Managing Debt – The Streamlined

Top Money Wasting Habits

Tue, 10 Nov 2020 10:34:55 +0000

The day-to-day habits that we live by are what shapes our present and future life. Unfortunately, when it comes to habits pertaining to personal finances, most people are irresponsible and even reckless. In fact, according to the American Savings Statistics, close to 70 percent of adults in the U.S. have less than $1,000 saved for rainy days. This is highly disconcerting, considering the fact that the average emergency room visit in the country is close to $1,400.

To help you save more over time, it’s important to shed any money-wasting habits that may be weighing your finances down. Here are the top 10 culprits that prevent people from saving and growing their money:

Signing Up For Too Many Subscription Services

Today, there is an unprecedented number of entertainment services that you can subscribe to for a monthly fee. Content-on-demand platforms, such as Netflix and Hulu, are popular subscription services that people sign up for, both of which can cost you at least $10 each per month. There are also monthly subscriptions for dog toys and treats, magazines, financial data services, etcetera. These recurring expenses, although seemingly small, can collectively add up to a hefty sum over time. Limit your subscriptions to essentials, and avoid having multiple subscriptions of a similar service.

Auto Renewing Your Monthly Plans/Services

The option to auto renew a service is convenient, but it can also lead to paying for services that you no longer need or want. Most companies will issue a refund, but it takes time and a phone call to get your money back. Auto-renewing services also leave you at risk of getting your bank account overdrawn if the payment is charged at the worst possible time. Rather than go through the hassle and stress, avoid setting your services to auto-renew at the start of each month, especially for services that you sign up for on a free trial basis.

Buying Brand Names

Another common money wasting habit is buying brand names instead of generic alternatives. Majority of generic choices that you will find at supermarkets and shopping centers are equally reliable but come at significantly lower price tags. Advertisement campaigns have convinced us that brand name products are a much better choice over generic brand names even though they are comparatively similar in quality. Do your own research as to where and how a consumer product is manufactured, what ingredients or materials are used, and how well received it is by recent customers.

Dining Out

In today’s fast-paced lifestyle, it’s become increasingly difficult to prepare your own meals and cook good food. You could chalk it up to lack of time and energy from a busy work schedule. Others reason their lack of skill in the kitchen. Dining out, however, has dire financial consequences that many people ignore. Depending on location and choice of cuisine, the cost per meal per person can range anywhere between $5 to $30. Multiply that to the number of times the average American eats out every week, which is 4, and the cost can be alarming. Rather than dine out, save money by cooking meals in bulk, parsing them into containers, and storing them in your fridge, or what today’s generation calls “meal prepping”.

Not Investing Enough

Bad habits concerning personal finances don’t always stem from where and how you spend your hard-earned cash. It may also come from your inability to grow it through passive investments over time. One of the good habits that successful people do is investing a portion of their savings into high-yielding assets, be it stocks, mutual funds, commodities, or cryptocurrencies. Rather than having your available funds sitting idly in a savings account that yields one percent each year, invest it in low-risk assets that can yield higher returns.

Overdoing Maintenance

Although it’s prudent to be on top of routine maintenance of your personal belongings, such as your car, electronics, and appliances, overdoing it can have a counterproductive effect on your personal finances. For example, if you are regularly changing your car’s oil for every 3,000 miles it clocks in, you are essentially tripling your cost over time as many cars can last for more than 8,000 miles without getting their oil changed, especially newer models that use synthetic oils. The same goes for professional carpet cleaning or frequent routine visits to your physician.

Not Haggling For Purchases

This is one of the many good habits that today’s generation seldom exercise. Since most of the shopping happens online, haggling has become a lost skill. That said, haggling is still one of the easiest ways to save money, especially when buying big-ticket items, such as new electronics, a new family vehicle, or a home. Learn the simple habit of asking for a price reduction. There is nothing to lose or be ashamed of by asking. And in most cases, you’ll get a good discount, if not some freebies thrown in at the very least.

Lending to the Wrong People

Of the many bad habits that waste money, lending to people who aren’t creditworthy is a very tricky one to avoid. You never know when a close friend or relative will ask you for a small loan to bridge gaps in their personal finances. And if you have it, the most likely reaction would be to lend them the money without second thoughts. Being blindly generous and helpful can greatly affect your ability to save money and grow your investments. Avoid being emotional when it comes to the subject of money and your circle of people. New habits to learn when dealing with this sensitive subject is to set clear boundaries and let them know that you’ll be treating the loan as a business transaction rather than a personal one and that they should do the same.

Buying Everything

Sure, there are things you wouldn’t want to buy secondhand – dining utensils, personal hygiene kit, food, pillows, etcetera. Typical consumer mindset, however, tends to waste money by buying everything brand new – car, appliances, electronics, luxury clothing, furniture, and the list goes on. Avoid this restricting mindset by acknowledging the fact that many secondhand items are still in “brand new” condition and not as dirty or sketchy as you skeptically think.

Underpaying Their Debt

Of course, it’s better not to have debt at all. But in this day and age, debt is inevitable and sometimes necessary. For instance, applying for and getting a credit card is the typical first step to building a credit score, something you’ll need to apply for loans, mortgages, etcetera. If you do have debt in your name, try to pay off as much of it in as little time as possible. Although seemingly infinitesimal, even single digit APRs can snowball into massive, money wasting debt.

Final Thoughts

You may just be guilty of one or all of these bad habits, but the important thing is to look at your finances from an unbiased and objective POV. Start building new habits that cut back on expenses and add on your money-making assets with the aforementioned tips above.

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Tips to Improve Credit Score

Mon, 29 Jun 2020 20:17:16 +0000

First, you’ll want to check your credit score. Your report should include information about the factors that are affecting your scores the most. Two of the most important factors that determine your credit score is your credit utilization rate and payment history. Together, they represent 70 percent of your score. Furthermore, the length of your credit history, types of credit and credit inquiries calculates the remainder of your credit score.

Apply for a Secured Card

If you can’t get approved for an unsecured card, apply for a secured one. It can improve your credit score and build your credit history. If you get approved for a secured card, you’ll be required to make a security deposit. For example, if your security deposit is $200, you’ll have a $200 credit limit. If you don’t make your payments, the creditor will take money from your security deposit. Eventually, the creditor may give you an unsecured card.

Be an Authorized User

Consider asking one of your family members who manages their credit and finances well if you get be an authorized user on their card. To get someone to agree, let them know that you have no intention in using the credit card and that you want to be an authorized user to raise your credit score.

Additionally, being an authorized user on another person’s card has a lot of benefits. First, their account will show up on your credit report. So, if they make on-time payments, it’ll boost your credit score. Furthermore, your credit utilization ratio may improve, further raising your credit score depending on if the card’s limit and its current balance.

Pay Before or on the Due Date

When you apply for a credit card or loan, creditors will look to see if you pay your bills late. If you’re currently in arrears, try to start making on-time payments. Paying your bills late will hurt your credit score.

Additionally, be sure to pay all of your bills by their due dates. This includes your rent, utilities, phone bill, auto loans and student loans. To help you remember to pay your bills by their due dates, consider signing up for automatic payment or calendar reminders.

If you’re currently behind on your bills, try to pay them as soon as possible. Thankfully, even though late or missed payments stay on your credit report for seven years, their impact on your credit score declines as time goes on. Recent activity has more weight.

Diversify Your Credit

Diverse accounts affect 10 percent of your credit score. For example, if you currently have an auto loan, student loan and mortgage, adding a credit card to the mix may improve your credit score.

Pay off Debt

As mentioned previously, your credit utilization ratio is an important factor in determining your credit score. It’s calculated by adding all of your current debt and dividing it by your total credit limit.

You should try to keep your credit utilization rate at 30 percent or less. Keeping it at 10 percent or less will further improve your credit score. Lenders like to see you have a low utilization rate because it tells them you haven’t reached your credit limits and you know how to manage credit well.

Apply for Credit Only If Needed

Don’t apply for lines of credit just to try to improve your credit score. Furthermore, applying for credit can cause lenders to create a hard inquiry, and it can negatively affect your score. They’ll stay on your credit report for two years. Additionally, applying for too much credit may make it difficult to resist overspending. If you overspend, you may hurt your utilization ratio, negatively affecting your credit score.

Ask for Higher Limits

Ask your current creditors to increase your credit limits without performing a hard inquiry. If your credit limit increases and your overall balance stays the same, your credit utilization ratio will decrease.

Don’t Close Accounts

Don’t close accounts you don’t use unless you’re paying an annual or monthly fee. Additionally, closing an account may increase your utilization ratio, and the age of your accounts matter. If you have to close accounts, close those that are newer.

Communicate

If you know you can’t pay a bill, call your creditors to ask if you can skip a payment. Ask them if they’ll the missed payment to the credit bureaus. Additionally, if you’re having problems paying a lot of your bills, ask to set up a payment plan.

Consider Debt Consolidation

When you first enroll in a consolidation program for your debt, your credit score may temporarily decline. Fortunately, it’ll quickly improve if you make on-time payments.

Be Cautious Paying off Old Debt

If a debt is “charged off” by the creditor, it means they don’t expect further payments. If you make a payment on an account that’s been charged off, it’ll lower your credit score and reactivate your debt.

Dispute Inaccuracies

Check your credit report from all three major credit bureaus for any inaccuracies. The three major credit bureaus are TransUnion, Experian and Equifax. Any information that isn’t correct on your credit reports could decrease your credit scores. If you see any information that’s incorrect, dispute it immediately. The credit bureaus have 30 days to investigate and respond to your dispute.

Additionally, monitoring your credit report on a regular basis can help you spot incorrect information before they do damage.

Final Words

Unfortunately, it takes a long time to remove negative information from your credit report. The length of time it takes to rebuild your credit history depends on various factors. Here’s how long some negative information stays on your report:

Delinquencies: Seven years

Public records: Seven years

Bankruptcies: 10 years

Thankfully, you may see your credit score increase in three to six months if you practice good habits. Remember, having good credit will lower your interest rates, make it easier to get approved for lines of credit and more.

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