Beating Broke

Personal Finance from the Broke Perspective

All Is Not Lost

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I can’t tell you the number of times that, in our seemingly never-ending struggle with debt, that I’ve seriously contemplated just giving up.  Just throwing in the towel and saying f-it.  You know it’s bad when you catch yourself fantasizing about it.  About how much easier your life would be without the struggle.  Just declaring bankruptcy, taking the hit on your credit score, and moving on with your life.

Even now, after having written about personal finance for over five years, I still find myself in that place occasionally.  We let our budgeting lapse, and inevitably our spending gets out of whack again.  Something happens, and the emergency fund just doesn’t seem to cover it all.  Or, worse, doesn’t seem to replenish itself as quickly as it should.

someecards.com - I can't believe I work this hard to be this poor.I can try and lay the blame somewhere.  That always helps, right?  If it isn’t my fault, then I can’t be blamed for it.  I can’t be the one that everyone points to as the failure.  I can deflect that attention to someone or something else.  That helps.  Until it doesn’t.

Every single time, it’s really me that deserves the blame.  It wasn’t the boss that refused to give me a raise.  It wasn’t the heater in the car that needed to be fixed.  And it certainly wasn’t the kids that needed to eat.  It was me.  Every.  Single. Time.

I failed to negotiate the raise.  I failed to have enough saved up to make that repair.  I failed to budget properly to make sure that we wouldn’t have to cut corners at the grocery store.  Me.  I did that.

I could just give up.  I could miss having to work harder to be paid appropriately.  I could miss having to pay attention to my budget to save money for car repairs, or to pay for groceries.  I could do that.  Giving up would be so easy.

Until it isn’t.

5 Ways a Better Credit Score Leads to Better Finances

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BookkeepingEverybody 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.

  1. 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!
  2. 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!
  3. 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.
  4. 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.
  5. 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

We’re All Financial Optimists, and It’s Hurting Our Bottom Line

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Are you an optimist or a pessimist?

Do you see the glass half full or half empty?

No matter your answer, I have a secret for you.  We’re all financial optimists, and it’s hurting our bottom line.

Don’t believe me?

I didn’t expect you to.

You might say, my finances are a mess.  I have debt; I’ve pulled money out of my 401(k).  I’m definitely not a financial optimist.

But, I’d argue that you are.  When you look into the future, you don’t see bankruptcy and years of the same financial mess.  You likely think that eventually things will get better, and you make decisions based on that.

If your financial situation isn’t that bad, you’re probably even more of a financial optimist.  Say you’re getting ready to buy a house, and you know that your limit is a house that costs $250,000.

You find the perfect house.  The problem?  It costs $270,000.  Still, you decide to buy it, even though you know you can’t afford it.

What do you tell yourself?

  • It’s in a good neighborhood, and the house will appreciate.
  • In just a few years, inflation will make your now nearly unmanageable payment much smaller, and paying it won’t be such a hardship.
  • You’re just starting your career, and in a few years you’ll be making a lot more money, so the house payment will be easier to afford.

Sound familiar?

Just a few years ago, millions of people thought their houses would appreciate, and then they were caught up in the housing crisis.

Houses don’t always appreciate, but we optimistically think ours will.

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Sure inflation will make your house payment more manageable, but you’ll have other expenses in a few years that you’re not thinking of because you’re thinking optimistically.  In a few years, maybe you’ll have a few kids to fill that house, and they’ll cost a lot of money.  You’ll be spending more on food, health care, transportation and day care, just to name a few things.  Suddenly, having a manageable house payment doesn’t really make a financial difference because you’ll have so many other expenses competing for your money.

If you’re lucky, your career will soar, and you’ll make more money, but that doesn’t always happen.  You might get laid off and have to find a job that pays less.  You or your spouse may decide to quit so one person can stay home with the kids.  Or, maybe you do get raises, but at the same time your health care premiums go up every year so your pay essentially stays stagnant.

Of course, thinking optimistically is beneficial to our mental health, but for our financial health, recognize that thinking optimistically hurts your bottom line.  When you get ready to make a large purchase like a house or a car, don’t forecast into the future.  Determine if you can afford the item now, in your current situation.  If you can, you’ll tie up less of your future money and benefit from this.  If you can’t, it’s best to pass it up.