Posts Tagged ‘Credit Cards’

Getting Out Of Debt

Attacking Your Debt: What’s the Best Approach?

You may know the feeling: You’re at the bookstore and spy a wonderful new reference book that’ll help with your art….or you’re at the clothing store to pick out an outfit for an audition, and the perfect fit is just outside of your price range.

What’s a little credit card debt, right? You’ll be able to pay it off later. Hopefully.

Whether you took on debt by overspending on your craft, or your job doesn’t pay enough, debt is a weight that’s hard to relieve. That said, getting rid of debt is the first step when creating the Abundance Bound mentality. According to financial site NerdWallet, the average household in the U.S. carries $15,422 in debt. Ouch. More meaningful is the fact that once people have debt, they’re likely to use credit more and more often. The flip side? 53.3% of the American population carries no debt at all.

We can’t solve the American debt problem, but we certainly can help add you to the 53% without debt, can’t we? How should you pay it down?

Much has been made in the financial press lately about how you should attack your debt. Researchers recently concluded that often what people think of as the smartest option hasn’t been the most effective way to pay down debt. Let’s look at two popular methods and review why you might want to choose the sub-optimal method to pay down your debt.

The Mathematically Sound Method To Pay Debt

If you want to take the fastest path to debt relief, and can stay on it, here’s the obvious solution: (more…)

5 Tales of Financial Horror

I know Halloween was last week, but let’s keep the fun alive with some financial horror stories. Didn’t you love horror stories as a kid? I liked them…until I tried to sleep. Then, more often then not, I spent the night staring at the ceiling, sure that at any minute some disconfigured arm would grab me from under the bed.

 

The bad news is that we all have friends who have real life financial horror stories. Their money problems make it difficult to sleep. Maybe you have those issues. There’s good news: many of these horrible stories we can fix simply by turning on the lights: if we know they’re out there, we can avoid them or find ways for them to vanish:

Horrible Story #1) There once was a man who paid an annual fee on his credit card! There’s no reason to pay annual fees for cards unless you’re a high-powered user. Too many cards are available with no fees that still give you a low interest rate and reward points. Only pay fees if you find a card which you are certain will be justified by the rewards that are unavailable from a non-fee card.

Tip: Use online comparison sites to determine which card best meets your needs without paying a fee. (more…)

Overwhelmed With Financial Planning? Here’s Where to Start

A friend recently said, “I don’t know how you keep all of this straight…what the Dow Jones is doing, what’s a good rate on a credit card, how a will works, the right type of life insurance. Ouch! It makes my head hurt.”

You may feel the same way about your financial picture. Between your craft, family, friends and obligations, it seems like a huge hassle to remember everything you need to know.

But there’s good news: it’s not that difficult.

I imagine you might be thinking, “Ha! Easy for you to say. You do this every day.”

I understand that it’s a whole new world for many of our readers, but I’m serious: it’s not that difficult.

Sure, you might not understand every point about finalizing a mortgage or how to tell a good mutual fund from a bad one, but like any task, if you organize it correctly, it’s easy to see what you really need to know now and what can wait for later. (more…)

Daily ProsperiTIP

 

Here’s a trick I like: round your debt (including your mortgage) to the next round number. If your minimum payment is $45 on a credit card bill and you can’t pay more toward the balance, just round the bill to $50. Sure, it isn’t much, but most people can afford a few dollars extra toward debt repayment. What feels like a small amount can add up to much quicker payoffs.

Refinancing Your House, Car, or Credit Cards

Interest rates are low. Most of the time it’s wise to ignore anyone who tells you “you really need to….”, but believe me, you should check the interest rates of all your debt before interest rates rise.

…and when are interest rates going to rise? That’s the problem; I don’t know. Therefore, I recommend you do it right now.

Before We Begin

Make sure you read my post from two weeks ago: How to Take Advantage of Low Interest Rates. It lays out the simple steps to check your credit. You don’t want any surprises if you end up filling out applications to lower your interest rate.

Today, we’ll focus on three areas: your home, auto and credit cards.

How to Refinance Your Home

1) Compare rates through several lenders. This is done easily through a mortgage broker or an online comparison site. While many lenders appear to have different rates, you’ll find those with lower rates generally have higher fees. On the inverse, those with higher rates often have lower refinance costs. Generally, I prefer lower cost mortgages (which often means a slightly higher rate).

2) Gather information about each type of mortgage. Home lenders offer two basic types of mortgages: fixed or adjustable. While there are many iterations of each type, here are some you’ll see regularly during your search:

a) A basic fixed rate mortgage comes in a 15-year and 30-year variety. Usually, a 15-year mortgage will have a slightly lower interest rate than a 30-year option.

b) Adjustable rate mortgages often keep the rate stable for 1, 3, 5, or 7 years, before changing. Usually the rate will change annually after the short fixed period.

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Daily ProsperiTIP

According to Fair Isaac, the company that builds the FICO score, the single biggest contributor to a good credit score is your payment history.

Missing a payment or paying late are two of the biggest detractors from a good score. Here are some tricks to make sure payments are made on time each month:

  • Sign up for automatic payments. If you allow the company to withdraw the minimum amount due from your account each month, you’ll still have the option of paying more to reduce the loan size.
  • Schedule set times to pay bills each week. By keeping a “budget meeting” each week, you’re less likely to get distracted by other tasks. If for some reason you must miss your budget work, make sure and reschedule the time in your calendar.
  • Drop unnecessary credit cards. I’ve witnessed people getting in trouble with a card they use infrequently, then forget to pay later. Use a single credit card for all of your purchases or pay cash.

How to Cure a Credit Card Hangover

Ah, late January… a time of colder temperatures, snuggling around a warm fireplace…and December’s credit card bill waiting like a bomb in your mailbox.

Nightmare!

Did you overspend during the holiday season? If not, many people you know made up for you. According to this Bloomberg Businessweek article, consumer debt rose more in November of last year than it had in 10 years.

Although analysts call this a “good sign” for the economy, doesn’t this statistic frighten you? Weren’t we just talking recently about many people losing their homes because of too much debt? People in the arts, especially, shouldn’t take on debt they can’t afford. In many cases, our income streams bounce around enough that we shouldn’t be spending next month’s paycheck that may never arrive.

But, if you overspent over the holiday season, there’s nothing to do now but clean up the mess. It won’t be easy, but with a good plan and the right tools, you’ll be back on your financial feet in no time. Here are my four steps to curing your credit card hangover: (more…)

Why the New Credit Card Law Affects You

Honing a craft is a solitary activity. Excellence means many hours out of the spotlight, so that once you’re finally ready for prime-time, all of the finer points of the work are complete. To your audience it’s effortless; you’re a pro.

Unfortunately, this “solitary confinement” approach to excellence often clashes with successful money management. The government and business community are constantly revising rules that affect your ability to manage your money.

That’s precisely what happened late last month. A new credit card law went into place that has the potential to have a devastating effect on some artists.  I thought I’d give you my take on the rules and some ideas of how to respond, so that you aren’t surprised the next time you apply for credit.

Here’s the part of the ruling which could derail your planning:  you can no longer use spousal or overall household income to apply for credit.

What does this mean for artists?  If you’re working full-time (or near full-time) on your craft, your income may not yet be where you’d like it to be. First, you may be spending money that counts against your income, lowering the amount you can claim. Or, you may be still building skills to make money later. In either case, you may now find it difficult to secure credit in your name. (more…)

The Most Important Score in Your Financial Life

I pulled my car into a garage to have the oil changed this week. I realized during this process how closely some of these financial topics mirror auto repair jargon. Sometimes it takes all of my acting experience to pretend I know what a mechanic means when he’s explaining the difference between types of oil. I’m terrified he’ll recognize me as the not-sure-where-the-oil-goes person I am, and suddenly the cost of my car repair magically skyrockets.

As I’m smart enough to realize that there are auto-related facts I must know to keep my costs down, it’s similar with some financial concepts. One number may save you more money than any other in your financial life. It’s called a FICO score. This number tells lenders how reliable you are with payments to debt. People with high credit scores are offered lower interest rates to borrow. They’re also often given better repayment terms.

Knowing your score became more important than ever a couple months ago when Bank of America changed their fee structure. (more…)

When Debt is the Only Way

CONGRESS appears to be nearing a fight about debt. I don’t want this to be a political discussion, but often current events can help us look at our own financial picture more objectively. Some members of Congress assert that they will not allow the United States debt ceiling to rise. Others, recognizing the huge gulf between the amount of money available and the amount that needs to be cut in order to balance the budget, seem willing to talk about cuts but want a more reasoned approach. However it ends, this fight is long overdue. Imagine if you managed your financial house this way, constantly adding new debt without a plan to repay it?

Long time readers of this newsletter know that I’m on a mission to free the creative community from the pain and stress of out of control debt. I’ve watched more people’s dreams crumble under the weight of debt than from stock market declines or rising health care costs. Debt can bring a person to her knees quickly. Just one more credit card can be the tipping point between financial solvency and ruin.

But what happens when you must take on debt? What if there is no other way?

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