Mary Lynne Gibbs

Not Preparing for Emergencies

An emergency fund is important for anyone. A signing bonus-whether you’re a pro athlete or a non-athlete receiving a one-time bonus for meeting goals at work-can help give a big boost to an emergency fund. Aim to have one year’s salary in savings for emergencies, such as losing your job.

Saving and Investing Early

Having large paycheck for 10 years or so can lead to forgetting about saving and investing for the long-term. If you’re a high earner, regularly getting significant checks can make you think the good times will last forever and that you don’t need to save for retirement.Living paycheck-to-paycheck can also be difficult and push you into putting off saving or investing for retirement. Try not to let that stop you from contributing to a 401(k) retirement plan at work, especially if your employer matches your contribution. It’s turning away free money.

Too Many Hangers-On

Chances are you don’t pay for your friends and family every time the bill shows up, but you may be paying people in small ways that can add up. Do you loan money out without ever expecting to be repaid? Do you charge a few rounds of drinks after work, only to forget it until your credit card statement arrives? Your generosity could be costing you, especially if you can’t afford it. Cut back such spending and put that money in a savings account instead.Any financial mistakes could be devastating if you don’t get them under control.

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If you’re in debt up to your eyeballs, or at least up to your waist, it can be hard to see which debts should be paid first. The creditor that screams the loudest may not be the best one to repay first.Some debts should take precedence over others because they can have worse consequences. Here are bills you should pay off first:

Back Child Support Payments

If you don’t pay child support, you could be found in contempt of court. That could land you in jail, have half your net wages garnished, and driver’s and professional licenses revoked.A lien could be placed on your property, tax refund intercepted, and your car could be booted, among other things you don’t want.

Income Taxes

Owing the federal government money can leave you with high interest and fees, in addition to the original amount owed.To resolve this, the feds may put a tax lien on your property-which will be listed on your credit reports-and they could seize your property and garnish wages. Money in retirement accounts and other bank accounts you have may be claimed, and your home or vehicle may be sold to pay the debt.

Car Title Loans

These loans use your vehicle as collateral, usually providing 30 days to repay the loan. They have high interest rates of 25 percent or more per month, equaling an annual rate of 300 percent.Miss a payment and the lender can repossess the car. If you need your car to get to work, then getting the money for the loan will be that much harder.The car may be sold at auction. You may also be required to pay the difference between what the car is sold for and how much is left on the loan.

Vehicle Payments

If you don’t have a title loan but are financing your car with an auto loan, paying late or missing a payment or two could cause the vehicle to be repossessed. You’d have to make the payments, along with late fees, to get it back.

Mortgage PaymentsMissing a mortgage payment is only behind missing a car payment because it takes longer to foreclose on a home than it does to repossess a car. A foreclosure takes an average of 19 months to process, giving you a longer span of time to work out the problem.That can be enough time to pay the missed payments and late fees, or at least find another place to live. Your credit score will be extremely low, making it hard to rent or obtain another home loan.

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The fine print at the end of a credit card offer letter can tell a consumer a lot more about how good-or bad-the offer is than the main area of the marketing letter, where flashy photos and less text are more likely to catch the eye.But the small-font text in the last pages of a credit card offer are less likely to be read than the bigger, main points early on. At least that’s what credit card companies are hoping for.The type of credit card offer you get in the mail tells a lot about what the company thinks of you and how it can best gain your business, according to a research project by the MIT Sloan School of Management.The researchers studied more than 1 million credit card mailing campaigns and found two types of mailers targeted at different consumers:

• Photos of enticing holiday destinations and reward miles, with the best credit terms, and aimed at highly educated and financially sophisticated people.

• Low teaser rates for an introductory APR (annual percentage rate), more rewards, visual distractions and fine print at the end of the offer letter, all aimed at less educated and less sophisticated customers.

For the less-educated customers, the credit card companies expected them to skip reading the fine print, the researchers found. Those customers were offered cards with complex features and hidden charges, such as higher rates, late fees and overlimit fees after the introductory period ended.The more educated customers were offered cards that didn’t rely so much on backloaded fees but had higher upfront fees, such as annual fees and higher APRs. The cards have low late fees and over-the-limit fees and are more likely to carry airline reward miles.Offers with the worst credit terms were more likely to have the terms in small font or on the last pages of the offer letters. The letters with backloaded terms also contained more photos and less text, perhaps to distract from the details of the offer.Whatever your education status, you can get help choosing the best credit card by comparing the terms in the fine print and carefully reading the Schumer box. This is an area where the relevant terms are put in one place and are supposed to be easy to read.The marketing material may be best left in the trash, except for the fine print section that usually ends up thrown away first.

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Overspending is easy to do with a credit card – way too easy – and can often lead to debt.Researchers have found that even for people who don’t carry a balance each month on their credit card, they overspend when using a credit card instead of cash. Credit cards can make people more willing to spend twice as much for something than they would when using cash.A simple solution can be to keep your credit cards out of your wallet or purse so that you don’t conveniently have them at hand when you’re shopping. But there are other ways to keep credit cards out of sight, and hopefully out of mind:

Freeze them, literally

Put your credit cards in a plastic, ziplock bag, and then put that bag in another bag. Put the bag into either a bowl of water or another ziplock bag full of water, and put it all in the freezer.To get your credit cards out, you’ll have to thaw the block of ice. That may give you enough time to reconsider your purchase.

Freeze usage

If putting your credit cards in a freezer is too extreme, consider freezing the usage of them through your credit card company.Some credit cards can be turned on and off, such as through an app, allowing you to turn access to them off when you don’t want to use them for a while. This can help deter thieves, but also requires you logging into your account to turn credit card access back on. Again, the point here is to create another step before you can use your credit card, giving you time to think about what you’re about to buy.

Set a budget and carry cash

Having a weekly or monthly budget can help keep spending in control, but not so much if you use a credit card. If you want to be faithful to your budget, try for a month to only buy things with the cash you have on hand.Go to your bank and withdraw the amount of cash you have budgeted to spend that week. Once that cash is gone, you’ll have to come up with creative ways to do things. Walk instead of taking a taxi. Empty out your refrigerator to make lunch instead of eating out.If you prefer not to walk around with a load of cash in your pocket, then put the money in a checking account and use a debit card to withdraw it as needed.Hope you found these tips helpful! Contact me for more insights and info.

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Improving your credit score can take a few months. So if you’re looking to get an auto or home loan, or want to apply for a new credit card, an early start can give you time to raise your credit score and then get a loan or new credit card at a better interest rate.Here are some ways to improve your credit within a few months:

Pay your bills on time

Payment history is the most important factor in FICO scores, accounting for up to 35 percent of a credit score. Paying your bills on time – from credit cards to utility bills – can help a lot. Late payments stay on a credit report for seven years. The longer ago they happened, the less they affect credit scores. If a bill goes unpaid long enough the debt can be sold to a collection agency, which will be reported to credit bureaus. Set up online alerts when a bill is due, look at your balances online and set automatic payments for a credit card.

Low credit utilization rate

Keeping a low balance lowers your credit utilization rate, which is the amount of credit you’re using. Also called credit usage, it is the second most important factor in credit scores and accounts for 30 percent of a score. It’s calculated by dividing the total of your balances by your total credit limits. Paying off the balances in full each month should keep the credit utilization rate low – preferably not more than 30 percent on any one card or in total.

Increase your credit limit

Another part of credit usage is how much your credit limit is. Increasing your credit limit just a little by getting a new credit card can lower your credit utilization rate by giving you more money to use. However, using that higher credit card limit could increase your credit usage, so you may want to use it rarely and pay it off in full each month.

Keep those old credit cards

If you’re thinking about cutting up some old credit cards that you don’t use anymore so that they won’t be tempting to use, forget it. Age of credit history has a 15 percent impact on a credit score. Creditors and lenders like to see an average account age of more than five years.

Few credit inquiries

Credit inquiries account for 10 percent of a credit score. To minimize the impact on your credit score, keep credit applications to within a one-month period when you need a new credit card or loan. So, if you’re going to apply for a new and better credit card, apply for all of them in the same month. I hope you enjoyed this article. Contact me today with your real estate questions!

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