Posted in Budgeting for Everyone, Credit Cards, Debt Free, Financial Freedom, Saving for Your Future, Winning with Your Money, You and Your Money

The Credit Score Game – Part 2

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Your credit score is your financial reputation.  It is the only accurate picture the world – and you – has of how you handle your money.  And we all know a picture is worth a thousand words.  We should never become obsessed about our score, but we should all understand what it means so that we can make good financial decisions that will move us forward and not backwards in the area of our finances.

Last week, we talked about the biggest part of the pie – your payment history which makes up 35% of your score.  Today’s factor makes up 30% – which means that just these two things make up almost 2/3 of your score.  In my mind, that means that they are pretty important.  These two things show us very quickly how we handle our finances.  The first factor shows whether we honor our commitments and use tools such as budgets and spending journals to make sure we can follow through on our promises.  It also shows whether we are prepared for emergencies when they arise.  The next factor shows us how much we rely on debt in our finances.  Let’s take a look at factor number two!

Part 2 – 30% of your score is your credit utilization.  This is the percentage of your credit limits you use.  For example, if a credit card has a limit of $5000 and you have a balance of $1000, your utilization is 20%.  Here is a huge factor when it comes to the utilization percentage – it is the balance as of the statement date.  This means that even if you pay your cards in full every month, your utilization can be high.  In a minute, I will share a tip on how to avoid this.

The ideal percentage to keep a good score is 30% and below.  However, if you stay below 10%, your score will get a boost as that is considered excellent.  If you are a person who relies on debt to buy stuff, it may take a while to get this into a good position.  The only way to do this is to pay off your debt.  Unlike part one where you could start today and see results pretty quickly, this will take a little longer based on where you are and how much credit you have access to.  If you owe $400 on a $500 limit, you can knock that 80% down in one month.  But if you owe $5000 on a $10,000 limit, it may take months to get that 50% down.  This factor isn’t about timing so much as it is about the math.  And depending on where you are getting your score from, your percentage can be based on each individual account or can be an overall average of accounts.

There are two keys to helping this as soon as possible – one if you are a pay in full person and one if you are a debt person.  If you pay your card in full every month, the key is to make sure that your payment post before the statement date.  Paying it off then can be the difference in an 80% utilization and a 0% utilization.  Big difference!  If you are a debt person, the best thing you can do is start attacking your debt smallest to largest.  This will start to show zero percentages on cards and will lower your average utilization.  This will weigh heavy on the positive side especially the more you pay down.

The one thing you need to know about all of the parts of your credit score is that what is done is done.  You can’t go back and change it.  However, you can make better decisions going forward which will begin to outweigh the bad ones.  Trying to do it all can seem very overwhelming which is why I wanted to talk about the top 3 factors so that you can begin there.  You may not be able to start paying everything on time immediately if you have struggled with this for a while, but there is no better time than today to sit down, list out all of your bills with their minimums, set up a budget and begin to make it happen.  Doing this will automatically improve your utilization – lower debt = lower utilization.  You can do it!  I was $200,000 in debt making just $10,000/year with a 560 credit score when I started the process.  And look at me now – debt free, making way more than 10 grand, and my score is over 800.  It is not impossible and I hope that these small tips that I will be sharing will help you to start the journey now.

Credit is a part of life – we need it for things other than debt in today’s world.  It is your financial reputation.  And it’s okay if your reputation is scared a little right now.  Just make the decision to start over – start today making one better financial decision, pay one bill on time, pay one debt off, anything!  Today is your day!

Posted in Budgeting for Everyone, Building Wealth, Debt Free, Financial Freedom, Marriage and Money, Winning with Your Money

Budgets – The Key to Financial Success

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When you hear the word budget, do you think freedom or prison?  Many people lean on the side of prison, but as I found out, a budget is the key to financial success and freedom.  For the first 28 years of my life, I never did a budget – I mean I didn’t even write a list of my bills down each month.  Then, as many of you know, I found myself $200,000 in debt, a single mom making $10,000 year.  In order for me to get out of that situation and move forward in my finances, many things had to change.  The first thing was budgeting.

All budgets need to be written – at least until you reach the level of financial freedom where you automatically have set limits and can always stick to them.  I know millionaires who still write down budget items such as donations, medical expenses, etc. – items that they need to keep in check to make sure they don’t go over what their boundaries are.  And that is all a budget is – a list of your expenses and what your boundaries are in each category.  Your true boundary is your income – if you spend beyond that, you will head into dangerous territory.  The best way to avoid doing that is to set up a list of every dollar you are bringing in and where you want it to go including savings, retirement, fun, etc. – a zero budget.  Everyone can do this – whether you have regular income or irregular income.

Regular Income – When you get paid the same thing every month, it is easy to do a budget.  You know ahead of time what your take home will be so you can sit down a week or so before the beginning of the month and write out your budget.  You can use pen and paper like I do, or you can use a spreadsheet or one of the many apps out there.  It doesn’t matter how you do it – the important thing is that you do it.  As I mentioned before, make sure you do a zero budget – this is where every dollar has a home.  If something changes throughout the month, you can switch money around, but when you leave extra money floating out there, you have a tendency to forget about it and spend it on something you shouldn’t.  You are in charge of your money and if you don’t tell it where to go, it will literally go and you will never see it again.

Irregular Income – It is a little more challenging to do an specific budget when you have different amounts of income coming in each month.  However, it is just as important that you do one.  The first step is the same – write down all of your expenses.  Then rewrite them in priority order – let me help with this one – food, housing, utilities, transportation come first.  Then you can worry about credit cards, debt, etc.  Never pay a credit card before your rent/mortgage.  When your money comes in, simply start at the top of the list and pay down the list until you run out of money.  Everything else gets moved to the next check.  Here is a major tip that will help you if you have irregular income:  Have a cushy emergency fund.  If you have one, you will be able to cover all your expenses every month no matter what the income.  And when the months are good, you can rebuild the fund with the extra.  This will keep you from missing payments, being late and racking up extra fees.

Many people don’t like doing budgets because they believe that doing one will make them have to say no to something.  However, not doing one will make you have to say no to a lot of things in the near future.  A budget is a wealth building tool.  A budget is you being the boss of your money.  A budget is your key to financial freedom.  If you are scared to start budgeting, I understand.  I was right where you are.  Let me put your mind at ease – you will fail multiple times.  Not because you can’t do it, but because budgets are emotional things.  You will have to face your truth doing a budget.  You will have to say no sometimes doing a budget.  But without doing both of these things, you will never reach the financial freedom you so desperately want.  Start by doing a spending journal.  Learn where your money is actually going.  Then use that spending journal to do your first budget.  And I would also suggest continuing the spending journal in conjunction with the budget for several months or forever.  It is a great tool to have in your wealth toolbox. And my last tip – add a G.O.K. (God Only Knows) category to your budget.  All you need to put in it is $20-40 per month, but this will help you with those tedious expenses that pop up out of nowhere.

Budgets are not hard, but they are emotional.  Just remember, with a zero budget, you only have what you have.  Therefore, if something changes, the money has to come from somewhere – either another category or the future, meaning it may have to wait until next month.  After a few months, you will begin to build your muscles and you will get stronger with each month – and wealthier too.

Always remember – budgets are our friend!

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Posted in Budgeting for Everyone, Credit Cards, Debt Free, Financial Freedom, Winning with Your Money

Christmas Shopping Tips You Must See

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This time of year, there are hundreds even thousands of blog posts with savings tips for your Christmas shopping – the biggest shopping time of the year.  I didn’t want to be left out.  However, I am sharing tips that I never knew about until my journey to financial freedom.  I hope these tips will be new and exciting for you and if not, at least a great reminder.

  1. Buy only what you can truly afford to pay cash for – This may mean that you buy nothing this year.  Maybe you only buy a thought gift for a few of your closest family members or you buy one big family gift that everyone can enjoy.  Whatever it means, be honest and authentic when it comes to gift buying and the Christmas season.  Society and even the people we love the most sometimes make us feel like we must buy something for everyone we know.  Etiquette  tells us to reciprocate gift giving – meaning if someone buys for you, you need to buy for them.  Many of us buy simply out of obligation or so the other person won’t “look badly upon us”.  This is all hogwash.  You have to live your authentic life and your authentic life may be that you can’t buy anything this year.  I am going to share tips on how to buy thought gifts and maybe that is all you can do.  But no matter what, buy only what you truly can afford to buy in cash and only what you really want to buy.  Christmas is not a time to see who can buy the bigger and better present.  It is a time for family & friends and reflection on who we are and where we are going.  So if you are getting out of debt or your budget simply can’t handle anything or just a small amount this year, I am telling you that is okay.
  2.  Buy gifts in sets and break them up – I have bought my mom, my aunts, and others like my hairdresser and staff gorgeous gifts that have cost under $10 – I’m talking brand names like Lenox and real pearl earrings like Honora pearls.  The first time I thought about this was watching @QVC, but you can find these gift sets anywhere.  And make no mistake – these gifts are not small or cheesy and they are not something that someone will shove in a closet.  They are gorgeous gifts that people will be proud to wear and display.  Sometimes we think that if we buy a gift set, we have to give the whole set to one person.  This is simply not true.  That is what they make gift bags for.
  3. Regifting is okay – You may be saying, “Oh Lord Debbi, now you are crossing a line.”  No I am not.  Listen, if you have something that someone, out of the kindness of their heart gave you, but it is just not your thing, then give it to someone who would enjoy it (just make sure it is not the person who gave it to you).  It is wasteful to have something sitting in your house collecting dust because you aren’t using it.  Many people would call this tacky but I call it paying it forward.  Someone thought of me, but I couldn’t use the item, so I am going to give it to someone I am thinking about who can use it.  This can apply to gifts or gift cards.  One year, my husband and I received a gift card to a place we do not go to.  However, my cat sitter did so we gifted it to her.  We didn’t announce it – we just gave it to her and she was very happy which is what matters in the end.  And yes, there are people who may do a follow up interview regarding the gift they gave you – don’t lie.  Just simply say “We haven’t had a chance to use it yet, but we really appreciate you thinking of us.”  This is one where you need to use your discretion, but don’t rule it out.  Do what is right for you.
  4. Handmade gifts are not tacky – One of the least expensive handmade gifts to give are the mixes in a jar.  It can be soup, cookies, hot chocolate or any other wonderful treat.  This lets someone know you were thinking of them, but it doesn’t break the budget.  One year, I went to Michael’s and bought unpainted wooden reindeer shapes.  I painted them brown, added eyes and a pompom nose and a string for hanging.  This cost me less than a dollar and I still have family members who hang it on their tree every year.  It may seem cheap to you (and yes it will come across cheap to some receivers as well), but they are perfectly good gifts and if someone has a problem, it is their issue, not yours.

For many of us, Christmas can be an extremely stressful time, but there is no need for it to be.  We are not put here to live our lives for other people and this includes during Christmas.  We are put here to be ourselves, to be true to ourselves and to live our authentic lives.  For you, this may mean using one of the tips above when it comes to presents instead of putting a strain on your finances by buying too many gifts for too much money.  It may also mean you finally bring your favorite Christmas tie or sweater out of hiding.  It also may mean that you spend a few less minutes at the family gathering this year.  Whatever it means, do it!  Do what you want to do, do what makes you happy, and have a very Merry Christmas (or whatever holiday season you celebrate).

Would you love to have Debbi add your church, organization, conference, or meeting to her “Living Your Authentic Life Tour 2016“?  Email her today at dking@debbiking.com and schedule now to make sure your date doesn’t get taken!