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9 Tips For Spring Cleaning Your Personal Finances

Cleaning womanFor many of us spring just arrived – at least officially. We’re watching our lawns green up, thinking about having carpets cleaned and wondering when we’ll have time to clean those dirty windows. Now would also be a good time to think about your personal finances and what you could do in terms of spring-cleaning them. Here are nine tips that could help spruce them up, too.

#1. Revisit those credit card offers

The credit card companies are now hollering for business. One research firm has reported that the direct mail offers from credit card companies increased 12% between November and December. Did you receive one or more of these offers? Now might be a good time to apply for one, as the rewards offers are getting juicier. In fact, the credit card companies have been 25% more generous in handing out frequent-flyer miles, rewards points and sign up bonuses versus what they were offering just a year ago.

#2. Check out the new home financing options

The big quasi-governmental organizations Fannie Mae and Freddie Mac recently announced programs where you could put down as little as 3% when buying a home. The Federal Housing Agency requires as little as 3.5% down and recently lowered its annual mortgage premium. So if you’re thinking about buying a house now might be a good time to start shopping.

#3. Go cheap

There are some items were it doesn’t pay to be cheap such as toilet paper. However they’re other items where you can save a good deal by skimping. Grocery items are often marked way down when they near their sell-by dates. These can be perfectly okay so long as you either freeze or cook them right away. Inexpensive dishes and glassware will hold up just as well is the more costly ones. Plus, it hurts a lot less when you break a plate. Another place to save is on children’s clothes, as they will soon be outgrown anyway.

#4. Get your FICO score free

JP Morgan Chase, USAA, the State Employees’ Credit Union, Ally Financial, Discover and Bank of America are in the process of rolling out programs that will provide their customers with their FICO scores free. This is a monumental change because it will help you know your own creditworthiness, which is critical when it comes to applying for a loan or credit card. However, this is an area where it pays to be a bit careful as not all credit scores are created equal – even those that carry the FICO brand. But whichever you get should be close enough to your true FICO to know how potential lenders will view you.

#5. Move your money to an online savings account

The job market has approved this past year and gas prices dropped dramatically. If these have left you with some extra money you could save the best place to put it isn’t in a conventional bank or credit union savings account. These have an annual yield of around 0.0017% meaning that if you were to save $1000 you would earn just $1.70. But the online banks can generally offer higher interest rates and charge lower fees because they are not required to maintain brick-and-mortar branches. As an example of this MySavingsDirect and GE Capital Bank are currently offering 1.05%. While this may not change your life much it is certainly better than what you would get from your local bank.

Adult Woman#6. Get the credit card you want

We know that if you’ve been rejected for a credit card it can really sting. There are ways to maximize your chances of getting the cards you want and the most important is, of course, to maintain a high credit score. The way you do this is to pay your debts on time and carry as little debt as you possibly can. You should also space out your credit applications. You could call and ask for your application to be reconsidered if you have been rejected. Your creditor might send you a rejection letter explaining why you were rejected. In this case learn a lesson and take whatever steps would be required to remedy the problem. You can learn more information about raising your credit score by checking out this brief video.

#7. Consider leasing you next car

If you can pay cash for your car and keep it past your loan’s payoff date you will probably come out ahead financially. But if you are always shackled to a car payment because you trade in frequently, then leasing could be a good choice. You will have lower payments because you’re paying for the depreciation of the car only over the term of the lease. Also, the car will almost always be under warranty because most leases are for three years. As an example of what this could mean, if you were to lease a 2015 Chevy Malibu for three years you will come out $4000 ahead then if you were to buy the car with a five-year loan and then sell it after three years.

#8. Check out a HELOC

If you have equity in your home now could be a good time to tap it. It’s likely that the Fed will raise interest rates in the coming months and you might be able to get a HELOC or home equity line of credit with a good temporary fixed rate before any interest rate increase. While HELOCs generally have interest rates that fluctuate, some of the current offers have a fixed rate from 12 months to many years and this can be a way to save money if you plan to pay it back before the fixed-rate period ends. And it could be a good way to finance renovations to your home, to cover college tuition or to consolidate your credit card debts.

#9. Save money with free coupon apps

If you stayed away from using coupons because it all seemed too time-consuming then rejoice. It’s now as simple as swiping the screen on your smart phone. There are dozens of apps available that will help you compare prices, navigate sales and even get money back on some of the stuff you buy. ShopSavvy and RedLaser will let you scan an item’s barcode and then will tell you how much it costs at different online stores and if there are special deals available on the item at nearby stores. The app CouponSherpa includes coupons from hundreds of restaurants and retailers and RetailMeNot will alert you as to those stores near you that have coupons and deals available. PriceJump has a feature that will tell you precisely where you can find the best price on an item in each of three categories – Amazon, local and online.

How To Put Your Personal Finances On Autopilot

student with a notebook and calculatorIf you’re like most of us you have a smart phone. If so, you’ve probably already learned how to manage a lot of your life. You may be using apps to wake you up in the morning, to remind you of meetings and other important dates, to keep track of your music and to provide you with the news of the day. But did you know that you could use that phone to automate much of your personal finances? There are a number of great apps that can help you better manage your money whether you’re saving, investing or just want to keep an eye on your cash flow. But of all these apps there are five you could harness to put your financial life basically on autopilot.

Mint Bills

One of our personal favorites for budgeting is Mint.com. The app Mint Bills distills down the best of what this program offers and presents it in clear, easy to understand snapshots of your overall budget. It combines this with the ability to pay your bills. All that’s required is that you sync your bill-paying account with those bills you pay each month such as your credit card bill, cable, cell phone, etc. Mint Bills will then determine when your bills are due and send you an alert. You could open the app and pay the bill right there and then. Mint Bills also allows you to track your investment accounts and your savings. Another feature of this app, which you should definitely take advantage of is its alert system. If any suspicious transactions occur on your account or your account balances run low, it will immediately tip you off. You can download Mint Bills free and any payments you make via your bank account are also free. But one thing you don’t want to do is use this app to pay bills with a credit card. These transactions cost a $4.99 processing fee, which switches to a flat 4% if the payments are over $125. Do the math. That’s $5 per transaction. Ouch.

Acorns

You’ve probably heard that old adage that giant oak trees from little acorns grow. We’re assuming that this probably has something to do with the name of this app. Whether that’s true or not, this app is a great way to start investing if you don’t have much money. You link it to your debit card. When you use the card to buy something and it doesn’t come out to be a round number, Acorns will round up the transaction to the nearest dollar and then save that change. When your savings balance hits $5, Acorns deposits the money in whatever investment account you chose. You will need to provide the app with some personal information regarding your investment goals, your income and your net worth. It will then recommend one of five investment portfolios. These portfolios range from aggressive to conservative and consist of ETF’s that are chosen and rebalanced by the Acorns people. The app is free to download but costs $1 a month until there’s $5000 in your account. After that, Acorn’s fee is 0.25% of your total assets per month. If you decide to withdraw your funds there are no fees.

Digit

Would you like to be able to save money without even knowing you’re doing it? I mean, talk about painless. After you sign up for Digit you will need to link it to your checking account. The app has a very smart algorithm that will monitor your spending. Then every few days it will determine what you can afford to save. It will then move the money into a Digit savings account, which is insured by the FDIC up to a maximum of $250,000. The beauty of this app is that it only takes a small bit of cash at a time so that you hardly notice the money has been withdrawn. It also eliminates the fear of overdrawing your account because of this was to happen, Digit will pay any overdraft fees. Most of the savings transfers that Digit makes range between $5 and $30. However, there is one downside, which is that you don’t earn any interest on your money. This means that you don’t want to use this account for long-term savings. You would be better off leaving that money in high interest-bearing accounts. But Digit represents a terrific way to save up for something mindlessly such as gifts for the holidays or a weekend getaway.

Credit Karma

There are a number of ways to get your credit score. You could get it on the site www.myfico.com if you’re willing to either pay for it or sign-up for a free trial of one of FICO’s services. You can also get your credit score free from the three credit reporting bureaus – Experian, Equifax and Transunion. Some of the credit card companies are now giving credit scores free. Even Mint now provides them. But we really like Credit Karma because it gives you that critical credit score not from just one of the three major credit-reporting bureaus but from two of them – Transunion and Equifax. It will also provide you with a complete summary of your credit history and let you see almost immediately what would happen if you were to make a new credit inquiry or get an increase in one of your credit limits and how this will affect your credit score. Credit Karma can also be very useful for monitoring your credit to see if there are any suspicious activities. Just as important, it’s free.

stack of cash

Personal capital

Finally, the app Personal Capital offers all the same would impact your credit score. budget-tracking abilities of programs such as Mint but is great if you are an investor and would like to track all your investments in one place. One of Personal Capital’s most important features is that it will analyze your mutual fund and retirement account fees and then alert you if they’re are higher than average. You can also see snapshots of how your investments are doing in real time with a feature called Investment Checkup. To take advantage of this you will need to sync your accounts with the app or to its website. If you have more than $100,000 in assets Personal Capital offers a financial advisory service that provides low-cost wealth management services. Personal Capital is free to download. The fees for financial advice start at 0.89% for assets under $1 million.

A word of warning

All of these apps with the exception of Credit Karma require that you link them to your financial accounts. As you might guess they each have an impressive list of security and privacy protections to ensure that your information stays secure. However, beyond this you should take whatever steps you can to protect your accounts on your end. This means setting up a PIN on your smart phone or what’s even better is fingerprint ID. Also, sign up for two-factor password protection if it’s offered and alerts that will tell you if your account changes.

The net/net is that if you’re willing to spend a few minutes downloading and setting up these apps you will have basically automated the most important parts of your personal finances – and saved yourself many hours of drudgery.

Purchasing A Big-Ticket Item – Pay Cash or Use Credit?

Man looking frustratedIt doesn’t happen every month but at least once or twice a year you’re faced with the task of purchasing a big-ticket item. It might be a new washer-dryer, new living room furniture or an entertainment center. You’ve decided what you want to buy and how much you’re willing to pay for it but … the question is should you pay cash or use credit? Unfortunately, what financial experts will tell you is that there is no hard and fast answer. The decision to pay cash or to use credit will depend on your finances, whether or not the asset will increase in value and what interest rates are available.

The first thing you should do according to most financial experts is evaluate your personal finances. What’s your household income? Do you have one or two wage earners? Is your income very consistent? How much are you saving for retirement? Do you have a lot of revolving, credit card debt? If your answers to these questions tended to be on the negative side, it would make less sense to buy that big-ticket item in the first place. If you find that you would have trouble financing the purchase, this could create even greater problems going forward.

When financing doesn’t make sense

If you’re eyeing something that’s actually out of your reach financially or beyond your means then financing it just doesn’t make sense. The only time it makes sense to finance a big purchase is if it’s an asset that will grow in value such as your home or an educational degree. The reasoning here is that the asset will ultimately be worth more than what it would cost you plus the interest you paid. And despite what you may have been told, it just doesn’t make sense for most people to pay $500,000 in cash for a home when they could invest that money and get a 6% or 7% rate of return.

Not all are created equal

It’s important to understand that not all loans are created equal. If you were to take out an interest-only loan this can mean that you’re buying a house you truly can’t afford. When you do this, you really don’t own your home. The bank does. While your mortgage loan payment may be low it’s important to remember that you’re spending money every month but not making any progress towards owning your home. In other words you never gain any equity. The better option is to get a loan where every month you’re paying on both the interest and principal.

The conventional wisdom

While conventional wisdom is that you shouldn’t finance any asset that will depreciate such as a car, a vacation or consumables this is not necessarily true these days. Interest rates are at almost all-time lows. It might make good sense to finance that car. If you can find a dealer that will give you 2%, why not take it? This means that if you have a four- or five-year loan, you’re basically financing your purchase at the rate of inflation. For that matter, 0% financing can be had on a number of purchases such as furniture and jewelry or even an automobile. Unfortunately, those mouthwatering rates are typically available only if you have a credit score of 720 or higher.

Paying it off immediately

If you decide it’s not best to finance that big-ticket purchase you might consider using a credit card to buy it and then pay off your balance immediately in place of handing over cash or writing a check. The policies on credit cards vary but there are often advantages to charging a big purchase. In fact, any time you can put a large purchase on a credit card, it’s pretty appealing to do so. When this is the case, you’re simply using the credit card as a sort of payment conduit so that you can pick up points or miles. In addition, some cards offer protection for the purchases you make with them. As an example of this, if you have a credit card with built-in travel insurance you’d probably be better off charging that $5,000 vacation as cash doesn’t come with any of these kinds of protections.

The caveats

If you decide to use your credit card to make a big-ticket purchase there are some caveats to keep in mind. For one thing, don’t max out your card in such a way that it disrupts your everyday cash flow. You could have an utility bill you pay automatically that bounces because putting that big-ticket item on your card put you at your credit limit. In addition, you should try to keep your debt-to-credit ratio at 30% or less to maintain a good credit score. If you’re not familiar with your debt-to-credit ratio it’s simply the amount of debt you’ve used divided by the total amount of credit you have available. For example, if you have $7500 in total credit limits and you’ve charged up $2000, your debt-to-credit ratio would be roughly 26%, which is good. Your debt-to-credit ratio makes up 30% of your credit score so if you were to let it get to 40% or more your credit score could be adversely affected. You need to be careful when charging that big-ticket item as it could put you over the 30%. And of course, you don’t want to put a big purchase on a credit card if you’re already carrying a revolving balance. This can be a slippery slope that ends in serious financial problems. In fact, this is where most people get into trouble – by continuing to use their credit cards when they can barely make the minimum monthly payments required.

If you’d like to learn more about credit scoring and why your credit score is important then here’s a short video from the credit reporting bureau TransUnion you should find of interest.

When it makes more sense to pay cash

There are certain instances where it’s better to pay cash or to write a check then to put the purchase on a credit card. As an example of this, it’s best to pay cash if it would allow you to negotiate a price as with an independent shop or a dealer. You might be able to save 10% or even better on a purchase if you can pay with cash. There are also some institutions or businesses that charge credit card-processing fees. If this is the case, make sure that the miles, points or cash back that you’re earning is more than what these fees will cost you.

In short, the answer to the question of whether to pay cash or to use credit when purchasing a big-ticket item is … it all depends. You need to take stock of your financial situation including how much you currently owe on your credit cards, whether you’re purchasing an asset that will grow in value and what the purchase could do to your credit score. If you do this you’re certain to make a good decision and not one that will come back to haunt you in the months ahead.

5 Things You Absolutely Must Know About Your Personal Finances

woman thinkingThere are situations in life where what you don’t know could actually kill you. You don’t know that the snake sitting next to your chair is one of the deadliest in the world. You don’t know that little spider is a Brown Recluse and that its bite could send you to the hospital or worse. And maybe you don’t know that tree branch right above you is rotten and could fall on you any minute.

While the things you don’t know about your personal  finances won’t kill you they can definitely cost you. For example, do you know your net worth? If you don’t, you’re not the Lone Ranger. Most Americans have no idea about the net worth. It’s very important for you to know this and it’s very easy to calculate. It’s just the total value of your assets including your savings and retirement accounts, your home, car, any collectibles you own and your boat, your second home or RV (if any of these are applicable). Subtract your total debts from that number including the payments on your house and car and you’ll have your net worth. It’s important because it’s the key to keeping track of your financial health. When you know what your net worth is, you will have a good picture of the state of your finances showing how you handle your money. Once you’ve determined your net worth you should calculate it regularly like once a quarter so that you will be able to see those areas where you can make improvements.

What’s your mortgage interest rate?

There was a report released recently by the website Bankrate.com revealing that an amazing 35% of us don’t know our mortgage interest rates. Or maybe you once knew your interest rate but forgot it over the years. The interest rates on mortgages have hovered around historical lows for the past few years. If you don’t know your interest rate you need to look it up, as you might be able to benefit from refinancing. We’ve heard stories of people who refinanced their mortgages and saved $200, $300, or even $400 a month. Wouldn’t this kind of increase help you?

Have you seen your credit report recently – or ever?

If you haven’t seen your credit reports recently it’s absolutely critical that you get them. You have three reports, as there are three credit-reporting bureaus. They are Experian, Equifax and TransUnion. You can get your report from each of them free once a year or on the website www.annualcreditreport.com.

Why is this so important? It’s because your credit report has very detailed information about your credit history. This includes the way you have used credit cards, your auto loans and any debts that were sent to collection. Even more important, they could contain errors that are hurting your credit. One recent FTC study revealed that almost 40,000,000 Americans have mistakes in their credit reports. Given the fact that fewer than one in five of us check our reports, the odds are that most people have errors in theirs but don’t know about them. If it turns out that you are one of these people and that it’s a serious error or even a case of identity theft, you definitely should dispute it with the appropriate credit bureau. While all three of the credit bureaus have forms on their sites for this purpose most experts say it’s best to dispute the matter in writing and be sure to send a letter registered and return receipt requested. Once the credit bureau receives your letter it’s obligated by law to contact the institution that provided the information and ask for it to be verified. If the institution doesn’t verify the information or fails to respond within 30 days, the credit bureau must remove the item from your report, which could give your credit score a nice boost.

credit history definitionSpeaking of your credit score

Something else that’s crucial to know is your credit score. It’s the little three-digit number that represents how much of a risk you are for credit. The credit scoring service used by the overwhelming majority of lenders is FICO. Its scores range from 300 to 850 and as you might guess, the higher your score the better. Everyone from lenders to landlords look at your credit score as do an ever-growing percentage of employers. The National Foundation for Credit Counseling recently discovered that 60% of us haven’t reviewed our credit scores within the previous year. This can be a really big mistake, especially if you’re looking for a loan. The reason for this is that there is an inverse ratio at work here. The higher your credit score in the lower your interest rate will be. If your score is somewhere in the mid-700s you will save thousands of dollars in low interest rates. Conversely, if your score is below 620 and you apply for a loan it will be at a higher interest rate and less favorable terms or you might not even be able to get the loan at all.

Where can you get your credit score? The only place you can get your true FICO score is on its website www.myfico.com where you may have to pay for it. The three credit reporting bureaus will give you your credit score though it won’t be your true FICO score. There are also sites like CreditKarma.com and CreditSesame.com where you can get your credit scores. While these won’t be your true FICO scores they should be close enough to give you a good idea as to how lenders will view you.

Your credit card statements

When one of your credit card statements arrives in the mail to you review it carefully or do you simply make a note of your balance and then file it away until it’s time to make a payment? In this day and age of identity theft and data breaches its critical to review your credit card statements carefully every month. Look for transactions you don’t remember having made or merchants you can’t remember doing business with. Also look for small charges of one dollar or less. What identity thieves often do is make a very small charge to your account to see what happens. If you don’t spot the charge and dispute that you could then be in for a world of trouble, as the thief will then hit your card hard. The same is true of any errors you find. Most credit card issuers restrict your liability in cases like this to $50 and may even waive that. But if you do find an error it’s important that you report it to the credit card issuer within 60 days or it’s possible you could be stuck with the charge.

13 Things You Need To Know To Know All About Personal Finance

Two smiling girls have coffee timeWhen you hear the term personal finance does it cause you to roll your eyes? Or maybe it just puts you to sleep or causes a headache. We understand that the subject of personal finance is not an exciting one. But it is an important one. We’re sure you know the old saying that insanity is doing the same thing over and over but expecting a different outcome. Personal finance is a bit like that. If you’re having a problem with your finances it’s probably because you’re continuing to do the same things over and over but hoping for different outcomes.

The good news is that it’s easy to learn the important stuff about personal finances and here it is.

#1: Don’t buy lottery tickets

States don’t run lotteries unless they can make a profit. The way they win is by you losing. In many lotteries your odds of winning are one in several million. You would stand a better chance of walking outside and being hit by lightning. Plus, studies have shown that people who win those huge jackpot lotteries end up no happier than those that lost.

#2: Buy high-deductible car and home insurance

While you need to have insurance on your house and car, it can be very expensive. If you buy high-deductible insurance, you’ll save money over the long run but will still be protected against those big-ticket items like having to replace your roof.

#3: Keep it simple

Were sure you’ve heard the old acronym KISS as in Keep It Simple, Stupid. We’re sure you’re not stupid but you do need to keep it simple. When you try to follow complicated financial strategies it just makes things tougher and your life more stressful. All you really need to manage your personal finances successfully is a budget and a savings account. Creating that first budget doesn’t have to be that tough, either. The easiest way to do it is to get out your checking account statements and credit card bills for the past month and total them up. Then compare this to your total earnings for that month. Ideally you should be spending at least 10% less than you earn. If not, you’ll need to go back to those statements and make a list of your spending by categories such as food, dining out, entertainment, utilities and so forth. That will show you roughly where your money’s going. Once you do this you should be able to see where you can make cuts in your spending to get it down to that 10% less than your earnings.

#4: Create an emergency fund

If you’re wondering why it’s important to get your spending down to less than 10% of your earnings it’s so that you can use the difference to create an emergency fund. You must have an emergency fund. Let us repeat that. You must have an emergency fund to shield you from the unexpected. When you don’t have an emergency fund and you run into an unexpected occurrence your only option will be to borrow money, which means creating debt.

#5: Protect yourself from worst-case scenarios

Disasters happen. We’re not talking about needing to put a new transmission in your car or pay for a medical emergency. We’re talking about a real disaster such as losing your job or becoming disabled. You can buy disability insurance either directly or through your job. It’s a relatively inexpensive way to protect yourself. You should also buy term insurance to protect your loved ones in the event you suffer the worst-case scenario possible, which is to die. If you’re in, say, your mid-30s you should be able to buy $100,000 or more in term life insurance for practically pennies a month.

#6: Learn to be content with what you have

We all tend to be on what’s called the “hedonistic treadmill,” which is that no matter how much we earn we want more. Try not to pin your hopes on that next raise or a new high-paying job. The only path to true happiness is by getting off the treadmill and learning to be satisfied with what you have.

cutting a credit card#7: Pay off your credit cards

Credit cards come with the highest interest rates you’ll probably ever pay on a loan. In fact, we’d be surprised if you don’t have at least one credit card with an interest rate of 19% or even higher. When you rollover the balance on a credit card the interest will be compounded meaning that you’ll be paying interest on the interest you accrued the month before and so on and so on. There are essentially two ways to pay off credit card debts. The first is to order your debts from the one with the highest interest rate down to the one with the lowest and then do everything possible to pay off the card with the highest interest rate, as this will save you the most money. The second method is called snowballing your debt. It’s where you list your debts from the one with the lowest balance down to the one with the highest and then do everything possible to pay off the card with the lowest balance. Whichever of these methods you choose be sure to keep making the minimum payments on your other cards.

#8: Never buy a vacation home as an investment

Sharp sales people will tell you that a vacation home is a good investment because of the depreciation you’ll earn. What they won’t tell you is that the cost to finance and maintain that vacation home will outweigh the depreciation you’ll earn. It just makes much better sense financially to rent a vacation home two or three weeks a year rather than buying it.

#9: Don’t spend money trying to impress people

“Luxury” clothes labels and designer brands are designed to overcharge people that are seriously insecure. You’ll save money when you buy non-designer brand clothing and you won’t be seen as nouveau riche. Watch what old-money families do and you’ll see they generally keep it on the down low.

#10: Cut out the waste

Review your bills and you’re very likely to find ones where you’re spending too much. One of the best examples of this is your cell phone bill. You may also be spending too much money on your car or cars. And nothing busts the budget more than dining out regularly.

#11: When you invest put the majority of your money into equities (stocks)

Once you build up an emergency fund equal to three or six months of your living expenses you can begin investing. The best place to put your money into is equities or stocks. They might be the most volatile but they almost always generate the best returns long term of anywhere from 4% to 5% a year above inflation. And don’t panic when your stocks plummet. Hang on to them, as they will come back.

#12: Never gamble on individual stocks

Your Uncle Henry might tell you that you’ll double or triple your money by buying stock in Amalgamated Industries but don’t do it. You could make money this month but then see it all disappear next month. The safest way to invest money in stocks is by buying mutual funds or indexed funds.

#13: Plan to live a long life

The odds are that you will live one third of your life after you turn 65. This means the best strategies are to pay off your mortgage and then save at least 10 times your annual salary by the time you’re ready to retire. Also, avoid taking your Social Security benefits for as long as you can up to when you turn 70. This will maximize your monthly checks.

How To Improve Your Personal Wealth This 2015

piggy bank with moneyDo you think that you experienced any genuine financial improvement last year? As we start 2015, you may want to look back a little to figure out the right and wrong decisions that you made about your money. This is important if you want to improve your personal wealth by the end of this year.

In truth, improving one’s finances is not as hard as it used to be thanks to our rising economy. According to an article published on Bloomberg.com the US economy improved last year. The household net worth is actually $1.3. trillion higher than the peak before the recession – which was at $67.9 trillion in the second quarter of 2007. This is caused in part by the improving real estate market that grew by 4.9% by September of 2014. Not only that, the improving job market is also a factor in improving the net worth of Americans.

It was not all good news though. There was a damper in the household wealth improvement caused by a drop in the stock indexes. However, this should be easy to recover as long as consumers take extra care of how they manage their investments. Another thing that may be slowing the growth of household wealth is the rising consumer debt. Obviously, the growth in our personal wealth is making us confident when it comes to taking in more credit.

3 steps to improve your finances this year

If you want to take your wealth to the next level, you need to start planning how you can do that. As early as now, you should have plans in place that you can follow periodically this year. Without a strategy, you will just go around blindly, hoping that you will hit the jackpot. Obviously, this is not the best way to improve your personal finances this year.

If you really want to revolutionize how your money is spent, think about these three steps that you can work on this 2015.

Pay off your debts

The first thing that you should do is to pay off your debts. According to a speech delivered by William C. Dudley at the Bernard M. Baruch College in New York, when debt goes down, the net worth goes up. The speech titled “The 2015 Economic Outlook and the Implications for Monetary Policy” was published on FRB.org. While discussing how consumers are in better financial shape, the speaker revealed that the household liabilities have gone down by roughly $500 billion as compared to the peak debt amount in 2008. This is helped by the lower interest rates – which is a factor in increasing debt loads. With this decrease in debt, the household net worth was able to recover and increase – thanks to a higher asset value.

It seems to correlate with each other. The less debt you have, the more you have in your personal wealth. Even if you own a home that is valued at $500,000, if you still owe $400,000 in your mortgage, you only have $100,000 in your personal assets. The more you pay towards your mortgage, the more equity you own in your home. This concept can be applied to all your debts – whether it is credit card debt, auto loans or student loans. What you are paying towards your debts can be used to grow your savings or increase your investments.

Another way that paying off debts can improve your wealth is the money that you will save on interest. This is only making your creditors and lenders rich. Pay off what you owe as soon as possible to lower the money you waste on interest payments.

Increase your savings

Once you have paid off your debts or at least implemented a repayment plan, it is time for you to focus on your savings. Increasing your savings is the direct way for you to improve your personal wealth. When you spend, you are distributing what you earned and putting them in the pocket of other people. When you save your money, you are putting it in your pocket. Whether it is to be spent on something that will increase your net worth or saved for the rainy day, the bottom line is it will be an addition to your assets.

According to an article published on EquitableGrowth.org, wealth comes from two sources – your income and your savings. While wealth can be inherited, that is something that is beyond your control. Your income and savings, on the other hand, is something that you have full control over – more so with savings. Your income will still depend on your employer but the amount you save will entirely be based on your own discretion. So grow your savings and it will directly affect your wealth.

Map out your financial goals

After working on your debts and savings, the third step that you need to work on is mapping out your financial goals. In some cases, this should be the first on your list. But considering how debt is rising and savings are decreasing, it may be more prudent to work on the first two before adding more financial goals.

So what goals can you work on? That will depend on you. It can be a new home, a car, your child’s college fund, retirement, or a business. The important thing is to have a goal. When you have a goal, it gives you focus. It gives you motivation. It gives you something to reach for. In essence, it gives you something to live for in the future. Not only will it do all that, it can also grow your personal net worth – at least, if you choose the right financial goal.

Tips to make your wealth last long

Growing your personal wealth is only the first phase in achieving financial success. Make sure that after growing your wealth, you know how to make it last long. You may end up with a huge amount but if you do not know how to manage it, this will not last.

Here are some tips that can help you make your money last long.

  • Live below your means. One of the fastest way to deplete your wealth is by living beyond your means. This simply means you are spending more than what you are earning. Some people think that living within your means is the best way to go. While it will keep you in debt, it will only preserve your finances and keep you in the same financial state. The best way to make your wealth last long and increase it at the same time is to live below your means. This way, you can take care of all your expenses while having extra money to set aside for savings.
  • Think before you spend. Regardless of how much wealth you have, smart spending will always be important. Even if you can afford it, that does not mean you should buy it. Ideally, you want to buy things that are aligned to your financial goals. If not, then think carefully before you make the purchase.
  • Make investments. Like savings, this investing is another way to grow your personal wealth. think about where you can place your money and consider the risks that you will face. Without a little risk, growing your money will not be as rewarding as it should be. Investing the extra money you have is one of the best ways to make your finances work for you.
  • Be aware and educate yourself at all times. In the end, you can make better financial decisions if you are aware of your options. Always make time to educate yourself about something. Read about rules, laws and various techniques to manage your money. While hiring financial experts will work, it will serve you better if you know what is going on with your personal wealth.

Having Trouble Staying On Your Budget? Here’s 8 Tips That Could Help

budget on top of moneyYou do have a budget, right? No, you say. Well, then you need to develop one. There is not a successful business in this country that doesn’t run on a budget or what’s euphemistically called a business plan. Most “successful” families also run on budgets. If you don’t have a budget you should get started creating one. It’s not really all that tough. There are actually a couple of approaches to creating a budget. The simplest one is to get out your last month’s bank statement and all your credit card statements then sit down, add everything up and then compare this to your earnings. If you find you’re spending, say, 10% more than you earn you now know you need to cut your spending by at least 10%.

A second option

A second way to get to a budget is by tracking your spending for a month and by this we mean writing down everything you spend money on from your utility bills to that soda you had at work yesterday. This should give you a totally accurate picture of your spending.

Whichever you choose

Whether you choose the simple or more difficult way to learn where your money’s gone the next step is to divide your spending into categories. The most common categories are:

  • Home repair and maintenance
  • Utilities
  • Food
  • Health and medical
  • Transportation
  • Debt payments
  • Entertainment/Recreation
  • Pets
  • Clothing
  • Investments and savings
  • Miscellaneous

Of course, depending on your circumstances you may eliminate some of these categories or add others.

There’s yet another way to create a budget that’s called the shoebox method. Here, courtesy of National Debt Relief, is a video explaining it.

Tighten the screws

Now that you know where your money’s gone the next step is to determine what you want to do in the future, which is the budget. If you learn that you’ve been spending more than you earn or if you haven’t been able to save money you will need to tighten the screws by cutting your spending in some or all your categories. Most people find the best categories to reduce spending are clothing, entertainment/recreation and food. Your goal might be to reduce your overall spending by 10% or even more – depending on what you learned when you analyzed your spending.

Staying on a budget can be hardfrustrated woman with a paper and calculator

There’s no question that creating a budget can be hard and frustrating. And staying on that budget can be even harder and more frustrating. But once you have a budget it’s critical that you stay on it. Having and staying on a budget can mean fewer financial problems and much less stress. If you’re married then having a budget can even help your marriage. One of the biggest bones of contention between couples is money and when you have a budget to manage it this reduces a lot of the financial stress and the arguing that often accompanies it. So what can you do to stay on your budget?

1. Use cash for discretionary spending

Once a week take out the cash from your bank or an ATM that you need for that week to cover your discretionary expenses or those things that you could live without. You will probably find it easier to not buy those great shoes on sale for just $50 if it will take the majority of that week’s cash.

2. Cut out your bad habits

Stop and think for a minute about your bad habit. Is it smoking or alcohol? These are habits that can be very expensive. If you cut out a bad habit then you will have that money to put towards your other expenses. You should see your bills go down and your health get better. Down the road, you’ll also save on health care expenses and might even qualify for cheaper insurance premiums.

3. Share the obligation

One thing you don’t want to be for sure is the only person in your family that’s worrying about the budget and saving money. There’s no way you can win the battle if your partner is spending you into debt. The two of you need to make a plan as to how much spending money each of you will have. Sit down once a week and do a reality check to see how you’re doing. When the budget is everyone’s responsibility then everyone has a stake in things. This will ultimately make a big difference. It’s just not fair that one person has to shoulder the entire burden by him or herself.

4. Pay down your debts

Credit card debts especially can bog down your entire financial situation. If you don’t pay off your balances each month, the money will be added to next month’s balance as well as the additional interest. When one month’s interest rate is rolled into the next it’s “capitalized” and this means you end up paying interest on the interest. There are two ways to get debts under control. One is to put all of your efforts against paying off the debt with the highest interest rate, as this will save you the most money. Then go to work on paying off the debt with the second highest interest rate and so on.

The other way to get your debts under control is called the snowball method. This is where you concentrate first on paying off the debt with the lowest balance. You should be able to do this fairly quickly and will then have more money available to start paying off the debt with the second lowest balance, etc. In either case if you have other debts you must remember to continue making at least the minimum payments on them.

5. Keep all your receipts

Regardless of how you determined your spending you now have a budget and it can be very tempting to stop keeping up with every little expense. But if you do keep your receipts this can really help you stay on your budget. You should also write down the places where you spent money but didn’t get a receipt. You should find it more difficult to overspend when you can see how much money has actually gone through your hands.

6. Keep your checkbook balanced

If you don’t balance your checkbook regularly it’s important you start doing so. This is especially true if you’re on a tight budget. This is because just a few small mistakes could end up in overdraft charges or insufficient funds in your checking account. If every time you get a statement from your bank you balance your account, this can help you make sure you stay on your budget and in the black.

7. Continue to analyze your spending

Reducing your spending should be an ongoing process. Try to sit down at least once a month with your budget and your receipts. See if there are expenses you could cut. Do you go out for lunch every day? Maybe you could take your lunch to work a couple of days a week. If you have a fairly long drive to work you might be able to set up ridesharing with a co-worker or even take public transportation. Every cent you save by cutting gas costs and the cost of eating out will be money you will have available to save or for big purchases.

8. Stay the course

Life is full of unpredictable happenings. Your budget should include something for them as well as variable expenses. And be flexible. Don’t beat yourself up if you go over your budget occasionally. If you make a mistake or two, it can be frustrating and a bit difficult to get back on track. But it’s important that you do so because the longer you can stay on your budget the bigger the rewards you will earn in the years to come. The important thing to keep in mind is that budgeting is worth the effort and that staying on a budget will help your life run more smoothly, as your finances affect so many things.

Tips For Managing Your Finances When Unemployed

frustrated looking womanWe know from personal experience that there are worse things in life than losing your job but not many. It’s usually not just a blow to your finances but also to your ego. No matter whether you’re told, “you’re fired,” “sorry but were downsizing,” or it’s not your fault, it’s just corporate restructuring,” it still represents a rejection almost as bad as when the person you loved more than anything else in the world told you to get lost.

Being unemployed means having to search for a new job, which can also be very stressful. You will need to market yourself against competing candidates and try your best to keep up with all those daily job search tasks. It’s enough to make even the most jaundiced professional squirm. Add to this the fact that you now have another stressor and that is your personal finances. Of course, you’ll be in relatively good shape if you have built an emergency fund over the years, especially if it’s the equivalent of six months worth of your living expenses. However, if you are not able to do this, sit down, take a deep breath and as Green Bay quarterback Aaron Rodgers recently said,
“R E L A X”. There are things you can definitely do to keep your personal finances under control and even get them back on track.

First, take an honest look at your finances

If you’re not careful it’s easy to start rationalizing. You could be telling yourself, “I can get an odd job if necessary” or “I can always borrow money from my IRA or 401(k)” or “I can hit up the relatives for a short-term loan.” But this is a case where it’s much better that while you’re hoping for the best you’re also preparing for the worst. It’s critical that you be realistic and truthful about your finances and face them head-on.

Make a budgetbudget and scissors

Sadly enough if you’re typical you’ve don’t have a budget. It’s probably just one of those things that you always planned to do but never did. The good news here is that making a budget is pretty simple. All you need to do is write down all your revenue sources and all of your expenses. Then do a quick add and subtract and presto! You will know how big is the gap between the money you have coming in and going out. This will help you determine how and where to allocate your money each month.

File for unemployment

If you were let go by your employer, which is probably the case, and you weren’t fired due to misconduct then you should file for unemployment insurance. If you believe you would be eligible, don’t procrastinate. Contact an unemployment office in your state immediately. While unemployment programs vary from state to state you can generally count on getting benefits for at least 26 weeks. In some states your benefits can extend up to 73 weeks. Do understand that how much you receive weekly will depend on your income and how long you have been unemployed.

Decide what’s most important

For the next 30 days write down everything you spend money on excluding your regular monthly bills. This would include movies, eating out, drinks with friends, clothes, food – everything. If you just buy a paperback or magazine or a soda at your favorite fast food restaurant, write it down. Do this and you may be shocked at how much money you’re spending. Next, consider the items that you’ve enjoyed in the past but may not be necessary until you again have a job. Be realistic. Decide what you absolutely need and what you can do without. Then eliminate those things you could do without until you get a job. We’d be willing to bet that if you really put a sharp pencil to those expenses you’ll be able to slash them by 20% or even better, which would make it a lot easier for you to meet your fixed obligations such as your mortgage payment, auto loan(s), student loans (if appropriate) and utilities.

Get started right away

When you first start thinking about your job search plan set aside some time to review your personal finances. If you take control of them early on in your job search, you can put the issue aside and keep focused on what is important, which is finding a job. Plus, if your finances are healthy this will give you much greater control over your job situation – meaning that you won’t have to take the first job that’s offered because you’re so worried about money

Treat credit cards like Ebola

The simple fact of the matter is that credit card debt is very destructive debt. This is because of their interest rates. Some credit cards have interest rates as high as 20%. It may not seem like a very big deal if you’re buying necessary items on a credit card while job searching but beware! You need to pay the full balance at the end of every month and not just the minimum amount required. If you make just those minimum payments, you’re most likely headed for a downward spiral in your finances. The best tactic is to treat those credit cards as if they had Ebola – except in case of an absolute emergency.

man and woman shaking handsGet some professional financial advice

Again if you’re typical you don’t have a financial advisor. You probably feel you can handle your money yourself or you may be worried that the advisor won’t be looking out for your best interests. While these justifications might be valid, your bank or other financial institution has a vested interest in making sure you don’t default on your payments. Check with your bank or brokerage as it might have a financial advisor you could talk with — free or at very low cost. If so, do it. That person could help you put together a financial plan that would work with your current situation. And when it comes to financial planning never be afraid to get a second or even third opinion.

Don’t clean off your financial slate

If you are lucky enough to receive a severance package or if you have other assets available you may be tempted to use the money to pay off your credit cards, your car loan or other debts. However, this is a case where you might be much better off if you pay just the required or minimal monthly payments. This will help you stretch out your cash and meet your living expenses in case you are unable to find a new job within the first several months.

Harm not your retirement

If you have a 401(k), an IRA or some other employer-sponsored retirement plan you might be tempted to cash it out and use the money to help cover your living expenses. There’s one word for this– don’t. If you do this you’ll not only jeopardize your retirement you’ll probably be required to pay a lot in penalties and income taxes. If you have money in a 401(k) a better option is to roll it over into an IRA or just leave it in your previous employer’s plan. Don’t tap any of your retirement funds except as a very last resort.

The Nasty Consequences Of Identity Theft And How To Prevent It From Happening To You

appearingIt seems that identity theft used to be a problem that just happened to isolated individuals from time to time. Well, that’s no longer the case. There’s an article almost every week revealing that hundreds of thousands or even millions of people have had their identity stolen through what’s called a data breach. One recent example of this is Target Stores where a data breach exposed more than 100 million customer records at US retailers, Internet companies and banks. Then, of course, there was Sony Pictures where the Social Security numbers and other personal details of nearly 50,000 former and current employees and film actors were stolen and posted online where anyone could view them.

When it comes to individuals, one company estimates that 33% of Americans were affected by a data breach and ultimately became the victims of data fraud just last year alone. This was up from one in nine in the year 2010.

You are protected — sort of

While the banks and credit card providers often absorb false charges, it’s up to you, the victim, to clean up your credit history and recover any stolen funds. Besides the lost money, time and emotional energy you also face the ongoing frustration of not seeing anyone pay for the crime. Identity theft cases are hardly ever prosecuted. This is because local police have limited resources, plus the fact that these criminals are often overseas making it very difficult to find and prosecute them.

Making things even more complicated

What makes catching these crooks even more difficult is that they often steal or buy consumer information from one or more sources and then combine the information to create a complete dossier on potential victims. This is probably why hackers last year were able to impersonate rich and famous people to get the credit reports of Michelle Obama, Paris Hilton and even Gen. Keith Alexander who, ironically enough, was then the head of the National Security Agency.

$24.7 billion in losses

Identity theft might be a global problem but it is very difficult to measure worldwide losses. However, a study done by the Department of Justice estimated that identity theft of all kinds was responsible for losses of $24.7 billion in 2012 just in the US. This is nearly twice the $14 billion that was lost from all other property crimes including burglary and theft. Another survey found that when a credit card is used for fraud the average loss is $1251. The average loss is $2330 when a Social Security number is exposed and then used to open new accounts. It is true that banks take the biggest financial hit in these cases but out-of-pocket losses for consumers can range from an average of $63 in the case of credit cards to $280 for fraud involving Social Security numbers.

Protecting yourself from identity fraud

It may be almost impossible for you to totally protect yourself from identity theft but there are things that you can do to protect yourself as much as possible. For example, guard your Social Security numbers very closely as well as your credit and debit card information and account passwords. You should also change your account passwords periodically and try to make them more secure. Passwords like 1-2-3-4, your birthday or A-B-C-1-2-3 just don’t do the job even though they may be easy to remember.

Shred them

cutting a credit cardYou should be sure to shred any unneeded financial records and credit offers you receive. Combination shredders-wastebaskets can be purchased these days for $30 or less and would be a great investment. While credit card statements rarely include your full credit card number anymore it certainly couldn’t hurt to shred them as well.
Get your free credit report

You’re entitled to get your credit report free from the three credit reporting bureaus annually. You could contact Experian, TransUnion and Equifax and get your credit reports from them or go to the site www.annualcreditreport.com and get all three simultaneously. Some people choose to get their credit reports one at a time at four-month intervals, as this is sort of a free way to monitor their credit on a continuing basis. When you get your credit report or reports read them carefully to see if there have been any unauthorized purchases or accounts opened. If you find one or more of these, you should dispute them with the appropriate credit bureau and ultimately have them removed.

Ignore those sales pitches

If you watch any television or are on your computer for an hour or so a day you’ve probably seen sales pitches for those companies that charge a fee for credit reports, for your credit score or to monitor your credit. We have two words for this. Ignore them. As noted above, you can get your credit reports free and if you order your report from one of the credit bureau every four months you could be basically monitoring your history year around. There are also websites such as www.CreditKarma.com and www.CreditSesame.com where you can get your credit score free. It won’t be your true FICO score, which is the one that most credit providers use, but it will be close enough to give you a good idea of how you stand – credit wise.

It couldn’t hurt

Most experts suggest that you not sign up for a paid credit monitoring service as you can basically monitor your credit yourself. However, if you are told that a company you do business with has suffered a data breach it couldn’t hurt to sign up for any free credit monitoring it offers.

If your identity is stolen

If you are hit by identity fraud or theft, the Federal Trade Commission suggests that you immediately notify one of the three credit reporting bureaus and ask for a 90-day credit alert. This alert will tell businesses that you need to be contacted before any new accounts can be opened in your name. You can renew that alert every three months or if you filed an identity theft report with the police you could keep it in effect for seven years. And if you are the victim of credit card fraud, you should contact whichever company issued the card to dispute the fraudulent charges and have any bogus accounts closed.

Keep good records

It’s important to keep good records of any correspondence between you, your bank or credit bureau. Make sure you keep copies of all correspondence and reports. Whenever you send a letter to your bank, one of the credit bureaus or a credit card provider, be sure to use certified mail to get delivery receipts and when you make a phone call, keep good notes as to what was discussed and what, if anything was promised you.

14 Tricks And Tips For Turning Around Your Finances In 2015

Couple Using Laptop And Discussing Household Bills Sitting On Sofa At HomeThe end of 2014 is soon approaching and if you’re like most Americans there are a bunch of things you wish you had done differently especially in the area of personal finance. But if you’re coming to the end of the year and you feel your finances have become a jumbled mess, don’t despair. There are some very simple things you could do for turning around your finances next year. That way, when New Year’s Eve 2015 rolls around you’ll be able to pat yourself on the back and say about your finances, “job well done.”

1. Understand that you’re unemotional about your money

Whether we like to admit it or not we’re all pretty emotional about our money. As an example of this, if your desire is to pay off your mortgage so that you can live debt-free this might feel really good but it also might not be your best decision. The reason for this is that even with the tax break a 4% mortgage is really more like a 3% return on your investment. But if you were to put that $100,000 into an index fund with an 8% return you’d be way ahead of the game. The important thing is to understand that you have irrational feelings about your money and work to overcome them.

2. Don’t think bank balances. Think net worth

There are apps such Mint and Personal Capital where you can track your net worth. If it’s going up, things are great. If it’s going down, not so much. But by doing this instead of just checking your bank balances it will keep you accountable.

3. Create an emergency fund

It’s always best to have six months savings to get you through a period of unemployment, as this is the amount of time required to find a new job on the average. For that matter, you could suffer a disastrous medical emergency or the transmission could fall out of your car. In any event, if you have an emergency fund it will stave off having to borrow more money and keep you from going into debt.

Man counting money4. Try to negotiate everything

Don’t you just hate to haggle? Most of us do. But this is a big mistake. You should even try to negotiate all of your monthly bills and by this we mean all of them. There are states where you can choose which company generates your electricity, which could cut your bill dramatically. And, of course, be sure to haggle on your rent before you move in. If you can win a discount this will be multiplied across many months or years.

5. It isn’t savings until it’s in a savings account

Let’s say that you change to a new wireless plan and manage to cut your costs by $100 a month. Don’t think you’re really saving that money unless you put the $100 into a savings account every month. One good tip here is to open a separate account and then transfer the money each month. That way you can see your savings growing and growing.

6. Don’t be afraid to challenge everything

Sit yourself down on January first or second and go through your expenses line by line. Ask yourself in each case if you really need to spend the money on that item. For example, are you really using that gym membership? Or do you really need to spend $9.99 a month on Spotify. The important thing here is to challenge every one of your expenditures. Were willing to bet you will be able to find at least half a dozen that you could cut out and save money.

7. Sell your old stuff on Craigslist

The other side of the ledger to saving money is finding ways to earn extra cash. You should be able to earn that cash by selling all the junk you don’t use on Craigslist. We know of one person who sells just three items a month but has found that it definitely adds up. It’s also okay to sell stuff on eBay but with Craigslist you never have to worry about shipping the stuff.

8. Google the word “coupon” alongside whatever it is you’re planning to buycoupons and scissors

This is a great and simple trick especially when buying a big-ticket item. There are coupons available that will save you money on just about everything. Thinking about buying a bigger screen TV? Then try Googling “52 inch HDTV and coupon.” You might be amazed at what turns up.

9. Buy secondhand

There is no shame in buying stuff secondhand and it’s a great way to save money. If you’d rather not be seen shopping at Goodwill try one of the more upscale secondhand stores such as Plato’s Closet or Twice. For that matter you will also find really good deals on all kinds of things on Craigslist and eBay.

10. Buy everything with your credit cards to earn cash back

Try to put all of your purchases on credit cards to earn cash back. One of the best is the Chase Sapphire Preferred card. If you put $3000 on that card within 30 days you can redeem the cash for a $400 statement credit or $500 in travel. This means it’s basically $400 in free money just by putting $3000 on the card. You could easily meet the sign-up requirements to earn your bonuses by using the card to buy gas, groceries, regular purchases and even health insurance.

11. Or put those cards away

The financial guru Dave Ramsey advocates paying cash for everything. He recommends what’s called the envelopes strategy if you find you’re having a hard time keeping your spending in check. This is where you divide up your money every two weeks into envelopes representing your spending categories such as groceries, clothing, entertainment, dining out and so on. Then when one of those envelopes is empty that’s it. You can’t spend any more money in that category.

12. Determine your limits

There have to be areas where you could cut back on your spending. For example, how many times do you eat out a week? If the answer is more than four this is certainly an area where you could cut back. Another area where you should be able to trim your spending is on clothes. You don’t have to think about giving up everything. You just need to look at every one of your expenditures as a choice and not as a mandatory cost.

13. Google everything and we mean everything

If it’s something you’ll be spending money on be sure to Google it. We recently heard one story where a person saved $700 by searching for a part that she needed to replace on her car. You can find virtually everything online these days and there’s a very good chance that it will be cheaper than the “retail” price.

happy family14. Make realistic goals

You undoubtedly know the old adage “never bite off more than you can chew.” When it comes to turning around your finances its easy to create huge goals. Anything that’s worth saving for probably requires a large amount of money. When February rolls around and the euphoria of that New Year’s Eve resolution begins to wear off it’s easy to lose steam and just quit saving for that goal. A better answer is to break your big goals into smaller more realistic ones. That way, you can feel good about reaching each of your benchmarks. But even if you don’t reach a benchmark on time, you can keep saving, as you will be able to see that you are actually making progress.

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