credit — Beating Broke

The Habits of People With No Debt

September 18, 2015 By Thomas Bawdy 2 Comments

When you’re battling debt and credit issues, you might take comfort in knowing you’re not the only one to experience this situation. For that matter, you might speak with friends who have endured something similar to get their advice and encouragement. When you’re dealing with financial disaster, listening to another person’s credit story can motivate you to work toward recovery. But what if you don’t know anyone who’s gone through a similar experience?

Fortunately, you don’t need a direct connect. Thanks to the Internet, finding a testimonial video that relates to your current situation is much easier than you think. Whether you’re dealing with a low credit score, debt, unemployment, or another financial problem, the stories you read online are educational and a practical resource for improving financial matters. Vicki’s credit story featured on Creditrepair.com is an excellent place to start if you need encouragement and motivation. Maybe you’ve been in a similar situation and need helpful suggestions.

A lot of good can come from watching or reading another person’s testimonial. Your credit matters and it takes a plan of attack to overcome financial hurdles. At the end of the day, you want to avoid repeating history. You can learn a lot from people who’ve risen above financial problems like Vicki. If you want to get out of debt and avoid future problems, it pays to familiarize yourself with the habits of people who don’t have debt.

They don’t have egos

Some people get into credit card debt because they want to have the best and newest of every item. Whether it’s an electronic gadget, a car, or a house, some people have to keep up with the Joneses at all cost, even if it means getting into deep debt.

They exercise patience

People with no debt are patient. They might have access to a credit card or a nice savings account, which gives them the option of buying whatever they want. But they also understand the importance of saving up for purchases and buying when the price is right.

They pay with cash

Using a credit card can build your credit history and it can provide emergency funds when you’re short on cash. But for the most part, people who avoid debt believe cash is king. They would much rather save up and purchase an item outright than get into debt and deal with monthly payments for years to come. It might take them longer to purchase an item, but at least they can sleep soundly knowing they don’t have a huge payment hanging over their heads.

They check interest rates

Since most of us aren’t rich, we have to get a loan to buy a house, car, or pay for other important things. Getting a loan isn’t bad in itself, but people without debt make sure they’re able to pay off their balances as soon as possible. They only finance what they need, and they shop around and compare interest rates to keep their monthly payments manageable. Comparison shopping can be time consuming and prolong getting a loan, but it’s much better to get a loan you can afford than realizing down the road that your payments are too much for your budget.

They avoid expenses that bleed them dry

Some people get into debt because they shop uncontrollably. Others get into debt because their income isn’t enough to support their lifestyle. Every expense adds up. If you’re buying coffee every day on your way to work, or if you’re going out to lunch every day with your coworkers, you might be spending hundreds unnecessarily every month. Additionally, household services like cable, housekeeping, and lawn care can eat into your budget and leave you in the red every month. If you don’t have enough income to pay important expenses, you might pull out a credit card to close the gap. Evaluate your budget to assess what you’re spending, and make adjustments that can create more disposable income and help you avoid future debt.

They plan for the unexpected

It’s much easier to spend money than to save it. People who don’t carry a lot of debt know the importance of planning for the unexpected. If you don’t have an emergency savings account, it only takes one unexpected expense to plunge you further into debt. Make saving a priority and aim to save 10% of your salary.

Getting ahead financially takes a lot of work, and it can be hard to improve your finances when you’re stuck in debt. Your situation might seem bleak today, but with an effective plan and determination, you can erase debt and dramatically improve your financial health.

5 Ways a Better Credit Score Leads to Better Finances

August 30, 2013 By Shane 14 Comments

Bookkeeping Everybody knows that you want to have the best credit score you can. Why? Because the better your credit score, the better the rates you can get on your loans, of course! But, did you know that there are other reasons to try and improve your credit score? In fact, here’s five ways that having a better credit score can lead to better finances.

More money. This is the obvious one. A better credit score leads to better rates on loans (see above), and better rates lead to less interest paid over the life of the loan. And less interest paid leads to… (wait for it) a better bank balance!
Better rentals. It’s a sad fact that many landlords are doing credit checks on prospective tenants these days. They’ve got assets to protect, so it’s a smart move for them, but the fact that there are so many landlords out there getting burned that it’s become necessary is sad. But, having a good credit score can help make sure you don’t get turned down for that great apartment down by the beach!
Quicker payoff. This one goes really closely with the first point. With those lower rates, and lessened interest also comes the ability to pay the loan off quicker. And, of course, a quicker payoff means a much better financial situation. Especially if you avoid any new loans afterward.
Any loan you like. If you must loan money, at least do it smartly. With the current state of affairs, you can’t just walk in and get a loan that has a pulse as it’s only requirement. In fact, many banks and credit unions are cutting way back on their sub-prime lending for anything. (P.S. the term “sub-prime” doesn’t just apply to mortgage loans) If you have poor credit, it’s much more likely, today, that you’ll get turned down for a loan altogether. Better credit means that if you really need a loan, you probably can have one.
Less fees. We all hate fees. Well, all of us except the financial institutions. A growing number of them are making a growing amount of their revenues from fees. And many have moved to an account structure that is based off of risk. And risk is determined by credit score. A lower credit score could mean an account with higher fees, or with monthly fees that some accounts might not have, while a higher credit score might qualify you for a different account without those fees.

So, you see, having a good credit score can really send your finances in the right direction. And, having a bad credit score can really send them into the dumps in a hurry too! Unless you’re very dedicated to the extreme frugaler lifestyle, and never plan on really using money, it still pays to have a good credit score. It doesn’t take much to build it, and you might be glad you did someday.

photo credit: o5com

Compare Those Credit Card Offers

May 28, 2013 By Shane 7 Comments

Like many mailboxes around the country, mine seems to overflow on occasion with credit card offers. I’m not sure what it is, if their marketing departments all work on the same cyclical calendar, or if there are certain market indicators that trigger a flood of offers, but whatever it is, they all seem to come all at once. Normally, they all find their way to the shredder, to then find their way to the trash can.

One of the things that we still do, because we haven’t paid off all of our credit card debt, is to occasionally transfer the balances to take advantage of those same credit card offers. One of those offers recently expired, and so I had been keeping my eye out for a new offer to make the move. That offer came in the form of those little convenience checks that the credit card companies are so fond of sharing. In this particular case, from a card that we’d already paid off, but had left open. It had two checks in it. One that offered 0% interest for about 13 months, and the other that offered 1.99% for about 18 months.

Which Credit Card Offer Will Reign Supreme?

There was plenty of balance on the paid off card to take care of the entire balance of the other card. It was just a matter of writing the check to transfer the balance, and mail it. But, which one? Most people, including myself, if making the decision in a quick manner would likely choose the 0% offer and mail it off. However, it bears a little more analysis than that. Especially if, like in our case, you don’t think you’ll have the balance paid off at the end of the 13 months. When the transfer special expires, the rate bumps back up to the normal 12.24%.

I put a little thought into it, and thought that there might be some advantage to using the 1.99% rate with the longer term. But, I had to be sure. I’m no math wiz, especially when it comes to interest rates, so I went looking for a calculator that might help me figure out for sure if there was an advantage to one rate or the other. I found two that gave me the numbers I was looking for.

Credit Card Offer Calculators

The first was a calculator from my friend Todd Tresidder over at FinancialMentor. It’s a simple Credit Card Comparison calculator. I think it’s meant to compare different credit cards, but I just punched in the numbers for the different offers on the same card and hit the button. What did it tell me?

In both this calculation, and the second one, I used a few assumptions. These aren’t really true assumptions, but I had to use some baseline to determine the difference. I assumed that it would take us longer than 18 months to pay off the entire balance. I used an approximate payment. I also assumed (since the calculators didn’t allow for different payments) that we’d pay the same payment for the entire life of the credit card. Here’s what I found.

In Todd’s calculator, the difference between the two offers was about 5 payments to payoff, and about $300 in savings. Which one won? The 1.99% offer. My initial thoughts were confirmed. An interesting note; I played with the payment amount, and the more we pay as a payment, the less difference there is. In fact, there’s a tipping point, where the 0% offer is better. As I suspected, the more you pay, the sooner you’ll pay off the balance, and the more advantage you get from using the 0% rate. But, remember that I made the assumption that we wouldn’t be paying it off in less than 18 months, so that isn’t an issue in our case.

The second calculator that I used is this credit card balance transfer calculator. This calculator seemed to be set up a little more for this specific calculation. It adds in calculations for the balance transfer fee which is something that you certainly need to take into account if you are thinking of transferring a balance. With all the numbers punched in, and the calculator spinning up, my initial thought was once again confirmed. In fact, this calculator seemed to show even more advantage to going with the 1.99% rate. Here, I got an answer of about $405 in costs. Again, massaging the payment gave the same results in that the more you pay, the more advantage there might be in taking the 0% rate.

We Have A Credit Card Offer Winner!

So, all that calculated, we filled out the check for the 1.99% transfer and sent it off. But, it brought an interesting revelation to me. You’ve got to compare the offers. A difference of a few months, or a few interest rate points can make a much larger difference than you think. Compare them thoroughly, and try and make accurate assumptions about your payoff behavior so that calculators like the ones I used can give you accurate information.

Have you ever found that an offer that, at first glance didn’t seem the best, really was?