Author Archives: Common Cents

Outstanding Debt

Paying down and eliminating further debt

Most of us have at least one charge card.  The idea with a charge card is to purchase something when we don’t have the available cash to do so.  This has a small good point….. you can get the sale price, and you don’t have to carry cash around.  But….. the bad point is if you purchase an item(s) and then the bill comes due, but you don’t have the money to pay for the item in full as well on time.

The only way to use a charge card is ….. purchase the needed item, and when the bill comes due, pay it in full, and before the due date.

This means you’re paying only for the item.  You aren’t paying finance charges on the outstanding balance nor are you paying a late fee.  These added charges are not only a waste of money, but over time add up, piling fee upon fee and putting you in debt….. debt that mounts and puts you in a financial hole which can – and has for some – taken them years to get out of. And, for some, with their continued use of the credit card as well as their continued behavior of only paying the minimum and/or paying late, puts them in financial ruin for life.

Do not do this to yourself!

Only use your credit card in an emergency and pay for what you spent in full and on time when the bill comes in. This is the ONLY way to use a credit card.

Doing this will mean that you have less stress, and shows that you are disciplined at living within your means. It will also reflect on your Credit Score.

If you are already in financial debt because of your credit card history, now is the time to shred the card(s).  Work on paying down your outstanding debt…. pay more than the minimum due and do so before the due date.  This will, eventually, pay the card off.  It will also, hopefully, teach you to never put yourself in that position again.

Discipline is the key word here.

 

What are Your Goals in Life?

Figuring Your Goals and How You Pay for Them….

We all have goals…. purchasing a home, travelling, buying a car, college, a wedding etc.

These all cost money, and that said, we should start saving for our goals.  Organization of saving for different things is important and the simple way to do this is separately.  Open bank accounts and each paycheck add something to each.  This way, you see where you are with the amount you’ve saved versus the amount you need for a particular goal.   It will also prevent you  from using money intended for a particular goal and when you need it, it’s not there….aka: robbing Peter to pay Paul.

A good idea is to put you goals in order of importance….. and of course, sometimes plans change and the goals can (and should) be shuffled around.  The idea is to add to each ‘goal account’ every paycheck…. direct deposit is a good idea as it will automatically be deposited and ‘what you don’t see, you don’t miss’.

The important thing is to save….. every penny counts….. It’s Common Cents!

Thinking of Getting a Credit Card??? ……

Don’t…….. at least not until you read further….

Getting a credit card has responsibilities that go along with it.  So, unless you’re able to take them on, put off getting one until and unless you’re going to adhere to some things which will keep you out of a financial debt nightmare.

This is for your own benefit.

A credit card is a direct link to your Credit Score.  It shows how you handle your expenses and payments of them.  A Credit Score can, in many instances, either get you a car loan, a mortgage, rental apartment, college loan etc….. or not.

There are numerous cards available….. most have ‘rewards’….. perks that keep you spending in order to rack up the miles, or cash back, or whatever else it promotes.

There are also annual fees to some cards….. steer clear of those.

And they all come with rules of their own….. if you don’t adhere to them, what you think you’re getting by using the card can change drastically from what you think.

And they all have very staggering fees …… for not paying the whole balance before the due date there are finance (interest) charges tacked on to your next bill.  If you’re late, even a day late with getting the payment in, there are steep late charges. These charges are a complete waste of money!

So…… Unless you are sure, very sure, you can use the card only if you know you can pay the full bill before the due date, you probably should not open a credit card… yet.

If you do, and pay only a portion, or worse, only the minimum, then be prepared for as much at 27% (and more) interest tacked on the balance you don’t pay.  And each month, it continues to add on, so that eventually, your purchase is only a bit of the bill you’re looking at, and the rest are interest charges, and possibly late fees if you don’t pay on time.

This would be a financial hole you want to definitely avoid.  It’s a nightmare to dig out of.

Making Budget Decisions

What to keep vs What to eliminate

Setting up a budget is fairly easy… some things are common sense: Rent/Mortgage, Utilities, Food, Medical, Car Loan/Insurance, Outstanding debt etc.

Others can be downsized or eliminated completely.  Depending on your income, and the way you’re currently handling expenses is key… and how you make decisions about what to cut back on or cut out completely.

After figuring what ALL your expenses are (including weekly, monthly, annually), and adding those figures, compare the total with your annual take home pay.  If your expenses are less, kudos to you and keep up the good work (you’re living within your budget)!

If your take home figure is less, it’s time to cut back on things that are unnecessary…. stops for coffee (make it at home), dining out or take out (stop completely or dine out on only a special occasion, gift giving (cut your list down to only family members, and explain you’re trying to get on track (there will be those who will breathe easy and might even admit to you that it helps them too).

Once you do this and you’re getting the hang of it, you’ll think of other ways you can cut back.  Doing this allows you to, if you have outstanding debt, you now have ‘extra’ money to put on that. This, of course, means that your debt will decrease and you will…eventually…have that money to put into savings.

Savings is so important in so many ways.  Saving for an unexpected emergency means that when the emergency arises (and they do), you won’t have the stress of ‘How am I going to pay for it”, because the money will already be set aside.  Aim for $1,000. in that account.

A Reserve Income Savings Account is for when/if you are out of work for a time. With no income coming in, this account will cover your necessities. Only your necessities…rent/mortgage, utilities, medical etc.  Aim for 6-12 months, but as that figure may be daunting right now, aim for 3-6 months.  You’ll be so glad it’s there should the need arise.

So, set up a realistic budget, and live within your means.  That of course means you don’t spend what you don’t have.

It’s common sense!

 

Teens … Learn the ABC’s of Money

Common sense steps that will carry you through life

Two things to remember always are: Pay yourself first, and… Don’t spend what you can’t pay for.

If you start doing this as soon as you begin handling your own money, then you should be okay all along.

A…… Always pay yourself first.  That means when you receive money from working, gifts, etc., set some of it aside and put it in a savings account.  If you do this each and every time, it will become a habit and you’ll see your savings grow. It’s common sense.

B ….. Budget.  If you learn to budget now, it will become second nature…a good habit.  If you don’t have the money to buy something, you can’t get it.  You can set part of the money you have for that special item, but until you can pay for it in full, don’t get it.  It’s called budgeting or ‘living within your means’….  and … it keeps you out of debt.

C….. Common Cents. Save every penny you can. They add up and every penny counts.  You will never regret doing so.

Budgeting as a teen is easy and it will teach you the concept of how to budget as an adult.  The items within the budget may differ, but the end result is the same…. You can’t spend money that you don’t have.

As a teen, you may receive a money gift, and it may be a partial payment for something you’ve been wanting/needing for a while. Even so, try to put a little of it into savings and use the rest for the coveted item.

If you have a part time job, you probably get a paycheck each week.  This is the money you should absolutely learn to budget.  The following are probably the categories you’d need, but you can adjust them to suit what you need. Make a list of how you split your money up.  Start with savings.

You may have to give a little towards what was always referred to as ‘room and board’….that means you help pay towards what you eat and where you sleep.

If you drive, you probably need to pay for at least a portion of insurance. And don’t forget the gas tank…if you use the car, you need to fill it with gas.

You should also set a little aside and holding that money out for things you may want or need…. such as a new phone, sneakers, sweatshirt etc.  Paying for some of your things gives you pride in the fact that you’e capable of doing that yourself.  This ‘set aside money’ will also be for when you’re out with friends, you can get a burger or pizza.

The money you put into savings should stay in savings….. for ‘a rainy day…way down the road’. Once you have at least $10. set aside for savings, open a savings account at a nearby bank. Most banks don’t charge any fees for those under age 18.  Take a few extra deposit slips home, and each paycheck, when you go to the bank to cash your check, fill out a deposit slip so you can deposit money into your savings account immediately…out of sight, out of mind.

If you don’t have anything on your wish list, then set some money aside and add to it for when the time comes that something special comes on your wish list…. you will have all or at least some of the money already set aside.

Saving something from each paycheck, by paying yourself first is common sense. And budgeting is easy.  Every penny counts…it’s Common Cents!

You can do this!

 

 

 

 

 

Getting Started….

Learn to simplify.

If your finances aren’t in order, chances are other facets of your life are in disarray as well.  If you learn to simplify your life, you will have less stress and things will fall in to place.

Gather your bills, and list all of your outstanding debt.  Make a complete list of ‘have to’s…. rent/mortgage, utilities, food, medical, car insurance, etc.  Anything other than the ‘have to’s will have to get cut back or get cut out of your budget completely.  Until your finances are on track, meaning spending less, getting rid of debt, and saving.

Add all the figures in the ‘have to’ column, and that is now your working budget.  Any income over that should be put to pay down your outstanding debt.  Once that is done, the figure you were using to pay down the debt should be put to your savings.

Until you have a handle on how to save, and have at least $1,000. in an emergency fund, any incidentals are out.

Paying down your debt, and seeing this happen should be a good feeling for you.  Being debt free is awesome.  And, having an emergency fund….used only for that, such as a plumbing issue, new tires, a dental emergency etc. is also a good feeling and it takes some of the stress at that time out of your life, because you’ll know you have the money set aside for the emergency.

Once the emergency fund is set aside, open another account for  6-12 months of your income.  It sounds daunting, but it is doable.  The reason you need this is just in case you are out of work for a while without an income, or should you lose your job.  Having this money set aside will allow you to live financially unaffected while you look for work or recover from a medical issue. In either case, you’ll have enough stress without worrying about how to pay for the roof overhead and feed yourself and family.

This does take discipline, but once you begin and then see your outstanding debt getting less and less, and your savings growing each paycheck, then you will become determined to do this.

It is after all a gift to yourself.  And it is doable.

 

Is Buying A Home In Your Future?

What you need to know…and do….beforehand.

You want to own your own home someday.  A dream of many.  You need to know what is expected of you first.

You will need a down-payment of 20% (or more) of the cost of the home you’re choosing. You will also need approximately $5,000-7,000. for other costs associated with the closing: home inspection, legal fees, title, Homestead Act, etc.  All necessary to complete the transaction.

The 20% (or more), is the down-payment figure used, because if you put less down, you will have to get Mortgage Insurance (which will have to be paid monthly until you reach your 20%. The home inspection cost (approximately $500.) is for your protection. A registered home inspector is hired by you (before you actually purchase the home), and he/she goes through the house thoroughly and lets you know what needs to be repaired/replaced now or in the near future and approximate cost for each.  This now gives you the opportunity to ‘back out’ of the deal If there are costly repairs coming up, that may be out of range of your budget.  Or, you could negotiate with the sellers to either make repairs or deduct money from the price of the home and you will handle the repairs on your own.

The closing costs are just that…. costs at the time of closing the deal.  You should have a lawyer, and he/she will draw up papers and go to the Registry of Deeds to register the purchase/sale.

So that is where the figures of at least 20% plus legal costs fits in.

Now, do you have a few thousand dollars (for a lawnmower, some plants etc or if you want to paint the living room or kitchen?  This would be a good idea too.

It sounds ominous, but truly it’s doable.  Be disciplined about saving and you’ll get there.

And when you have the money you need set aside, then shop for the best rate on a loan and a reputable mortgage lender.

Soon To Be A Couple?…..

One income becomes two…. What You NEED to know first!

Before you become a couple for life, talk finances!!  If you don’t, it is a guarantee that the subject will come up down the road, and then…. It’s too late!

If the relationship is getting serious, NOW is the time to bare all….. finances, that is.  Before you tie the knot in a marriage, it is imperative that you know all about your intended’s finances… and they yours.  It is very important, and did I say imperative??  Yes, imperative.

This is because we all earn, save, spend differently. And if you say ‘I do’ before you know this, it can cause you major headaches, arguments, and financial stress. So, it’s best to be up front and truthful on what you (both) earn, how you (both) save, and how you (both) spend.

If you’re not on the same page now, you never will be.  If one is a saver and the other a spender, then there will always be friction as to what is spent, and what is saved.  Honestly, if you cannot get past these issues now, then hold off on the wedding plans.

This is imperative because the spender, if he/she is spending more than their income, not on a budget, and doesn’t pay in full and on time for what was purchased, they’ll have a lower credit score than you who prefers to stay within a budget, save rather than spend, and when you do spend, you pay in full and on time to avoid late/finance charges.

You will also have ha higher credit score, and so their lower score now joins yours and will bring yours down.

Also, if they’re paying off college loans, car loans, etc, once you’re married, their debt becomes yours!!

So gather all your financial information, sit down together, and show and tell.  Talk, talk, talk.  Promises of ‘I’m going to do better’, isn’t good enough….. They’ll have to do it….. for a specific length of time.  This isn’t mean, it’s actually a gift to them, a valuable lesson on how to handle finances….   And it’s a gift to you too… you won’t be dragged down into their debt hole with just two words….(‘I do’).

The ‘I do’ also means I do know that what’s yours is mine and vice versa including their debt.

Start showing and talking!

Your Financial Reputation

How Do You Score?

Just like in life, you also have a reputation with how you handle your finances. You actually get scored on how well you do.  Your goal is to keep it in the ‘excellent’ category….. 750 or better.

Everyone has bills….. rent/mortgage, utilities, loan payments, credit card purchases etc.  How well you do at paying them, whether you pay when/before due, or if you’re late (and how often), and if you pay in full or just the minimum.  And, it shows how much outstanding debt you have and how you’re taking care of paying it off.

All this is reported and goes on a ‘Report Card’ of sorts…. called….. Your Credit Score.  You score anywhere between 250 – 850.

Obviously, the higher your score, the better.  And your score can determine whether or if…. you can get a job, an apartment, a loan etc.  And it’s legal for prospective employers, landlords, lenders etc to check to see where you stand.  So…..

Get in the habit of living within a budget, of not buying what you don’t need.  And when you do buy something, know that when the bill comes in, you have the money set aside to pay for the whole amount before the due date.  Doing this assures you that you will have no late fee or finance charge on the outstanding portion.  And…… it keeps your Credit Score in excellent standing.

This is why a budget is imperative.  Checking on what income is received, and how you disperse it should become a habit.  Doing so will not only let you know where your hard earned money goes, but it will allow you to know what you’re saving, and for what purpose.  And, it will relieve stress at wondering and guessing.

Once you’re in the habit of doing this, you become disciplined at it…. It becomes second nature.

So, get started!

 

Every Penny Counts… It’s Common Cents

Getting Started….

Organization in all aspects of life is less stressful, so once a realistic budget is settled, and you’re moving along smoothly with it, set up two accounts: One for Emergency Savings, and one for 6-12 Month Income Reserve.

Each is as important as the other, and so, should be added to consistently until your goal for each is reached.

The Emergency one is for just that.  Should an emergency arise (and they do), you should have a $1,000 – $3,000. account set aside so you can pay the bill for the emergency when it comes due…. dental, new tires, plumbing catastrophe etc.

The 6-12 Month Income Reserve is an account which will get you through 6-12 months should you find yourself without an income…. this, too, does happen.  Whether it be a medical emergency, one that you find yourself out of work for a while, or if you are a caretaker to a family member for a while. And since we have all seen what a pandemic can do to job loss, you will have money set aside to pay your monthly expenses.

These accounts are to be used for…..only…..that particular reason.

This can truly be done.  You will find yourself to be less stressed out when, should the need arise, you will be financially covered to pay for – the cost of the emergency, or – if you find yourself out of work, you can still pay for rent/mortgage, heat, light, phone, food.  You notice take out orders, entertainment of any kind or any other non-essential spending has not been mentioned.  This Income Reserve Account is for essential bills.

And remember, when you do need to use the money from these account(s), they should be replenished as soon as possible.

Life happens. Be prepared.