Millennials

5 Best Hacks for Eliminating Credit Card Debt

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Acknowledging debt may seem like a small thing, but it’s the first step toward handling it responsibly. So, good job!

Debt sucks—it’s complicated and confusing for almost everyone. For self-employed contractors and freelancers, how you manage your debt is especially important, since your personal credit directly affects your business credit, and therefore your ability to work and earn a living.

So, here it is—Lifesaver’s “cheat mode” for crushing debt.

#1: Stop Piling On the Debt

Back away from your credit cards. That means all of them—the personal and business cards.

One of the fastest and most effective ways to start tackling credit card debt is to stop adding to the amount you already owe. You may find it harder and harder to reach for your wallet when you know that it means dipping into your hard-earned cash.

This may sound obvious, but you’d be surprised by how many people attempt to combat debt while continuing to rack it up. So, resist the urge to swipe while you strategize and implement a plan to help you conquer your debt.  

#2: Confronting Your Debt

If you want to slay the debt dragon, you have to start by knowing exactly how much you owe and to whom. Gather all of your credit card statements, open a spreadsheet, and let’s start crunching numbers. Start by detangling your debt, separating out your personal credit card debt from your business debt. Go card by card, entering the balance for each. List important details like the amount owed and the annual percentage yield on that credit card.

Hopefully, you’re relieved by what you see. But if you’re feeling slightly depressed after knowing exactly how in the red you are, take comfort in knowing that we’re halfway there toward putting together a solution.

#3 Creating a Budget

Understanding your income and expenses allows you to start planning and experimenting with a few differents ways to save and lower your debt. We’ve got a step by step guide here. Once you’ve listed your total monthly income and expenses, subtract your total income from your total fixed expenses. The formula couldn’t be simpler:

(Total monthly income) — (Total fixed monthly expenses) = Money left over for spending (fun) or saving

Unfortunately, debt sometimes does require you to cut back, and that likely means you have to reallocate some your discretionary spending toward paying off your debt. Monthly subscriptions are a good place to start. Individually, their cost seems minimal, but these costs add up at end of each month. Besides, do you really need all three or four paid memberships to those music/movie/TV streaming platforms? Determine a monthly percentage of money that you’re comfortable with putting toward paying off credit card debt. Ensure the amount you choose works even when your income fluctuates. Ideally, you want to pay over the monthly minimum, so you can reduce the interest and the principal you owe.      

#4: Maximize Your Cash Flow

There are several ways to increase the amount of cash you have each month. You can start simple by reducing your spending. Put yourself and your business on a spending diet for a couple of weeks or months. Easy things like brewing your own morning coffee/tea, or preparing lunch at home, help avoid unnecessary expenses—for some, this alone can help save upwards of $200 a month. Spending diets are a test of wills and wallets, so tailor it to your financial specifications.

Try to make more money. OK, have your eye roll, but hear us out. It might be time to monetize your side-hustle. Maybe you‘ve been cooking, singing or making your friends laugh for free. Consider trying to generate revenue from your passion on the side.

You could also consider adjusting your fee or payment structure for gigs. This is easier and more flexible than it sounds. You could start by getting paid faster. Maybe you have a recurring gig or client that’s mostly great, but takes forever to pay you. Automating your invoicing system may help minimize the time it takes to get your hard-earned cash. Requesting partial payments for projects upfront is another way to increase your monthly inflows.

#5: Work Smarter

Working smarter means realizing that your credit card habits need to change for the better and, more importantly, for the long term. If you don’t want to find yourself buried in credit card debt again, you have to start incorporating these tricks into your regular money management routines.

Working smarter also means using the right tools for the job. Are you being eaten alive by monthly checking account fees? Alternatively, maybe your savings is just sitting in an account collecting dust—rather than accruing interest. Lifesaver makes it easier than ever to find the financial institutions and services that fit your wallet and lifestyle, so take advantage.

 

The (Fin-tech) Revolution Will Not Be Credit, Guys

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No amount of noble intentions or technological innovations can solve the complexities of poverty without education.

In the decade since the financial crisis, fin-techs (financial technology companies) have changed the ways in which we spend, borrow and save, revolutionizing both our relationship with money and our interactions with financial institutions. Among the highest performing in this cohort are alternative lending startups, many of which were designed to fill the historic service gaps that banks and traditional lenders created,  delivering the sources of credit that many traditional financial institutions were unable to provide in the immediate aftermath of the financial crisis.

Alternative financial lenders have changed how consumers find credit and created new avenues of access for individuals excluded from traditional lending. They have succeeded in delivering money to those who need it and previously had no access to traditional forms of credit.

But access is only half of the equation.

As new, previously underserved consumers enter into the alternative lending space, a reexamination of the assumed level of financial knowledge of these new consumers is required. Are these newly tapped consumers adequately informed to fully understand the potential risks posed by easy credit? Easy access to credit is not inherently a problem. However, providing customers with access to credit (which is really just future debt), without sufficient financial education is a problem.

Although tech innovation has changed how people access credit, what has not changed is the inherent relationship between credit and debt. Once used, credit immediately becomes debt. For some this may seem to be an obvious bit of information, but for many it is one that has to be learned. The perils of easy credit access without sufficient education were illustrated best in the 2008 housing market crash, where access to easy mortgage loans actually led to more foreclosures than the homeowners it purported to create.

The relationship of access and education is neither specific nor exclusive to finance.

Access to calorically rich foods, coupled with poor nutritional education, has led to public health concerns regarding the rising obesity rates across the U.S. Here perhaps the food industry may offer a model to help fin-techs balance the demands of inclusivity in access and education. After all, how amazing would it be if all financial products had an informational breakdown of their constituent parts (interest rates, APRs and fee disclosures) similar to the nutritional content found on food stuff? It was precisely questions of this kind that guided the founding of Lifesaver. We developed a model that empowers consumers of all financial flavors, combining access and information into a new user experience. We arm consumers with information on a product-by-product basis, explaining what a product is, how it works, and who it’s for. In this way, discovery becomes an educational experience that helps consumers make better, more informed financial decisions.

For more on the perils of accessible credit and its relationship to poverty, check out Elena Mesropyan's article "Accessible Credit Will Not Lift Individuals From Poverty, Financial Education Will". 

 

Broke But Woke: Why Millennials Aren't Screwed

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As we come into a new year and Lifesaver goes live at long last, we here at Lifesaver HQ have found ourselves reflecting on the issues that first led us on this incredible journey.

In early Spring of 2016, we were lamenting the lack of a one-stop-shop for “normal people”—those without in-depth knowledge of personal finance, investing, or banking—to find and use the financial services they need. With a healthy but unremarkable chunk of change languishing in a checking account (at a large bank the news media had already outed as being corrupt, no less), we asked around for some common-sense advice on what exactly one does with extra cash. The answers we received varied, and hinted at a deeper and more situational layer of complexity than we realized.

More importantly, though, the uncertainty surrounding the answers we received highlighted a startling realization that tied every piece of insight together: It didn’t matter if someone was a recent college grad with an internship in media, or a non-English-speaking retiree and immigrant, or a managing director at an investment bank—the fundamental question of the surest path to financial health remained elusive. Lurking behind the question “What are my best options?” was another, less obvious one: “What even are my options?”

By first addressing the latter, we believe Lifesaver is uniquely equipped to answer both. By intelligently matching people with the best financial offerings from their own communities, and with the most innovative financial technology services from around the web, our dual mission is increasing both our users’ access and fluency when it comes to bettering their financial situation. That means not only connecting our users with the products, services and institutions that can change their financial life forever, but helping them to understand how it can be done.

So where do we begin?

As millennials ourselves, our own demographic seemed like the perfect jumping off point, since conventional wisdom has it that every emerging business ought to start off by choosing one. And if you’ve been paying attention, you’ve probably at least heard reference to the beautifully-designed and heavily researched Highline article by Michael Hobbes that’s making the rounds on social media. Cheekily titled “Millennials Are Screwed,” Hobbes takes us on an alarming (if not depressing) tour of the financial situation facing American millennials currently, reminding us here at Lifesaver of our responsibility to our peers, and to the amazing people who gave us this opportunity to do something special.

The articles comes right out of the gate with some hard-to-swallow statistics, such as (1) millennials have incurred more than 300% more student debt than their parents, (2) “millennials are half as likely to own a home as young adults were in 1976,” (3) one in five millennials are currently living in poverty, and (4) many millennials “won’t be able to retire until 75.”

And the uncertainty we talked about earlier when thinking about the path toward financial health? Hobbes defines uncertainty as the “touchstone experience” for millennials navigating the path to a stable financial situation.

All of this doesn’t come from nowhere, Hobbes argues, and the blame certainly doesn’t lie wholly on millennials. Looking back on the 1970s as a period of significant change for the American economy, a few cataclysmic shifts are brought to light, and the ways in which these moments still shape our present situation become apparent. With the Federal Reserve cracking down on inflation, companies beginning to pay their executives more in stock options, and pension funds looking to riskier assets for growth, one major trend would come to encompass the behavioral patterns of companies for the following decades: Between 1960 and 2013, the average time that investors held stocks dropped from around eight years to four months—forever changing companies’ (and their stakeholders’) purview from a more long-term outlook to one with a laser-focused fixation on the upcoming fiscal quarter.

It’s no coincidence then, Cornell University economist Rosemary Batt continues, that corporations have since realized that “the fastest way to a higher stock price was hiring part-time workers, lowering wages, and turning their existing employees into contractors.”  As direct hiring declined, a 2015 report from the Government Accountability Office observed that 40% of American works are employed under some manner of“contingent” arrangement as indirect hires, “employees of random, anonymous contracting companies.” Resulting from this re-classification that saw employees become contractors is a loss in salary up to 40%.

That many millennials feel shadowed by the ominous possibility of losing everything isn’t just pessimism. Statistically, they’re right. Hobbes explains, “In the 1970s […], young workers had a 24 percent chance of falling below the poverty line. By the 1990s, that had risen to 37 percent. And the numbers only seem to be getting worse.”

But what about those millennials who are able to save?

In the coming decades, the returns on 401(k) plans are expected to fall by half. According to an analysis by the Employee Benefit Research Institute, a drop in stock market returns of just 2 percentage points means a 25-year-old would have to contribute more than double the amount to her retirement savings that a boomer did. Oh, and she’ll have to do it on lower wages. This scenario gets even more dire when you consider what’s going to happen to Social Security by the time we make it to 65. There, too, it seems inevitable that we’re going to get screwed by demography: In 1950, there were 17 American workers to support each retiree. When millennials retire, there will be just two.

Finally, the author shares a personal anecdote: “My father’s first house cost him 20 months of his salary. My first house will cost more than 10 years of mine.”

And what about things like socioeconomics and race? Millennials are neither monolithic nor homogenous, and when we start talking about any large group as though they are, someone is getting overlooked. In this case, we can’t talk about millennials without addressing the fact that one-half of us are minorities. (Fun fact: Lifesaver’s founders identify as minorities.)  For many millennials, their only safety net is their parents—a safety net that, for obvious reasons, is not equally available. As Hobbes states, “From 2007 to 2010, black families’ retirement accounts shrank by 35 percent, whereas white families, who are more likely to have other sources of money, saw their accounts grow by 9 percent.” If that’s not enough, consider that, “According to the Institute on Assets and Social Policy, white Americans are five times more likely to receive an inheritance than black Americans—which can be enough to make a down payment on a house or pay off student loans. By contrast, 67 percent of black families and 71 percent of Latino families don’t have enough money saved to cover three months of living expenses.” And lastly, and perhaps most shockingly, “Every extra dollar of income earned by a middle-class white family generates $5.19 in new wealth. For black families, it’s 69 cents.” So, to conclude that millennials have even been equally disadvantaged would be a grave misunderstanding of our present reality.

But this post wasn’t meant to substitute reading Hobbes’s article (which is seriously one of the most visually fascinating pieces of journalism we’ve ever had the pleasure of reading), nor was it intended as an indictment of America’s corporate or financial sectors. In examining and thinking about the conditions whose cumulative effect precipitated our need for Lifesaver, we hope to bring to our users (and to ourselves, since Lifesaver was first envisioned as a solution to our own problems) a platform with the potential to revolutionize the way people engage with their finances.

All people.

In first putting forth the question of what it might mean to connect people with the best financial products and services, we engaged in a months-long deep-dive into the full spectrum of offerings from large banks, community and regional banks, credit unions, and fin-tech (financial technology) companies. Taking into consideration everything from companies’ white paper and quarterly reports, balance sheets, mission statements and company history, to community feedback and press coverage, more often than not we found that the most features, savings, earnings, and security could be found right at home. Small- to medium-sized community banks and credit unions, often overshadowed by much larger institutions, are right now creating innovative financial products designed to side-step and overcome the very problems described in Hobbes’s article.

In other words, we realized that we, and pretty much everyone we know, were leaving money on the table. With nearly 7,000 banks in this country (and many more federal credit unions), that most people can only name 10 hints back to the problem discussed earlier. It’s not enough to ask, “What are my best options?” or even, “What options exist?”. A third, deeper question must often first be answered: “How do I even go about finding out what my options are?”

This may lie at the heart of the issue. We all know that some people are born into settings in which the privilege of an answer to this question can come pretty early in life. Some people may recall opening their first savings account at age 9. Others may recall growing up hearing about their college fund. Others still may have been born with a trust fund, and/or with family friends who work on Wall Street. But for everyone else, to even ask the question, “What should I do with my money?” isn’t so obvious, since none of us come innately into the real world knowing that anything can be done with money besides using it to purchase things. This is especially significant when we consider the financial realities of minorities and people in rural communities, as outlined in Hobbes’s article.

But think back on the issues raised in Hobbes’s article. Did you know that some community banks offer savings accounts with interest rates approaching 1%, with $5 monthly fees that can be waived with a $25 average monthly balance? Did you know that these same banks also offer loans that are literally impossible to default on, and whose sole purpose is to build your credit? Did you know that there are local credit unions offering checking accounts that earn dividends of 4.25% APY? That’s more money than you’d get with a five-year certificate of deposit from any large bank in America. Did you know that many community banks offer savings accounts that match a percentage of all interest earned on accounts, and donate that money to a local charity of their customers’ choosing? In this case, a bank is essentially paying out to their customers and to their community when people set money aside for the future. There are even financial products meant for those who are either contractors or self-employed, for whom long-term financial planning for things like healthcare and retirement can be both more complicated and much more expensive. To top it all off, some of the most useful and consumer-friendly financial institutions we’ve found are headquartered in historically lower-income urban centers and rural communities.

So, how can we better connect these institutions with the people who need them the most?

This is what we mean when we say that Lifesaver takes the guesswork out of personal finance. We created Lifesaver to work with people through all three of the most fundamental questions of personal finance:

1.    Where do I find my options?

2.    What are my options?

3.    Of my options, which are the best for me?

This is where we begin. More importantly, this is what we believe is missing from any number of the websites or platforms that purport to offer the keys to financial health. Millennials aren't screwed, but it's evident that something has been missing from the world of personal finance all along. Real people and real communities have long been overlooked in favor of those with the privilege to know which questions to ask, and the wherewithal to capitalize on the answers. With a smartphone in nearly every pocket in America, healthy and diversified financials should no longer be something esoteric, mystical, or unapproachable.

Get Lifesaver today, and join us as we continue to put financial health at the fingertips of people everywhere.