Budgeting

Financial Advice Keeping You Broke & In Debt

The post Financial Advice Keeping You Broke & In Debt appeared first on Penny Pinchin' Mom.

Financial advice is great – when it is the right type of advice.  There are tips and strategies that can make you money.  However, there is also a lot of advice that will do nothing but keep you broke and in debt.  These are things you don’t want to listen to.

I remember when I was younger, my mom told me that I had to get a credit card because it would be important for any emergencies which came my way.  I followed her advice and got a credit card. And, wouldn’t you know it, the first time I used it was for an emergency. Or, what I thought was an emergency.

I woke one snowy morning and someone had hit my car — and fled. No note on my windshield.  Just a dented door with green paint. I was devastated.  I had worked so hard to afford that car.  Now, here I was having to pay money to get it back to the condition it once was.  Since I was broke, I followed my mom’s advice.  I used my credit card.

I remember watching it go through the reader.  I signed my name and I was done.   When the bill came the following month, I paid that minimum payment. I decided that credit cards were pretty slick!  They were simple to use and it was the way to get what I wanted now and I could just pay for it later.

In hindsight, my mom would have been better to teach me the importance of saving.  That way, I would have cash on hand to cover my emergencies and not rely on plastic.

Sadly, this is the way many people live their financial life. The take the advice of friends and family and follow it rather than listening to financial experts.  Here are some common financial advice myths.

 

BAD FINANCIAL ADVICE YOU MAY BELIEVE

1. Some debt is good to have

I hear time and time again that you have to have debt in order to have a good credit score.  That type of financial advice is pure nonsense.

There is no such thing as “good debt.” Debt is money you owe someone and it is never a good thing. It is, however, sometimes necessary in order to purchase a house or a vehicle.  While not what one would call good debt, it may be a debt you need to have in order to live.

The type of debt no one should have is credit card debt.  Ever.  There should never be any instance where you owe more on your credit card in any given month than the amount of money you have in the bank to pay it in full.

Continuing to accrue debt that you can not pay in full each month makes no sense at all.

 

2. You need a credit card for an emergency

My story above is all too common for many.  The opposite is true.  You can have a credit card, but should not use it only for an emergency.  However, if that is how you plan to pay for emergencies, you are setting yourself up for financial trouble.

We all know that emergencies will happen.  There is nothing we can do to prevent them.  However, the smart thing to do is to plan ahead for the unknown.  This is why a fully funded emergency account makes more sense than a credit card.

If you think about it, having to deal with the stress of the situation is bad enough.  Add to it the thought of increasing your debt in order to deal with it just makes the situation a work.  Now, you not only had to deal with the broken furnace but now, you will have to find a way to pay for it as your monthly bills just went up.

Your emergency fund will come to your rescue when it is needed.  Knowing the funds are there to help cover those expenses will instantly make you feel better when dealing with a stressful situation.

 

3.  Leasing a vehicle is better

This is the one that makes me scratch my head.  When you lease a vehicle, you never own it.   Instead, you are stuck in perpetual car payments. How does that make any sense at all?

The common reason many say they lease is that they don’t have to worry about having an older vehicle.  They know that they are driving a new vehicle every few years.  The truth is, if you take care of your car, your vehicle can last you for years.  I drove our minivan for more than 13 years!  And, when I was ready for an upgrade, my vehicle was 3 years old.  Nothing new here!

If you lease a vehicle for 3 years at $300 a month, you will pay nearly $11,000 to drive the vehicle.  At the end of 3 years, you give it back. You have nothing to show for it.  You have just thrown away $11,000.  Now, you have to either lease again or decide to purchase your vehicle.  You are starting over on those payments.

However, had you purchased a vehicle that would offer you the same monthly payment of $300 for 3 (or even 4) years, you would own your car.  You now have $300 a month income freed up to do with what you wish.

The smart move would be to save that $300 monthly amount so that in 8, 9 or even 10 years when you need a new car, you can pay for it in cash.  This money will also more than cover some of the repairs that may be needed as your vehicle ages.

 

4.  Renting is throwing your money away

If you rent, you probably this financial advice frequently.  It is common for people to feel that it makes more sense to buy a house as your money is going to build up equity in your property.  And, truthfully, for some people renting is a waste of money.

But not for all.

There are situations where you do not have the funds for your down payment.  It could also be a time in your life when you know there will be the potential for relocating to a new city or venturing down a new career path.

By renting, you also avoid the additional costs of home maintenance, insurance, and other expenses which go with owning a home.

The best way to know this one is to look carefully at your own budget and personal situation. If renting works for you, then that is the path you should follow.

 

5.  You should always buy a new car

Turn on any television program and you will see ads sharing low-interest rate payments to lure you into wanting that new car.  These ads make it sound extremely affordable and tempting.  But don’t fall for it.

The truth is that when you purchase a new car, it will depreciate most quickly in the first few years you own it.  In fact, most cars will lose half their value every four years.  For instance, if your car is $25,000 brand new, in just four years it will be worth $12,000.  Add another four years and now the car is worth just $6,000.

You should not be a car that is too old.  Instead, purchase a late model car with lower miles. It will cost less to operate and will more quickly pay for itself.

 

6.  You must go to college

Many high school students believe that they must go to college when they graduate. However, that is not necessarily the right decision for everyone.  Not all careers or jobs will require a college education.  And, if you do not have the funds to pay for it, you can certainly rack up quite a bit of student loan debt.

If you happen to select a career that requires a secondary education, then it can be worth the cost. But, make certain you have the passion needed to carry you through.  Otherwise, you may find yourself amongst the nearly 60% who drop out, you will find yourself left with a mountain of student loan debt and nothing to show for it.

Rather than attend a college, consider a trade school instead.  Or, if you know for sure you do want to go to school, spend some time trying different jobs to figure out where your passion lies.  There is no rule that says you have to start college immediately after you finish high school.  Know what you want to do and then decide where to go for your education.

Getting financial advice from family and friends, be it solicited or not, can be helpful.  However, just make sure that what they say makes sense and do your homework.  Following what they say can often lead you down a path of increased debt and unhappiness.

Please note that I am not a certified financial advisor and the information shared on this site is based on my personal experiences.   It is important you consult with a tax or financial professional for assistance for your financial situation.

The post Financial Advice Keeping You Broke & In Debt appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

Uncategorized

The Ultimate List of More Than 50 Budget Categories You Must Use

The post The Ultimate List of More Than 50 Budget Categories You Must Use appeared first on Penny Pinchin' Mom.

It is no secret that you need a budget.  But, it is imperative that it includes everything.  Take the time to review your spending and don’t leave anything off of it.  Below you will find a list of household budget categories you need to include. Forgetting even one off might be a big mistake.

It is no secret that the number one thing you must do to take control of your finances is to create a budget.  Without one, you really can’t see where your money goes.  Or, more importantly, you don’t get to direct your money to be spent as you would like for it to be!

While there are posts on how to create a budget, one question I get frequently is, “What categories should I include in a budget?”   When you are new to making a budget, something such as a personal budget categories list can help.  I agree.

As you create yours for the first time, it is important you don’t leave off anything important. A successful budget is one that includes a line item for every way you spend your money.

If you are just learning about budgeting, you will want to check out our page — How to Budget.

There, you will learn everything you want to know about budgets and budgeting.

 

To help you get a jump start on with your budget, and to make sure you don’t leave off any categories, download our free budget template.  This form has helped thousands get started with creating a budget.

SIMPLE BUDGET CATEGORIES 

Once you have your form, you are ready to figure out your budget categories!  While you may not have each of these as individual line items on your form, just make sure you include them all somewhere in your budget!

 

DONATIONS OR CHARITY CATEGORIES

These are all of the monthly donations you make to various charities.  Don’t forget about those you may make only once or twice a year as well!

Church
Medical Research
Youth Groups

 

SAVINGS CATEGORIES

While not needed to live, it is crucial that you always pay yourself before you pay anyone else.  Once you meet your necessary expenses, ensure you are saving enough each month.

If you are in your employer’s retirement plan, you pay those before you get your paycheck, so you would not include them.  However, make sure you account for the different types of savings accounts you may have.

Emergency Fund Savings
Annual Fees, such as taxes, insurance, and dues
College Savings
Investments
Christmas/Birthdays/Anniversaries
Additional Retirement (outside of your employer’s plan)

Read More:  Yearly Savings Challenge

 

CATEGORIES FOR HOUSING

No one will forget to add housing to their budget.  But, make sure you include the amount you may save for repairs and other expenses. To figure out how much to budget, look over your prior year spending and divide that total by 12.  You will add this to your savings, but you can track it under your housing budget category.

First Mortgage
Second Mortgage (if applicable)
Property Taxes
Insurance
Home Owner’s Association Dues
Maintenance
Housekeeper/Cleaning
Lawn Care

 

PERSONAL BUDGET UTILITIES CATEGORIES

You can’t live without your water and electricity.  It is essential that you don’t leave any of these off of your budget either!  These are some of the basic budget categories most people will not intend to forget, but just might.

Electricity
Water
Gas/Oil
Sewer
Trash
Cable/Satellite/Streaming Services
Internet (if not part of your cable bill)
Phone

Read more:  How to Lower Your Utility Bills

 

FOOD

You have to eat. There are only two ways that happens  — you cook or you eat out. Make sure you include both of these categories in your budget.

Groceries
Dining Out

 

TRANSPORTATION CATEGORIES

You have to be able to get around.  That doesn’t always mean a vehicle as it could mean using other means of transportation.  Whatever method you use, make sure you include all of those expenses in your budget.

Remember that you may not have to pay for some of these items each month, but it is essential you budget for them monthly so that the funds are available when needed.

Vehicle payment (make sure you include all payments for all vehicles)
Fuel
Insurance
Taxes
Tags/Licensing
Maintenance
Parking Fees
Taxi/Bus Fares

 

CLOTHING

A line item many people leave off of their budget is clothing.  They forget that it is a necessary expense.  While this doesn’t mean you should go and buy new clothes all of the time, it does allow you to replace items which are worn out.

It is also essential that parents include this item as kids need clothes a bit more frequently.

Adult Clothing
Kids Clothing

 

CATEGORIES FOR HEALTH

Don’t forget your health expenses when determining a budget.  Make sure you include the money you pay towards your co-pays during the year.

Health Insurance
Dental Insurance
Eye Insurance
Doctor Visits
Dental Visits
Optometrist
Medications
Deductible Savings

 

PERSONAL ITEMS CATEGORIES

Personal is a “catch-all” category which may contain much of your discretionary spending!  Some of the most common types you need to include:

Haircuts/Manicures/Pedicures
Life Insurance
Child Care/Babysitting
Toiletries (if not included in your grocery budget above)
Household Items (if you did not already include in your groceries budget above)
Education/Tuition
Dry Cleaning/Laundry
School Dues/Supplies
Magazines
Gym Memberships
Organization Dues
Postage
Pet Care (food, grooming, shots, boarding)
Photos (school and family photos)
Random Spending (always useful as a way to pay for the things you may not have broken out in your budget)

 

RECREATION

We all love to spend some time doing things we love.  Don’t forget to include your entertainment category when determining your budget.

Entertainment (movies/concerts)
Crafts
Hobbies
Parties
Vacations

 

DEBTS

Once you pay off your debt, these will go away entirely and will no longer be needed.  You can learn how to get out of debt and get started with that (once you have your budget).

Credit Cards (all debt)
Unsecured loans
Home equity loans
Student loans
Medical loans

 

Now you have the categories you need for your budget!  Take the first step in getting control of your finances by putting this to work for you.

caclulator on desk to figure budget categories

The post The Ultimate List of More Than 50 Budget Categories You Must Use appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

DIY, Financial Planning

5 Financial Goals to Start in 2021

 

Although many people start New Year’s resolutions in January, there’s nothing magical about January with regards to self-improvement. Still, the best time to make a change or set a goal is today, so if you’re ready to level up in your life, there’s no time like the present. Here are five financial habits that you might consider starting this year. 

Commit to a written budget (and review it often)

The very first thing that you’ll want to do is commit to a budget. Having a budget is the cornerstone and foundation for financial success. Knowing where your money is going (and not going) can help you understand where you’re at. If you’ve had trouble making or keeping a budget, resolve to start a budget this year. A tool like Mint can be a great way to put your budget on autopilot.

Remember that a budget is just a tool to help you to not spend money on the things you don’t find important so that you have money to spend on the things that you do find important. If you already have a budget, make it a habit to review your budget, at least monthly. That can help you identify where you might be able to make improvements.

As you start or recommit to your budget, make sure that it is written down. Budgets that are not written down, like goals, tend to fall by the wayside easily.

Start (or build) your emergency fund

Another great habit to get into in 2021 is starting an emergency fund. An emergency fund should be one of the very first things you do with any extra money you have in your budget. Even before working on eliminating your debt or saving for retirement, it makes a lot of sense to set aside money for emergencies.

A good rule of thumb is to start with a $1,000 emergency fund. It may not cover catastrophic emergencies, but it can help you to avoid having to spend on your credit cards when the unexpected happens. After you’ve started that basic emergency fund, then you can continue to build it up while also starting to pay off debt or invest for the future. If you can, it’s a good idea to have a couple of months of expenses in your emergency fund. That way you’re covered for a while in case you lose an income source or have a major emergency.

Make a plan to eliminate your debt

The next habit to start or continue this year is to eliminate your debt. Depending on how much debt you currently have, it may not be realistic to pay off all of your debt in 2021. But no matter what, you should have a plan in place. There are a variety of different debt repayment strategies – the debt snowball and the debt avalanche among many. It’s important to pick a debt payoff approach that works for you, and that you can stick to. Make it a habit to spend less than you earn and work towards becoming debt-free.

Spend with a purpose

Another great habit that can help you live within your means is to spend with a purpose. Spending with a purpose means that you are conscious with your spending. If you ever find yourself wondering where all your money has gone, you may benefit from being more deliberate with your spending.

Many people find success by setting a rule about any non-essential spending. For example, before you make any purchases besides essentials like rent, utilities, and debt payments, you must write it down. Just the act of writing it down (or taking a picture of it) is enough for many people to be more deliberate and conscious about what they choose to spend their money on.

Pay yourself first, and make sure to give yourself a raise

If you’re like many people, you may have good intentions of saving money each month, but at the end of the month, you find there’s nothing left over after all the bills are paid. One habit that people who are successful financially have is to pay themselves first. Put your savings money aside at the BEGINNING of the month. It’s a bit of a mental trick, but many people find that having that money out of sight helps them to save more.

Another financial habit to start is to always give yourself a raise. Whenever you get a raise at work or come across any “extra” money, IMMEDIATELY put it either in your emergency fund or use it to pay down your debt. Putting any raise or extra money towards your savings (instead of increasing your standard of living) is a great habit to start. 

This is a great habit to start, especially if you are young or just starting out in your professional life.  Of course, paying yourself first and giving yourself a raise, doesn’t mean that you have to only eat ramen or can’t have nice things. But thanks to the magic of compound interest, the sooner you start to save and invest, the better off you’ll be.

The post 5 Financial Goals to Start in 2021 appeared first on MintLife Blog.

Source: mint.intuit.com

Auto Loans

A Millennial’s Guide to Getting Your First Car Loan

auto-loan-down-payment

Buying a car is almost a rite of passage. Making that first car purchase, negotiating with the seller, and arranging financing (if you need an auto loan) all require a certain amount of savvy.

And, once you successfully achieve the car-buying milestone, another signpost looms in the distance: Refinancing.

Whether you’re getting an auto loan for the first time, or you want to refinance your existing car debt, it’s important to be an informed consumer. Here’s what you need to know.

Get your finances in order

Before beginning your car search, you need your finances in order, according to Joe Pendergast, the vice president of consumer lending for Navy Federal Credit Union.

“Know your budget, check your credit score, and review your existing credit accounts to ensure they are reported accurately,” Pendergast said. Your credit situation can directly impact the interest you pay on your auto loan.

Emily Shutt, a certified financial coach who works closely with millennial women to help them manage a variety of money issues, suggested calling around to different dealers and banks or credit unions to see what credit bureau they use to check your score. Then you can check your report for errors and have them fixed before you talk to someone about financing your car purchase.

“Having errors on a credit report can negatively impact score, which can put you at a huge disadvantage when you’re negotiating for an auto loan interest rate,” Shutt said.

You should also know ahead of time where you stand with your budget. Use an online loan calculator to determine what you can afford in terms of a monthly payment. For example, if you think you can handle a $305 monthly payment, and you have the credit to get an interest rate of 2.9% for a five-year loan, you might feel you can afford to borrow up to $17,000 for a car.

Save up for a down payment

Just because you might be able to borrow so much for a car doesn’t mean you necessarily should. In fact, saving for a down payment makes a lot of sense, Shutt said. Not only does having a down payment help you to better negotiate your loan rate, but it also can allow you a shorter loan term and save you money in the long run.

Play around with the numbers a little with an online calculator. If you can put $7,000 down, so that you borrow only $10,000 of that $17,000 car, you could maybe get an interest rate of 2.5% and a loan term of three years. Even better, your monthly payment would only be $289 — and you’d save $1,494 in interest.

The less you borrow, the more money you have in the end. And that’s money you can put toward investing in your future, rather than paying interest to someone else.

Know what you want — and what it costs

Once your finances are in order and maybe you have a down payment saved up, it’s time to figure out what you can actually buy. Avoid over-borrowing by knowing what you want in a car and having an idea of what it costs, Shutt suggested.

“Everything should already be online so you can get a sense of what all the options are,” said Shutt. A little research can go a long way toward helping you get a sense for which cars will fit into your budget.

Shutt pointed out that the job of salespeople is to get you to spend as much money as possible. The more you spend, the more you have to borrow — and the more you’ll pay in interest. “Confidently stand your ground when a salesperson tries to upsell you or steer you in another direction,” she said.

Pendergast agreed on the need to research your car choices ahead of time. “Know the price other dealerships in the area are offering so you can make an informed purchase,” he said.

It’s even okay to play one seller’s price off another’s to get the best deal. Don’t be afraid to let the other dealerships know you’re shopping around. They’ll be more inclined to negotiate with you, potentially resulting in a better deal.

Get an auto loan quote from a bank or credit union

Before you ask for dealer financing, suggested Pendergast, talk to a bank or credit union.

“You should see what type of loans your financial institution has to offer,” said Pendergast. “This will give you guidance for your budget, but will also increase your purchasing power to help you in negotiations, regardless of the dealer’s proposition being on par with the lender’s.”

Donald E. Peterson, a consumer lawyer with almost 30 years of experience, warned that dealer financing still often requires the involvement of a bank or credit union. Dealers submit your information to lenders and get interest rates quotes back.

“Sometimes dealers mark up the interest rate above the rate banks would buy the loan at,” Peterson said. “The bank and the car dealer split the excess interest, usually 50-50.”

This practice isn’t just limited to banks, either. “Some credit unions have entered into interest-rate kickback agreements with car dealerships,” Peterson said. “You must apply to the credit union yourself to get the best rate.”

Starting with a financial institution allows you to get an idea of what’s available to you. Then, you’re in a position where a dealer who wants to finance you has to match the rate you’ve already been offered, rather than steer you toward an alternative arrangement.

Consider a cosigner

With my own first auto loan experience, I had to deal with the fact that I had a thin credit file. I didn’t have enough credit established to get a car loan without an unacceptably high interest rate.

I went through the steps of creating a budget and deciding how much I could afford, including factoring in my car insurance costs. However, after checking my credit report, I realized that having a credit card for six months wasn’t enough for me to establish much of a credit history.

After compiling research about the types of used cars I could afford, and how my earnings from my job were enough to cover an auto loan payment, I approached my parents. My dad was willing to cosign on a modest car loan through his credit union.

My interest rate — and my monthly payment — were lower because I had cosigner with good credit. I made all my payments on time, helping build my credit history so that the next time I bought a car, I was able to get a good interest rate without the need for a cosigner.

As you research your options, don’t forget about the possibility of using a cosigner. If you don’t have the credit history to get a good auto loan rate on your own, borrowing someone else’s good name can help you save money — while at the same time allowing you a way to establish your own credit for the future.

Don’t fall for the monthly payment scheme

While you do want to figure out what monthly payment you’re comfortable with, you don’t want to get caught up in it at the dealership, cautioned Shutt.

“Focus on the all-in price of the car,” said Shutt. “If the salesperson can get you to verbalize a monthly payment target, they’ll just manipulate other factors like the duration of the loan.”

When that happens, Shutt pointed out, you might end up hitting your targeted monthly payment, but long-term interest charges and other factors could mean that your car ends up being a lot more expensive. She said you should figure out about how much you’ll pay each month over a loan term you’re comfortable with, and then buy a car with a final price that fits those parameters.

“Take your time, and don’t be manipulated,” Shutt said. “If you’re not comfortable negotiating, bring a friend or family member who can support you in sticking to your budget.”

What about refinancing?

In some cases, you might discover that you qualify for a lower auto loan interest rate than you currently pay.

“Maybe you’ve been making timely payments for a year or two and your credit score has gone up,” said Shutt. “Now you can consider refinancing the loan.”

However, it’s important to be careful moving forward. Just as you shop around for the best auto loan rates on a new loan, it makes sense to shop for refinancing rates. Check with a few banks and credit unions to see if you can get a few quotes for refinancing.

When you refinance, watch out for lengthening the loan term. If you only have three years on your term, it might not make sense to refinance to a five year loan. Instead, only refinance what you have left. You could save on interest charges and still get rid of your car debt in the original time frame.

Shutt also recommended looking online for car loans. Compare the rates you find with online auto loan refinancing platforms to what your local financial institutions offer. By playing different lenders off each other, you could strike a better bargain — especially if you have good credit.

Know your finances and be ready to negotiate

Auto loans are a massive industry, with more than $1 trillion owed to U.S. lenders. Rather than being just another statistic, consider how you can come out on top.

Know your finances and understand what you can expect, Pendergast said. When you know where you stand, and when you research ahead of time, you can call dealers and lenders out. Shop around for the best auto loan rates and terms, and let dealers know you’ve done your homework, so that negotiations will go much better, saving you time and, importantly, money.

 

If you want to be sure your credit is good enough to purchase a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Image: iStock

The post A Millennial’s Guide to Getting Your First Car Loan appeared first on Credit.com.

Source: credit.com

Education

The Best Bill Negotiation Services: Bill Shark Vs BillCutterz Vs Truebill Vs BillFixers Vs Trim Vs Bill Advisor

Looking to lower your monthly costs? These bill negotiation services can help you to save hundreds of dollars on your recurring monthly bills.

The post The Best Bill Negotiation Services: Bill Shark Vs BillCutterz Vs Truebill Vs BillFixers Vs Trim Vs Bill Advisor appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.

Source: biblemoneymatters.com