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

The Biggest Myth About Needs

dd_01_filetWould you describe this steak as a need or a want?  Okay, that one was easy (it’s a want).  But what about a pair of jeans or shoes?  Or even a washing machine?  Or, the best one, a cell phone?

Each of the items listed above is a want.  Yes, a want.  A need is something that you must have to live, to survive.  And nothing I listed above falls under that description.  We actually only need a few things in life.  We need a roof over our head.  We need food in our bellies.  We need clothes on our back.  However, we don’t need a 2,000 square foot home with granite countertops.  We don’t need steak.  And we definitely don’t need multiple pairs of shoes, jeans or tops.

I had trouble with this one.  I would convince myself that I needed everything that I had – that I just couldn’t survive without them.  God taught me this lesson in the form of a washing machine.  One day my washing machine broke down and I had no way to fix it or replace it.  I was just starting my debt free journey so I didn’t have the cash to pay for a new one – or even a used one – and I wasn’t going to use a credit card.  So what was the answer to my conundrum?  I didn’t need a washing machine.  I knew this because my grandmother didn’t have one for many years and she survived just fine.  (She was my example on my journey)  So I hand washed my clothes for several months until I could save up for a new washing machine.  Was it easy?  No.  Was it annoying?  Yes.  But it was worth not mortgaging my future for something I didn’t need.

The biggest myth about needs is what actually defines a need.  You see, you can have anything you want, but you must meet your needs first and then go after your wants.  If you are homeless, you shouldn’t have a cell phone.  If you are behind on your mortgage, you shouldn’t be eating out.  When you understand the concept of needs versus wants, you will prioritize differently and make better financial decisions knowing that you can live without something for a while.  And a side benefit to embracing this new understanding is you will realize how truly blessed you are.  You not only have your needs met, but you have most of your wants as well.  And if you are on your wealth and financial freedom journey now, it will motivate you to make choices that will move you forward even faster.

You can have anything you want, but you can’t have everything.  Life is about priorities and choices.  Make sure your true needs are always met (they are for most of us) and then prioritize your wants based on your finances and future goals and dreams.  And please don’t misunderstand me or the point of this article – I have a cell phone, a washing machine, a nice home, and I eat steak.  But I have also gone through times in my life where I didn’t have those things and I lived just fine.  Never mortgage your present or your future to obtain or do things that fall in the want category.  It’s not worth it.

Have a blessed and prosperous week!  ~Debbi

http://www.debbiking.com

Check out Debbi’s award winning books on Amazon and Barnes and Noble

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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 Building Wealth, Debt Free, Financial Freedom, Saving for Your Future, Winning with Your Money, You and Your Money

Why Lord Why?

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We ask this question a lot whether we are a person of faith or not.  This morning I am, as a person of faith, asking it about the death of a loved one.  We ask this question when we are stressed, depressed and don’t know what to do.  Many of you have asked this question recently in the area of your finances – “Why Lord why is this happening to me?  Why do I owe so much, why are the creditors calling me, why is nothing good happening to me?”

The answer is more simple than you think when it comes to your money.  This is going to hurt, but it has to be said – you are where you are because of you.  Ouch!  Now I’ve pulled the Band-Aid off so let the healing begin.

You may be praying for a miracle, but you don’t need a miracle.  You just need to make a decision to get out of debt and do it.  You are probably saying, “But Debbi, you don’t know what I’ve been though.” “Debbi, I had no choice but to go into debt”.  Hogwash – on both counts.  I do know what you have been through and I know you did have a choice.  The only way I ridded myself of $200,000 in debt was to realize I did have a choice and to understand that the answer to the question “Why Lord Why” was because I made bad decisions.  I mortgaged my future for something that I had to have even though I didn’t have the money to buy it.  This holds true whether it is credit card debt, a car loan, or even a student loan.  You can go to college debt free, but you chose not to.  You can buy a working car with cash, but you chose not to.  You can live without a computer, iPad, iPhone, etc, but you chose not to.

I cannot say this enough – you are where you are because of the choices you made.  The good news is you can get out of debt the same way – by the choices you make.  You can choose to sell your car and buy one with cash.  You can choose to not take a vacation this year.  You can choose to get a prepaid cell phone.  You can choose to rent a movie instead of going out.  You can choose to cook at home instead of eating out.  Getting out of debt is a choice, just like getting into debt is.  And it can be done – I’ve done it and so have countless millions.

So here’s the real question – “Why am I not choosing to get out of debt?”  What is holding you back?  If it is knowledge, then get it.  We offer coaching programs, I have two award winning books, and so do countless other  great personal finance experts.  The knowledge is out there.  If it is excuses, throw them out.  Every time you find yourself making an excuse, replace it with a positive choice.  If it is because you think you can’t, I am here to tell you you can!  If it is because you don’t want to sacrifice, then I can’t help you.

You are the answer to the change you want to see in your finances.  You are the answer to the question “Why Lord Why?” in the area of your money.  Maybe you’ve had some bad luck that was out of your control – lost a job, etc. – but if you had money instead of debt, it would have worked out much differently.  You can’t change the past, but you can learn from it and change the future.  I hope today you will choose to make that change and begin your journey to wealth and financial freedom.

 

Book your 30 minute free consultation with Debbi today.

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http://www.abcsofpersonalfinance.com

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