Beating Broke

Personal Finance from the Broke Perspective

The Habits of People With No Debt

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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.

The Argument for Freezing Credit: Is Your Social Security Number Easily Found on the Web?

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You’ve likely heard about the recent security breaches at popular stores like Target, Neiman Marcus and Michael’s.  While it’s bad enough that so many customers’ security was compromised, what’s even worse is the reports that these customers’ personal and credit information often ends up on a large database to be bought by criminals for as little as $40.

You might imagine some shady database that is hard to find unless you’re a criminal.

Unfortunately, the truth is that your personal information is surprisingly easy to find on the web.

Hiding in Plain Sight on the Internet

Freezing CreditMy husband and I are searching for a house.  Like any diligent buyer, I searched the Internet for the address of the house we’re interested in.  (I did this just to make sure it had not been the scene of a murder or crime or meth bust.  Every perspective home buyer does this, right?)

While I didn’t turn up anything amiss with the home, I was shocked when I happened upon a site that touted itself as a reverse social security number look up.  The address I was searching was there, complete with the owner’s social security number.  In fact, every social security number that was listed had either the number holder’s full name or address.

Scary stuff!

You Can’t Control What Happens to Your Personal Information

The simple truth is, no matter how cautious you are about not sharing your social security number or making sure to shred all documents containing your personal information, you can’t control all aspects of that information.

If you’re living a normal life and using a credit card or debit card, you might be the victim of a company’s security breach (even though you did everything right to protect your identity).  Your own information could very well end up on the web even if you’re diligent about not having a web footprint.

Consider Freezing Your Credit

My friend recently had her identity stolen.  She found out fairly quickly–within 3 days, but by then the thief had already charged over $20,000.  She’s spent hours trying to clear her name while also caring for her 5 young children during the day.  I can’t imagine the stress she’s under right now.

Truth is, that could happen to any of us, especially when our personal information is so freely available on the web.

If you want to protect your name, identity, and credit score, the best way to do so is to freeze your credit.

First, to clear up a misconception, if you freeze your credit, the credit lines you already have open will not be affected.  You can use your credit as normal with no inconvenience.

However, freezing credit does have a few inconveniences.  If you want to open a new line of credit or even apply for a new apartment, for instance, you’ll need to thaw your credit.  Depending on the state you live in, this can cost anywhere from $2 to $10.  Initially freezing your credit also costs about $10 per credit bureau.

My husband and I have had our credit frozen since 2009 when we had our eBay account hacked and $1,000 was purchased over night.  I plan to keep our credit frozen for the rest of our lifetimes, thawing only when needed (like we did a few weeks ago to pre-qualify for a home loan), especially now that I know social security numbers and other personal information are so easy to find on the web.

Have you frozen your credit?  If not, would you consider doing so?

(Editors note: Freezing your credit is the best way to stop a lot of this stuff from happening.  It’s what many of the services like LifeLock (not recommended) really do. Alternatively, there are ID theft protection services like Credit Karma that you can use that will monitor your credit and credit score without the freeze, or in coordination with a freeze.)

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