Money Management Articles:
Some of the easiest things to do are to sign on the line for that car we need or that student loan to fund our education, or even build up too many monthly bills. One of the hardest things: paying off debt and growing a savings. It is so important, perhaps now more than ever, that we pay down our debt. The credit bureau, Experian, reports that the average person has about $4700 in credit card debt alone.
Dave Ramsey¹ has a really good plan of attack on debt. Take a look at the balance owed on each loan, regardless of the interest rate. Pay off the smallest balance first. That payment is then added to the next smallest, and then added to the next, and so forth. Being able to see the loans paid off quickly not only keeps us motivated to continue, but it shows us exactly how much our monthly bills are.
Focusing on paying off bills quickly has many benefits. Unexpected bills will always come up and the further you are in debt, those extra payments hurt more. Living with less debt gives people a sense of security. It has also been proven that those who live with less debt have less stress and live happier lives. Keeping up with the Jones’ comes with a big stress not only on your finances but your health.
How nice it would be to live with less debt. The reality of life is we will all at some point need financing for some reason; however, it is possible to minimize our debt. Paying bills and having extra at the end of the month to help a family member, friend, go on vacation, etc. can be very fulfilling.
Don’t be discouraged that the bills take the entire paycheck or that the process looks overwhelming. This will take time. Changing habits take time just like knocking down debt. Make time each month to take a good look at your finances. Stay on top of them before the bills get too out of hand. Be realistic about the bills. Not having anything at the end of the month is over extending your paycheck. Look at how much the bill is in comparison to your paycheck. How long does it take you to work to earn enough money to make that payment? Looking at it that way makes things less desirable.
Most importantly, talk to your creditors and be honest with them. If you are struggling with payments see if there is something they can work out with you. Most of the time they will be happy to help before it becomes overwhelming and both parties lose. If you want to consolidate your payments, see if your financial institution will help. Sometimes having just that one payment that can be broken down into each paycheck can be helpful. Put bills on autopay that way they don’t fall behind. Just make sure the money is there to cover it so there aren’t added fees.
Debt is a part of life and can consume most of our attention. But paying down debt can free up a lot more than just a little money in the account. It can free our time and energy up for the joys of life. You deserve to be happy so take the time to look at your bills. Be honest with yourself and see what you can afford to do. Then stick to it. Just because there are no results today doesn’t mean in a few months the strings of debt won’t be a little looser.
In today's world having a credit card is starting to become a must have addition to our wallets. With so many of them out there, finding the right card and financial backing is difficult. Do I get the department store card for the point benefits, or the one with the vacation benefits, or the one from the bank or credit union? This can make anyone's head swim and decide just to put it off until a "have to have" moment.
WHAT TO LOOK FOR
When getting a credit card, always look long term. Why would we do all the research for our mortgage, vehicle, and student loans, and just sign up for any credit card? Check the card out. Look at the rates, annual fees, sign up fees, bonuses, black out dates, and all the stuff that make the card attractive. Is the interest rate a teaser rate, or a rate that will change after so many months or years? Is there an annual fee or processing charge?
Credit Card companies are making enough on interest that having all the extra fees applied to the consumer is just too much. Find a credit card that the rate is fixed; no teasers, signups, or possibilities of the rates going up after a certain time. This alone can save thousands in interest and help keep the payments to what you can afford.
Fees are probably going to be a small percentage. You lose the card, expect to pay for a replacement. If you get a cash advance, expect to pay for it. But just to have the card or just to apply for the card, NO! Just as you wouldn't pay a monthly charge to keep your checking account or savings account, why pay annually to keep a credit card? Why pay monthly to have a card, especially if you take care of the card?
Having a credit card can help in emergencies, help build up weak credit, or give you that extra little money when the wallet is running low. In a pinch a credit card can help out. Vacations, flights, car rentals, and large purchases are all easy to keep up with because you know what card it went on. And a lot of times, the credit card has insurance on the card for those large purchases in the form of extended warranties. Check out the fine print, maybe that store warranty may not have to be purchased. Credit cards also have extra protection for purchases.
But having a credit card can cause some problems, too. Becoming more reliant on the card than your paycheck is a bad thing. Credit cards represent money you don't have and the more of that money you spend the less money you have when you do earn it. Eventually the bill comes in along with regular monthly bills then the paycheck looks even smaller than it is.
Charging only what is necessary helps out. Think of it this way: Would you take out a loan to pay $6 for breakfast? $27 for shoes? If you would not want to pay interest on it, then pay cash for it. The only way to avoid the interest is to keep up with what you charge and pay it completely off when the bill comes in. That is the smartest thing we all can do with credit cards.
Being smart with our credit helps us out in the long run. Being frugal with our money will help us out when the money gets frugal with us. Always ask for help if you feel consumed by your debt. There is always a way out and it isn't always bankruptcy. Talk to your debtors and they can work things out with you.
It seems like all we hear today is fraud this, phishing that, and scams, scams, scams. They look so real and who wouldn't want to win the lottery, right? Once your identity has been stolen, it is very hard to prove you are you. Social Security benefits, retirement, banking accounts, credit scores, and even something as simple as writing a check can become a monumental task. By doing a few things each day and one big thing each year, you can protect your most valuable asset, your identity.
Should I toss or shred?
Some things are okay to toss and others really do need to be shredded. Old bills, credit applications, anything with just one personal piece of information like date of birth, social security (either part or all), or statements of any kind really need to be shredded. Even if it just has the last four digits of your social security number on it, shred it. How many times have we chosen it to be a pin number, password, access code, or been asked to verify by phone? If given just one small piece of information your identity can be tilted in the thief's favor.
Watch your statements!
Watching your statements is a great way of noticing what is going on. From doctor's billing to banking and credit cards, knowing what is coming and going can catch possible fraud issues from the start. Not only fraud, but it can catch mistakes that people may not have noticed when they created the statement to send you. Fraud can start small and build. Reoccurring transactions for small amounts, one time debits, medicine that you didn't receive; all of this can lead to bigger things.
Order an annual Credit Report.
Your credit report shows what is being reported as yours. Verify the addresses, bills, amounts, balances, payment history. One thing wrong can not only hurt your score, but be a flag that someone is trying to use your information. Our favorite website to check your credit is www.annualcreditreport.com because they aren't trying to sell you extra stuff. With any website you will pay for protections or credit insurance or sign up for a membership before you can view your report. If you find errors on the report notify all 3 credit bureaus to dispute them. Only notifying one bureau doesn't change the other two. When people pull your credit to determine lending, they can pull from any of the three and you want it to be as accurate as possible.
Guard your pin numbers just like you do your house keys. Check your mail regularly and discard junk mail appropriately. Make sure your computer has anti-spyware and keep it up to date. When things don't add up, take the time to look into it. If the offer is too good to be true then it is. Just because the check has your name on it doesn't mean it is a good check. Ask questions when you go to cash it if you have any concerns.
Once someone has your identity it is easy for them to use it again and very rarely do the thieves get caught. They have to do so much damage before authorities can take the case and even then it isn't an exact science. They could be anywhere and could have gotten your information in many ways. Identity theft has become more and more prevalent. Protecting yourself is the first line of defense. Like momma always said an ounce of prevention is worth a pound of cure.
Summer is just about over and kids are returning to classes. Grade schools are easily paid for but what about College? Sure there are assistance programs but where do we look? And all those new rules and regulations for student lending, what about those? Paying for college, or getting a cost reduction can be easy if you only know where to look and are willing to do the foot work.
First thing first! Fill out your FASFA forms. You can get them from your financial aid department or you can go online at www.fafsa.ed.gov. Make sure you have your tax forms from last year and you may need your parents information. The more information you give, the more financial assistance you may be eligible to receive. After receiving your application, the government will grant an amount broken into two categories; subsidized, or non-taxed while in school, and unsubsidized, or taxed while in school. These loans are then broken into semester payments as per your college instructions. All student lending is now done through the government and 3rd parties like Sallie Mae and Great Lakes are no longer able to approve new loans. Always check with your Financial Aid department at your college for any type of financial assistance.
Scholarships are everywhere!! All you have to do is look. Bookstores have tons of books on awards that you can apply for in order to help pay for college without having to pay them back. If you are part of a church or community program, ask if they offer assistance. Never forget to ask your employer. Sometimes they will pay all or part of what courses will benefit your knowledge of your current job. Check with your financial institutions, local clubs, TV stations to see if they offer general scholarships. Small money adds up quickly. Going to big businesses and talking to upper management will often times get you some funds. They like the tax right off and you get the benefit of not having to pay it back. Check with your college to see if there are scholarships or discounts based on age, race, GPA, High school, location, or even if you choose to stay on or off campus. Are you part of a club or are you planning on joining one at the college level? Even if you don't get it right from the start, they may can issue it for the next semester.
If you aren't in college, start saving money now. Work summers and holidays to put money aside for when you need it. If you are a parent, open an account with the state to help fund your child's education. It not only locks in today's tuition rates, but keeps the moneys separate from your accounts. Don't forget those graduation announcements to family and friends. You never know what you might get in return, but you won't get anything if people don't know.
Take college seriously because it is too expensive to waste. By the time you graduate, you'll have something no one can ever take from you: knowledge, experience, and pride. How much is it worth to you? Wouldn't it be nice if you could get it fully funded?
What Folks with Great Credit Scored Do Right
by Ray Martin
Thursday, July 8, 2010
Earlier this week I answered a reader's question on steps to take to improve her credit score. But what about folks who don't want to just to improve their credit score, but want to get it to the highest possible range? Before you make a move, you first need to know the most important information used from your credit report in determining your score. Check out MyFico.com for more detail on what make up your credit score.
Here are the two things that account for two-thirds of your credit score:
- Your Payment History: Having a long history of making payments on time on all types of credit accounts is one of the most important items lenders consider before approving you for a loan.
- Owed Vs. Available Credit: This compares the amount you owe versus the total amount of credit available. Your credit score can be lower when you use more than 50 percent of your available credit for each account. That's because when you are close to maxing out on all of your credit limits, lenders see you as a higher risk and more likely to make late payments in the near future.
There are three other factors that account for about a third of your credit score:
- Length of Credit History: In general, a credit report containing a list of accounts opened for at least ten years or more will help your credit score. The score considers your oldest active account and the average age of all accounts.
- New Credit: Opening several new credit accounts in a short period of time can lower your credit score. Also multiple credit report inquiries may be seen as risky credit behavior on the near horizon, and can therefore lower your credit score. But "soft credit inquiries", which include requests made by you, an employer or by a lender who "pre-screens" or "pre-approves", have little or no impact. Also, multiple inquiries by automobile and mortgage lenders over a 30-day period count as just one inquiry, so shopping the lenders to get the best rate should not hurt your score.
Type of Credit You Use: Your mix of credit cards, retail accounts, finance company loans and mortgage loans is considered.
Your credit score ignores your age, salary and occupation. It also does not take into account financial gifts, support you receive, or your financial assets. For this reason, credit scores are less important for borrowers who seek loans that take these factors into account.
If you want to take action to increase your credit score, then take a look at folks with the highest credit scores. About 13 percent of folks have credit scores of 800 or higher. If you look at their credit profile, they have:
- four to six credit card accounts
- no late payments in the past seven years
- at least one installment loan — a mortgage or a car loan — with excellent payment history
- an average of 10 years credit history per account and a few accounts with 20 years of good history
- a low number of credit inquiries (fewer than three in the past six months)
- no bankruptcies, foreclosures, charge-offs or collections, and
- debt levels at no more than 35 percent of their overall credit limits per account
- The Bottom Line:Having a long history of making all payments on time, using the right mix of credit, and not maxing out on available credit are the keys to a having a great credit score.
- Be Flexible:When you plan around a certain week or weekend you may be paying higher rates just to enjoy that special week. Be flexible and see if another time frame will be less expensive. Sometimes during the week is less expensive than the weekend and some weekends are cheaper than others. Look around and try to see which dates would be best on your pocket book. We shop around for everything else, so why not our vacation?
- Look for Specials:Most websites offer coupons but you have to look for them. Even when you call to make a reservation, ask if signing up online would give you a better rate. Try talking to them to see if maybe they have any specials that you don't know about or offer coupons at the rest stops along the way. The few dollars you save can add up to a nice meal or that special trinket you saw while out on vacation.
- Start a Vacation Savings:Jackson Area FCU offers a VIP account; very important purpose. What could be more important than taking time out just to enjoy some peace and relax. Have the money payroll deducted into the account. Saving $20 twice a month adds up to be $240 and for a nice little weekend getaway that is worth saving towards. VIP accounts with us are not accessible by the ATM machine so it makes it just a little harder for you to get that money out allowing you to save a little more.
- Pinch Where You Can:Eating out frequently? Turning in movies late? Spending that little bit extra for things you don't really need? Pinching money can really add up. Say you don't eat out that one day for lunch. $7 a week for a year adds up to be $364; and that is just skipping one lunch. Imagine if you replaced 2 a week! Not only would we be healthier but we could really go on a nice weekender. Those late fees and extras add up too. Check your spending habits and see what little you can cut to add up to a lot.
- Staycationing? Sometimes we just don't have the money to enjoy a nice long vacation and we have to stay at home. That shouldn't stop you from enjoying what is right here in town. How long ago was it that you took time to catch up with some old friends for lunch? Took a walk around the Jackson Zoo? Enjoyed looking at the exhibits at the Natural Science Museum? Did you know the Davis Planetarium and the Agriculture Museum can be fun too? Even as adults we can still enjoy looking at all the things that are right here in town. Parks, window shopping, day spas, riding the Natchez Trace, visiting Vicksburg's Historical District, there are always things to do that can let us feel that we aren't really at home.
Whether it is hanging with friends and family, going to exotic type places, or just hanging around being lazy, take some time to recharge. It will make you feel better and give you something to look forward to doing
IRA's, or Individual Retirement Account, help save for retirement. Some employers offer 401k benefits where you can put money away and sometimes the employer will add to it as well. Social Security might help out, too, but can you really rely on 401k accounts to grow like you want and social security to be there for you when you really need it?
In the state of Mississippi, we have two types of IRA accounts: traditional and roth. The basic differences are below:
The biggest point on a Traditional IRA is that when you deposit the money it lowers your taxable income. For example: Bob makes $24,000 a year and makes a $5,000 deposit into his IRA account. His taxable earnings for that year are $19,000. It is as if that money was never earned. BUT if Bob decides to withdraw the money early, he may have to pay income taxes, early withdrawal penalties, and other government taxes. Basically, a Traditional IRA account is a tax deferred retirement account. You pay the taxes when you withdraw the money.
Once you reach age 59 ½ you no longer pay the early withdrawal penalties. At age 70 ½, you must begin withdrawals called RMD's or Required Minimum Distributions. You will be notified of how much to withdraw based on age and life expectancy.
The biggest point on a Roth IRA is that what you earn on the account may be tax free. You pay the taxes up front and the earnings on the account are not taxed when the account earns them. For example, Julie makes $37,000 and makes a $5,000 deposit into her IRA. She does not get the tax deduction to lower her income, but say over the years she has a large IRA account. Perhaps she has quit a job and rolled her 401k into the IRA account and now she has a large IRA. She is earning, for example, $3,000 in interest. While the money is sitting in the retirement account, she doesn't have to count that money as earnings on her taxes. When she goes to withdraw the money, based on income and age requirements, Julie may not have to pay taxes on that interest when she withdraws the money.
Other points of interest on the Roth, is that because money has to be taken out of some IRA accounts at a certain age, since the deposits are already taxed, you can still make deposits into a Roth IRA even after 70 ½.
Before opening an IRA account, ask your tax preparer which would be the best for you. Depending on how you file, one may be better than the other, or you may qualify for both to maximize your tax dollars. Both IRA accounts are based on earned income for the reporting year and both have maximum contribution limits of $5000 or $6000 depending on age and income. Both accept roll-overs and direct transfers and some rules may apply depending on where the money is coming from. Before you make a withdrawal or deposit into the IRA account you choose, ask your tax preparer if it keeps you within your limits.
That's a lot of information and sometimes looking at retirement can become overwhelming. Be sure and talk to your tax preparer and ask them which one is more suitable for you. IRA accounts will not only add the extra layer of financial security for your future, but it will help add that money in retirement to enjoy the time off you've worked hard for all those years.
With our Annual Meeting coming up around the corner, the credit union gets a chance to tell you how we are doing. But then again aren't credit unions the same as a bank and aren't we doing about the same as a bank? Let's look at the differences in the Credit Union movement and see why we are so much stronger.
|When you open a savings acount at Credit union, you become a member. Each member is an owner of the CU.||When you hold an account at the bank you are a customer. You have no ownership.|
|Members own the credit union. When You deposit your money, you are actually buying shares of the company. That is why Your membership account is called a Shares Account.||Bank are owned by investors who may or may not be customers of the bank.|
|Since credit union members are owners, each member has an equal vote in electing the board members, no matter how much money they have on deposit or in the credit Union.||Banks are owned and controlled by stockholders whose number of votes depends upon number of shares owned. Customers do not have rights.|
Board of Directors
|Unpaid volunteers elected by credit union members.||Paid directors elected by share Union members. Holders, who make decisions in the best interest of the stockholders, not the customers.|
|Credit unions are not-for-profit financial cooperatives that exist to serve their members rather than to maximize corporate profits.||Banks are for profit-oriented organizations and exist to earn a profit for stockholders.|
Where do Earnings go?
|Credit unions distribute earnings back to it’s members in the form of higher savings rates, lower loan rates and fees and enhanced products and services.||Banks declared earnings are paid to stockholders.|
|Credit union deposits are federally insured up to $250,000 by the NCUA.||Bank deposits are federally insured up to $250,000 by the FDIC.|
Bottom Line: Credit unions are a not-for-profit financial institution. After all the bills are paid the profits are returned to the membership in bonus payouts, lower loan rates, higher investments, more service options, updated services. Banks are for profit and their profits are returned to stockholders and CEO's by giving them vacations, expensive "perks", and raising incentives to keep the returns high.
Credit Unions and Banks are governed by the same rules and regulations. They also have to meet the same standards. So why are Credit Unions doing so much better. It all goes back to the membership. We take it personally because it is. We are just people helping people and that is the credit union philosophy.
It is already 2018 and this is the year we have decided to start saving, right? So what now? Here are a few ideas on keeping your money working for you and out of your hands.
- Savings Accounts: Put money on Payroll Deduction into your savings account. You don't have to send large amounts for it to add up. For example, if you get paid every 2 weeks and you send $5 dollars, you save $130. Doesn't sound like much, but when your tire is flat or its time to renew the car tag, that will come in handy. A savings account gives you a chance to put money away and earn interest, but still have access to it.
- Certificates of Deposit (CD): If you're one of the lucky ones and already have money saved, putting your money in a CD will make your money work harder for you. CD's have a steady interest payment each month. The money stays in the CD for a designated term and pays higher interest than a regular savings account. At maturity some automatically roll over and some close. Check your options when opening one.
- Retirement Accounts: There are two types: Roth and Traditional. Roth IRA is after taxed deposits and Traditional are before taxed deposits. Depending on how you file your taxes you may get a tax break; plus, starting early means possible early retirement and security for the future. IRA's earn money while the money is in the account. For example, if you were to put just $1000 a year in a retirement account for 30 years at a base interest rate of 1% your account would have a little over $68,000. Check with your accountant/tax advisor for more details.
- Saving money can be hard but when it is done in small steps it adds up. Take time to talk to the Credit Union about your options and what is right for you. Putting money aside also allows you to take a look at how you're spending your money and may help you pay off some of the unwanted bills early. Always, though, if you're able to, put money aside for yourself. It is such a good feeling to know that you have money to fall back on when times get rough, and we've all been through those times.
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Is Christmas really almost here? Just yesterday we had the turkey and now I'm really seeing red. Sometimes looking at our checkbooks or even our savings account we see more red this time of year than we do green. Here are a few helpful tips for keeping red in the cranberry sauce and out of your finances.
- Keep up with the numbers: Sometimes spending comes unexpectedly. You were on your lunch break and saw the perfect item on sale, but you forget you bought it later on. Keep the receipts and keep them in a place you know where they are. When you go back later to balance the checkbook, you'll know where you stand with your money. Don't forget the bills you have on an automatic draft either. Small stuff gets overlooked and overdraft fees add up quickly. By staying on top of the numbers you can stay out of the red.
- Coupons and Discounts:
Clipping coupons takes time and sometimes can be over looked. Clipping coupons isn't a bad idea, especially if you get coupons for stuff you actually use and not just because you have the coupon. There are other options too. Look at the stores sale paper if one is available. If having a store card gives you a discount, make sure you bring it.
Take advantage of bulk buying. Everybody needs a little more tissue, soap, and other items so why not buy in bulk. Warehouses that sell in bulk can save even without having a membership. Sometimes coming across a one day pass can keep from having to pay a joining fee for just one day.
Most of the sales this time of year are geared towards family gatherings. If you are only buying for one, make sure to read the ad carefully. If the ad says 10/$10 make sure you do not have to buy all 10 items just to get the discount. Buying extra items you do not need adds up. Instead of going shopping alone, go with friends and share the expenses. By each putting in equal amounts, you can increase your spending power.
- Name Brand Vs. Store Brand: Be flexible in what products you are buying. Some items have to be name brand because they are better. Some items can be store brand and you will never know. But sometimes what seems like splurging on name brand is actually savings. Don't always assume that name brand is more. Look at the item and its comparison. Are they the same size, make, and model but with a different label? Then buy the less expensive one. Sometimes mixing name brand and store brand save too. Other than food items, think about how much that item will be used. Invest more in the long term. Why spend more if the item will be "old hat" or completely consumed in a few months? The money you save can help you keep from spending more in the long run.
- Don't forget to set some money aside: We will all forget someone or something that we will need to get before Christmas. Put some money aside for that "Oh my gosh" moment. You can avoid the overdraft fees and not see so much red in the finances.
- Just because it is Christmas, don't go on a spending spree:
Some people feel like they have to spend more just because it is Christmas. You will see that most people can't afford to get a gift for every single person on the list. So why not just set a date to go out to eat or to a movie during the season. Time spent with someone is often our best memories with them. It will cost about the same as a gift that they may or may not like, and cuts out the gift card gifts as a last minute effort.
Looking back at gifts given to me in the past, I remember the actual gift but the time spent with that person is something no one can take from me. Christmas is about giving without trying to get something in return. Memories last forever, but the gift, well, there is always regifting next year.