As you know, your credit score determines your access to loans for things like cars, homes, and education. Anyone with a score of 750 or higher is considered to have excellent credit, while a score of 600 or less is considered poor. Don’t worry if you’re not in that 750 or above group. There are some simple things you can do to improve your credit score right now.
1. Double Check Your Credit Reports
The FTC discovered that about 5% of consumers have an error (or several) on their credit report. Obtain copies from each of the three major credit bureaus (Equifax, TransUnion, and Experian) and double check them for accuracy. You’re legally entitled to one free credit report each year. If you do discover an error, report it immediately to the credit bureau so it can be corrected.
2. Prove Your Track Record
Payment history is one of the biggest factors in determining credit score. To ensure consistent, on time payments, consider setting up automatic payments through your bank. The FICO score is weighted to give more value to recent history, so if you’ve missed payments in the past, you can override your bad history by being on time now. This also means you can’t skip payments. In addition, the age of the account matters. The longer you have a credit card open and in good standing, the higher your score will be.
3. Be Aware of Your Credit Utilization
Lenders look at the ratio of your credit limit and the amount used in a given month. Ideally, this should be less than 30%. Higher than that and you may be considered a poor risk. If you can keep it below 10%, that’s even better. To manage this, set up balance alerts, ask your lender to raise your credit limit, and pay off your balance several times during the month.
4. Lower Your Debt-to-Income Ratio
The debt-to-income ratio is a reflection of your monthly debt payments as a percentage of your monthly income. Lenders use this to determine whether you have enough excess money to cover your living expenses plus your debt obligations. The lower this ratio, the more income you have for a new loan. To lower your debt-to-income ratio, pay off outstanding debt and/or find a way to earn more income.
5. Consolidate Credit Card Debt
Credit card interest rates are often quite high and the interest rates on personal loans tend to be smaller. If this is true in your situation, consolidate your credit card debt into a personal loan. The lower interest rate could save you quite a bit of money as well as 3-7 years time in repaying the debt. In addition, because a personal loan is an installment loan with a fixed repayment term, you also lower your credit utilization in the process.
Taking one, or many, of these steps will greatly improve your credit score and help put you on the path to financial freedom.
Whether you’ve just started thinking about saving for retirement or having been saving enough, you can ramp up your efforts and still put aside enough to retire. There are five specific steps you should take to start increasing your retirement savings today.
1. Max Out Your Contributions
People younger than 50 can contribute up to $18,500 of pretax income to a 401(k) or other employer sponsored savings plan each year. After turning 50, that amounts jumps to $24,500. By maxing out your contributions, you not only increase your retirement savings, you also reduce your taxable income. This may mean cutting some spending now, but consider your long-term goals and figure out what you can reasonably cut back on now for the long-term benefit.
2. Invest Extra Money
If you get a raise, a bonus, or a refund from the IRS, invest all of it in your retirement accounts. In the event that you’ve maxed out your contributions to tax-advantaged funds, look at alternatives such as stocks or mutual funds. While it can be tempting to spend these extra dollars, approaching your retirement savings fiercely is the best way to make up for lost time.
3. Take Calculated Risks
Typically, financial planners suggest shifting towards a more conservative investment approach the closer you get to retirement. However, if your portfolio is still small, it may make sense to skew it towards slightly higher risk growth equities. Even someone who’s 60 years old may have 20 or 30 years to plan for part of his or her retirement funds. Be careful, though, and avoid chasing “magic bullet” investments.
4. Reconsider the College Fund
While it’s admirable to want to help your kids pay for their education, the truth is that there are many financial aid options available to them, while you have only one way to fund your retirement. Particularly for parents who had their children later in life, it may be worth focusing on savings for your retirement and helping your children find alternative ways to pay for college.
5. Work a Little Longer
Anyone born after 1960 qualifies for Social Security benefits at 67, however, the government will increase your payments by up to 8% every year until the age of 70 as an incentive to delay collecting. You may decide to retire from your current career and work at something else, but each year you can hold off can dramatically increase your retirement income.
Most college students are living on student loans, and/or money earned from a low-paying part-time job. In a 2018 survey by Goldrik-Rab, more than 1/3 of the more than 20,000 students who participated said they were either food insecure or had limited access to food in the preceding 30 days. In addition, 36% of those students said they were housing insecure.
What this boils down to is that college students are barely scraping by financially. At the same time, a financial crisis could cause them to have to drop out of college, severely impacting their future earnings prospects. However, with so little money coming in, many college students struggle with setting up an emergency fund to cover unforeseen situations. Fortunately, there are services available to help students are the majority of schools in the US.
Emergency Financial Aid
Someone at the school’s financial aid office will be able to provide you with information on emergency programs including loans, grants, scholarships, or vouchers. Typically, these funds assist with paying for tuition, housing, books and supplies, and transportation.
Emergency Food Funds
Some schools have campus food pantries or yearlong meal plans. In addition, food vouchers, meal plan financing, and SNAP funds may be available depending on the school. Again, the financial aid office will have information about these services.
Unfortunately, there aren’t yet good solutions for this problem. Some schools have rooms set aside, but more often, the student affairs office will point you to off-campus solutions such as shelters, room shares, sublets, or apartments.
If you haven’t already applied via the FAFSA program, you need to do that each year. In addition, emergency funds, which are separate assistance, may be available based on a change in life circumstances.
College is stressful enough. Don’t let money concerns add to the burden. Seek help and support from a variety of emergency fund programs.
You’ve heard the horror stories about identity theft destroying people’s credit, or worse. Although it’s sad such crimes are so common, there are ways you can protect yourself – and that doesn’t mean hiding your money under mattress or making all purchases in cash. Try these highly effective steps instead.
1. Protect Your Social Security Number
Do not carry your social security card with you. The only time you should ever have to show it is if you’re filling out paperwork for a new job. Your SSN is the key to all your data, so be sure you keep the card in a safe place and only give out the number when it makes sense to do so. If you live in a state that still has the option to use your SSN for you license number, opt for a state issued number instead.
2. Check for Skimmers
Skimmers are a tiny device identity thieves attach to outdoor ATMs and other payment systems. Before putting your card in, wiggle the slot to be sure nothing is attached to it. Whenever possible, use indoor machines which are typically more secure simply because there are people around.
3. Update and Strengthen Your Passwords
It seems like everything these days requires a password and it’s easier on our brains to use the same one or two. However, you want to be sure you’re changing your passwords on a regular basis and that you’re using a combination of letters, numbers, and special characters to make it more secure.
4. Be Aware of Your Public Profile
Can strangers see your birthday or family members on your Facebook or other social media profiles? If someone called you and asked the right questions or offered the right incentive would you share that information? Take a few minutes to check your privacy settings on your social profiles and use caution when speaking with people who call you asking for information.
5. Watch Your Mail
One of the easiest ways for someone to steal your identity is to steal your mail. Free credit card offers and other similar mailings are an identity thief’s dream. If you’re going to be out of town have your mail held or ask a trusted neighbor to bring it in for you. Or take it a step further and opt out of all pre-screened credit card offers.
6. Love Your Shredder
Bank statements, pre-approved credit card offers, and other similar documents should be shredded or burned to prevent someone from stealing your identity by fishing them out of the trash or recycling bin.
7. Situational Awareness
When shopping, be aware of your surroundings and take steps to protect yourself. Know where your wallet or purse is at all times and always put your card back in the same place after every transaction. When entering your PIN, be sure no one can see the number and don’t share your PIN or keep it on your card.
8. Protect Mobile Devices
Entering a password to access your phone can feel like a pain, but what happens if you drop your phone or forget it somewhere? If it’s not password protected and someone else finds it, it’s the perfect way for someone to start the process of becoming you.
9. Check Your Credit Report Annually
Legally, you’re allowed one free credit report yearly from each of the three major credit reporting bureaus. Take advantage of this and check for suspicious or incorrect information. If you watch your credit score, be on alert for any large change you can’t explain.
10. Monitor Your Financial Statements
It only takes a few minutes to look through bank and credit card statements. Be sure you recognize every charge – no matter the dollar amount. Know the due dates for your recurring bills and call if you don’t receive an invoice in a timely fashion. Also check your health insurance statements to be sure you recognize each appointment and charge. Having someone else’s health records confused with yours could be a potentially life threatening situation.
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Small business owners and solo-preneurs have a unique challenge in tracking business expenses. Many people in this position start out using a spreadsheet or other document to keep track, but that can quickly become cumbersome. Expenses need to be tracked and categorized for easy retrieval at tax time. Thankfully, there is software available to make this process easier. At True Assisting, we use Quickbooks and we suggest using it in conjunction with Shoeboxed for our clients’.
If you’ve looked into accounting software at all, you’ve come across Quickbooks. It’s the biggest name in the industry for good reason. Quickbooks offers different service levels depending on your business needs and can easily scale up as you grow. One of best features is the ability to create different access levels so you can keep personal data separate from what your bookkeeper and accountant see. It does require basic accounting knowledge, so if you’re uncomfortable, consider asking a professional to help you.
In the past, small business owners and entrepreneurs have had files (or shoeboxes) full of receipts backing up the data in their accounting system. If you have unlimited storage space, this might be fine. Chances are, though, that storage is limited, particularly if you work from a home office. Shoeboxed takes the place of the boxes and electronically stores those receipts. Unlike similar programs, Shoeboxed links directly to Quickbooks, eliminating the need to look for duplicates or cross-populate information. If you drive for work, Shoeboxed mobile app includes a GPS function that will automatically track and record your mileage when activated. This is also synced to Quickbooks making it simple to accurately report your mileage on your taxes and receive the appropriate deduction.
By using expense tracking tools all year long, tax season is no longer a nightmare of hours spent scrambling trying to figure out what you can deduct and where your data is. If you’d like help getting your business expense tracking software set up, please reach out. I’m happy to assist you!
Although not hard and fast, rules of thumb can be quite helpful with making decisions and achieving goals. You may have rules of thumb for finding a job or going to the grocery store. How about financial rules of thumb? These will help you manage your money and reach your financial goals.
For most people the 50/30/20 rule works well. With this, 50 percent of your income goes to necessities like housing and bills, 30 percent goes to “wants” like dining or going to see a show, and 20 percent goes towards reaching financial goals such as saving for retirement or paying off debt. In most situations, this creates a workable balance better present needs and wants and long-term goals.
Buying a Car
Other than a house, for most people buying a car is their biggest expense. Assuming you have a reasonable commute and decently paying job, the 20/4/10 rule is the way to go. Put down 20 percent of the cost of the vehicle and finance the rest for no more than four years. Overall, you should aim to spend no more than 10 percent of your gross income on transportation. In most situations, this ensures you don’t buy more car than you can afford.
Buying a Home
This one is a big deal – and a big commitment. Most people own their homes for at least five years. To help avoid added costs such as PMI, put down at least 20 percent of the purchase price. In addition to keeping your mortgage costs lower, it also helps ensure you don’t sign up for a bigger mortgage than you can handle.
No one wants to work forever. Unless you’re nearing the retirement age, putting 10% of your income towards retirement is a simple number to work with and ensures money is regularly being set aside.
Another way to figure out how much to set aside for retirement is to work backwards. You should set aside 20x your gross annual income. Thinking about it this way gets you focused on the future and helps you back into how much you need to set aside with every paycheck.
Saving and Investing
Emergencies happen. To protect yourself from financial disaster in the case of a crisis, aim to have at least 6-months of income readily available. Although having so much money in low interest accounts can feel like a missed opportunity, you’ll breathe a sigh of relief if you need it quickly.
Although these rules of thumb don’t work for every financial situation, they’re a good starting point, especially if you’re struggling to figure out a money management strategy.
There’s always a lot of focus on ways to save money, stretch your budget, etc. But what about things you’re spending money on that you could allocate more effectively elsewhere? Not surprisingly, there’s some commonalities for most people’s biggest money wasters. How many of these are part of your current spending habits?
According to a calculation on Credit.com, making oatmeal for breakfast at home 3 days a week for a year costs about $25. Buying that same amount of oatmeal from McDonald’s will set you back over $300! Or if you prefer Starbucks, you’re looking at a whopping $539! And that’s just breakfast. Think about the savings with pricier meals like lunch and dinner. You don’t have to be an amazing chef to make a sandwich, salad, or put something in a crockpot. Your wallet will thank you!
Credit cards and other loans typically charge a late fee on top of any annually accruing interest. For credit cards, late fees are capped at $27 for the first late payment and $38 for any late payment in the next six billing cycles. If you’re late even twice, that can add up quickly. Thankfully, you can easily avoid late fees by organizing your budget and paying on time.
Buying Stuff on Sale
Sure, if you NEED it, buying on sale is ideal. But if you buy something on a whim simply because there’s a sale, that’s not helpful. Before making any impulse purchases ask yourself if you really need it and if it will make you happy. If the answer is no, keep your money in your wallet for something else.
Simply changing these three spending habits can add up to hundreds, even thousands, of dollars in savings over the course of a year. While you still want to have a solid savings plan and budget, that extra money will make saving for a new car or that big vacation a lot easier.
Do you make a good salary, but still feel like you struggle to find money to pay the bills every month? Or maybe you run out and spend your paycheck the minute it hits your bank account – forgetting that you’ve already got bills and credit cards to pay. Oops! Money management sounds scary and many people are overwhelmed and don’t know where to start. The good news is that with just a few simple skills, you can change the way you think about money and discover you have enough for everything you need, including saving.
Build an Emergency Fund
Let’s face it, emergencies happen. Instead of relying on credit cards or other debt in a crisis situation, build an emergency fund. Depending on your situation and lifestyle, it’s suggested you keep three to six months’ worth of expenses set aside. If you’re single or the sole provider for a family, six months is better. If you’re a two-income family, at least three months is recommended. More is always better, but these are good targets to get you started.
What do you want to do with your money? Buy a house? Go on a fabulous vacation? Retire? Keeping these goals in mind will impact how you allocate your fund each month and also help you talk with a financial planner about the best options for you.
Assess Where You’re At
How are you doing with those goals? What can you do to manage your money differently to help you get, and stay, on track with them? Consider working with a Certified Financial Planner or other money management professional to help you get organized and come up with an investment plan.
You need to know where your money is going every month. Keep track of what you’re spending. Look at what you can change to reduce expenses. After you’ve made some cuts, remember to pay yourself first. Determine how much you can and need to save each month and make that the first “bill” you pay each month.
Your savings account is a key component of money management, but it’s not going to be enough to help you retire. You’ll need to invest to get the return you need. Don’t let this stress out you! There are amazing financial planners out there. Ask for recommendations and take the time to speak with a few before deciding on one. They’re going to be in charge of handling your money. You need to be sure you trust them and they understand your goals and values.
With these simple steps, you’ll have a much better handle on your money – and it won’t take long!
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No one likes being in debt, but it can be tough to figure out how much to pay and how quickly in order to maximize your paycheck and get out of debt. When you apply for a loan at a bank, they look at your debt-to-income ratio with the expectation that your monthly debt payments are less than 36% of your gross income. Ideally, you want that figure to be 10%, but even 20% is quite good. With that in mind, here’s what makes sense for the different types of debt you may incur.
Including taxes and insurance, your mortgage payments should not be more than 28% of your income. So if you make $4,000/month ($48,000/yr) your total monthly mortgage payments should not exceed $1,440.
Credit Card Debit
Unless you pay them off every month, credit card debt has a way of snowballing and sticking around forever. It’s best to pay them off as soon as you can. The interest rates are always ridiculously high and the money you’re throwing at it could be better spent elsewhere. In addition, 1/3 of your credit score is based on what’s called the “credit utilization rate” – meaning how much you’ve used of the credit that’s been extended to you. Basically, that’s the total of all the limits on your credit cards divided by the total amount you owe. To break that down, if your total credit limit is $10,000 and you owe $5,000, your credit utilization rate is 50%. Generally, anything higher than 30% could negatively affect your credit score.
Technically, this isn’t debt, but you should treat it like it is. The best way to save money and protect your long-term financial health is to pay yourself first, so every month set money aside in a separate account the same way you’d pay your other bills.
Getting out of debt takes time and discipline, but it is possible. If you’re still struggling after reading these tips, consider working with a daily money manager to create a budget you can live with.
For many people, budgeting can be tedious and stressful. It seems easier to avoid it – and short term it may be. But you know that long-term you need to have a budget. Thankfully, it’s a lot easier to create a budget with the help of some great apps. No more tearing your hair out in front of an Excel spreadsheet – try one of these specialty apps instead.
You Need a Budget (YNAB)
YNAB is hugely popular and super easy to use on both Mac and Windows platforms. In addition to being easy to use, YNAB actually teaches budgeting skills. The designers created this app for beginners, so you won’t be faced with a lot of tools and features you don’t understand. And as an added bonus, you can sign up for online classes. One of my favorite features in YNAB is that it alerts you if you’ve strayed from the budget you set up.
If your prior attempts at budgeting including stuffing dollar bills in an envelope, this app is for you! Based on that same premise, but bringing it to the digital age, Mvelopes works across devices and syncs to your bank accounts. Depending on your level of experience and budgeting needs, Mvelopes offers three different versions.
Quicken is probably the longest running budgeting app around. In fact, it’s been around longer than computers! While it did set the standard and does all the things you expect a budgeting app to do, it’s also a bit old fashioned. For example, it doesn’t auto-sync to your bank accounts nor is it cloud based. If those things aren’t important to you, Quicken can be a great option.
Inuit, the company that once owned Quicken, also owns Mint so the two have many similarities. One important difference – Mint is free if you’re willing to put up with lots of ads. Unlike some budgeting apps, Mint is a bit more flexible. It doesn’t measure you budget down to the last penny. Before you dive in, be aware that Mint can be tedious to set up.
There are two version of CountAbout, basic and premium. While they both connect to your banking institution, you need to do it manually in the basic version. Unlike many other budget apps, you can’t pay your bills online with CountAbout and there’s limited ability to manage your investment accounts.
If you like Quicken, but also prefer Macs, check out Money Dance. It’s basically the same program, but with the added functionality of tracking investments and changes in net worth. While it may not be ideal for beginning budgeters, it’s great for people with a bit of experience.
LearnVest is aimed at experience money managers looking to take their budgeting and investing to the next level. While it has all the typical budgeting tools, the goal with LearnVest is to create and maintain an overall financial plan.
Again not for people just starting out with budgeting, Personal Capital is focused on growing wealth. Features include tracking investments and net worth as well as the ability to monitor the stock market and fluctuations related to your holdings.
When you make a purchase, chances are it’s not in whole dollars. Back in the days when people paid cash, the change wound up in a jar and was saved up for a big purchase – like a fancy dinner or mini-vacation. Acorns does essentially the same thing, but digitally.
Using one, or several of these apps makes budgeting easier and helps you grow your personal wealth. What’s not to love about that?