Beating Broke

Personal Finance from the Broke Perspective

How to get More Financial Peace of Mind

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Money troubles kill relationships. They also cause major stresses, catalyze health problems, ruin plans, mess up sleep schedules, and so much more. We hate to admit it, but money is easy to worry about, and many of us do it a lot. What’s more, there is good reason to worry about money. Without enough of it, we can’t live where we want, eat what we want, get educated, have a fun time out of the house. Like it or not, your sense of well-being has much to do with how much money you have and how you use it. So here are a few ways to earn more peace of mind with your money.

  • Life Insurance

    Perhaps the best way to get peace of mind in your financial life is to buy life insurance. If you’ve never thought about buying life insurance before, you probably don’t have much of a sense of how much it costs. Many people that life insurance quotes come in at a much lower price than they anticipated, especially for people who are young and healthy. Life insurance creates peace of mind not just for you, but for the people who depend on your for income and security.

  • Know Where Your Money Goes

    If you’ve ever made a budget after a long period of not paying attention to your money, you know how much it hurts. It can seem like your spending record is judging you, and some people avoid this at all costs. But the only way to spend money more wisely is to take a close look at how you need to spend, and how you actually spend in practice. Often there is too much difference between these two criteria, and you should find a way to spend your money according to better measures and goals.

  • Get an Emergency Fund

    Saving for an emergency fund is one of the most important financial habits you’ll ever get in. An emergency fund is meant to protect you in the event of an accident, a breakdown, and any number of unexpected expenses. It takes awhile to build an emergency fund enough to cover you and your family for 6 months (the oft-recommended amount), but once you’ve managed to do it, you’ll find it’s worth it. An emergency fund provides great peace of mind 1) because you know you’re taken care of, and 2) to make one you will have had to attain other important financial goals like debt elimination and saving habits.

There are many ways to live beneath your means and acquire better financial peace of mind. We lose our cool financially when our money is out of control. Learn the basic ropes of personal finance, spend time caring for your own financial garden, and you may be surprised at the extent to which it improves your life. People don’t feel secure when their means of sustenance and shelter are constantly in upheaval. When you have financial security, you are very likely to have physical security, which can only have a positive impact on your state of mind.

Poor Credit Score: How are you Really Affected?

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This post in Collaboration with Debbie Fletcher

‘I’m not a number, I’m a free man’ so goes the classic line of the iconic 1960s BBC television series The Prisoner. Yet, in many respects that’s not true. These days you are defined – at least financially – by a number and it’s your credit score (especially if it’s a poor credit score).

This figure – barely understood by most people outside of the world of finance – can have a massive impact on your life, maybe even without you knowing what it is.

It’s important not to dismiss this as just another bit of jargon (there’s plenty of it in the world of finance after all). If you need convincing, they why not consider the issues that you might face as a result of a poor credit score?

Access to money

The most obvious issue facing you if you have a poor credit score comes with your ability to be able to afford big ticket purchases. Whether it’s a house, a car, a holiday or an emergency repair – life has a bit of throwing up key purchases that cannot be paid for upfront.

We are now a nation of borrowers as a result – but our ability to borrow can be severely hampered by a bad credit score.

The ‘score’ itself refers to a calculation given by a credit scoring agency (there are three in the UK and three in the US). It’s effectively a measure of your borrowing ability and you’ll be marked down for missed payments or debts that you have been unable to pay off.

The number will determine whether a lender will give you money in the first place. They want assurance that you are likely to pay them back and this is the way in which they’ll get their assurance. It might also dictate how much you can borrow and the interest rate you will be charged.

So, put simply, a bad credit rating will mean that you can get less money, will be charged more for the privilege of borrowing that money or even that you are just turned down in the first place. That means that house, car, holiday or home repair could be an awful lot more of a problem for you.

Jobs

It isn’t all about the money that you borrow, however. Your score could also impact upon your ability to earn too. Employers are able to run a credit check on the people who apply to them for a job. This check is about ensuring the candidate has a sound record and can be trusted – but you could feel like this is a crude way to do this, as you might not have chance to offer any explanation by way of context.

Does one missed loan payment five years ago or a dispute with an old mobile phone contract deserve to define you in the eyes of employers? Whether you think this is fair or not, it might well be the case.

Emotional

Then, of course, there’s the emotional aspect to all of this. A bad credit score might hang over you. There are steps you can take to improve your credit rating, but this might well take time and mean that big life choices have to be put on hold for a while. Do you really want to be forced to delay moving into your first home with a partner for a few years while you sort out your credit rating?

During those years you might feel under a great deal of stress and strain and some people might well feel embarrassed about what they consider to be a ‘black mark’ against them. We might be a nation of borrowers, but we’re not a nation that is terribly good at talking about borrowing and money. Indeed, our personal finances are still seen as something of a taboo by many people and that can cause people to bottle up their concerns or bury their head in the sand when they encounter trouble.

A poor credit score can, therefore, stop you buying the things you need, harm your chances of getting a good job and impact upon your mental health. When you put it like that, the importance of a good credit score becomes pretty clear.

2 Best Places to Start Fixing Your Finances

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When I first started trying to get my finances under control, I had no idea where to start. I tried to follow a patchwork of ideas like pay yourself first and only spend X percent of your income on rent, but at the end of the month there would always be more month than money. I couldn’t figure out what I was doing wrong until someone asked where my money was going every month. Aside from food, rent, cell phone and credit card payments, I had absolutely no idea. It was such a simple question and the answer ended up keying my turn-around financially but it took me a while to realize that mattered.

So if you’re trying to turn your finances around and save a bit of money every month instead of wondering where it all went, here are the 2 best places to start fixing your finances.

Fixing your financesTrack What You Spend

As I found out, the most important thing is tracking your finances. When I started turning my ship around, there wasnt a lot of good financial tracking software like their is now. I started with a blank sheet of paper and a stack of bills, working those and my online logins to figure out how much I was spending every month. It’s much easier now, with the online trackers for your finances such as mint and apps that are more investment focused, like personal capital. Once you start tracking your income and expenses, you’ll know where you need to cut and how much you can use to save or pay off debt each month.

Cut the Excessive Expenses

Once you get your expenses written down, I’ve found it’s most valuable to lower your structural expenses as much as possible at first. This includes things like rent, car payments, car insurance, electricity, water, cell phones and cable tv. I’ve found that many people way overpay for cable TV (Calling up and getting a discount usually works wonders) and if they switch to an MNVO like ting or republic wireless they can usually lower their phone bill by 66% or more per month. For a family of 2 if they switched phones and totally ditched cable, that’s an immediate savings of 200+ per month. Once that’s done, add all that money to your savings or debt repayment. Then it’s time to move on to your car expenses. Consider selling your car and trading in for a cheaper one that you own outright, and can carry less insurance on. This will get rid of your car payment completely and hopefully lower your insurance by a significant amount as well. Better yet, try getting a bike and getting rid of your car completely.

In my opinion, those are the low hanging fruit – things you can easily change and your day to day existence wont be changed much one way or the other. The best part about this is you can spend a day or 2 over the course of a week and you should be able to easily pocket 500+ per month in savings – that’s 6,000 per year! Like you, I could use the extra 6k per year.

Once you get your structural issues fixed in your finances, it’s time to move on to your habitual purchases. Is there anything that you spend too much money on and dont get a lot of value from? Do you spend too much on fast food, or alcohol? Or maybe you buy too many books you’ll never be able to read, or too many movies on blue-ray you cant watch?

Now is the time to deal with those, and the easiest way that i’ve found is to get a budget set up and spend that in cash every month. Say you want to limit your blu-ray purchases to 25 bucks per month – get that amount in cash at the beginning of the month, then when the cash is no, no more blu-ray until your cash re-ups at the beginning of the month.