Posted in College & Student Loans, You and Your Money

Raising Adults

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Yesterday, I returned home from a seven day cruise with my 19 year old daughter.  It was an awesome trip full of bonding moments as it was just her and I out in the world for 7 days (and she was trapped on the ship with me with no where to go).  On the last day of our trip which was a sea day, we were eating lunch and starting talking with this couple who had 2 teenagers but were traveling alone.  The gentleman was in law enforcement and my daughter is in college for Criminal Justice.  We talked to them for almost an hour sharing great advice and talking about our passions.  My daughter shared many of the things she has learned over the years and the couple seemed shocked and impressed at her knowledge and grasp on reality.  One of the subjects we talked about was the epidemic in this country with teenagers and young adults believing they are entitled to everything without working for it.  And my daughter agreed – she sees this with her friends and others all the time.  When it was time for us to part ways and move on to other activities, the lady leaned over and whispered in my ear “You raised her well.”  I admit I teared up a little.

I don’t say this to brag although I am super proud of my daughter and the young lady she has become.  I am telling this story because it brought home a lesson that I learned many years ago and have shared from that day forward – we are raising adults.  It doesn’t matter whether a kid is 2, 12, or 20, you are always raising an adult.  Let me explain.

Your kids and kids in your life – whether for a moment or for a lifetime – are watching every move you make and every word you say (and the way you say it).  Kids aren’t born knowing how to do things.  They learn by what we teach them.  The key word is teach them.  Now, you can teach your kids on purpose like I did my daughter or you can teach them by default – either way, they are watching and learning every moment of every day.  The other day I was in Wal-Mart and I heard a kid screaming from 4 aisles over.  He just kept screaming until he got to the aisle I was on.  Then I saw his mom give him a phone and he stopped.  Whether she realized it or not, she taught him that if he screamed, he would eventually get his way.

I hear parents say all the time “We don’t use the word no”.  Well you should, but not as a mantra.  Use it in conjunction with an explanation as to why the action or behavior is not allowed.  A great example is the entitlement issue I spoke of earlier.  Kids believe they are entitled to everything because that is what they have been taught – again either on purpose or simply by not teaching them a different way.  My daughter is no different than every other kid out there – she wanted stuff and still does.  However, I have no issue telling her no and at the same time explaining to her why not.  She has never once heard “because I said so” from me.

We must realize we are raising adults from the moment our kids are born.  Did you know that a newborn will cry and get upset if you are stressed when holding them?  But if you are calm and soothing they will be too.  It starts from day one and continues through their entire lives.  My daughter is still watching me even at 19 years old.  It is still my responsibility to be an awesome example to her on how to navigate life in a positive direction and reach all of her goals and dreams (not mine, hers).  So the next time you are speaking with a little tone because something isn’t going right or you are swiping that credit card to pay for something, just remember they are watching your every move.

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 Buying Your Dream House, Credit Cards, Debt Free, Financial Freedom, Winning with Your Money, You and Your Money

The Credit Score Game – Part 1

credit-score-report-historyWhen I was getting out of debt, I was told numerous times, credit scores mean nothing.  However, I learned that that is not exactly true.  Your credit score is your financial reputation – plain and simple.  When necessary, it shows people how you handle your finances – the good, the bad and the ugly.  I agree that your primary focus in your financial life should not be your credit score.  However, when you make positive financial decisions, your credit score will reflect that and in essence take care of itself.

In order for you to understand how that happens, you need to understand how the credit score works and what positive, on purpose money decisions you can make to help your score along.  So for the next 3 blog posts, we are going to cover the top 3 most important factors of your score and I will share tiny tips that you can do to raise your score simply and easily.  When I started focusing on getting out of debt and making positive decisions, my score went up 100 points in just one year – some take longer, some are quicker, but you have to start somewhere.  So here we go!

Part 1 – 35% of your score is your payment history.  That is over 1/3 on just this one thing.  And this is where many of us go way wrong.  Anytime you are overextended financially, someone doesn’t get paid.  If you don’t have the right health insurance and emergency fund, medical bills don’t get paid and end up in collections.  When you go credit card crazy and look up and owe hundreds every month that you don’t have, bills end up in turmoil.

Your payment history is very important to your financial reputation.  It shows people whether you have it together or not.  People don’t have to look at your bank accounts to know if you have a proper emergency fund – they simply need to look at your credit report.  You don’t have to show anyone your budget for them to know if you are doing one or not.  It is all reflected in your credit report.  Many people fall on hard times and if you are not properly prepared, it will affect your credit history and your financial reputation.

But don’t worry – it is never to late to fix it.  The first thing you need to start doing is get on a budget and pay every bill’s minimum payment every month on time or early.  If a bill is due on the 20th, pay it no later than the 15th – I mean the payment posts on the 15th.  Online payments usually posts within a day, but mailed payments can take 10-20 days to post.  Take this into consideration.  If you have to start with one, then another, then another and so on.  This is better than every single bill being late every single month.

Once you have everything being paid on time or early, begin to work on cleaning up any collection items that may be sitting out there.  They are already being reported as not being paid, but once you settle them (even if it is for a written settlement partial) it will show paid and raise your score.

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.  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, anything!  Today is your day!