important and that we should implement simple yet efficient testing to make sure that children know how to survive in the “real world”.


Take a look at some stats:

Student debt is at its all-time high with $1.4 trillion owed in total by people in the US.

  • Consumer debt is creeping closer to mortgages.
  • 40% of millennials cannot deal with debt on their own.
  • Each 2nd millennial cannot save for their future.
  • The vast majority of students who use credit cards do not know fully how debt works.
  • About 43% of millennials borrow money from payday lenders and prefer rent-to-own stores.

The latter is quite troublesome. Payday loans are great to quickly pay bills or cover other forms of immediate debt, but they should not be used as a primary source of credit.

Payday loans should be used efficiently and correctly in order to avoid debt. The problem is that high school students do not know about it and spend money recklessly without fully understanding how to survive on their own.

College students can learn more about managing finances since most colleges offer business lessons. However, roughly 16 million young people enter the adult stage of their lives without college education meaning that they must learn about personal finance.


Personal Finance in Schools and Potential Problems

The first problem is delivering the knowledge to students. Debates are still being held on the form of lessons and efficient methods of teaching. Another problem is financial illiteracy of teachers. Recent studies showed that only 20% of teachers feel ready to teach how to manage money, debt, and taxes.

Implementing personal finance courses will require us to train more specialists. This means that we must partially overhaul the very system of education and add more personal finance lessons for college students who will later become teachers.

Students in colleges do receive some knowledge on personal finance management but this knowledge is very limited and insufficient. There must be standards that will ensure that our teachers can provide consistent informative teachings for their students.

There is also a debate on whether personal studies should be taught in school. Some believe that this is knowledge best taught at home by parents. However, more than 70% of parents feel either incompetent or uncomfortable talking to their children about money. This means that there is no way that children can be taught at home.

The generation gap is another problem. A lot of baby boomers are not prepared for retirement as recent studies showed. This generation does not have necessary knowledge to teach the new generation that is growing up. Millennials are bounded by debt also do not have (on average) necessary skills and experience to efficiently teach their children.


Classes that Should Be Taught

The last question is the volume and form of lessons. Which classes should be prioritized? Should we focus on practical moments like filling out forms and learning to work with documents? Should we emphasize the importance of money management in general and teach how to spend, save, and borrow money? This is a very dark alley.

However, we have some classes that are being developed or already implemented:

  • Saving money in banks;
  • Investments, planning, and saving;
  • Interest income;
  • Creating assets;
  • Managing credit and debt;
  • Everything about credit scores;
  • Sources of income;
  • Paying taxes;
  • Insurance and its forms.

We need more lessons and we must focus on managing debt. Payday loans and credit cards can be quite useful when used correctly. Taxes and fees will be less burdensome if handled properly. Saving will be easier if spending is reduced reasonably.

Payday Loan Approval and Credit Report — Will There Be a Correlation?

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If you are worried whether you can receive a payday loan because of problems related to your credit score, there are several things that you must be aware of. First of all, credit scores can be changed and you can directly affect how they change. Another important thing is that you can receive your credit report from any credit bureau if necessary.

Every single lender uses some form of background checking in order to assess possible risks of lending money. No one wants to risk money for no reason and lenders are afraid of give money to people with bad debt. This leads to a particular situation when banks and payday lenders need to know whether a person is a reliable borrower.

This is where credit bureaus come into play. These companies use various metrics to evaluate potential borrowers and provide a special score that determines whether it is safe to give money to that particular person.


Using Credit Report to Your Advantage

When you come to the office of a payday lender and apply for a credit, the company will conduct a simple background check by looking at your credit history and current score and determine whether you can be trusted as a borrower. One of the problems that was evident in some states is that payday lenders sometimes ignore some aspects of the credit score and give money to people who cannot really pay back.

This is a double-edged situation. People with bad credit scores are generally worse borrowers and often generate debt that they cannot afford. Credit score was partially encouraged by such situations and exists to protect customers who cannot pay their debts. On the other hand, such blindly given away credits put lenders in peculiar situations where they need to somehow collect their money but simply cannot due to inability of the borrower to pay back.

Payday lenders work (in the vast majority of cases) with three major credit bureaus: Experian, Transunion, and Equifax. Some of these companies use FICO scoring systems other rely on Vantage score, but it does not really matter which system is being used in general since bad score means disapproval from any payday lender.


What can you do in such situation?

  • First of all, you can apply for a credit is several companies at once. Every lender has their own thresholds regarding the credit score of a potential borrower. If one company said “no”, another one can be much more loyal towards you.
  • The second thing is that you can try to change your credit score. This is not possible in a couple of days, but by slowly increasing the limit on one of your credit cards you can significantly improve your FICO score. In order to start doing something, you will need to receive a special credit report where your score is detailed and presented in a comprehensible form.
  • While your credit score costs money and you won’t receive it for free under normal circumstances, there is a way to get a free credit report according to the Fair Credit Reporting Act. This legislation allows borrowers to receive a free credit report if they were denied a credit in a bank or a registered licensed lender. You won’t receive necessary evidence of denial in an online lending company, but payday lenders will gladly offer you all necessary information that you will need to prove the fact of denial.
  • Then, you will have 60 days to apply for a free credit report. This is why you need to know which type of score and provided by which company is used by the chosen lender. If you were denied a credit, just inquire why and how you can improve your score. Ask about the credit bureau that provides scores to the lender and apply for a free credit report.

The Main Takeaway

Credit score definitely affect whether you are denied a credit or not. However, you can change the it and even receive a free credit report to understand the problem and eliminate it.