Tuesday, February 17, 2015

There’s No Excuse for not Understanding Your Finances these Days

If you’re reading this article then I assume you have access to the internet.  And if you have access to the internet, then – whether you realize it or not – you may have the opportunity to utilize all sorts of incredibly easy-to-use financial tools.

You don’t necessarily have to be any financial wizard or have a business background to utilize a litany of available financial tools these days.  So there is little excuse for not harnessing these tools to better understand your personal finances.

Debt payoff calculators
According to CNN Money, “The average American household with at least one credit card has nearly $15,950 in credit-card debt (in 2012), according to CreditCards.com, and the average interest rate runs in the mid- to high teens at any given time.”

Figuring out how to tackle consumer debt can be difficult.  Which debts to payoff first, how much to apply to those debt, and how long it will take to pay down the debt are all questions that might be lingering in a person’s mind when looking at their overall debt situation.  Using a debt payoff calculator could help getting a better grasp on just what loans are outstanding, how the overall interest obligation may be reduced if such loans are consolidated, what the payoff timeframe would be if making extra payments in certain amounts, as well as assist in sorting the loans by type, amount, associated interest rate, and remaining number of payments.

Mortgage and amortization calculators
It’s amazing to me how many people have mortgages but understand so little about how these debt obligations can affect their finances over time.  How mortgages are amortized (broken down between interest and principal), how interest rates affect how much such a loan costs over time, whether it’s a good idea to refinance at a particular interest rate, how much interest is paid on top of the loan amount itself over the course of a mortgage, and the total cost of a mortgage are all things that various mortgage calculators can help determine.  Not only this, but a mortgage payoff calculator might help with seeing just how much of a difference extra payments can make when applied to a mortgage and how small contributions can add up to big savings in this area.

Investment calculators
But financial calculators can be helpful in more than just determining how best to pay back money.  They can also help determine how best to make it.  However, it can be hard these days to find safe investments that earn much in interest.  In many cases, certificates of deposit, savings bonds, savings and checking accounts, money market funds, and the likes just aren’t paying out much in returns.  This doesn’t necessarily mean that it’s not worth trying though.

Understanding what certain investment returns can earn you over time can still be critical to the financial planning process.  Investment calculators allow you to see investment amounts grow over time, set short and long-term goals, review your net worth, and determine where to put money to maximize its growth and return potential.



Disclaimer:

The author is not a licensed financial professional.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

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