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16 Simple Ways to Keep Your Financial Resolutions in the Coming Year

January 10th, 2019 · Budgeting, Credit Rebuild, Credit Repair, Debt Consolidation, Debt Management, Financial Literacy, Saving, Your Money

With the start of a new year comes a rash of resolutions. These promises to do better in the coming year are an annual rite of passage, but making those promises is far easier than keeping them.

Everyone who has resolved to lose weight and get more exercise can sympathize with this situation, but promises to save money can be just as hard to keep. If you have vowed to make this the year you finally get a handle on your finances, you need more than a promise – you need a plan.

If you plan ahead and make the right choices, you can get ahead financially in the coming year. Here are some simple and relatively painless ways to keep those financial resolutions once and for all.

Banish the bank fees. If you are still paying to keep your money in a bank, now is the time to banish those fees. If you look around, you can find a bank that values your business – and does not charge you for it.

Get a grip on your cash flow If you want to improve your personal finances this year, start planning your cash flow in advance. When you learn to develop a budget and stick to it, you get a better idea of how much cash you will have on him each month. Understand what your cash flow will be for the next six months and adjust your spending accordingly. When you reduce your reliance on credit cards and start focusing on how much cash you have on hand each month, you realize how easy it is to reduce your debt load simply by making smart purchasing decisions.

Ramp up your interest. Once you have banished the bank fees, look for ways to make your money work harder for you. Interest rates are on the rise, so take advantage of that free money.

Adjust your withholding. If you get a big tax refund every year, why not put that money to work now? Once you have found a great interest rate on your bank account, adjust your withholding rates for a fatter paycheck – and even more free money.

Pay attention to your debt-to-income ratio. Start paying attention to your debt-to-income ratio if you want to improve your financial situation this year. Understanding your debt-to-income ratio is crucial if you want to improve your liquidity and build your net-worth. Monitor what percentage of your income goes toward paying down debt and make it your mission to decrease that percentage by the end of the year.

Turn your clutter into cash. All that extra stuff gathering dust in the closet could be a source of ready cash. Make this the year you stop collecting, and start selling off your unwanted stuff.

Increase your retirement plan contributions. If you have a 401(k) plan at work, ramp up your contributions and save even more. You can reduce your tax bill and prepare for your future, all at the same time.

Abandon your unused subscriptions. From magazines you never read to services you no longer use, the cost of unused subscriptions can really put a damper on your finances. Review those subscription charges and put the money back in your pocket.

Pay more than your monthly minimum payment. Consider making larger payments on your debts to reduce the time you spend paying off your credit cards and or loans. Paying your monthly minimum payment is not an efficient way to reduce your debt. Even paying an extra $50-$100 per month on your loans or credit card balances can significantly improve your financial situation after just one year.

Set financial goals. If you want to improve your personal finances this year, start setting annual financial goals for yourself. It is not enough to want to be better off financially; you must be willing to put in the hard work. Set long-term goals like saving enough money for a vacation, purchasing a new car, or saving up for a down payment on a home. Be specific with your goal setting and track your progress on a weekly basis.

Pay down student loans. If you’re still going to school, it may make sense to begin paying on those loans right now.  Long gone are the days where student loans come at low interest rates. If you’re out of school and currently paying them down, make throwing a little extra cash to the balances of the loan a priority.  Read about more about student loans here.  

Open a new credit card. While it may seem counter-intuitive, getting a credit card can greatly help your credit:  part of your credit score is the ability to get new credit (the theory here is that your credit is good enough to get new credit).  If you don’t currently have a credit card, now may be a good time to get one – credit standards for new customers are much more relaxed then they were during the last recession.  In addition, there are many rewards cards programs that can save you money, especially if you pay your credit card balance in full each month. For more information on getting a credit card, see our credit card guide.   

If you are renting, request that your payments be reported.  While not all landlords have the capability to report to the credit bureaus, several of the credit reporting agencies do accept rent payment histories via several rent reporting services, some of which are free.  This can be especially important if you are planning to buy a home sometime in the future and you don’t have much credit history already built up.

Consider talking to a financial planner.   Even if you don’t have much money to invest right now, talking to a financial planner can help put your overall long-range money goals into perspective.  Part of what financial planners do is actually calculate the date at which you can retire, based on monthly/weekly/annual savings rates, which can be a great motivator to save.  Read more about financial planners.

Build an emergency fund. All that money you are saving?  It not only helps to pay down existing debt, but having emergency funds can help stave off the financial crisis of having surprise car repairs, medical expenses, or having that home appliance or plumbing break down.  If you don’t have the money to cover emergency expenses, you may find yourself getting into more debt, essentially forcing you to take a step back in your march to improved finances.

Improve your credit scores.  Higher credit scores mean lower loan costs, better access to cheap credit, lower insurance, overall, your financial status is better!  There are some simple things you can do to improve your credit: correct your credit report, pay down credit cards and ask for a credit line increase.  Creditinfocenter has a complete guide to credit repair.  

 

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Credit Freezes Are Now Free

October 10th, 2018 · Credit Repair, Credit Reports

Because of new law signed last May by President Trump, credit freezes are now free at all three credit bureaus. The freezes formerly cost $10 per bureau. Once a report is frozen, it must be thawed and credit “thaws” also used to cost $10 per bureau, making the cost of a credit freeze $60 for a single freeze/thaw cycle. The new law took effect September 21, 2018 and was part of the Dodd-Frank Act. Before the law took effect, Equifax and TransUnion had already quietly waived the fees, but because of the law, Experian must now also offer credit freezes/thaws for free.

What is a credit freeze?

A credit freeze essentially blocks a lender’s access to your credit report. If you are having issues with identity theft, a credit freeze will essentially block a lender from reviewing your credit report information. Without access to your credit report, a lender will not issue new credit, so no new accounts can be taken out in your name. Since different lenders use different credit bureaus, or all three, In order to effectively freeze your credit, you need to freeze your credit reports at each of the bureaus: Experian, Equifax and TransUnion.

A credit freeze will not block existing creditors from looking your credit report, nor prevent you from reviewing your own credit report at websites like annualcreditreport.com. Annualcreditreport.com is where consumers are allowed pull their credit report for free once per year.
See this article for more information on credit freezes.

Other Credit Report Protections
There are different types of security measures you can take with your credit reports, some of which are not free.

Credit Locks
You can also do a credit “lock.” A credit lock is essentially the same as a freeze, but is supposedly easier, as the lock or unlock process happens instantly. The other difference is that a credit lock costs money at Experian. Like a freeze, you must do the lock at all three bureaus for it to be effective.

Here’s where the gotcha comes in: service agreements for each bureau make it clear that the companies don’t guarantee error-free operation or uninterrupted service. The protections of a credit freeze are mandated by law and can offer better protection.

While all three locks can be done with the aid of an app, there are differences. Experian bundles its lock with another credit report service and charges $9.99/month. It also requires that you waive the ability to enter into a class action lawsuit and mandates arbitration. Equifax and TransUnion do not require you to waive your right to sue, though TransUnion requires you to opt into advertisement of various credit products.

Fraud Alerts
Another type of protection is a fraud alert, which requires credit bureaus to contact you to verify your identity when a company requests your credit file. This isn’t a fool proof system. Under the new law, initial fraud alerts must last for one year once established. Advantages: fraud alerts are free. One other advantage: with a freeze, you must initiate at freeze at each credit bureau, meaning you need to go through the process 3 times and maintain 3 separate PINs. With a fraud alert, placing the alert at one credit bureau automatically places the alert at all three bureaus.

To remove a fraud alert, Experian and Equifax requires that you notify them in writing and submit copies of proof of identity. TransUnion has an online system to remove the fraud alert.
You can have both a credit freeze and a fraud alert on your credit report simultaneously if you want to make your credit report as tamper-free as possible.

Credit Monitoring
With credit monitoring, the consumer is sent alerts when something on their credit reports change. All of the credit bureaus offer this service at a price, though there are some free ways to get credit monitoring. For instance, if you sign up to a website like Credit Karma or have a credit card from a major bank, you are often offered credit monitoring for free. Paying for credit monitoring is not really a good idea. It’s like finding out your home has been robbed and the thieves have already made off with all the loot — doesn’t really do you much good. It just allows you to know there is a problem and take steps to fix the damage, not prevent it in the first place.

Should I do a credit freeze?
Since there is absolutely no cost for doing so, some experts recommend doing the credit freeze permanently, only thawing when you know you are going to apply for new credit. The only things you will have to remember are your PIN (which you are required to create at the time of freezing your credit), and to give the process ample time to thaw your credit file. The process of thawing is supposed to take an hour, but really you should give it three business days so you are not left in the lurch when trying to obtain new credit. Also, since it’s impossible to predict which bureau the lender will use, you will need to initiate the thawing process at all three credit bureaus, then freeze them again when the process is complete.

Even with the well-known Equifax hack which happened in 2017, where millions of American consumers were affected. many consumers did nothing to protect themselves from this potentially serious personal security breach. According to the New York Times, the University of Michigan interviewed 24 people who knew about the breach and its serious nature and found that none of them had taken any steps to protect themselves. These consumers suffered from what the researches called “optimism bias,” which is to say that the consumers believed nothing could really happen to them. In other cases, people with poor credit assumed that because their credit was so terrible, no identity thief using their information would be offered credit. Such people often wake up to unwelcome surprises when reviewing their credit files.

The new law also required that credit bureaus allow parents to freeze their children’s (age 16 and younger) credit reports. Children are commonly the target of identity thieves as their Social Security numbers are untarnished — unused and have no credit data. A person under the age of 18 cannot legally enter a contract without a parent’s permission, so typically, children do not open credit accounts and often a child’s credit report is not reviewed with the frequency as an adult’s. This makes the situation ripe for taking the information and running with it. If the information is obtained early enough in a child’s life, the identity thief could potentially operate for 10 years without being detected.

Where to place a freeze:
TransUnion: Visit TransUnion.com/credit-freeze. The company also has a free-freeze mobile app called myTransUnion, available at the Google Play Store and the Apple App Store.
Equifax: Visit https://www.Equifax.com/personal/credit-report-services/. Or call its automated line at 800-685-1111.
Experian: Visit www.Experian.com/freeze. Or call 1-888-EXPERIAN (1-888-397-3742).

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4 Things You Can Do While Waiting to Buy a Home

September 20th, 2018 · Mortgages

If you’re feeling wary about taking on a mortgage right now, you’re not alone. As reported by HousingWire, nearly one-quarter of Americans think high prices make this is a bad time to buy a home. On the flip-side, Yahoo Finance has good news on the same front – experts expect home prices to soften this year. While you wait, take steps to put yourself in the best position for buying a home when the time is right.

Why U.S. Homebuyers are Holding Out

Rising prices

As reported by MarketWatch, over the past year, the median home value has risen by more than 8 percent:

“The national median home value is now $217,300, an increase of 8.3% on the year and 8.4% above the bubble-era peak. In 21 of the nation’s 35 largest markets, the median home value is now at an all-time high.”

Why the price hike? It’s largely due to low inventory.

Rising mortgage rates

As though higher-priced homes don’t make affordability challenging enough, consider the impact of rising mortgage rates, too.

Jonathan Miller, president and CEO of real estate appraisal firm Miller Samuel Inc., told Yahoo Finance that “While the rate increases are currently nominal for Americans living paycheck to paycheck, it’s enough to sway a person’s decision to make that home purchase.”

Wages not keeping pace with inflation

It doesn’t help that inflation is growing at a greater rate than the wages of potential homebuyers.

According to Yahoo Finance, “When you adjust for inflation, wages haven’t risen in a decade, experts note. As the lack of inventory drives home prices up, affordability becomes an issue.

“Wages aren’t keeping pace and consumers are priced out of markets by 6% to 8% — depending on which home price index you look at, in terms of home values and wages.”

Fear of another housing bubble

As stated in the report cited by HousingWire, “We suspect memories of the house price crash 10 years ago are also playing a role in the relatively fast build-up in concerns over high house prices…. An understanding that house prices can quickly lose value is making Americans more cautious about buying a home.”

What to Do While You’re Waiting to Buy

1) Improve your credit
While you can buy a home with subprime credit, you’re much better-served taking the time to improve your credit score first. Otherwise, you’ll be looking at a much higher interest rate that will dramatically increase the cost of your loan.

To improve your credit before buying a home:

2) Do the math
How much home can you really afford? Use our mortgage calculator to figure your monthly payment – and overall loan cost – based on a specific interest rate.

3) Save your down payment
Aim for saving 20 percent for your down payment. Anything less than that may mean paying more, either in the form of higher interest or private mortgage insurance (PMI).

Fortunately, renting right now has its perks in this department.

As reported by MarketWatch, “The median rent nationwide only increased 1.3% over the past year to $1,440, marking the second straight month in which rent appreciation has fallen below the overall rate of inflation.”

In other words, as much as you may dislike renting right now, with rent appreciation falling below the rate of inflation, you’re in a better position to save more.

4) Educate yourself about mortgages
One of the biggest mistakes homebuyers make is going into the process unprepared. This not only means making uninformed decisions; it can also make an already stressful process even more challenging to navigate. So, do yourself a favor and make sure you can answer all the following questions before delving in.

Before You Buy

  • Do you know how to improve your credit first?
  • Do you know the best type of mortgage for you?
  • Do you know how to figure the real cost of your loan?
  • Do you understand underwriting guidelines?

After You Sign on the Dotted Line

  • Do you know how to pay off your loan early?
  • Do you know the alternatives to foreclosure?
  • Do you know how loan modifications work?
  • Do you know how to spot mortgage relief scams?

Find answers to all these questions (and more) in our comprehensive guide to mortgages.

While you may not love waiting to buy a home, it really is in your best interest. Take advantage of all these good things you can do in the meantime to put yourself in the best position once the time is right.

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