Beating Broke

Personal Finance from the Broke Perspective

6 Tips You Should Know to Keep Your Credit Balance From Impacting Your Credit Score

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managing credit balances
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If you’re not in a position to have zero balances on your credit cards, how can you keep a credit balance from impacting your credit score? Managing your credit balance and credit score is a delicate balancing act that takes knowledge and strategy. Here are the tips you need to know to improve your credit score, even when you have credit balances.

1. Pay More Than Your Minimum Balance

Just paying minimum balances every month will not only increase the time it will take you to pay off your credit cards due to interest, but it also won’t help your credit score. Instead of just paying your minimum balance each month, make payments throughout the billing cycle. This way, these smaller balances on your card will be reported to credit bureaus.

2. Pay on Time

This may seem obvious, but late payments will negatively impact your credit score. On-time payments make up 35% of your FICO score and it’s hard to come back from too many missed payments. If you’re struggling to make payments on time, contact your credit card companies as soon as possible. You may be able to negotiate a payment plan.

3. Keep Your Credit Utilization Low

Keep credit utilization low when you have a credit balance
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Credit utilization is the ratio of your debt to available credit. This number accounts for 30% of your FICO score. Because of this, it’s usually not beneficial to just move debt around to one card and close other accounts. Your credit utilization will still remain the same. Instead, focus on paying off your credit balances.

4. Don’t Close Accounts

Even if you pay off some of your credit cards, don’t close the accounts. This short-term strategy to boost your score, won’t help you in the long run. Closed accounts can lower your score and impact your credit history. Plus, closed accounts still show up on your credit report.

5. Try and Increase Your Limit

Increase your credit limit
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Calling your credit card companies and asking for a credit increase can help increase your credit score. Make sure to update your income information to increase your chances of an increase. Having more available credit will help boost your score. However, this doesn’t mean that you should open several new accounts to try and boost your score. This will actually have the opposite effect because each new account will trigger a hard inquiry on your credit report, lowering your score.

6. Take Advantage of Opportunities to Boost Your Score

Did you know that on-time payments on bills like utility bills, cell phone bills, or rent payments can help boost your score? You can try services like Experian Boost that take these payments and report them to increase your credit score. When you have balances on your credit cards, these creative ways to increase your credit score can make a big difference.

Managing a Credit Balance

Just because you aren’t debt-free doesn’t mean that you can’t have a good credit score. By managing your credit card balance wisely, you can increase your credit score and make smart financial decisions. It’s always a good idea to create a plan that will help you pay off your credit card debt.

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10 Simple Habits That Can Help You Become Debt Free in One Year

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Debt free in a year
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Is it realistic to pay off your debt in just a year? Absolutely, but it requires planning and consistency to achieve your goal of being debt-free. Here we’ll give you the tools and tips to eliminate your debt in a year.

1. Read for Financial Success

The first habit to adopt to help you on your way to being debt-free is to increase your financial literacy. There are so many helpful books to help you on your journey. One example is Dave Ramsay’s Total Money Makeover, which can help you change your money habits. By focusing on brushing up on your financial literacy, you’ll learn about strategies like the Avalanche or Snowball method and the 50/30/20 rule. If you surround yourself with the tools and knowledge you need to pay off your debt in one year, you’re more likely to achieve success.

2. Know What You Owe

Next, you have to be aware of how much debt you’re in. It may seem obvious, but creating a spreadsheet or using a budgeting app is essential if you plan on aggressively paying back your debt. You may be stuck in the cycle of paying minimum payments on credit cards that you don’t have a good idea of the big picture. Take a step back to assess where you’re at so that you can come up with a realistic game plan.

3. Make an Easy Debt Payoff Plan

Sticking to the ambitious goal of paying off your debt in one year is completely achievable, but you have to make your payoff strategy realistic. At the same time, you’ll also have to pay more than just your minimums. Finding the right schedule for debt repayment can make the process easier. You can choose to make payments every paycheck for an easy schedule. Maybe you’re more comfortable with weekly payments. It’s all about holding yourself accountable and creating a comfortable schedule.

4. Change Your Shopping Habits

You’ll be surprised how much you can save by adjusting how you spend money. Some families benefit from placing a spending limit each week for groceries and then shopping sales to reach that goal. There are so many grocery store hacks to help you save money. With a few adjustments, you can save money on things you normally buy without feeling like you’re cutting back or missing out.

5. Lower Your Utility Bills

Lower your utility bills to become debt free
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Another simple way to create additional money to pay off your debt is to try and lower your utility bills. In the winter, can you lower your heat by a few degrees? Can you unplug appliances when they aren’t in use and turn off lights when you leave a room? Even limiting how many times a week you run your washer and dryer can reduce your bill. These small changes can add up to big savings over the course of a year.

6. Celebrate Your Wins

Make sure that you adopt the habit of celebrating your wins when you make progress toward paying off your debt. If you’re a visual person, a debt payoff meter or a jar full of coins that you fill in each time you make a payment could give you a rush of dopamine. You may even start to enjoy reaching your financial goals more than you enjoy spending money.

7. Increase Your Income

Increase Your Income
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Are there small ways to increase your income to help you become debt-free in a year? This doesn’t mean that you need to find another part-time job though. If you have any hobbies like crocheting or baking can you turn those into side hustles in your spare time? Even picking up small tasks like dog walking, delivering for Doordash, or washing other people’s laundry can help you add additional income.

8. Sell Off Things You Already Own

Not only can selling off things you own help you become debt free, but it can also help you declutter and live more simply. Facebook marketplace is a great place to list items you’re no longer using like household appliances or furniture. Even just a few hundred extra dollars can help you become debt-free in a year.

9. Continue to Enjoy Life while You Pay Back Debt

You can still enjoy the things you love while becoming debt-free. You just have to change the way you enjoy those things or the frequency to stay on track with your goals. If you really enjoy trying new food, could you learn new recipes to try at home instead of eating out often? Maybe you love a good latte in the morning. There are so many recipes for Starbucks dupe recipes that you can make at home. Also, you can indulge in a meal out or a morning coffee say once a week if it fits into your budget and debt repayment plan. But, you may have to look at your lifestyle if you’re spending hundreds of dollars every time you leave the house.

10. Say No to Additional Debt

Saying no to additional debt
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When you feel like you’ve got a better handle on your finances, you may be tempted to take on additional debt. One trap to avoid is Buy Now, Pay Later debt. It may feel like it’s better than a credit card purchase, but this kind of spending adds up quickly and can get in the way of your goal of being debt free.

Achieving Your Goal of Becoming Debt Free

These simple habits can help you achieve financial freedom and eliminate your debt in just a year. If you believe in yourself and stick to your goal you’re sure to find success. Are you in the process of becoming debt-free? What strategies are you using to pay off your debt?

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Building A Monthly Budget: How to Calculate Your Costs

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Budgeting is always the hardest when first starting out. The idea of creating a spreadsheet with a breakdown of every monthly cost and expense is so intimidating that many people put it off for a long time.

All a budget is, in essence, is a well laid out plan. When calculating a budget, what you must do is calculate the difference between your anticipated income and your fixed costs so that you can get an idea of how much you have left for desirable expenses. You don’t have to be an accountant to know how to create a budget plan though, here are some easy tips.

·        Add Up Monthly Fixed Expenses

The first thing that you need to do when making a budget plan is to calculate your monthly fixed expenses. These include costs like rent, car insurance, payments on any auto or title loans, or insurance.

You can use a spreadsheet or budgeting app to keep things organized, and accurately access what your expenses look like each month.

·        Add Up Monthly Variable Expenses

Variable expenses are expenses that change month to month, and they can be a bit of a challenge to add to your budget plan. Calculating these costs is more of a judgment call than anything else, especially if they fluctuate greatly month to month.

Costs like groceries, gasoline, electricity and discretionary spending can vary monthly so setting aside a specific amount can be difficult. However, by averaging and overestimating variable costs like electricity or gasoline, you can write it into the budget without worrying that the actual costs will be more than what you’ve planned for.

Tips to Keep in Mind when Creating a Monthly Budget

Now that you’ve added up all your monthly costs, you know how much money you need to make ends meet. In a monthly budget, you want to compare these expenses to a monthly income. You don’t want to take into account a holiday bonus that you’re expecting in 6 months, because that isn’t affecting your expenses or income this month. For a monthly budget, use your monthly income to calculate any leftover funds after your expenses.

If you have a fixed income, such as a salary, or you are paid hourly with a set schedule, then this is easy. If your income is varied due to a fluctuating workload, then the best you can do is average your earnings.

Once you’ve calculated your excess income, you can figure out what to do with it. Ideally, you added discretionary spending as a line item in the budget, so your excess money shouldn’t just become spending cash. Any excess funds should go towards debt or savings. If you have more excess income than normal one month, feel free to spend it on entertainment or desirable expenses. Now that you’ve created a budget, you can spend money and still feel financially responsible.

Stick to Your Newly Created Monthly Budget

Now that you’ve gone through the work of crafting a monthly budget that works for you, know that you have a financial plan set. Having a monthly budget makes life easier and making a physical one can better help you visualize the numbers and make adjustments without guesswork.

Making a monthly budget is not the hard part though. The difficult aspect is sticking to the budget, tracking expenses, and not making a habit of exceeding your budget. Going out to eat is fun and enjoyable, but if you do it more than you should, your available income for the month will start to eat into any excess funds you have–and possibly exceed them! If you’ve calculated for the entire month though, splurging every now and then shouldn’t throw you off track. And if you do slip up, relax because you can always get right back on track next month! So enjoy your financially responsibility!

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