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Yahoo
4 days ago
- Business
- Yahoo
Ramit Sethi Says There Are 7 Levels of Wealth — Where Do You Fall?
The 2025 Financial Literacy and Preparedness Survey, which The Harris Poll conducted for the National Foundation for Credit Counseling, found that 53% of people felt like they were encountering financial setbacks regardless of what they did. Check Out: Read Next: According to money expert Ramit Sethi, feeling trapped in a financial situation isn't uncommon, but you can start getting yourself out once you realize where you are and know where to put your focus. In a YouTube video, Sethi detailed these seven levels of wealth and provided clear steps on how to make it to the next level. Consider your finances to see where you fall. You're in this lowest stage if you struggle to pay everyday bills, feel terrified about handling unexpected expenses and don't know much about your money. You're also lacking stability and peace. Sethi recommended starting with a close look at your finances, including calculating your gross income and identifying all debts and expenses. You'll also want to determine your housing expenses and figure out your monthly savings and investing contributions, which Sethi encouraged making even if you can only dedicate a small amount. Discover Next: Next, you should reconsider and get rid of any money beliefs that could be keeping you stuck in survival mode. After that, work on making more money to get more margin. When you reach this level, you're probably still in a bit of a financial pinch and unsure about financial planning, but you're not struggling to survive or running out of cash for bills. Sethi also mentioned that still having debt and facing difficulties saving regularly are possibilities. His advice for this stage included having a 'conscious spending plan' and automating your savings and monthly payments, which he said was essential for leaving this stage. He also suggested stashing away 5% of your after-tax income into investment and savings accounts, which is a small amount that can eventually add up to a large amount of wealth. Next, focus on working out better rates on any high-interest debt. That saved interest can go toward investments and savings. Finally, Sethi said you need to know your main 'money dial,' which he described as the main thing you'd like to spend money on without guilt. Security means you have some peace and confidence about your financial future. Some signs include awareness of your spending and income, no or manageable debt, regular investment contributions and an emergency fund. Sethi recommended continuing to put money in your emergency fund until it has three to six months of your typical expenses. He also suggested doubling your investment rate to 10% of your after-tax income and identifying your crossover point, which is when the money you're making from investments is more than your monthly expenses. 'It could take you 15 years or 20 years from now, but when you know that target, it shows you how quickly you are moving towards your goals,' Sethi explained. This is the first stage that Sethi said is rarer for people to reach. You're here when you see consistent investment growth, have key dates for your wealth targets and have a strategic mindset. Sethi recommended investing 1% more each year to keep up your growth. So, if you're starting at 10%, you'd be at 15% in five years. He also mentioned trying an investment calculator to see how your wealth would grow over time. Plus, look at your money dials again to make sure you're spending intentionally and consider how your money beliefs are now different. Once you're financially free, you can finally take risks and do things you want to do, like no longer work at all, travel the world or pursue your dream business idea. This is also when you can look years out when making financial decisions. Sethi said to consider what kind of life you want from the freedom you have. That way, you can make the right decisions to get there. He also recommended choosing the amount of money you can spend on things without worrying about it. You can be flexible about that number as your wealth grows. 'The point is to consciously shift your mindset from scarcity to freedom,' Sethi explained. This is a major milestone where you're making stable money, enjoying investment growth and using your wealth in ways that make your life satisfying. Sethi said it's also a time when you work with financial professionals and give to others. Since you've got the money and flexibility, Sethi recommended choosing areas in your budget where you can spend without any questions. He also suggested focusing more on helping others, which doesn't always have to involve money. A University of Alabama at Birmingham article noted that generosity can even reward you with better health. You've reached the top when you're completely financially independent and shift your focus to using your wealth to benefit other people and do big things. Sethi suggested thinking about what you'd like your legacy to be. For example, maybe you decide to regularly dedicate money to a charity that helps your community. Other moves Sethi addressed are formally planning your estate, passing down knowledge and being around like-minded people. 'This is where money becomes a highly influential tool to build something truly meaningful,' he added. More From GOBankingRates 6 Big Shakeups Coming to Social Security in 2025 7 Luxury SUVs That Will Become Affordable in 2025 This article originally appeared on Ramit Sethi Says There Are 7 Levels of Wealth — Where Do You Fall? Sign in to access your portfolio
Yahoo
4 days ago
- Business
- Yahoo
Ramit Sethi Says There Are 7 Levels of Wealth — Where Do You Fall?
The 2025 Financial Literacy and Preparedness Survey, which The Harris Poll conducted for the National Foundation for Credit Counseling, found that 53% of people felt like they were encountering financial setbacks regardless of what they did. Check Out: Read Next: According to money expert Ramit Sethi, feeling trapped in a financial situation isn't uncommon, but you can start getting yourself out once you realize where you are and know where to put your focus. In a YouTube video, Sethi detailed these seven levels of wealth and provided clear steps on how to make it to the next level. Consider your finances to see where you fall. You're in this lowest stage if you struggle to pay everyday bills, feel terrified about handling unexpected expenses and don't know much about your money. You're also lacking stability and peace. Sethi recommended starting with a close look at your finances, including calculating your gross income and identifying all debts and expenses. You'll also want to determine your housing expenses and figure out your monthly savings and investing contributions, which Sethi encouraged making even if you can only dedicate a small amount. Discover Next: Next, you should reconsider and get rid of any money beliefs that could be keeping you stuck in survival mode. After that, work on making more money to get more margin. When you reach this level, you're probably still in a bit of a financial pinch and unsure about financial planning, but you're not struggling to survive or running out of cash for bills. Sethi also mentioned that still having debt and facing difficulties saving regularly are possibilities. His advice for this stage included having a 'conscious spending plan' and automating your savings and monthly payments, which he said was essential for leaving this stage. He also suggested stashing away 5% of your after-tax income into investment and savings accounts, which is a small amount that can eventually add up to a large amount of wealth. Next, focus on working out better rates on any high-interest debt. That saved interest can go toward investments and savings. Finally, Sethi said you need to know your main 'money dial,' which he described as the main thing you'd like to spend money on without guilt. Security means you have some peace and confidence about your financial future. Some signs include awareness of your spending and income, no or manageable debt, regular investment contributions and an emergency fund. Sethi recommended continuing to put money in your emergency fund until it has three to six months of your typical expenses. He also suggested doubling your investment rate to 10% of your after-tax income and identifying your crossover point, which is when the money you're making from investments is more than your monthly expenses. 'It could take you 15 years or 20 years from now, but when you know that target, it shows you how quickly you are moving towards your goals,' Sethi explained. This is the first stage that Sethi said is rarer for people to reach. You're here when you see consistent investment growth, have key dates for your wealth targets and have a strategic mindset. Sethi recommended investing 1% more each year to keep up your growth. So, if you're starting at 10%, you'd be at 15% in five years. He also mentioned trying an investment calculator to see how your wealth would grow over time. Plus, look at your money dials again to make sure you're spending intentionally and consider how your money beliefs are now different. Once you're financially free, you can finally take risks and do things you want to do, like no longer work at all, travel the world or pursue your dream business idea. This is also when you can look years out when making financial decisions. Sethi said to consider what kind of life you want from the freedom you have. That way, you can make the right decisions to get there. He also recommended choosing the amount of money you can spend on things without worrying about it. You can be flexible about that number as your wealth grows. 'The point is to consciously shift your mindset from scarcity to freedom,' Sethi explained. This is a major milestone where you're making stable money, enjoying investment growth and using your wealth in ways that make your life satisfying. Sethi said it's also a time when you work with financial professionals and give to others. Since you've got the money and flexibility, Sethi recommended choosing areas in your budget where you can spend without any questions. He also suggested focusing more on helping others, which doesn't always have to involve money. A University of Alabama at Birmingham article noted that generosity can even reward you with better health. You've reached the top when you're completely financially independent and shift your focus to using your wealth to benefit other people and do big things. Sethi suggested thinking about what you'd like your legacy to be. For example, maybe you decide to regularly dedicate money to a charity that helps your community. Other moves Sethi addressed are formally planning your estate, passing down knowledge and being around like-minded people. 'This is where money becomes a highly influential tool to build something truly meaningful,' he added. More From GOBankingRates 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth 10 Cars That Outlast the Average Vehicle This article originally appeared on Ramit Sethi Says There Are 7 Levels of Wealth — Where Do You Fall?
Yahoo
4 days ago
- Business
- Yahoo
Ramit Sethi Says There Are 7 Levels of Wealth — Where Do You Fall?
The 2025 Financial Literacy and Preparedness Survey, which The Harris Poll conducted for the National Foundation for Credit Counseling, found that 53% of people felt like they were encountering financial setbacks regardless of what they did. Check Out: Read Next: According to money expert Ramit Sethi, feeling trapped in a financial situation isn't uncommon, but you can start getting yourself out once you realize where you are and know where to put your focus. In a YouTube video, Sethi detailed these seven levels of wealth and provided clear steps on how to make it to the next level. Consider your finances to see where you fall. You're in this lowest stage if you struggle to pay everyday bills, feel terrified about handling unexpected expenses and don't know much about your money. You're also lacking stability and peace. Sethi recommended starting with a close look at your finances, including calculating your gross income and identifying all debts and expenses. You'll also want to determine your housing expenses and figure out your monthly savings and investing contributions, which Sethi encouraged making even if you can only dedicate a small amount. Discover Next: Next, you should reconsider and get rid of any money beliefs that could be keeping you stuck in survival mode. After that, work on making more money to get more margin. When you reach this level, you're probably still in a bit of a financial pinch and unsure about financial planning, but you're not struggling to survive or running out of cash for bills. Sethi also mentioned that still having debt and facing difficulties saving regularly are possibilities. His advice for this stage included having a 'conscious spending plan' and automating your savings and monthly payments, which he said was essential for leaving this stage. He also suggested stashing away 5% of your after-tax income into investment and savings accounts, which is a small amount that can eventually add up to a large amount of wealth. Next, focus on working out better rates on any high-interest debt. That saved interest can go toward investments and savings. Finally, Sethi said you need to know your main 'money dial,' which he described as the main thing you'd like to spend money on without guilt. Security means you have some peace and confidence about your financial future. Some signs include awareness of your spending and income, no or manageable debt, regular investment contributions and an emergency fund. Sethi recommended continuing to put money in your emergency fund until it has three to six months of your typical expenses. He also suggested doubling your investment rate to 10% of your after-tax income and identifying your crossover point, which is when the money you're making from investments is more than your monthly expenses. 'It could take you 15 years or 20 years from now, but when you know that target, it shows you how quickly you are moving towards your goals,' Sethi explained. This is the first stage that Sethi said is rarer for people to reach. You're here when you see consistent investment growth, have key dates for your wealth targets and have a strategic mindset. Sethi recommended investing 1% more each year to keep up your growth. So, if you're starting at 10%, you'd be at 15% in five years. He also mentioned trying an investment calculator to see how your wealth would grow over time. Plus, look at your money dials again to make sure you're spending intentionally and consider how your money beliefs are now different. Once you're financially free, you can finally take risks and do things you want to do, like no longer work at all, travel the world or pursue your dream business idea. This is also when you can look years out when making financial decisions. Sethi said to consider what kind of life you want from the freedom you have. That way, you can make the right decisions to get there. He also recommended choosing the amount of money you can spend on things without worrying about it. You can be flexible about that number as your wealth grows. 'The point is to consciously shift your mindset from scarcity to freedom,' Sethi explained. This is a major milestone where you're making stable money, enjoying investment growth and using your wealth in ways that make your life satisfying. Sethi said it's also a time when you work with financial professionals and give to others. Since you've got the money and flexibility, Sethi recommended choosing areas in your budget where you can spend without any questions. He also suggested focusing more on helping others, which doesn't always have to involve money. A University of Alabama at Birmingham article noted that generosity can even reward you with better health. You've reached the top when you're completely financially independent and shift your focus to using your wealth to benefit other people and do big things. Sethi suggested thinking about what you'd like your legacy to be. For example, maybe you decide to regularly dedicate money to a charity that helps your community. Other moves Sethi addressed are formally planning your estate, passing down knowledge and being around like-minded people. 'This is where money becomes a highly influential tool to build something truly meaningful,' he added. More From GOBankingRates 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth 10 Cars That Outlast the Average Vehicle This article originally appeared on Ramit Sethi Says There Are 7 Levels of Wealth — Where Do You Fall?
Yahoo
19-05-2025
- Business
- Yahoo
What to do when your mortgage application gets denied
Mortgage applications can be denied for multiple reasons, including credit issues and changes in employment. If your mortgage application is rejected, you can explore other lenders and loan options and address the reasons for the denial, including improving your credit and paying off debt. Getting denied for a mortgage can be a tough pill to swallow, but it doesn't necessarily mean your dreams of homeownership are over. If you've been rejected for a home loan, there are steps you can take to strengthen future applications. How often do underwriters deny loans? In 2024, lenders denied almost 20 percent of home loan applications, according to Home Mortgage Disclosure Act data. Credit issues and high debt-to-income ratios were the two most common reasons for rejection. If a lender rejects your loan application, you'll receive a mortgage denial letter. This document will include information about why you were refused and which credit reporting agency supplied the credit report used to evaluate your application. Receiving a mortgage denial 'shouldn't be a surprise,' says Brian Koss, a Winchester, Massachusetts-based regional sales director at Movement Mortgage. If you had a few potential red flags in your mortgage application, your loan officer should have discussed this with you before you submitted it. Either way, though, it's smart to schedule a conversation once you receive the denial. 'The lender is supposed to provide you with the reasons you were denied so you can take that info to heart and use it to identify a way to resolve things, so you can get on a better financial footing and re-qualify later,' says Bruce McClary, senior vice president of membership and communications for the Washington D.C.-based nonprofit National Foundation for Credit Counseling. Even if you were denied for a conventional loan, you may qualify for another type of mortgage. For example, you can consider a government-backed loan, like an FHA, VA or USDA loan. Although these are widely available, you should still confirm that the lender or lenders you're considering offer them. You could also contact a mortgage broker, whose job is to match borrowers with lenders. A broker submits your information to their network of lenders, including some that might not work directly with consumers. Your credit score is one of the main factors that determines the types of mortgages you'll qualify for and the mortgage rates you're likely to get. After getting a mortgage denial, look for any errors or inaccuracies in your credit reports that could be dragging down your score. And if your score needs work, there are a few ways to improve it before applying for another mortgage: Pay bills on time Don't open new accounts Pay off credit card balances and other debt Become an authorized user on a parent's or relative's credit card Sign up for credit-boosting programs Paying off existing debt will also boost your odds of approval in one other way: by reducing your debt-to-income (DTI) ratio. This is a measure of how much of your monthly income you spend per month on debt, such as rent or mortgage payments, credit card bills, car payments and student loans. Even if you have a solid credit score, lenders will want to determine that you're not already financially overextended. If most of your income goes toward bills and debt repayments, lenders might question your ability to pay for a mortgage on top of it. In most cases, you'll need a DTI of 43 percent or less to get approved for a mortgage. If your ratio is higher, paying down debt will lower it. Getting rejected for a mortgage can be disheartening, but remember that not all lenders have the same standards. If you're rejected by one, you may well be approved by another. However, if you go this route, keep these tips in mind: Consider the credit impact. After you've been rejected for a mortgage, there's no minimum waiting period before you can apply for another one. Still, it's usually a good idea to hold off for a while. Mortgage applications involve a credit check, which can temporarily lower your credit score. Don't limit yourself to a specific type of lender. There are many kinds of mortgage lenders — including banks, credit unions and online lenders — with options for all sorts of buyers. Applying with at least three lenders may help boost your approval odds. Ask for help. If you're a young or first-time buyer with below-average credit, getting approved for a mortgage can be tough. But if your parents have stronger credit and are open to co-signing your loan, you might have more success. Keep in mind that submitting an application with a co-signer is often more complicated because you'll have to provide additional documentation. When a mortgage application is denied, the lender provides the applicant with a mortgage denial letter, also known as an adverse action notice. This letter typically includes the following: Explanation of denial: The specific reasons for the loan refusal. These typically relate to the applicant's finances, employment history or the property itself. Credit information: Details about the credit report used when reviewing the borrower's application, the credit bureau that supplied it and the credit score listed. Legal rights: Information about the borrower's rights, including how to get a free copy of the credit report used to evaluate the application. This is required under the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA). Contact information: Contact details for the lender or a representative who can further discuss the refusal and next steps. Reconsideration options: A mortgage denial letter may include information about how the borrower can have their application reconsidered, such as submitting extra documentation, fixing credit or exploring other types of loans. Your mortgage application can be denied for many reasons, including: Credit problems: Lenders review your credit history to understand how responsible you've been with credit in the past. If you have a low credit score or derogatory marks on your credit report, they might consider it too risky to lend you money. A lender might also reject your application if you don't have much credit history, because it can't assess how well you manage credit. Employment changes: Lenders prefer applicants with stable employment and consistent income. If you've recently switched employers or have a pattern of jumping between jobs, your loan may be more likely to get denied. High DTI ratio: Your DTI ratio compares your monthly debt commitments to your monthly income. If your total debt is too high, lenders may doubt your ability to take on a mortgage. Unexplained cash deposits: You might think that having lots of cash on hand will improve your application odds, but if you received the money suddenly and can't explain where it came from, a lender may deny your mortgage. Issues with the property: Before funding your mortgage, your lender will want to ensure that the property is worth what you're paying for it. If you have an appraisal gap — that is, your appraisal comes back lower than the purchase price of the home — and you can't make up the difference, it's likely to derail your mortgage. If you get preapproved for a mortgage, it is still possible to get denied. A preapproval doesn't guarantee financing. Instead, it's a preliminary agreement from a lender to give you a certain amount of money for a home based on your financial profile. Typically, if you're preapproved, you will be approved for a mortgage. However, if the lender has concerns about the specific property you're buying or finds red flags after digging deeper into your mortgage loan application, you may still be denied despite receiving a preapproval. Similarly, if you switch jobs or take on more debt after being preapproved, your lender may decide not to grant your application. What happens when funding gets denied after closing? A mortgage shouldn't fall through after closing day, but it may fall through just before or on the day you're scheduled to close. This could happen, for example, due to issues with the property, or if you've recently lost your job or purchased a big-ticket item with a credit card. If you find yourself in this situation, consider pausing your home-buying journey to focus on improving your credit or paying off debt. Can you get a mortgage with student loans? Yes, you can get a mortgage with student loans. However, like any other form of debt, student loans can increase your DTI ratio and affect your ability to qualify for a home loan. Lenders consider this when assessing your application and deciding how much money to loan you. What can I do if my mortgage was denied due to student loans? First, review your mortgage denial letter to confirm that your student loans — or overall debt load — were the reason for the denial. If that's the case, focus on lowering your DTI ratio. You can do this by increasing your income — for example, by finding freelance work or asking for a raise — or decreasing your debt. While it's not practical for most people to pay a lump sum toward their student loans, if you can reduce your monthly payments — perhaps by signing up for income-driven repayment — you'll improve your DTI ratio.
15-05-2025
- Business
Woman shares her strategy to paying off $20K in credit card debt
Tracy Schultz is now debt-free and says help is available. 2:38 A few years ago, Tracy Schultz was drowning in credit card debt. The Massachusetts resident said she was going through a breakup and covering rent on her own, and she started spending more money than she had. "It started out just trying to cover the difference in rent, like, I would charge my groceries," Schultz told "Good Morning America.""And then the issue became spending for feeling better." The 42-year-old said she wound up racking up a balance of about $20,000. "It got to the point where I didn't have enough in my budget to cover the minimum of what was due every month. And that's when I realized that I was in trouble," Schultz said. Schultz said she turned to a nonprofit debt management program for help. "They contacted my creditors and set a payment each month that was doable," Schultz said. "It was good because I knew exactly how much I was going to have to pay every month." With a program in place, Schultz consolidated her payments into a set amount each month and gradually paid off each balance. Schultz also tracked her spending and aimed to make purchases only in cash. Today, she is debt-free and says the biggest lesson she learned is to avoid impulse buys and to stop using credit cards. "When you charge, it's like, the money's not even real," said Schultz. Nonprofit debt management programs are often available for people in debt at no cost. The organizations work directly with creditors to reduce interest rates on debt and create manageable payment plans. The key is to avoid high-fee "debt settlement" companies that promise quick fixes. Look instead for nonprofits that are certified by the National Foundation for Credit Counseling. Schultz's advice to others who want to follow in her footsteps is to reach out for help. "There is help available," she said. "It's great to actually feel like you're taking control of a situation rather than being a victim of your own bad choices."
