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Have a Saving Goal and Stay Focused

August 3, 2009

in Personal Finance

Like the majority of people, you have probably often thought about how important it is to save some money. You have likely figured out by now how setting aside money (such as for children’s education, down payment on a home, or even for retirement) is a good idea. However, what you might not be aware of is how exactly to make that first step, so here are a few tips to help you get started.

Start Where You Are

To build good savings habits is really only a simple matter of actually doing something instead of doing nothing. So, start where you are. For example, at the end of each day, empty you wallet and pockets of any change you accumulated during the day, and put it in a jar. Deposit this money monthly into a savings account. Another option is to skip on one coffee a day, and put a dollar aside instead. At the end of the month, this will amount to roughly $30 to deposit into that savings account. After an entire year of doing this, you will have saved an approximated $360!

Keep Track of Habits

Many people typically spend approximately $5 eating out several times a week at the office cafeteria. If you were to reduce this to only once or twice a week, you could take the extra five dollars from the days you don’t spend it, and deposit it into your savings account. The same scenario can be used once you finish paying off your car or student loans. Once the actual loan has been paid in full, continue depositing the same amount in your savings account every month.

Set Goals for Success

In order to develop a discipline for saving, most successful savers have the need to experience a number of small successes in the beginning so one positive experience reinforces the other. Start out by picking short-term, easily attainable goals which will give you a sense of personal satisfaction from the start.

For example, your goal might be a new stereo or paying off a credit card balance. Determine what those goals will cost, and give yourself a deadline for achieving them. Then all you have to do is just do it – begin by setting aside the right amount of money as per your schedule, and stick to it. Before you know it, your goal will have been reached.

Needs or Wants?

At some point or another we all have the urge to splurge or pamper ourselves. Of course it’s nice to treat ourselves to something new every now and again. Before making any purchase, however, remember to take the time to consider these questions: “Do I need this?” and “Does this help me achieve my savings goal?” As a rule this will help you make the appropriate decision and stay focused on your goals before making a purchase.

Monitoring Your Expenses

You may want to sit down at the end of each month and review all of your expenses. There may have been areas you didn’t consider before, but by seeing them on paper you realize they are part of what needs to change for the next month.

Stick With It

The most important point in any savings plan is to stick with it. Some people find it helpful to keep their goals in writing. Writing down the amount you need as well as the date you expect to achieve your goal gives you something concrete to focus on. With long-term goals, such as saving for retirement, you may find it helpful to establish milestones you can celebrate along the way.

Think Big

Big-time savers use an “I can” attitude while thinking long term. By exercising discipline now you can see rewarding paybacks later on. Saving can make the world of difference not only for yourself, but for your children as well. Starting to save today means less to worry about tomorrow.

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Five Ways to Improve Your Credit Score

April 23, 2009

in Money Management

Our credit scores play a big role in determining the results when we apply for a credit card or loan. A good credit score can help us get the credit we need at the best possible rate. A poor credit score could result in a higher interest rate or denial of credit. It is in our best interest to make sure our credit scores are as high as possible.

The credit bureaus keep the exact method for figuring credit scores a mystery. But there are a number of factors that are known to impact our credit scores. Here are five things you can do to improve yours:

1. Keep an eye on the information contained in your credit report. Sometimes the bureaus make mistakes, and identity theft can also wreak havoc on one’s credit report and score. Federal law requires each credit bureau to provide one free report per year to any consumer who requests it online, by phone or in writing, and we are also entitled to a free report if we are denied credit. So check your report regularly, and if you find any inaccuracies, dispute them in writing.

2. Always pay your bills on time. Even if you’ve made payments late in the past, keeping current bills paid on schedule will help raise your credit score. The longer your history of keeping payments current, the more it will improve your credit score.

3. Keep credit card balances low. Just because you have a $10,000 credit limit, that doesn’t mean you should use it all. A good rule of thumb is to keep each credit card balance at or below 25 percent of the limit. Even if you have a perfect payment history, carrying too large of a balance can adversely affect your credit score.

4. Avoid opening too many accounts in a short time frame. This is especially important if you have a short credit history, but it also applies if you have well-established credit. Opening lots of accounts in rapid succession raises concerns that you could get in over your head, hence lowering your credit score.

5. If you pay off an account, keep it open. This will help by lengthening your credit history. It can also reduce your balance to credit limit ratio, unless you transferred the balance to another card.

Improving your credit score is not as difficult as you might think. A few simple adjustments can really make a difference, but it does take some time. If you are planning to apply for credit, start working on your credit score a few months ahead of time. This will increase your chances of getting the loan or credit card, and it could save you lots of money on interest.

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Tips for Paying Off Credit Card Debt

April 10, 2009

in Personal Finance

Experts will tell you that the best way to pay off credit card debt is to make a list of your credit cards with the highest interest rates cards first. Then, for the card at the top of the list, pay off as much as possible each month instead of making the minimum payment.

When that card is paid off, move on to the next high interest rate card and follow the same procedure. This is known as the “snowball” process.

Of course, if you choose to pay off credit cards with smaller balances, that’s fine too. But those high interest rate credit cards can keep you in debt for years and years.

Here’s an example. According to Bankrate, “Paying just the $60 minimum payment on a $3,000 credit card balance would take eight years to pay off and cost a person a whopping $2,780 in interest. By paying an additional $50 a month, the debt would be paid off in three years and they would be spared $1,800 in interest charges.”

In today’s economy, this may seem a daunting task. However, considering that the unemployment rate is rising, more home foreclosures are expected, and not only banks but corporations are facing major financial problems, it is important to have the least amount of debt possible.

Will it be easy? No, it will not. Sacrifices will probably have to be made. Family budgets will have to be addressed once again to determine where additional funds can be put toward credit card debt.

In addition, in order to save money to pay off the debt, Bankrate advises that you follow these recommendations:

* “Brown bag ten lunches per month
* Have movies and popcorn at home instead of going out
* Use coupons for groceries and buy store brands
* Make pizza at home instead of ordering out
* Buy in bulk and freeze dinner entrees
* Give handmade cards and gifts
* Shop at consignment, thrift and discount stores”

There are additional measures you can take to increase the amount of money you save each month, including:

* Becoming more energy efficient
* Bundle the cable, phone, and internet
* Call credit card companies to have interest rates lowered
* Eliminate magazine and newspaper subscriptions
* Eliminate unneeded telephone services
* Increase insurance coverage

Anything you can do to begin to pay off your credit card debt will only serve to help you in the coming months and years. Most economists assert that the economy will only get worse before it gets better. It is incumbent upon you to be prepared for any eventuality, including setting aside money for any emergency that may occur.

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