Credit Guarded: Why some credit card decision are ill advised

So much about credit cards gets twisted and contorted to the point that you aren’t sure what to believe.

Furthermore, you end up making bad decisions just based on those comments, when really the reputation of credit and using credit cards needs a serious overhaul or a good public relations job for consumers and individuals alike to start truly understanding how to use them properly.

What we have now is a hodgepodge of tips that range anywhere from smart to silly and everything else you can think of in between.

Case in point: has anyone ever told you that you should use credit cards all the time and as much as you can to show you can pay them back on a regular monthly basis? How about the advice that suggests you should close unused credit cards right away, no questions asked?

Both of these are classic tall tales that should be modified and downright avoided when you really look at the repercussions that could come from doing this.

Let’s take a look at the first question, the one stating you should rack up high credit card bills and start paying on them so you can come off as a good financial solider who can pay bills on time.

This is downright dumb: your balances versus your actual credit limit make up your credit utilization and that needs to be low, so you shouldn’t be carrying a $5,000 credit card balance on a card with a $5,500 limit. Lower balances are always better, so if you want to show you can use a credit card and pay it off the right way, start with spending $50 on a shirt or $75 on a pair of jeans on a credit card and pay if off in full the very next month.

You’ll have no problem building credit like that, in small, manageable chunks first.

The second piece of “advice” regarding closing out unused or credit cards with zero balances also hurts you more than it helps.

Credit history and having a longer tale of the tape so to speak means that older, unused cards show just how long you’ve been able to manage credit effectively. The longer the credit history, the better, so closing old cards not only hurts in that regard but also tightens that aforementioned credit used versus available, too.

Credit cards can be used effectively so completing swearing them off isn’t the right call, but using them in a way that helps more than it hurts is advisable and, actually, quite feasible.

Life Saver: How to start saving young

Like any child, you probably had and coveted your piggy bank or some sort of ceramic or plastic apparatus (in some animal other than a pig, perhaps) because every time your grandmother gave you a quarter or your dad let you keep the change from a purchase, chance are you couldn’t wait to drop that coin in the slot and watch your modest amount of money grow.

Not sure what happened between being a kid and saving at almost every turn versus being a young adult and not really valuing money all that much at the moment, but the disconnect in the 20 something crowd is rather stunning in relationship to saving money.

For the most part, the average 25 year old isn’t really thinking about saving per say but rather are in a state of financial influx as a result of where they are career wise along with other contributing factors.

The average 20 something year old is most likely fresh out of college and is pursuing their career of choice but may have not found much in the way of a job that pays all that well. Perhaps they’re living at home or have ventured out into a modest apartment, and money really isn’t over abundant but you make enough to pay your expenses and have a little bit leftover as a result.

The most apparent and common reaction to that scenario is to spend the money freely, whether it’s dinner or a night out or some sort of entertainment factor that allows you to spend what money you have remaining and not really give saving a whole lot of thought. If you’re living at home with your parents, and you’re not saving money then you’re missing out on that final opportunity to be gainfully employed and not have to shell out a good portion of your paycheck on rent.

If you have rent as an expense, and have money leftover, you should really consider budgeting properly and putting what little profit you have aside given this might be the leanest you will ever be living expense wise.
The biggest misstep by most young adult are those who have employers who have a retirement plan, yet they scoff at the idea of retiring because the topic seems like it is light years away at 25 or 26 years of age. Don’t make the mistake of giving away free money and instead think about even a modest contribution in the 2 or 3 percent mark, which is only going to grow (even if it’s in small chunks) as you continue to invest and work.

Being young is one thing but don’t follow in the young and dumb blue print that is only going to make your 30s and beyond that much more of a struggle now that you let your 20s fly by with little to show for it financially.

Fund times: How to start an emergency fund

The term “emergency fund” isn’t something that sounds, at first glance, all that appealing.

For starters, the word “emergency” doesn’t really do a whole lot of the average person given that they tend not to want to think about something, an event specifically, that elicits panic that courses through their entire body at a moment’s notice.

“Fund” isn’t too bad since it’s pretty close to the word “fun” but really is mostly centered on money, a topic that few want to think about or discuss at any given moment in time.

But thinking or talking about an “emergency fund” is of the utmost important because without one, you’re never going to feel that sense of ease about money in general or the thought of something happening in life and being totally unprepared to pay for it.

Those who have money set aside live by two very golden financial rules: they have at minimum three months of salary in the bank at all times and make it a point to save about, again at minimum, five percent of their monthly earnings. That money, in turn, is automatically put into a savings account or the said emergency fund.

Paying yourself isn’t uncommon when trying to establish an emergency fund, and that practice is one of two that separates having an emergency fund and not. The Catch 22 in this discussion is that most argue they can’t afford to set aside five or 10 percent of their pay each month because they need that money to pay bills.

And in that breath is when the second point resonates all too loudly: budgeting.

The only way you can save money and in essence build an emergency fund through paying yourself on a monthly basis is through budgeting. You have to take into account the idea that if you’re living paycheck to paycheck or if your expenses match or, worse yet, are more than your income that you need to start cutting or at the very least replacing some of your expenses with lesser alternatives.

Cable bills go away in favor streaming, cell phone plans become talk and pay as you go or you complete go without new clothes every season or a few summer vacations just to prove a point that saving trumps all. And as much as those cuts will sting, they’ll be a staunch reminder of just how important saving money is, not to mention that emergency fund taking on a whole new meaning when you actually have one to speak of now.

Game On: How to play catch up with your savings

Have you ever felt like, money wise, that with every passing day and dollar not saved that you’re constantly playing a game of catch up with your savings account?

What makes matters even worse is the constant barrage of expertise and opinion that states you should be converting income into savings at a rate of 5 to 10 percent with each paycheck, making sure that “nest egg” stays nice and warm (and untouched) heading toward retirement or, specifically, if something happens that you need cash up front to fix (i.e. medical expenses, home repair, etc.)

But if you aren’t saving, there must be a reason why.

And your job is to find it, correct it and start saving now, rather than later. Don’t get bogged down in the fact that you aren’t where you need to be but instead about where you want to end up when it’s all said and done and your golden years are upon you.

Playing catch up sounds daunting but it doesn’t have to be if you exercise a few budgeting maneuvers and adjust your income in the process. Income adjustment means simply that you look for ways to increase your stream of money coming into the household. Some do this with a convenient part time job or perhaps starting to sell items that you no longer need.

When you’re friend who makes less than you all of a sudden tells you that he or she paid for new furniture just on odds and ends from the basement, your ears should perk up immediately.

In addition to addressing your income, you also want to budget by taking two “wants” off the list. Incidentally, a want is something you don’t need to live, such as a $300 per month personal trainer tab or trips to and from the salon to get the works (nails, massage, pedicure, facial, etc.).

Yes, no one is going to argue that these things are fun and, at times, necessarily when stress hits an all time high, but you have to limit them to the point where you’re not spending hundreds of dollars per month in lieu of saving that cash.

That doesn’t mean you can’t ever have a massage or treat yourself to something but instead those buying impulses should be tempered for special occasions or extremely sporadic. Some have eliminated them all together and watched as saving $200 or $300 per month on “wants” turns into about $5,000 at the end of a calendar year.

Imagine how you’d feel if you had that kind of money waiting for you after 12 months of playing catch up. Not only would you have that savings account well on its way to being built but also you’ll be in the process of learning how to save, and that is more valuable than any purchase.

Worry Warned: How to finally stop being concerned with money

So don’t let the headline fool you. You should always concern yourself with money, but not in the way you might think.

When you talk about paying attention to money, that means having a budget, making sure you know what your expenses are and always try to lessen them any chance you get, so that you can save money for unexpected expenses and retirement.

That overview is what you should be “concerned” with, not so much the constant worrying you have when it comes to the almighty dollar.

Worrying about money isn’t new to the general public. You have plenty of individuals doing anything from paying bills without a budget to living beyond your means and not really understanding what the problem is.

How exactly do you stop concerning yourself with money in a way where your spending and saving is almost on auto pilot?

Well, the real trick is making sure that your budget isn’t just there, but also is updated to reflect changes in income, an added expenses or change in a line item, either more money needed or less. The ever evolving budget is something that only the really good money managers know and then do, rather than just writing on a piece of paper what they spend on the larger items or simply refuse to update and tweak as needed or is warranted.

This shows not only the ability to adapt but understanding exactly what your money situation is, and how to fix it. The real problem we find for those who can’t manage money is they don’t truly understand that a problem exists. You wouldn’t necessarily call it sticking your head in the sand, but you’d be hard pressed to see accountability when it comes to money, and that centers on worrying about having the latest and greatest products or keeping up with the rest of the world, when in actuality you can’t afford it.

And if you’re struggling debt wise, you have to address it, get it under control by any means necessary. That can start with consulting a financial planner, consolidating debt or finding some way to lower interest rates (even if it’s balance transfers that you know can be paid off during the special rate time period).

Saying or suggesting you’ll never worry about money is silly. That simply isn’t going to happen, but your concern should be that of how to continue to improve your standing, rather than wondering how you’re going to get from one money gaffe to another.

Running on Empty: Will you have enough money to see retirement through?

Do you want to make every last dollar saved for retirement actually last for your entire time you’re not working?

The answer, for everyone, should be a resounding “yes.” When polled, retirees (or ones on the cusp of doing so) say their biggest fear about retiring is simply running out of money and thus being forced back into the workforce to take on a job to cover expenses when they’re 70 plus years old.

Hello, early retirement (not really).

If you’re worried about running on empty financially as retirement comes closer or you’re in the midst of it (at least a few years in), some would argue that you didn’t do an adequate job of planning. While that has some truth to it, the argument also could be made that you might have a surprise expense here or there, as well.

So how do you make your money last or even grow as you get older and make your way safely and securely money wise through retirement?

What tends to fall by the wayside the fastest is actually having a budget beyond retirement. As much as you scrimped and saved and watched all of your dollar and everything made sense, why would you think it to be a good idea to let that disappear once you hang up your work clothes for good? Far too often, you’ll hear of people running out of money because they spend it as if there still is the same amount of income available as when they were working.

You have to adjust that budgeting process accordingly with what ever drop you have in your income and also allow your saved money to play into that. If you only have $60,000 to retire on and you made that amount of money per year when you worked, and nothing about your budget changes, you can see the major flaw in that plan.

Refinancing also can be a worthwhile option as well, even thought that word often is met by a lot of grimaces and groans. The idea that you can refinance means that you lower rates, consolidate debt and thus spend less per month without extending the payments to a degree that has you paying on a home, for example, until you’re 105 years old.

Retiring should be a time to put your mind and body at ease, and that includes what happens with your money. If you’re prepared to retire and have taken all the steps to do so expertly, that’s only the beginning as the budgeting and paying attention to your money isn’t about to let up as far as importance goes.

Off-Limits: Certain money habits are always bad ideas

Depending on who you talk to, money is greatly debated as far as what is smart, prudent and good and, of course, what you want to try to avoid.

But as much as we discuss, often time common ground eludes us on things like budgeting, paying off credit card bills and other money related issues.

There are, however, some money habits that we all can agree are bad news, no matter who you are or what perspective you take with them.

For starters, if you’re someone who pays for vacations, groceries or bills with your credit card, you’re living beyond your means and your budget needs a serious overhaul, without question. That type of behavior is not only going to put you in debt but it is a cry for help that your income is not what it needs to be.

And as long as we’re discussing credit cards, are you only paying the minimum on those? If that’s the case, you’re setting yourself up for a lifetime of debt. Instead of the minimum, why not follow the lead now being set forth by the card companies who have to tell you what amount will get you out of a debt faster, such as suggesting a $100 per month payment that will have the card paid off in three years rather than the minimum of $35 and 20 years of debt with one charge card?

Budgeting also is paramount, and if you’re one of the millions of individuals that has no budget and just earns and spends without a care in the world, you’re not doing yourself any favors as far as saving money is concerned. Budgeting is the lifeblood of saving, and without one that is true to your income, your expenses and all the little incidental buys you have throughout the course of a month or year, you’re only sabotaging your ability to save.

You’re also making it very hard to have a nest egg, savings account or emergency fund. Call it what you will but what it boils down to is you should have money in hand just in case something happens you’re not prepared for at this very moment. Otherwise, you’ll be begging, borrowing and only increasing your debt.

To go along with budgeting, you can’t overlook financial decisions you make with a budget in mind, such as spending more than 35 percent of your income on a home and thus becoming “house poor,” a term coined that suggests all of your income is being sucked up by your mortgage payment.

Money will always be a polarizing topic, but some money mistakes are blatant, obvious and so bad that the masses have no problem nodding in unison at them.

Retired Lament: Why you won’t be able to retire on time

For those who have retirement on the brain, you can tune out at this moment, because you’re undoubtedly well on your way to getting the funds set aside to call it quits on your terms. You have a retirement plan, and you’re following it to a tee, but sadly you’re in the minority for the most part when it comes to saving money for the day you stop working.

The rest of us have retirement on our minds, but hardly at the forefront. We want badly to have the right amount of money so we don’t have to work into our late 60s or early 70s. Our bad habits when it comes to money tend to hold us back, however.

For starters, you know retirement is important. That doesn’t keep you from spending money all too freely as a result, and you’re not so much concerned with the future as you are with present day and that means you might be inclined to buy too much house or a brand new car when a used when could save you thousands.

And then, you have those who just aren’t paying any attention to their retirement whatsoever. They don’t get involved in the company 401K, even if their employer employs a company match. If there’s nothing offered by the company, this group still doesn’t look into a retirement plan on their own or invest in an IRA to boot.

What often is overlooked when you aren’t able to save for retirement is the thought that you can’t put money aside because you have to much invested already: into debt, that is. Having too much debt means you’ll be paying on it for quite some time, and those monthly payments, particularly if you have more than just a few, are going to take away from money you could be saving and putting toward retirement.

Finally, you have to really take a long, hard look at your retirement and determine what is realistic to the point that you know when you can retire and how much you’ll need money saved wise to be able to live comfortably for more than just a few years. Often retirement numbers and goals get bloated due to the masses wanting to have a plethora of cash to travel or spend as they see fit, and don’t do it in a way that makes the most sense as far as how they’ve saved and spend for the 30 years they’ve been working.

Retiring will never be viewed under the same light as everyone, but discounting its importance is just plain silly.

House on Hold: Why some expenses at home can be cut

Saving money starts at home, whether that’s clipping coupons for grocery store shopping or spending less on clothing via at second hand stores or online auctions, and anywhere else you can pull together money for our savings account.

But instead of staring blankly at a change jar that gets all those loose pennies, how about really getting serious about saving money and looking a little deeper at household expenses that you really can cut or eliminate altogether.

First and foremost has to be your television, more specifically your cable and internet package. The internet, for your entertainment purposes, might be needed but streaming is the way to go to save money. Cable can easily be eliminated if you’re perfectly fine with getting your news via the internet and not nightly and feeling as though movies and television shows can be enjoyed via Hulu or Netflix. The costs of those streaming services pale in comparison to the enormous amount spent on cable, probably close to five times expensive for cable or satellite.

When was the last time you stood in line, bought something and realized that you just spent anywhere from $50 to $200 on an “extended warranty.” That number grows exponentially when you buy something like a vehicle, too. Extended warranties are typically viewed by the consumer as protection for the “what if.” But most of the time, that “what if” never comes to fruition and so when it comes to lower cost items or even that car, truck or SUV, say no to the warranty. You’ll find if you read the fine print that the extended warranty really isn’t all its cracked up to be.

Often lost in the household expense conversation is the topic of credit cards, fees and interest. If you have a card that has a high interest rate, move it over to another card or focus on paying that one off first. You’ll save hundreds or thousands of dollars in interest that you’re avoiding. Furthermore, if you have credit cards that have annual fees or fees in general that aren’t interest, walk away. No, run. There’s no reason why you should be paying interest on a card along with fees that have no business even being part of this agreement between you and your card.

If you can’t look around the house and see spots where you can save money, then chances are you’re complacent with your budget and aren’t really looking hard enough to in the place where it is easiest to find savings.

Get Smart: Why successful people keep the process of saving money simple

Do you consider yourself smart when it comes to money? Yes, of course.

The more important question is if you are successful when it comes with money, and that is a totally different skew than being smart or what your opinion of the matter is.

Those who are successful with money, quite frankly, have it. But “having it” doesn’t just mean making good money or being able to finance a couch or a trip to Florida when you want to without worrying about applying for credit or spending money on a flight.

“Having it” means that you make good decisions, long term, about money.

The first question you have to ask yourself: Do you have a built up emergency fund?

And if you don’t, when do you plan on starting one?

An emergency fund is having money set aside for just what it says: if something happens unexpectedly as a result of anything from fault plumbing or carpentry in your house to those braces for your kids that you hadn’t planned on as early as last week.

Being successful with your money also means you realize that just because you have it doesn’t mean you have to spend it: all of it, that is.

Those who have a budget and stick to it are the ones that are able to put money aside, build that fund but also have the peace of mind that they don’t live paycheck to paycheck. In short, they live below their means and don’t push their income threshold to the point where their expenses butt right up against it. If you make $5,000 per month, that doesn’t mean you have to have a mortgage that is $4,000. Living below your means doesn’t mean you can’t have or buy things for yourself, but more along the lines of using the 50 to 50 rule. If you make $5,000, your expenses should be about half of that. You have to remember that those who are successful with money are the ones that have the leftover capital to not only save money but to think about things like upping your retirement contribution or having a plan if that monthly income suddenly gets cut in half. Losing a job or having wages cut is a harsh reality that exists and can happen in an instant.

But, will you be ready? You will and can answer that with an affirmative “yes” if you have budgeted accordingly and lived below or well within your means.

Those who are smart or successful with money know one thing: money is only as good as the person who is managing it. You can gauge your own definition of “successful” but those who have already shown they can be dubbed that will tell you that the term centers on saving, budgeting and having a lifestyle that is conducive what you earn.