DebtWave offers free, insightful personal debt management resources, which includes tips and advice for smarter saving, spending, budgeting, maintaining your credit score and more.
Personal Debt Management Resources
Developing a monthly spending plan and sticking to it is probably one of the most important steps of becoming financially fit. After all, credit card debt comes from spending money you do not have. A strong budget helps you understand where your money goes, ensure you do not spend more than you make, increase your wealth, and achieve your short and long-term goals.
Click through to get your budgeting plan started with five easy steps.
1. Document Your Projected Income and Expenses
Write down your monthly income and expenses. You should have expenses for about 15+ separate categories. Some common categories include: Rent/ Mortgage, Cars, Gas, Food, Toiletries, Day Care, Clothing, Laundry, Gifts, Entertainment, Travel, Alcohol/ Tobacco, Pet Care, Credit Cards, Utilities, and Insurance.
2. Prioritize Your Projected Expenses
After writing out a list of all of your expenses, you can prioritize them. Write a number next to each one starting with #1 as the most important. Essential categories, such as Food, Housing, and Utilities should be near the top. Non-essentials, such as gym memberships, entertainment, and magazine subscriptions should be near the bottom.
3. Keep a Journal of All Actual Daily Expenses
Now go one full month of tracking your actual expenses. Once again, place everything into a category. Account for all purchases regardless of the price. At the end of month, compare your actual expenses to your projected expenses. This should determine some problem areas and give you motivation to make some cut backs.
4. Allocate Some Money to Your Savings Account
Force yourself to start depositing money into your savings account every month. Even if it is just $20, you need to start somewhere. You will be surprised on how quick your savings can grow. Treat it like another bill and commit to it.
5. Repeat Steps 1-4 Every 3 Months
Your income and expenses often change; therefore, it is very important to revisit your finances at least every three months. Make additional cutbacks, add more money to savings, or start increasing payments to your debts.
If you have a deficit at the end of the month, then you need to reevaluate how and where you spend your money. The best way to accomplish this is to cut back on the expenses that fluctuate (food, entertainment, utilities, etc.).
Click through to read ten quick ways to reduce your spending.
1. Bring Lunch to Work
If you buy $5 to $10 lunches every day, this can add up to a lot of money by the end of the month ($100-$200).
2. Shop for Large Purchases
If you have to make a large purchase; for example, a television, washer and dryer, etc., always check out prices online. Do not be tempted to get it at the local store without taking a look at competing prices. Not only will this ensure that you have found the best price, but will help prevent any impulse buying.
3. Balance Accounts
Try to plan at least once a week to sit down and balance your checkbook. Bounced check fees can cost around $35, not to mention potential late fees, which can all be avoided.
4. Avoid ATM Fees
Avoid using the ATM machine anywhere else besides your bank. Though these fees may seem small per transaction ($3-$5), being hit with ATM fees once a week adds up to $150-$300 per year.
Always stay on the lookout to get future gifts at today’s discounts. Birthdays and holidays always involve spending money; however, you can always find the right gifts at the right price well in advance. Remember, it is the thought of the gift that counts, not the price.
6. Go See a Matinee
Movies are expensive and even the matinee price is getting up there, but it is a big savings! You can eat a snack or meal before going into the theater as well, which will save you the cost of snacks at the movies.
If you have young children, then you know how quickly they grow out of their clothes. People everywhere pass their children’s clothing to their friends, whose kids are just a little younger, so do not be afraid to ask.
10. Grocery Shopping
Make a list of items that you only need before going to the store and stick to it. Always be sure to eat before going grocery shopping to help from overspending and buying things that you do not need. Also, use coupons to help save a few bucks.
Credit Card Tips
It can frustrating and challenging to make progress in decreasing the balances on your credit cards.
Click through to read fifteen tips to help pay off your credit card debt.
1. Get Organized
Take a look at all of your credit card statements and enter them into a spreadsheet or write them down on a piece of paper. Enter the following information on each account: Current Balance, Interest Rate, Minimum Payment, and Monthly Finance Charge. Then, add up each category.
2. Always Pay Bills on Time
Pay them 1-2 weeks in advance if possible to avoid any late fees or negative reporting to the credit bureaus. Most creditors will charge a late fee of $29-$39 even if you are just one day late.
3. Monitor Interest Rates
Make sure your rates are as low as possible (10% or less) to prevent absurd monthly finance charges. Some creditors may offer a low interest rate for a balance transfer, but you should read all of the fine print before applying.
4. Stop Charging on Credit Cards
If your goal is to become debt-free, it is nearly impossible to pay off your debt if you continue using credit cards.
5. Do Not Open New Credit Cards
It is also nearly impossible to pay off your debt if you continue to open and use new lines of credit.
6. Pay More Than the Minimum Payment
If you just pay the minimum payment whenever possible, it could take you over thirty-years to pay off some accounts.
7. Beware of No Interest/ No Payments
Before you sign up for a department store credit card, check if there is no interest and no payments for twelve or twenty-four months. If you do not pay off the balance within the time frame, you will more than likely get hit with hefty finance charges.
8. Avoid Taking Cash Advances
Try not to take cash advances from your creditors if you cannot pay it off immediately. Most interest rates on cash advances are usually well over 24%.
9. Do Not Lend Credit Cards
If you let someone borrow your credit cards, you will ultimately be responsible for the charges.
10. Pay Off the Lowest Balance First
If you have balances on many credit cards per month, focus on paying off the smallest balance first. Pay the minimums on all of the other cards and send extra money to the smallest balance. Once that account is paid off, move on to the card with the next smallest balance. This is a great way to build up momentum and confidence in becoming debt-free.
11. High Interest Rates
If you have interest rates that are 12% or higher, call your credit card company and ask that they get reduced. Threaten to take your business elsewhere if you are not having any luck.
12. Avoid Closing Accounts If Possible
If your credit card company increases your interest rate, do not close your account or not pay them in response to getting even with them. That will just hurt your credit. If you want revenge, transfer the balance to a competitor with a lower rate.
13. Understand Your Consumer Rights
Once you fall behind with your payments, the calls from your credit card companies begin. Be sure to understand your rights as a consumer by reading the Fair Debt Collection Practices Act. This act covers what debt collectors can and cannot do.
14. Avoid Bankruptcy If Possible
Bankruptcy should always be viewed as the last alternative to managing your debt. Be sure your Bankruptcy lawyer is looking after your best interest and not his or her best interest. Also, understand the difference between Chapter 7 and Chapter 13 bankruptcy.
15. Destroy Old Credit Cards Properly
When your credit or debit card expires, be sure to cut the card into pieces so an identity thief will not be able to make out your name, account number, expiration date, or security code.
The first step is to stop using credit cards and then you can deposit money into your savings account on a monthly basis as if it were a monthly bill.
Click through to read six tips to help you start saving.
1. Start Small
Experts suggest that you save 5-10% of your monthly income to put into savings and treat it as a bill to force yourself to stick to it. Establishing a savings habit and saving consistently is better than putting aside a big sum just once. Start with something you know you can live with, and promise yourself that you will save that much per week or month.
2. Monitor ATM Withdrawals
Decide how much you will take out each week and make it last. Make the amount a little tight and try to decrease it over time if you can. If you have money left at the end of the week, put it into your savings account.
3. Sign Up For 401(k) Plan at Work
If your company matches your 401(k) contributions, take advantage of it as much as possible. Contribute up to the amount of the company match, which is the amount your employer kicks in when you contribute.
4. Set Up an Automatic Investment Plan
You can arrange to have as little as $50 per month deducted from your account and deposited into a mutual fund account.
5. Open an IRA
Do this only after you have maxed out of your company’s retirement plan. You will probably come out best with a Roth IRA, which means you contribute after-tax dollars, but then get to withdraw it in retirement tax-free. If, however, you think you are going to be in a lower tax bracket at retirement or you have already contributed significantly to a regular IRA, you may want to stick with the traditional version.
6. Account for Money
Keep a little notebook with you to record your small cash purchases. People who know where their money goes spend far less and save more. Also, always have 3-6 months worth of expenses in your savings account for an emergency fund instead of relying on using credit cards.
Credit Score / Reporting Tips
Credit scores reflect credit payment patterns over time with more emphasis on recent information. Your credit report is a major factor in determining your eligibility to qualify for loans, what interest rates you will be charged, your ability to rent an apartment or house, and your ability to get a job. Credit scores/ reports give lenders a fast, objective measurement of your credit risk.
Click through to read nine tips to improve your credit score.
1. Pay Bills On Time
You always want to make your payments on time because delinquent payments and collections can have a major negative impact on your score.
2. Keep Credit Card Balances Low
High outstanding debt can affect a score.
3. Stop Opening New Accounts
You should do this only as needed. Do not open accounts just to have a better credit mix because this will probably not raise your score.
4. Pay off Debt
Instead of moving your debt around, pay down your debt as quick as possible. Also, do not?close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may not lower your score.
5. Order a Credit Report Copy
You are entitled to order a free copy of your credit report from all three credit bureaus at least once a year. You can order your credit report through www.annualcreditreport.com.
6. Review a Credit Report Regularly
You should do this so you know what is being reported. It will not affect your score to request and check your own credit report.
7. FICO Score
First, Payment History makes up 35% of your FICO score. Second, how much you owe compared to how much credit you have available accounts for 30%. Third, how long you have had credit makes up 15%. Typically, the longer you have had credit, the better you will score in this category. Fourth, the types of credit you use accounts for 10%. Having a mix of credit cards and installment loans, like a car or mortgage, can help you. Fifth,?Credit Inquiries make up 10%. Each time you apply for credit, the lender will pull your credit (called an inquiry). Each inquiry can lower your FICO score, so try to keep the number of inquiries to a minimum.
8. Dispute Any Errors Immediately
Under the Fair Credit Reporting Act, you have the right to add a statement or comment in the event you wish to clarify some information on your credit report. If you have a negative item on your report, you may want to explain the reason to avoid having to repeat yourself to each potential lender. Creditors are given 30 days to respond to the dispute.
9. Calculate Debt-to-Credit Ratio
Each time you run your credit report (annually), write down a list of all of your open accounts and/ or accounts with balances, including the name of each creditor, balance, and credit limit. Take the total of your balances and divide that number into the total of your credit limits. You want to see this number at 30% or less.