Money Monday #6

remember Money Monday?

i've been meaning to resurrect it, but every monday brings new distractions.

back before i totally slacked off with this, a lot of you asked about debt and how to "get out of debt."

a lot of you also asked how having debt can affect you purchasing a home.  i'll give you the quick answer to that question: having debt will limit how much house you can purchase.  the qualifications are all based on ratios and percentages, so if you can hold off buying a house for 6 months or a year or whatever to pay down your debts, you'll be able to afford a more expensive home.


and now i'll teach you about a WONDERFUL resource that can help you pay down those debts quicker.

the best part about it is that you can use this at home... you don't need a debt management company.

it's called PowerPay.  and the website is powerpay.org


and you'll need to know 3 things about your debts:  interest rate, balance, and payment.

*follow the steps to make an account.
*next click on the PowerPay tab at the top.
*then enter in your creditor information.

your screen will look like this.

so say those are all my debts... if you can see at the bottom under "results" it will take me 5 years to pay off all those debts (paying the minimum payment) without power payments.

now... the MOST IMPORTANT THINGS about power paying down your debts is that
1.  it won't work if you add more debt
2.  the total dollar amount going towards debt reduction remain constant

then we can see how long it will take us to pay off these debts with power payments.  click on "payment calendar" in the bottom right hand corner under "what should i do next?"

(sorry this is small... click on the photo to enlarge)

*if we do these power payments it will take us 2 years and 7 months to pay off these debts instead of 5 years.  i don't know about you, but that sounds WAY better.  PLUS, we could save over $1700 in interest.

so how does it all work?

below the results will be a a payment calendar.

*as you can see... for a little while you are making all the regular payments, until one is paid off... then the MAGIC happens. 

*how this works is you would take the money that you were paying on a debt that is now paid off and apply that amount to another debt.  you can select which method from a drop down menu at the top, but it's best to apply to the highest interest rate first.

*fairly soon you're taking all those monthly payment amounts and power paying down your debts one by one.

this takes a very disciplined person to accomplish this.  you can see how important it is to not acquire any more debt.  but the amount of time and money you can save can big your biggest motivation!

on the first screen you can also add extra payments (a great one to use is your tax refund!!) and pay it off even quicker!

i LOVE this resource... and hope you have fun playing around with it.

there are many other things you can explore on this site like starting an emergency savings (extremely important), balance transfer benefits, power saving, spending plans, housing calculators, and more.

i hope this helped some of you!  email me with any questions you have and i'd be glad to help.

Money Monday #5

how was your weekend?

mine was wonderful!  it was just so happy and fun.

and i didn't have to stress about finals/homework once!  man... it was great.


today, lincoln and i are both starting new jobs, and we have a lot going on this week.
i'm quite shocked looking at the calendar, realizing we are only 4 short weeks away from the big day.

i honestly can't believe it.
but i'll talk more about that stuff tomorrow.

today's money monday post is based on questions i've gathered from quite a few of you about credit.
my friend lindsay asked these questions:
"First of all, is it true that you need to have a credit card and start building credit before you can start making major payments like buying a car or a house? Because I'm not all that keen on the idea of credit cards and prefer to use my checking account. What are the benefits of using and immediately paying off a credit card as opposed to just using a debit/checks? In what kind of purchases is it a good idea to use a credit card?"

credit is one of my favorite things to teach about.  you can use it for your advantage or ruin it very easily.

so to answer lindsay's first question...
you don't necessarily need a credit card FIRST to build credit, but it's a fairly easy way to do it AND you don't have to pay interest on your purchases as long as you pay it off every month.

let's begin by talking about your credit history.
your credit history is basically a record of what kind of borrower you are.
your credit score is calculated from the following 5 areas:
-35% is based on payment history... so like, late payments, on time payments, etc.  it also includes any bankruptcies, judgments, charge offs, collections, or liens.
-30% is based on the ratio of outstanding revolving debt to available revolving debt.  an example of this would be if i had a $1,000 limit on my credit card and i was maxed out on it every month (my balance was close to $1,000) this would negatively effect my FICO score.  experts recommend keeping the balance below 30% of your available limit. 
-15% is based on the age of open accounts.  it's best to keep credit cards open that you've had for longest, even if you don't use them.  just make sure you aren't getting charged inactivity fees, or something like that. 
-10% is based on new credit.  for example, if you have gone out in the last six months and applied for credit like 5 or 6 times, you are usually seen as a riskier borrower... taking on a lot of debt in a short amount of time.
-10% is based on types of credit.  for example, if all you have on your credit report is credit card accounts, it doesn't necessarily reflect the type of borrower you are, because you only have one type of credit.


okay... now that you understand how your credit score is calculated, let's talk about credit cards.
credit cards can either work for you or majorly work against you.  credit cards are considered revolving credit, meaning that you have an open limit (like $1,000), which you can spend and then pay off pretty much however you please, as long as you make the minimum payment every month.  in another post i will show you the cost of credit and how long it will take you to pay off a credit card if you only make the minimum payment every month.  the interest is calculated on a monthly basis on the balance left unpaid from the previous months purchases.


this is how you can make credit cards work for you:  first, you show repayment history (remember the big chunk of your score 35%?) by charging and paying it off every month.  this can help you become an established borrower.  you can also get rebates or rewards from the purchases you make (depends on the features of the card).  AND if you pay it off every month, you aren't paying any interest on your purchases.  they are also fairly easy to get approved for.  for someone who doesn't have any credit, they usually give a small limit ($500) to begin building credit.  in my experience, creditors like seeing some kind of repayment history before approving you for, let's say, a home loan.  i'm not really sure if you could get a home loan without a credit score populating because you have no payment history.  they would have no idea what kind of borrower you are and have no indication that you will repay a pretty LARGE loan.


this is how you can make credit cards work against you:  they usually have MUCH higher interest rates than other loans.  so if you charge something on it that you won't be able to pay off for a while, it could cost you a lot more in interest.  they also can be perceived as free money.  NOT TRUE.  you have to pay it back.  it's easy to fall into the trap of putting every day purchases on there and they build fast.  before you know it... you're maxed out.  the minimum payment is also calculated by the balance, so it can change every month when your balance changes.  let's say you have a $10,000 balance and your rate is calculated by multiplying that by 2.5%?  your monthly MINIMUM payment would be $250!  that's a nice car payment. 


so back to lindsay's comment.  yes, credit cards can sometimes be scary.  just make sure you know what you are signing up for!  luckily, recent laws have made this easier and protect consumers from unfair practices.  yes, credit cards can sometimes get out of hand, but they are also really easy to use RIGHT!  debit cards are not tied to your credit history even though they look just like a credit card.  i can't tell you what purchases are good or not good to put on a credit card, but sometimes i'll recommend just charging your gas purchases for your car and paying it off every month.  if you restrict it to just gas, it's not as easy to overspend and get out of hand. 


in the end... i always say it's better to try and pay cash if you can.  there are only 3 things that i think are worth going into debt for... home, school, and maybe a car.  but that's just my personal opinion.  don't take that as counseling.


actually, don't take anything i say as counseling.  i'm just trying to empower you with knowledge and resources to hopefully help a little bit in the somewhat confusing world of finances.  hopefully it's helping.


if you have any more questions about credit cards, let me know!
thanks, lindsay.






see you guys tomorrow.

Money Monday #4

now, back to our scheduled programming.

i've had a couple of you ask about budgeting and what is the right method to use.

i'm here to tell you all:
there is no right method!

you need to find one that works best for you and your family.

budgeting is kind of a scary word.  no one really likes talking about budgeting, it makes people often feel restricted, and there always seems to be a negative connotation with the word.

so, we are going to call it a "spending plan."  doesn't that initially make you feel like you have more freedom?  i think so.

the first thing with finding a spending plan is setting goals.
what do you want to achieve with your money?
the next step is to estimate your income and expenses.
you do this by tracking everything.
once you see how much you are spending in each category, evaluate what you would like to spend in that category.
then choose a control system.  there are many options and you can even combine a few to find what works best for you.  you can purchase software, use the envelope system, the checkbook method, or come up with one of your own.
you many find once you implement it that it's not working.  and especially when life changes come along (married, child, new job) you might have to reevaluate it.

it's also important to remember there are many different money personalities.  so not everyone will spend their money the same.  some people are savers.  others are spenders.  so remember this.


now i will tell you what has worked for me, but don't think it's the right one for you.
my friend told me about a free website called mint.com
i think it is awesome!
i choose this method because i'm not very good at writing stuff down or saving receipts and i use my debit card about 99% of the time.  if you use cash, this might not be the best resource.  this website tracks all of your expenses for you and puts them into categories (that you can name and choose) and then tells you how much you have left to spend in that category.  it's very good for me, because i can easily log on and at-a-glance see where i am at.  in my busy schedule, this works best for me.
i also make everything automatic.
there is this book called The Automatic Millionaire by David Bach.
it pretty much changed my life.  i LOVE this book.
it has made my life so much easier.  essentially you make all your payments automatic, including paying yourself into a savings account/retirement account.  i never have to worry about getting to the bank to make payments or out right forgetting about them.  it's all done for me.  in a way, it's a spending plan because you are already setting aside savings, payments, rent, savings for hawaii, etc. but you don't have to actually DO anything.  it's great.  i love it.  and it's so easy.  just ask your financial institution to help you set up the payments.
and i think you should read that book because it just shows you don't have to make a ton of money to become a millionaire.  you just have to be smart with your money. 

i just have to say that i am a HUGE advocate for paying yourself first.  (saving 10% of your income is what experts usually recommend, if you are saving more than that, GREAT!)  please, please have a savings account, even if it's not very much.  it's so important.  and if you think that you can't afford to save right now, pay yourself first, and i promise you you'll have enough left.  don't be tempted to dip into your savings.  even better, put it in a retirement account!  then you can't touch it.

you think i'm crazy for telling you to start a retirement account in your early 20's?  in another post, i'll show you how important it is to start now!

i could go on and on about this, but i'll stop for now.  soon i'll tell you about stumbling blocks to budgeting.  stay tuned.



thank you shelby and lindsay for asking questions about budgeting.  i hope this helps.  if you want me to expound on anything, let me know.

Money Monday #3

hello, all.

how are you on this lovely monday?
i am busy.
busy busy busy.

i have a lot to do this week.
and i'm just a little bit stressed.
but it will all be okay come saturday.
the last week of class is called "dead week," but it's more like "cram-all-the-big-projects-and-presentations-in week."

i wanted to start out by telling you last part of my redbox story.

remember how the guy told me to call back in a week to find out what they decided?
so i waited... and called back saturday.  this time the lady pulled up my case and had no information about whether or not they received my fax (my statement with the initial charge) and whether or not they were working on resolving the information.
she told me the same exact things as the other representatives had.  i told her i wanted the other $15.98 refunded because i returned the DVD.  she said she would rebate it for me (FINALLY!) and then told me i should check my emails they send out and call if there is a problem.
yes, she is correct.
but honestly, i have A LOT more things to worry about than sifting through an old email's junk mail folder for redbox emails.
i trusted that they received the DVD when i was charge the $1.07 initially.
i kindly informed her i wouldn't have to worry about checking my email from redbox ever again because i would no longer be renting from them.... ever again!
and then i filled out their customer service survey they sent me.
and that was that.


thanks for all your recommendations on netflix.  i think i'm going to try it out.

back to our scheduled programming...



next week.


sorry, folks.  that's all i have time for today.

Money Monday #3

i'm interrupting this Monday Monday post with a story of my own.

this past week i experienced my own frustrations with a business, although small on the grand scene of things, it made me think of some good things to tell you about.

on friday, i was looking at my account history (which i do every day, multiple times a day... i'm kind of obsessive.)

good thing i've obsessive because i overlooked the charge the first time.
i had a charge from redbox for $25 that i didn't any have any idea what it was for.
the last time i rented a redbox was almost a month ago and i barely remembered what movie it was.

first thing, merchants will usually list a phone number next to a charge on your account.  if you have any questions about it, call the number!
so that's exactly what i did.

the customer service rep on the other end informed me the charge was for never returning the movie i rented almost a month ago.
false.  i did return it.  two days after i rented it.

i knew we returned it, but i still checked with lincoln and asked him where and what day and what time he returned the DVD.

i also checked my account for the initial charge.  it indeed was there.  we got the first day free with a promo code and returned it the next day, so naturally they charged my card $1.07 when the movie was returned.

second important piece of info:  do your homework!  keep records.  back yourself up.

the first time i called, the rep totally made me feel like i was a liar for not returning the movie.
yes, some people may lie about this type of thing, but i feel like a company should always believe the customer otherwise the relationship with that customer could be compromised.

which is true in this case.  i'm so ticked at them right now, that i might never rent from them again.
and you betcha, i'm going to tell everyone i know about it, which then compromises their relationship with those customers as well!


bad move, redbox.  bad move.

the first rep i talked to said there was no record on his computer showing i returned the movie and said the best he could do was give me a $10 refund.

heck no!

i am not paying $15 for a movie i know i returned, just because that's the "best they can do."
they can do better.  they can refund me the full amount.


there was no way i was going to let this go down.
$15 could go a long way in my poor college student life.  i wasn't just going to let some company take that from me.

so after further investigating my end of it, i called the company back the next day and insisted i talk to a manager.

the manager wasn't very keen on believing me either. 

this was my biggest disappointment in the company--that $25 was so important (probably a multi-million dollar company) that they risked their relationship with me, the consumer, by accusing me of lying.  they shot down my suggestions that something could have gone wrong with their technology (nothing is perfect!) and never admitted that i could be right about all of this.

so they required me to fax in my statement with the initial $1.07 charge for returning the movie.  they said they would "further investigate the situation."  they did not take my phone number and made no explanations of follow through, which means i had to call them again today to see how everything was coming.  this time the rep told me that it could take up to a week for them to receive my fax and investigate!  um... excuse me???

if the company refuses to refund me the full amount, i plan to fill out a visa dispute form with my bank.  i might just do that so i don't have to wait for them to figure it out.  visa disputes are another option you can use for charges not authorized by you. 

my point is.  check your account thoroughly!!
stand up for yourself if something isn't right.
it's better to be nice and polite through the whole process even though you may be way ticked, like i was.  people are generally more willing to help if you refrain from screaming profanities.  :)



also last week, lincoln had two $12 charges for some subscription he didn't know he signed up for when he ordered me flowers for Valentines.  he contacted the company and they were prompt about refunding the money.  but he wouldn't have noticed if i hadn't said anything.

so...
do any of you have similar experiences?

how do you feel about redbox now?

is customer service as important to you as it is to me?


so blog readers, all i'm saying is... be cautious renting from redbox.  watch your account.  how are we to know they aren't scamming 1,000 people across the nation every day?  that's $25,000!!  and maybe most people don't notice because they don't watch their account. 



thanks for listening to my rant.  i'll let you know what happens.

Money Monday #2

Michelle asked:  My husband and I were just recently married. We already have a great savings account and almost zero debt. We don't have student loans or anything. We have an $8,000 car loan to pay off and only $70 on one credit card. We are hoping to start a family in about 6 months or so and we really want to start setting aside money for babies and their future. What is the best way to do this? We keep a minimum of in savings for emergencies.

There are a couple topics I would like to discuss today that were triggered by Michelle's question.

First of all, I don't really know how much babies cost.  So it's hard for me to tell you how much to save and how long it will take, etc.  I know they do cost a pretty penny and in my personal opinion, it would be wise to prepare financially for a child.  It is up to the couple to discuss how involved you want to be in your child's financial obligations.  If you decide that you want to pay for your child's education, I would say start saving for that when they are born.  Don't wait five years to start a college fund.  Time is on your side.  You also need to discuss if you want to buy them a car when they are sixteen, if you're going to encourage them to get a part-time job during high school to pay for their extracurricular activities, etc.  A lot of that depends on how you and your spouse want to raise your children.  If you decide to pay for their education, I would recommend mutual funds or some kind of educational IRA.  They have many tax benefits which you should discuss with an accountant or tax adviser.  (I'm not an expert on taxes.  :) )  But there are many options out there that are tax-free if the funds are used for education purposes. Ask your credit union or bank for options too!


Secondly, I applaud you for having an emergency savings!  I can't stress how important this type of savings account is.  Experts have advised to save at least 3 months of your expenses in case of unforeseen events, such as job loss.  Since the current economic crisis and unemployment rate, the number of months they advise has changed to 6.  Yes, it is taking people that long (or longer) to find another job.  An emergency savings is there so you can still make your payments on your loans, buy food, etc. without completely ruining your credit score.  (I'll talk about credit another week.)  It is also there to help pay for other emergencies such as your car breaking down, an appliance kicking the can, etc.  Depending on your obligations, an emergency savings can be quite a large chunk of change.

For example, if i have a
mortgage payment: $900
utilities: $250 (electric, gas, internet, water, garbage, etc.)
car payment: $200
food: $400 (2 kids, 2 adults)
gas: $60
health insurance: $100
(obviously there are more expenses every month, but you get the idea.)
If I were to build up an emergency savings to sustain my family for 3 months with these types of payments it would need to be around $5,800! 

In my opinion, I feel like a lot of people today live pay check to pay check without preparing for emergencies.  Then when they lose their job they don't have any money to pay their bills, their house is in default, and their credit goes down the drain.  Or they use credit cards (yikes!!).  Don't let that happen to you.  

I barely feel like I have enough saved for an emergency savings and it took a while to save.  It's hard to not want to spend that money on something else.  I get that.

My point is, you can't predict what could happen.  Start an emergency savings today! It may take a little time to build up, but can you see how important it is?

I will tell you in a few weeks about different savings accounts where you can put your emergency savings and where you can earn the highest interest rate in this market.

Thanks for your question, Michelle!  Hope it helped.



Upcoming topics:
-how to pay down your debts faster!
-what is a credit score?
-what is the best budgeting method?

Okay, people!

I'm begging you to ask me questions!

I know you have them.

Or maybe you are all experts!

Come out of hiding and email me already.

jaybphoto{at}gmail{dot}com

Do you like this?

Is it helping?

Am I boring you to death?

Money Monday #1

can i just tell you that i'm really excited about this?!

i had a few responses to my post about finances.  so i decided to start this new series called "Money Monday."  but i want more of you to ask questions!!  i promise it'll be fun.  and you'll learn a lot of valuable information.  keep in mind that i am still learning, but i will try and provide you with the most accurate information possible.

............................................................................................................... 

and now, i present our first Money Monday question.

Jess asked:
"back in the beginning of college, i applied for and received a credit card for emergencies. i activated it over the summer but never used it. after activating it, i moved to school. my mail was still delivered home. it wasn't until 3 months later that i happened to discover bills from the credit card agency... due, passed due, wayyy passed due bills. not having ever USED the card, i didn't expect any bills. i was unaware of an activation fee. blame my nativity, blame ignorance, blame whatever you want... i contacted the company, they saw that i never used the card and canceled it- including canceling the $60 fee that was more than 90 days late. i was informed that it was all taken care of.



this was back in 2004. i had since forgotten about it. earlier this year (a mere 6 years later), i applied for another credit card for emergencies. i was denied- after looking over my credit report, the glaring blemish was the 90 day missed/late payment from 04. am i screwed? or can i call someone to challenge this? i don't even know which company i would contact first... blah."


first of all, great question!!  i think a lot of people have questions about credit/credit cards.

the question jess asked brings up another point i would like to start with.
the best thing you can do for yourself with most aspects concerning finances is prevention.
whether is be prevention from identify theft, prevention from not having enough in retirement, prevention from not having any money when an emergency arises, etc.

did you know that you can get a copy of your credit report for free every four months?
i will tell you how.  under the Fair and Accurate Credit Transactions Act (FACTA), you are entitled to receive a copy of your credit report from each of the three credit bureaus once a year.  since all three are somewhat intertwined and have most of the same information on them, you can space it out so you are obtaining a copy of your credit report every four months.  for example, in April you request a copy from Experian, then from Transunion in August, and finally, Equifax in December.  this way you are making sure all of your information is correct and accurate every four months, even if you haven't obtained credit.

so where can you get a copy of your credit report?  at www.annualcreditreport.com
make sure you click on your state and not on one of the credit bureau symbols at the bottom.
it will walk you through some questions and then you can print it off.

if anyone has questions about reading and understanding their credit report, let me know.  i'd be glad to help.

so, first thing to remember: check your credit report every four months.  that way, if problems arise, you can take care of them soon after.

next: read and ask what you are signing up for!  ask about activation fees.  sometimes they are sneaky!



but what can jess do now?

i've asked a couple people and read up on some literature.  here's what i've found out.

first, you should try contacting the credit card company and ask them to take the 90 day late off your credit report.  explain the situation and what was said to you back in 2004 and be prepared with any records you have of the credit card.  and talk to managers!  i'm not aware of any time restrictions, but it was quite a while ago.  under the Fair Credit Reporting Act (FCRA), you have the right to dispute incomplete or inaccurate information.  if they say they will take it off, the most important thing you need to do is FOLLOW UP!  also request a written agreement be sent to you if they say they will take it off.  request a copy of your credit report about a month later and make sure it is deleted permanently.

next, if they don't give you any help, you have the option of writing a 100 word statement on your credit report explaining the situation.  this won't take the derogatory information off, but it could help you when applying for credit.

lastly, derogatory information stays on your credit report for 7 years.  it might drop off soon anyway, but it could have affected your score significantly.  you definitely don't want this to be the case.


whew... that was a lot, huh?  did it make sense? did i bore you to death?
i hope this helped you out, jess.  and maybe someone else out there.
please let me know what happens... i have some other resources we can turn to if the credit card company won't budge.  so please let me know!

...............................................................................................................

do any of you have money questions?  please ask!  i would love to help.

email me at:

jaybphoto{at}gmail{dot}com