Should You Close A Credit Card?

August 10, 2017

One question we often receive is whether or not to close a card after it’s paid off or no longer in use. At first, your instinct might be to close the cards to avoid annual fees and perhaps to never face the risk of running that debt back up again. However, there are a couple of reasons why this can actually hurt your credit score.

Credit utilization

The first reason is that a big part of your credit score is your credit utilization or what percentage of your total credit limit you’re using. (It doesn’t matter if you pay off your credit cards each month because it’s measured at a random point in time.) Let’s say the total credit limit among all your cards is $10k and you have a $3k balance. In that case, your utilization would be 30%, the recommended max you should use to maintain the best credit score. If you close some cards and now have a total credit limit of $5k, that same $3k of debt would result in a 60% utilization.

Credit history

Of course, if you don’t use the cards anymore, your credit utilization will be zero no matter how many cards you have. There’s another reason why closing credit cards isn’t always a good idea though. Closing an old card can shorten your credit history, which is another factor in determining your credit score. So if the card you’re thinking of closing is your oldest card, you may want to keep it open just to keep that history active on your credit report.

This isn’t to say that closing cards is always a bad idea. If you have too many lines of credit, closing a few can actually help your score. To find out, you can use Credit Karma’s free Credit Simulator tool to see what the impact might be.

Alternatives to closing

If closing cards turns out to be a bad idea, there are some alternatives. If you’re worried about using the cards and running the debt back up, you can always physically destroy them or put them someplace hard to access, but keep the credit line open. If you’re trying to avoid fees, contact the card company and see if you can convert the card into one with no fees or one with rewards that outweigh the costs.

Measure the right things

Finally, don’t forget that credit scores are far from the most important number in your financial wellness. In fact, a few points here and there may make no difference at all in your ability to get a loan or the interest rates you qualify for. So despite what may be small impact on your credit score, sometimes the best choice is to just go ahead and close those cards.

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How One Woman Went From The Brink Of Bankruptcy To Retirement Ready In Two Years

June 27, 2017

Last week I wrote about how a workplace financial wellness benefit is different from your 401(k), and mentioned that one of the goals of my work these days is to change lives. In that spirit, I just have to share an amazing story of one woman I had the privilege to work with who literally turned her life around through her financial wellness benefit.

When I met this woman two years ago, she was contemplating bankruptcy but wondering if there was a possible way to avoid it. Additionally, she wanted to get herself to a place of being able to retire and know that she’d be financially secure for at least twenty years in retirement.

It was a tall order, but I’m not one to shy away from a challenge. After reviewing her finances, I told her that she could avoid bankruptcy and get out of debt completely, but she would have to sacrifice. And by “sacrifice,” I really meant it – it was a tough love kind of conversation. She said she was willing to try it, so here’s what I suggested she give up:

  1. Her stuff. I told her she needed a “fire sale” of everything but the clothes on her back and then to live on the bare minimum for a few years.
  2. Her home. She was living in an expensive part of the country, which meant that her monthly mortgage expenses added up to much more than the standard “25%-35% of take home pay” rule of thumb.
  3. Her community. Selling her house wasn’t enough – even if she moved to a different place, the area she lived in was so expensive that no matter what, she was going to struggle just to cover living expenses, which left little room for paying down debt or saving money.

To my delight, she did it! She took my guidance and sold everything, moved out of state and in with her mother until she paid off all of her consumer debt. And now she’s on track to retire when she wants to. Her sacrifice has given her the financial freedom to live life on her terms.

It’s hard for me to describe the gratification that I felt when I she emailed me her last status report to tell me all of this – it’s the essence of why I do what I do. But the real take away is that sometimes in order to get what we want to, we have to take a step back and give some things up. It wasn’t easy for her, but she decided that her long-term financial security (and owning up to the debt she’d incurred) was far more important to her than any house, outfit or piece of furniture. Sometimes it takes some tough love and real sacrifice, but in the end, it’s worth it.

For more on how she did it, check out these resources:

How I Sold All My Stuff Online

Debt Blaster calculator

8 Inexpensive Ways To Prepare Your Home For Sale

 

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How to Better Prepare Your Kids to Manage Money in College

April 18, 2017

This is the season where I start to get invitations to friends’ and relatives’ kids’ high school graduations. It never fails to amaze me how quickly they grow up. As I start to think of these kids graduating, I realize many of them will be getting ready to go to college, completely unprepared for how they will handle money.

That was the case with me. My family never discussed money with me and when I went to college, the peer pressure of having to look a certain way and the desire to hang out friends quickly left me broke, no matter how much money I had. If I could go back to 1990, ten years ago when I graduated from high school (please allow me to remain in my mathematical delusion), I wish my parents would have better prepared me for managing my money in college by doing the following:

Give them an allowance that includes ALL of their monthly expenses. My parents gave me money as I needed or wanted. Typically, I would ask for money for the movies or to cover my expenses for being on the track team such as travel, hotel and sneakers…oh and I forgot – the money to get my hair done. I learned in college that I was high-maintenance and could not afford my own upkeep.  Consider adding up how much you spend on your kids’ activities, personal care and outings and giving it to them to manage themselves.

Teach them how to think about upcoming expenses and budget the money they have. One of my favorite quotes about budgeting is from John Maxwell, “A budget is telling your money where to go before wondering where it went.” Walk your child through the budgeting process to get them thinking about upcoming expenses and how to create and stick to a budget.

A friend of mine opened a checking account for her child in high school.  She deposited money into the account monthly for his expenses. She helped him create a budget using online software like Mint and she had a weekly budget meeting with him.

Her son had to show her how he spent the money for the week and how much he had left. She did this while he was in high school so the money management habits will kick in by the time he went to college. Consider doing something similar with your child to help create the habit of budgeting and thinking through their financial needs.

Teach your kids about credit. When I was in college, it seemed like every credit card company known to man was on my college campus. Even though it has gotten better, credit card companies still market to college students who have no idea what they are signing up for.

Luckily, the CARD Act of 2009 provided some level of protection to college students. The act cracked down on giving credit cards to students under the age of 21. Generally, a jobless student cannot get a credit card without proof of income or a co-signer, but eventually, they will be eligible for a credit card.

I thought credit cards offer “free” money that I could take my time paying back. I had no idea that in addition to paying for the items I bought, I was paying an additional 25% in interest. Help your children understand that the money is not free and that the less they pay on their credit card, the more money they will pay in the long run.

If you decide to give your child a credit card, first make she has good money management skills. Control the credit limit and check in weekly at first to make sure the credit card is being used wisely. Then switch to monthly meetings.

The last thing you want is for your child to walk out of college in credit card debt and with bad money management skills. Teach them good money management habits now to help them build a good financial future. What better graduation gift is there?

 

 

 

What It’s Like to Work With a Credit Counselor

February 03, 2017

One of the things that our financial planning team talks about with people in distress about their debt level is the concept of using a non-profit credit counseling service to help them work their way out of debt. This usually happens after someone has had a few failed attempts at different “do it yourself” debt reduction strategies, like the “debt snowball” (pay off lowest balance first and when it’s gone, roll that payment into the next lowest balance debt and repeat till debt free) or “debt blaster” (pay off highest interest debt and then roll that payment into the next highest interest debt, etc.). After trying those and making very little progress, no progress or actually incurring more debt, people can be incredibly frustrated and feel like they need to take their efforts up a notch and get help from an external source.

When considering using an external source for help in getting out of debt, the number of options out there can be a bit daunting. There has also been enough fraud perpetrated by nefarious players who hold themselves out as debt reduction experts to make the landscape a little bit scary. Given that there is a great deal of uncertainty about how this vague concept of “credit counseling” actually works, I figured it would make sense to talk to a few people who have gone through the process to get their perspective.  Based on those conversations, here are some observations and things I learned that might be helpful for people who are ready to take that step to help their financial lives.

What did the process look like? The first step was a phone call with a counselor to talk about my situation and they pulled up a credit report. From there, we built a budget worksheet for me and my life. 

They contacted my credit card companies, got my rates reduced down to a really low interest rate and sent me a proposal that showed how much I’d pay each month and how many months I’d be paying. I’d pay them once per month and then they pay my credit card bill. If I sent in extra money, they’d apply that to each of my cards.

I’d get statements monthly and they charged a small fee ($25-$35 per month), which I wasn’t crazy about, but I paid it because I was seeing actual progress. While they are non-profit, they aren’t free and that was something I didn’t fully grasp at first. By the time I made my last payment, I had changed my spending habits, I was debt free and my credit score (after the initial drop) was higher than it had ever been. 

What surprised you? In order to qualify for the DMP, I had to complete a budget sheet and I had never done that. It helped them structure a plan that I could stick to with payments that I could actually handle. The closing of all the cards was also a surprise, but it makes sense. Once you’ve dug a hole and want to get out, it makes sense to put down the shovel.

What’s the best thing about using a credit counseling service? They helped me get out of debt and I had a schedule that made sense. Before entering into the DMP (debt management program), I was very scattered and would pay a bit extra on some cards but end up using others. It took 4 ½ years, but I went from over $30,000 in credit card debt to $0.

What’s the worst thing? Finding the right provider. My first shot at it, I used a company that called me. I ended up paying them for 6 months, they informed me to stop paying my credit card bills, and they never paid the bills. I feel like I got robbed, but I didn’t do my homework on them, so I take some of the responsibility for that.

Once I got to a non-profit credit counselor, I was able to get into a program that worked for me. I had to close every credit card except for one emergency card. My credit score dropped a lot when I stopped paying the credit cards and it took a while to recover, but once I got all the debt paid off, the initial pain was a distant memory so it probably wasn’t all that bad.

What warnings could you give to people considering working with a non-profit credit counselor? Be VERY careful with who you choose to work with! The non-profit credit counselors at debtadvice.org have a much better reputation than the for-profit wild wild west approach where you don’t know who is legit and who isn’t.

Don’t get into a DMP if you aren’t 100% committed to a multiyear process. If you’re looking for a magic pill that solves your debt issues overnight, this is probably not the right path for you. If you stick to the plan, you’ll get out of debt, but I’ve know people who start and get frustrated after 6 months and bail out of the program because they aren’t seeing results fast enough.

Like any tool out there in the financial world, the world of credit counseling isn’t for everyone. There are good things, not so great things and even the unexpected thing periodically. Do your homework, ask questions until you feel comfortable and get yourself out of debt whether you do it yourself, use a credit counselor, use a debt resolution company (future blog topic) or end up filing bankruptcy. Reducing and eliminating debt is a fantastic step toward getting yourself to a place where you’d call yourself financially secure.

 

My Favorite Credit Cards

January 19, 2017

Do you find yourself stuck with big credit card bills after the holidays? One way to make credit cards work for you instead of against you is by maximizing the points you earn on stuff you buy throughout the year. In fact, I generally enough in points to more than cover my holiday spending.

Don’t forget that this only works if you pay the balance off each month. Late payment fees and interest charges can more than erase the value of points you earn. With that being said, here are the cards I use for each of my major spending categories:

Regular bills: For things like my cable, cell phone bill, insurance premiums, and subscriptions, I use the Chase Ink Cash Mastercard. It pays 5% cash back on the first $25k per year you spend on office supply stores, cellular and landline phone service, and Internet and cable TV services, 2% cash back on up to $25k per year spent on gas stations and restaurants, and 1% cash back on everything else. I keep this card at home so I don’t have to worry about losing it and having to update all my autopays.

Business travel: I use the new Chase Sapphire Reserve, which offers primary rental car coverage and 3 points per dollar spent on travel and restaurants. Those points can then be combined with the Chase Ink points above and redeemed for 50% more in Chase’s Ultimate Rewards portal or exchanged for points 1:1 with one of Chase’s 11 travel partners. There’s a pretty steep $450 annual fee but also a $300 travel credit and a $100 Global Entry fee credit so you can still come out ahead if you travel enough. Finally, it offers a 100,000 point sign-up bonus if you apply by March 12 at one of Chase’s bank branches and spend $4,000 in the first 3 months.

Amazon purchases: I’m an Amazon Prime member and do most of my big ticket spending on Amazon so the Amazon Prime Rewards Visa Signature Card makes sense. It offers 5% cash back on Amazon purchases (for Prime members), 2% back on restaurants, gas stations, and drug stores, and 1% back on everything else along with purchase and extended warranty protections. Not only is there no annual fee, you also get a $70 Amazon gift card for signing up.

Target purchases: I have a Target a couple blocks from my home so I tend to do most of my in-person shopping there. The Target REDcard provides a 5% discount and an additional 30 days for returns. I signed up for the debit card since it provides the same benefits without having yet another credit card on my credit report.

Other purchases: I use the Consumers Credit Union Visa Signature Cash Rebate card. It gives me 3% cash back on grocery stores, 2% on gas, and 1% on everything else. That doesn’t sound that great, but if I spend $500 in a month, I can get a 3.59% interest rate on up to $15k in my Consumers Credit Union rewards checking account and if I spend $1,000 in a month, I get a 4.59% rate on up to $20k in that account. That 4.59% interest rate can easily dwarf the value of other cards’ rewards, especially if you’re more of a saver than a spender like me.

Once I hit $1,000 in a month on my Consumers Credit Union Visa, I use the Citi Double Cash Mastercard. It offers a simple 1% cash back on every purchase and then another 1% cash back when you pay it off for a total of 2% cash back on all purchases. This is a good card to have in addition to any cards you may choose for more specialized spending categories.

Keep in mind that just because I chose these credit cards doesn’t mean they’re the best for you. Think about how you use credit cards and what you spend them on to see which card(s) offer you the most value. (For some, the simplicity of having only one card may be their best value.) Finally, I’m always up for suggestions. If you know a card that might be better for my spending, send me an email at [email protected].

The Fastest Way To Pay Off Credit Card Debt

December 07, 2016

Is one of your financial goals getting out of credit card debt so that you can start directing that money toward something more fun like a new home, college education or retirement? Throwing away money on credit card interest is an incredible waste. The best way to avoid this, besides staying out of debt in the first place, is to work to lower your interest rates as much as possible while paying off your debt as quickly as possible. Here’s how I dug myself out of $8,000 worth of credit card debt after college:

  1. I listed all of my accounts in order of interest rates, starting with the highest.
  2. I started paying the minimum on all cards except for the one with the highest rate. I paid as much as I could afford on that account, initially starting out with a fixed $200 per month payment.
  3. When I received an offer to open a new card with a 0% promotional interest rate on balance transfers, I applied and received a card with a $2,000 credit limit.
  4. I transferred $2,000 from the highest rate card to the new card but kept paying the highest amount on the original card.
  5. Once that card was paid off, I added $200 to the amount I was paying on the card with the next highest interest rate.
  6. I marked my calendar for when the 0% promo rate was to expire and a month before, I opened a new 0% card and transferred the balance over.
  7. I continued to pay down my other cards that charged interest with gusto.
  8. Anytime I came across extra money such as a tax refund or a signing bonus for a new job, I sent the money straight toward my highest interest rate credit card.
  9. Eventually, I was just left with the balance on the 0% card. I continued to pay it down aggressively, and when the promo rate expired, I continued to open new accounts at promo rates to transfer the balance.
  10. Within about five years, I was debt free.

Now, there are a few things to consider here. First, every time I applied for and opened a new account, my credit score took a hit. This only worked for me because I had excellent credit, which I maintained through on-time payments for all my debt, including my student loans, car payment and even utilities.

Second, each balance transfer incurred a fee that was typically a percentage of the balance I was transferring. I had to make sure the interest I was saving by transferring the balance was more than I paid in a balance transfer fee. Finally, I had to actually stop using credit cards in order for this to work. Once I was out of the debt, I did go back to using credit cards, but I kept a close eye on the balance so that I was able to pay it off each month.

If your credit isn’t great, you may not qualify for low promotional rate cards. If that’s the case, then consider calling up your credit card companies and request that they lower your rate. You may even suggest that if they lower your rate, you’ll transfer other balances onto that card. Remind them of your on-time payment history and threaten to transfer your balance away if they don’t work with you.

The key to success here is never wavering on that large payment amount. Being strategic about how you pay off your cards can also trim months or even years off your debt. Use this Debt Blaster to calculate the difference it will make.

 

 

Don’t Believe Everything You Hear

July 01, 2016

I’m the kind of person who will always try to listen with an open mind to different points of view and find something to learn from the speaker. I hear a lot of theories that way, some which appear to be myths, superstitions or misinterpretations, and some of which offer a refreshing change in perspective. In many cases, what’s true for most people might not be true for everyone. When sifting through financial advice, make sure to ask yourself if that guidance makes sense for your situation. Here are three common examples of financial guidance where you might want to think about things differently:

Question: I’ve been told that I should always have a mortgage so that I can get the mortgage interest deduction. Is that always true?

My view on it: MYTH

For each $1 in interest they pay the mortgage company, the typical family gets ~$.20 in tax relief (using the tax rate as the real payback number). To me, you lose $.80 on the dollar by paying interest. Plus if you have no mortgage, your embedded cost of living is permanently lower, so your accumulated savings and investment dollars can last a whole lot longer. Financial advisors typically say disciplined, long term investors could do better in the stock market rather than using savings to pay off a mortgage, but I’ve observed that most people prefer to have the peace of mind that comes with low or no debt so I’m not a huge fan of carrying a mortgage just to get a tax deduction.

Question: I should never contribute more to my 401(k) than my company’s matching contribution. Once I reach that, I’m told I should open a Roth IRA. Is that the right choice?

My view on it:  MYTH

Most people I see who try to implement this, forget one critical part – funding the Roth IRA. The problem with this guidance is that many people never get around to funding the Roth IRA every time they get paid. Once their paycheck hits their checking account, it gets accounted for in so many other ways.  I’d prefer to see people shoot for the maximum 401(k) contribution ($18,000 this year, plus $6,000 in catch-up contributions for those over 50) and once they max out the 401(k), THEN contribute to an IRA.

Also, maxing out the 401(k) doesn’t have to be an instant thing. You can increase your contribution level by 1-2%/year until you get there. If you have a rate escalator in your plan, sign up for it today!

Question: If I close out some of my credit cards, that should improve my credit score, right?

My view on it:  MYTH

Well, it’s not that simple! There are a lot of factors that go into your credit score. A few great places to see the multiple factors are CreditSesame.com and CreditKarma.com.

If the credit cards you want to close are relatively new, closing them may help you because it could increase your average “age of credit” (how long your open accounts have been open). But it may decrease your score because it reduces your overall credit limits and if you carry balances, it makes your “utilization ratio” higher. That’s the amount of overall credit balances divided by overall credit limit. Keeping that ratio below 25%, ideally at 0%, will be additive for your credit score. If closing accounts increases your utilization percentage, then closing the accounts can harm your score.

The thing to take away from this is that credit scores are fluid things. They change constantly. But if you take the time to review your scores and factors on the sites above, you will be able to make well informed decisions that impact your credit score.

As you go about living your life, learn how to discern the differences between good, solid personal financial management and misapplied financial principles. How? Ask a financial planning professional, pose a question on our Facebook page or ask me a question in the comments section below. Having the facts on your side can help save you from the many conflicting theories of managing your personal financial life.

 

What Really Matters to Your Credit Score

June 15, 2016

Do you know what elements make up your credit score? First, it’s important to know the difference between your credit score and your credit report, which are often confused. Your credit score is based on the items found on your credit report, kind of like how your grades are based on how you did on your homework and class assignments.

In order to get a better grade, you need to improve your homework and assignments. So before you freak out because your score is lower than you think it should be, you need to know how it’s calculated. Here are five things that you might think matter – but don’t – and five that really do.

What Doesn’t Matter

  • Employment history. Even though the amount of credit card offers I receive skyrocketed when I re-entered the workforce after being self-employed back in the day, credit agencies do not track your employment, nor does it affect your credit score. Whether or not you have a job may affect your ability to obtain credit (such as a loan or credit card), but that information does not go into your credit history.
  • Interest rates on debt. The lower your rates, the quicker you’ll pay off debt, which matters. But having higher rates does not affect your score.
  • Savings account balance. Your credit score is based solely on your credit history. Your bank account balance is not a part of your credit history. Rich people can have bad credit too.
  • Your age. Your date of birth might be on your credit report, but it does not play into the calculation of your credit score.
  • Where you live. Sorry, but that swank ZIP code won’t do diddley for your credit score if you’re not paying your bills on time!

What Does Matter

  • Paying on time. Whenever anyone asks me how to increase their credit score, my automatic response is, “Pay all your bills on time. Every time.” One late payment can wreak havoc on your score. You’d be surprised how many wealthy people struggle with this one!
  • Your credit utilization. The balance of your accounts relative to your credit limits definitely makes a difference on your credit report. The closer you are to maxing out, the worse the effect.
  • How long you’ve had credit. It’s called a credit history for a reason. The whole purpose is to help a creditor decide if they should lend you money. The further back you can demonstrate that you regularly pay your debts back, the better your score will be. This is where the advice about keeping a zero balance card open comes into play – just to show how long you’ve had it.
  • New accounts and credit checks. Opening a slew of new accounts (or attempting to) in a short period of time is a red flag to a lender. It can indicate that you’re planning a spending spree or that you are expecting to lose your job. If you’re planning to apply for a mortgage or other loan where your interest rate is determined by your credit score, try to avoid applying for any new credit cards at the same time.
  • The number and type of accounts. There are such things as “good debts” and “bad debts.” Having a mortgage, student loan or car loan looks better (as long as you don’t have late payments on your record), because it implies that you’re responsible enough to maintain a home, go to school and take care of a car. Plus the things that credit bought tend to last longer than the loan, making it good debt. Credit card debt isn’t as flattering – especially a bunch of store cards that are maxed out. Hello, shopaholic!

Finally, make sure you’re checking your credit report annually and cleaning up any errors. (The ONLY official place to get your federally mandated free reports is at www.annualcreditreport.com.) After all, one more thing that can matter to your credit but shouldn’t is someone else’s mistakes.

 

The Top 5 Mistakes People Make When Paying Off Debt

June 01, 2016

As someone who has dug myself out of credit card debt a couple times, discussing the best way to get out of debt isn’t just some academic exercise. It’s sharing what worked for me, considering the fact that nobody’s perfect. However, in the process of working with people who are struggling with credit card debt, I’ve noticed some common mistakes they make that if avoided, could really accelerate the arrival of their Debt-Free Day. Here are five ways people mess up their debt pay-off plans:

1. Neglecting to address the root cause of the debt first. Most credit card debt stories start one of three ways:

  1. A job loss that doesn’t lead to any spending cuts
  2. An accumulation of unexpected expenses like vet bills, travel for family emergencies, car repairs, etc
  3. Reimbursable work expenses that come in after the bill is due and aren’t applied against the balance

Before you can really implement a debt reduction plan, you have to first address the reason you got into debt in the first place. This is typically a lack of an emergency fund compounded by living beyond one’s means.

First, you have to find a way to make sure you’re spending less than you make each pay period, while also setting aside an amount each month to build up that emergency fund. This might require temporarily canceling services like cable, taking a break from dining out or even selling a lesser-used car. Then find a way to stay within your means using something like the No-Tracking Budget.

2. Continuing to use cards while paying them off. I have seen so many people try this, thinking they would just pay off the new charges each month plus an added amount toward the old balance. It’s often driven by a desire to earn credit card rewards like airline miles or cash back. I don’t care what kind of record keeping system you try, this never works, and the resulting extra interest far exceeds any rewards you earn. You have to stop using credit cards in order to pay them off. No way around it.

3. Using low interest promo offers to pay off old cards, then running up the new card. When done correctly, using cards with promo balance transfer offers can be a great way to expedite your debt pay-off plan. Where it goes completely off track is when people either continue to use the card that was paid off or when they use the new card for purchases, thinking they might as well take advantage of the low promo rate. (See point number 2. If you really want to get out of debt, you have to stop using debt in order to get there.) Then use the Debt Blaster calculator to make your plan.

4. Worrying too much about their credit score. There are multiple factors that affect your credit score, but carrying a balance on your credit card is not required to boost your score. It’s the ratio of your balance to limit and the timeliness of your payments that matters. Besides, your credit score really only matters when you’re trying to borrow money and sometimes when applying for a new job. When working on a debt pay-off plan, the primary number you should be focused on is the total balance of your debt (and making it go down), which will naturally improve your credit score.

5. Making payments willy nilly. When little windfalls occur such as tax refunds, work bonuses or even income from a side gig, it’s a great idea to direct that money toward paying down debt. But I often see people just randomly throwing this extra money at balances without looking at the overall picture. When you find yourself with unexpected extra cash, first make sure that you have a little safety net in place to help in times of unexpected extra expenses. Once you have the safety net in place, go back to your Debt Blaster calculator and see where the payment will have the most impact on your pay-off timeline. That’s what the “New Lump Sum” field is for.

Above all, the most successful debt pay-off plans start with an actual plan. Figure out how much you can afford to pay each month toward the debt, then treat that lump sum amount like a fixed bill until all the debt is gone. Once you’ve paid it all off, you’ll already have a nice amount that you can direct toward saving for other goals.

5 Questions to Ask Your Credit Card Company

March 08, 2016

National Consumer Protection Week, from March 6 to March 12, involves numerous organizations focused on helping to empower consumers to make informed decisions about financial products and services. Nowhere do I see a greater need for this than with credit cards. In my role as a resident financial planner, I have spoken to too many people who did not fully understand their credit card. The lack of understanding cost one employee hundreds of dollars in fees. If you are either shopping for a credit card or unsure of how your credit card works, consider asking these 5 questions: Continue reading “5 Questions to Ask Your Credit Card Company”

The Five Biggest Myths About Saving Money?

December 10, 2015

When one of my colleagues recently sent me an article titled “The Five Biggest Myths About Saving Money, According to a Millennial,” I was intrigued. After all, it can be fun to bust myths, especially about something as important as saving money, and hearing a Millennial perspective is interesting, both because I might be one myself (I was born in 1979 and Millennials are sometimes described as being born in the late 70s and other times in the early 80s so maybe I’m actually something called an Xennial) and because they (or we) are the future. The article features the views of Ethan Bloch, the 30-yr old founder of Digit, an online financial company. Here are the “myths” about saving that Bloch aims to correct: Continue reading “The Five Biggest Myths About Saving Money?”

Finding Some Good In My Worst Financial Decisions: Part 3

November 09, 2015

During the last few weeks, I’ve pointed out some of my own financial failures. Well, these failures weren’t exactly complete financial fails because I learned something from them and moved forward with a greater sense of purpose for how to better use wealth to accomplish life goals. Perhaps it is the voyeuristic culture that we live in with constant social media updates and reality TV shows that condition some of us to enjoy seeing others make mistakes right in front our eyes. I don’t know what that really says about our society, but it may just make us feel better to see that others are a little more messed up in the head than we are. Continue reading “Finding Some Good In My Worst Financial Decisions: Part 3”

Finding Some Good In My Worst Financial Decisions

October 26, 2015

Have you ever made some really dumb mistakes with your money? Perhaps your rational brain was screaming “No!” at the time but your emotional brain won the battle.Well, even though I may be a professional financial planner tasked with leading others to smart financial decision-making, I’ve had some major money missteps along this journey called life too. This week is the first in a series of blog posts about a few of my biggest blunders and how I tried to turn those mistakes into some good old fashioned life lessons. (Unfortunately, some life lessons can be quite expensive.) Continue reading “Finding Some Good In My Worst Financial Decisions”

Here’s Your Next Superhero!

September 25, 2015

I was talking with a young man today who was facing a rather large debt load and was looking for a way to effectively manage that debt so that it doesn’t ruin his life or at least make it difficult to feel anything other than trapped by his debt. He bought a relatively inexpensive ($20,000) car, has around $8,000 in credit card debt and about $80,000 of undergraduate and graduate school loans. His salary today basically allows him to pay rent, his debts and a little bit of discretionary money for entertainment. He said that his life was not very much fun right now and he feels like he is suffocating. He sounded very frustrated and he joked that at this stage, he’d be willing to sell an organ to raise cash to pay off some of the debt.  Continue reading “Here’s Your Next Superhero!”

4 Financial Ground Rules For Everyone

September 23, 2015

Figuring out how to prioritize the various things you could do with your money is one of the key quandaries of individual financial planning. Should you use extra money to pay off your car loan, boost college savings for your toddler or finally take that trip to Australia? There are countless options, depending on your individual values and goals. But before working toward any of those goals, there are four aspects of your finances that should be in place, no exceptions: Continue reading “4 Financial Ground Rules For Everyone”

Using Rewards Cards The Right Way

September 02, 2015

Using credit cards that allow you to accumulate rewards or cash back is a great way to get more bang for your buck. It totally works as long as you start out with no credit card debt and stay that way. But this is also how many people end up in debt in the first place. (There’s a reason that card companies offer those plush rewards.)

Continue reading “Using Rewards Cards The Right Way”

5 Tips For a Debt-Free Honeymoon

April 07, 2015

Spring is an awesome time of the year. You can finally climb out of the 5 layers of clothes you wore during the winter and actually see more than the eyes of the people around you. This is also prime wedding planning time. One of our resident financial planners, Kelley Long, recently got married and shared her story of how to make sure a honeymoon does not follow you two years later in credit card bills: Continue reading “5 Tips For a Debt-Free Honeymoon”

Why I’m Still Sticking With Cash

February 20, 2015

 

I recently read an article in the Delta Sky magazine that talked about the future of how we pay for things. The author summarized that cash and credit cards will soon be as obsolete as encyclopedia sets, 8-track players and typewriters.  His opinion is that new mobile technology such as Apple Pay or Google Wallet will be the preferred way to buy our groceries, gasoline and everything else because it will be more convenient and safer.  In fact, an article in Business Insider points out that U.S. consumers are using cash less than debit and credit cards for the first time.  So, will cash go the way of the typewriter?

While new technology is exciting and can help make our lives more efficient, it can also create new problems. For example, smartphones can keep us connected, but we now live in a world that feels impersonal and forever noisy. I appreciate convenience as much as the next person, but I’m not convinced that giving up cash will make life that much easier.  Here’s why:

  1. Cash is tangible.  Many people prefer cash because they can touch it, hold it, and see it. It is the easiest way to understand how money works and still helps many live within their means. The envelop method of budgeting is based on the principle of putting cash into physical envelopes for different categories. It may be old school, but it works because when the cash is gone – it’s gone.
  2. Cash doesn’t need electricity. I remember when a nasty storm blew through town a few years back and brought the area to its knees. The wind and ice took out the power and/or telephone lines in most of the city for almost a week. As power and phone service were brought back on, it was clear that cash was king. Many businesses had generators to power the basics but only accepted cash. Most banks were closed so no ATM. My father taught me to always have cash on me but over time, I grew lazy and reliant on using my debit card. After living through that storm and lack of electricity, I now keep cash on me at all times!
  3. Cash can earn you discounts. Credit card companies like Visa, American Express and Discover charge merchants up to 3% on all transactions. Apple Pay and Google Wallet are simply fancy ways to pay for your purchases using your existing credit cards. That’s why some business owners offer an incentive for their customers to pay with cash instead of credit.
  4. Cash is secure. Millions of Americans’ private credit data was stolen last holiday season when hackers compromised retailers like Target and Home Depot. These retailers do an incredible job of trying to keep their customers’ information secure, however there are inherent risks with using credit cards. While the new mobile payment companies use new technology to make those transactions more secure, it’s only a matter of time before the bad guys figure out how to hack this too. Cash doesn’t have that problem. If you are concerned about keeping your private data secure, consider paying in cash more often.

These new technologies may indeed be the norm years from now. But until the technology becomes more mainstream and proves to be more secure, I think I’ll stick with good old cash as much as possible.

Which Credit Cards Are the Most Rewarding?

December 04, 2014

One of my favorite things this time of year is being able to use credit card reward points to cover most or even all of my holiday shopping. While it obviously doesn’t make sense to buy things just to earn rewards (especially if you can’t pay the card off in full), why not get as much as you can from purchases you’re going to make anyway? In deciding which cards to use, there are a few rules of thumb I like to follow: Continue reading “Which Credit Cards Are the Most Rewarding?”