2-5-06
In continuing on this series of improving your financials, I would like to share a few more tips.
1. Educate yourself. So many people don't have a clue when it comes to money. There are numerous web sites out in cyberland when you can get up to snuff.
2. Prepare a financial statement. Most banks require a customer with a lot of debt to prepare a financial statement once a year. That isn't enough. Everybody should prepare a financial statement every month and track it on a spreadsheet. This will tell you whether your assets are increasing (which is good) or your liabilities are going up (which isn't a good sign, most of the time).
3. Check your rates on loans and credit cards. So many people just jump on the first loan they are offered by a local bank without shopping around for better rates. Most of the time it is easier this way, but you could be hurting yourself in the long run. When you are shopping for a large purchase, most of the time people compare prices. Do the same thing on borrowing. Same thing goes for your credit cards. Compare the rates you are paying and try to either get the credit card company to lower the rates or refinance it elsewhere.
4. Good credit helps. Check your credit score at least once a year. You don't want to do it too often as that will drive your score down. It's amazing how many times there are errors on your report. It might be from somebody with the same name or something that you have already paid off. If there are mistakes, report it to the credit reporting agency. There are three different ones: Transunion, Experian and Equifax. The better your score, the better rate you will get on loans, credit cards, etc.
5. Know the difference between your wants and needs. A want is something you want (like duh?). It is not something you have to have. A need is a roof over your head, clothing, food, transportation. Sometimes you have to borrow money for your needs and that isn't always bad. But if it is a want, you should do your best to save the money to pay for a want or be able to pay for it.
6. All debt isn't bad. Really. Let's look at the good debt and the bad debt. Good debt is the kind that brings money into your pocket, like a business loan. Bad debt is the kind that takes money out of your pocket and doesn't return any. This includes credit card debt, pretty much everything else. I know, we all have to borrow money for cars and homes. But this should really be your only debt.
7. Always look for ways to increase your income while decreasing your expenses. One of the best ways to up your income (aside from begging your boss) is to start a business on the side. Do this with something you enjoy, such as woodworking, quilts, etc. We are fortunate to receive extra income from rental properties, photography and web sites.
8. Examine your debt ratios. Take your monthly debt payments (including everything from your mortgage, auto payments, credit card payments, etc. Divide this total by your monthly gross income. If that figure is over 38 percent, you have too much debt. On your mortgage, it should not be over 28 percent of your total gross earnings.
9. If you don't know something, ask. There are a lot of people who would be willing to help you with whatever questions you have.
10. Don't bury your head in the sand. If you are having problems with making your payments, contact the creditor. Tell them what you can do and when. Some of the creditors could care less about your problems and only want their money. I know that if my customers let me know if they are having a problem, we can work together to try and get it solved. I hate it when they hide or lie. That's not the solution.
Thank you for reading and I hope this helps.
1. Educate yourself. So many people don't have a clue when it comes to money. There are numerous web sites out in cyberland when you can get up to snuff.
2. Prepare a financial statement. Most banks require a customer with a lot of debt to prepare a financial statement once a year. That isn't enough. Everybody should prepare a financial statement every month and track it on a spreadsheet. This will tell you whether your assets are increasing (which is good) or your liabilities are going up (which isn't a good sign, most of the time).
3. Check your rates on loans and credit cards. So many people just jump on the first loan they are offered by a local bank without shopping around for better rates. Most of the time it is easier this way, but you could be hurting yourself in the long run. When you are shopping for a large purchase, most of the time people compare prices. Do the same thing on borrowing. Same thing goes for your credit cards. Compare the rates you are paying and try to either get the credit card company to lower the rates or refinance it elsewhere.
4. Good credit helps. Check your credit score at least once a year. You don't want to do it too often as that will drive your score down. It's amazing how many times there are errors on your report. It might be from somebody with the same name or something that you have already paid off. If there are mistakes, report it to the credit reporting agency. There are three different ones: Transunion, Experian and Equifax. The better your score, the better rate you will get on loans, credit cards, etc.
5. Know the difference between your wants and needs. A want is something you want (like duh?). It is not something you have to have. A need is a roof over your head, clothing, food, transportation. Sometimes you have to borrow money for your needs and that isn't always bad. But if it is a want, you should do your best to save the money to pay for a want or be able to pay for it.
6. All debt isn't bad. Really. Let's look at the good debt and the bad debt. Good debt is the kind that brings money into your pocket, like a business loan. Bad debt is the kind that takes money out of your pocket and doesn't return any. This includes credit card debt, pretty much everything else. I know, we all have to borrow money for cars and homes. But this should really be your only debt.
7. Always look for ways to increase your income while decreasing your expenses. One of the best ways to up your income (aside from begging your boss) is to start a business on the side. Do this with something you enjoy, such as woodworking, quilts, etc. We are fortunate to receive extra income from rental properties, photography and web sites.
8. Examine your debt ratios. Take your monthly debt payments (including everything from your mortgage, auto payments, credit card payments, etc. Divide this total by your monthly gross income. If that figure is over 38 percent, you have too much debt. On your mortgage, it should not be over 28 percent of your total gross earnings.
9. If you don't know something, ask. There are a lot of people who would be willing to help you with whatever questions you have.
10. Don't bury your head in the sand. If you are having problems with making your payments, contact the creditor. Tell them what you can do and when. Some of the creditors could care less about your problems and only want their money. I know that if my customers let me know if they are having a problem, we can work together to try and get it solved. I hate it when they hide or lie. That's not the solution.
Thank you for reading and I hope this helps.
posted by Craig Hall | 6:58 AM
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