Personal Finance and Investing

With a multitude of bills piling up, debt consolidation can appear to be an easy way out. Claims of reduced rates and one payment convenience can seduce just about anyone. But before you commit to such a plan, make sure that you have weighed the pros and cons to make certain that you
will actually save money in the end.

Is Debt Consolidation Always A Good Deal?

Debt consolidation rolls your short term debt, such as credit cards accounts or bills, into one loan. The idea is to reduce your interest payments, helping your monthly payments go farther and eliminate your debt faster. But you have to be careful, because a lower monthly payment or interest rate doesn’t always mean you are saving money.

Time is your enemy with debt consolidation loans. The longer your loan period, the more you will pay in interest charges. For example, $20,000 in credit card debt at 15% for 5 years will cost $8,547.91 in interest. Consolidate that debt into a 30 year home equity loan at 6% and interest charges soar to $23,167.72.

Other Reasons To Consolidate Debt

But saving money isn’t the only reason to consolidate debt. Reducing your monthly payments through consolidation can help you get through a job loss or health crisis. Taking a look at the previous example, the monthly payment on the credit card debt at 15% would be $475.80. Convert that to a 30 year loan, and the monthly payment drops to $119.91 – a difference of $355.89.

The Elements Of A Good Debt Consolidation Loan

To see a savings with a debt consolidation loan, make sure you find a low interest, short term loan. Home equity loans with 5 to 15 year terms offer reasonable rates with few fees. But if you only have a few thousand in debt, opening a new credit card account with 0% on transfers would be a better option. Before signing with any lender though, make sure you do some comparison shopping to ensure you are getting the best available financing.

With more room in your budget, work to make additional principal payments to save on future interest charges. You will also want to check out your credit report and possibly close some accounts to improve your credit score. Just remember to keep your longest held accounts open since
a long credit record improves your score.

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An easy way to save money is to conserve energy.
Not only is it good for your wallet, it’s also good for the environment.

Look for the ENERGY STAR logo. ENERGY STAR is a government-backed symbol for energy efficiency. It is a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy helping us all save money and protect the environment through energy efficient products and practices.

Appliances

When buying an appliance, remember that it has two price tags: what you pay to take it home and what you pay for the energy and water it uses. ENERGY STAR qualified appliances use 10-50% less energy and water than standard models. The money you save on your utility bills can more than make up for the cost of a more expensive but more efficient ENERGY STAR appliance.

Compact Fluorescent Light Bulbs

When replacing light bulbs, you should also look for the ENERGY STAR qualified compact fluorescent light bulbs [CFLs]. These light bulbs fit into a standard incandescent socket and use 2/3 less energy than a standard incandescent and last much longer. This translates into a savings of $30.00 or more in energy costs over each bulb’s lifetime.

For more information about ENERGY STAR visit: http://www.energystar.gov.

Other energy saving tips:

oTurn off your computer at night for a savings of $70.00 per year.

oTurning off you television when no one is watching can save $200.00 per year.

oWashing clothes in cold water can save an additional $60.00 per year.

oLower your thermostat. According to the U.S. Department of Energy, during each 24-hour period, you will save about 3% on your energy bill for every 1 degree that you lower your thermostat setting (or raise it when air conditioning is the big cost).

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