Are You Prepared For A Rainy Day?

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It’s never a bad idea to prepare for a financial emergency.

Unexpected expenses, market fluctuations, or a sudden job loss could leave you financially vulnerable. Here are some tips to help you get ready for your bank account’s rainy days!

Know the difference between a rainy day fund and an emergency fund … but have both! People often use the terms interchangeably, but there are some big differences between a rainy day fund and an emergency fund. A rainy day fund is typically designed to cover a relatively small unexpected cost, like a car repair or minor medical bills. Emergency funds are supposed to help cover expenses that might accumulate during a long period of unemployment or if you experience serious health complications. Both funds are important for preparing for your financial future—it’s never too early to start building them.

Tackle your debt now. Just because you can manage your debt now doesn’t mean you’ll be able to in the future. Prioritizing debt reduction, especially if you have student loans or credit card debit, can go a long way toward helping you prepare for an unexpected financial emergency. It never hurts to come up with a budget that includes paying down debt and to set a date for when you want to be debt-free!

Learn skills to bolster your employability. One of the worst things that can blindside you is unemployment. That’s why taking steps now to help with a potential future job search can be so important. Look into free online educational resources and classes, and investigate certifications. Those can go a long way towards diversifying your skillset (and can look great on a resume).

None of these tips will do you much good unless you get the ball rolling on them now. The best time to prepare for an emergency is before the shock and stress set in!

Are You Prepared For A Rainy Day?

There’s no doubt that credit card debt is a huge financial burden for many Americans.

On average, each household that has revolving credit card debt owes $6,913.¹ It might be tempting to see those numbers and decide to throw out your credit cards entirely. After all, why hang on to a source of temptation when you could make do with cash or a debit card? However, keeping a credit card around has some serious benefits that you should consider before you decide to free yourself from plastic’s grasp.

You might have bigger debts to deal with. On average, credit card debt is low compared to auto loans ($28,632), student loans ($58,309), and mortgages ($203,291).² Simply put, you might be dealing with debts that cost you a lot more than your credit card. That leaves you with a few options. You can either start with paying down your biggest debts (a debt avalanche) or get the smaller ones out of the way and move up (a debt snowball). That means you’ll either tackle credit card debt first or wait while you deal with a mortgage payment or student loans. Figure out where to start and see where your credit card fits in!

Ditching credit cards can lower your credit score. Credit utilization and availability play a big role in determining your credit score.³ The less credit you use and the more you have available, the better your score will likely be. Closing down a credit card account may drastically lower the amount of credit you have available, which then could reduce your score. Even freezing your card in a block of ice can have negative effects; credit card companies will sometimes lower your available credit or just close the account if they see inactivity for too long (4). This may not be the end of the world if you have another line of credit (like a mortgage) but it’s typically better for your credit score to keep a credit card around and only use it for smaller purchases.

It’s often wiser to limit credit card usage than to ditch them entirely. Figure out which debts are costing you the most, and focus your efforts on paying them down before you cut up your cards. While you’re at it, try limiting your credit card usage to a few small monthly purchases to protect your credit score and free up some extra funds to work on your other debts.

Need help coming up with a strategy? Give me a call and we can get started on your journey toward financial freedom!

¹ Erin El Issa, “Nerdwallet’s 2020 American Household Credit Card Debt Study,” Nerdwallet, Jan 21, 2021 https://www.nerdwallet.com/blog/average-credit-card-debt-household/

² Erin El Issa, “Nerdwallet’s 2020 American Household Credit Card Debt Study,” Nerdwallet, Jan 21, 2021 https://www.nerdwallet.com/blog/average-credit-card-debt-household/

³ Latoya Irby, “Understanding Credit Utilization: How Your Usage Affects Your Credit Score,” The Balance, Oct 5, 2021 https://www.thebalance.com/understanding-credit-utilization-960451

(4) Lance Cothern, “Will My Credit Score Go Down If A Credit Card Company Closes My Account For Non-Use?” Money Under 30 Oct 1, 2021 https://www.moneyunder30.com/will-my-credit-score-go-down-if-a-credit-card-company-closes-my-account-for-non-use

Should You Get Rid Of Your Credit Cards?

Dealing with debt can be scary.

Paying off your mortgage, car, and student loans can sometimes seem so impossible that you might not even look at the total you owe. You just keep making payments because that’s all you might think you can do. However, there is a way out! Here are 4 tips to help:

Make a Budget. Many people have a complex budget that tracks every penny that comes in and goes out. They may even make charts or graphs that show the ratio of coffee made at home to coffee purchased at a coffee shop. But it doesn’t have to be that complicated, especially if you’re new at this “budget thing”.

Start by splitting all of your spending into two categories: necessary and optional. Rent, the electric bill, and food are all examples of necessary spending, while something like a vacation or buying a third pair of black boots (even if they’re on sale) might be optional.

Figure out ways that you can cut back on your optional spending, and devote the leftover money to paying down your debt. It might mean staying in on the weekends or not buying that flashy new electronic gadget you’ve been eyeing. But reducing how much you owe will be better long-term.

Negotiate a Settlement. Creditors often negotiate with customers. After all, it stands to reason that they’d rather get a partial payment than nothing at all! But be warned; settling an account can potentially damage your credit score. Negotiating with creditors is often a last resort, not an initial strategy.

Debt Consolidation. Interest-bearing debt obligations may be negotiable. Contact a consolidation specialist for refinancing installment agreements. This debt management solution helps reduce the risk of multiple accounts becoming overdue. When fully paid, a clean credit record with an extra loan in excellent standing may be the reward if all payments are made on time.

Get a side gig. You might be in a position to work evenings or weekends to make extra cash to put towards your debt. There are a myriad of options—rideshare driving, food delivery, pet sitting, you name it! Or you might have a hobby that you could turn into a part-time business.

If you feel overwhelmed by debt, then let’s talk. We can discuss strategies that will help move you from feeling helpless to having financial control.

4 Ways to Get out of Debt

Having a good credit score is one of the most important tools you can have in your financial toolbox.

Your credit report may affect anything from how much you pay for a cell phone plan, to whether you would qualify for the mortgage you might want.

Getting and maintaining a good credit score can be advantageous. But how do you achieve a good credit report? What if you’re starting from scratch? The dilemma is like the chicken and the egg question. How can you build a positive credit report if no one will extend your credit?

Read on for some useful tips to help you get started.

Use a cosigner to take out a loan One way to help build good credit is by taking out a loan with a cosigner. A cosigner would be responsible for the repayment of the loan if the borrower defaults. Many banks may be willing to give loans to people with no credit if someone with good credit acts as a cosigner on the loan to help ensure the money will be paid back.

Build credit as an authorized user If you don’t want or need to take out a loan with a cosigner, you may want to consider building credit as an authorized user of someone else’s credit card – like a parent, close friend, or relative you trust. The credit card holder would add you as an authorized user of the card. Over time if the credit account remains in good standing, you would begin building credit.

Apply for a store credit card to build your credit Another way to start building your credit record is to secure a store credit card. Store credit cards may be easier to qualify for than major credit cards because they usually have lower credit limits and higher interest rates. A store credit card may help you build good credit if you make the payments on time every month. Also be sure to pay the card balance off each month to avoid paying interest.

Keep student loans in good standing If there is an upside to student loan debt, it’s that having a student loan can help build credit and may be easy to qualify for. Just keep in mind, as with any loan, to make payments on time.

Good credit takes time Building a good credit report takes time, but we all must start somewhere. Your credit score can affect many aspects of your financial health, so it’s worth it to build and maintain a good credit report. Start small and don’t bite off more than you can chew. Most importantly, as you begin building credit, protect it by avoiding credit card debt and making your payments on time.

The starter kit for building good credit

Dealing with finances is a big part of any committed relationship and one that can affect many aspects of your life together.

The good news is, you don’t need a perfect relationship or perfect finances to have productive conversations with your partner about money, so here are some tips for handling those tricky conversations like a pro!

Be respectful. Respect should be the basis for any conversation with your significant other, but especially when dealing with potentially touchy issues like money. Be mindful to keep your tone neutral and try not to heap blame on your partner for any issues. Remember that you’re here to solve problems together.

Take responsibility. It’s perfectly normal if one person in a couple handles the finances more than the other. Just be sure to take responsibility for the decisions that you make and remember that it affects both people. You might want to establish a monthly money meeting to make sure you’re both on the same page and in the loop. Hint: Make it fun! Maybe order in, or enjoy a steak dinner while you chat.

Take a team approach. Instead of saying to your partner, “you need to do this or that,” try to frame things in a way that lets your partner know you see yourself on the same team as they are. Saying “we need to take a look at our combined spending habits” will probably be better received than “you need to stop spending so much money.”

Be positive. It can be tempting to feel defeated and hopeless that things will never get better if you’re trying to move a mountain. But this kind of thinking can be contagious and negativity may further poison your finances and your relationship. Try to focus on what you can both do to make things better and what small steps to take to get where you want to be, rather than focusing on past mistakes and problems.

Don’t ignore the negative. It’s important to stay positive, but it’s also important to face and conquer the specific problems. It gives you and your partner focused issues to work on and will help you make a game plan. Speaking of which…

Set common goals, and work toward them together. Whether it’s saving for a big vacation, your child’s college fund, getting out of debt, or making a big purchase like a car, money management and budgeting may be easier if you are both working toward a common purpose with a shared reward. Figure out your shared goals and then make a plan to accomplish them!

Accept that your partner may have a different background and approach to money. We all have our strengths, weaknesses, and different perspectives. Just because yours differs from your partner’s doesn’t mean either of you are wrong. Chances are you make allowances and balance each other out in other areas of your relationship, and you can do the same with money if you try to see things from your partner’s point of view.

Discussing and managing your finances together can be a great opportunity for growth in a relationship. Go into it with a positive attitude, respect for your partner, and a sense of your common values and priorities. Having an open, honest, and trust-based approach to money in a relationship may be challenging, but it is definitely worth it.

7 Tips for Talking to Your Partner About Money

Life is full of surprises – many of which cost money.

If you’ve just used up your emergency fund to cover your last catastrophe, then what if a new surprise arrives before you’ve replenished your savings?

Using a credit card can be an expensive option, so you might be leery of adding debt with a high interest rate. However, you can’t let the ship sink either. What can you do?

A personal loan is an alternative in a cash-crunch crisis, but you’ll need to know a bit about how it works before signing on the bottom line.

A personal loan is an unsecured loan. The loan rate and approval are based on your credit history and the amount borrowed. Much like a credit card account, you don’t have to put up a car or house as collateral on the loan. But one area where a personal loan differs from a credit card is that it’s not a revolving line of credit. Your loan is funded in a lump sum and once you pay down the balance you won’t be able to access more credit from that loan. Your loan will be closed once you’ve paid off the balance.

The payment terms for a personal loan can be a short duration. Typically, loan terms range between 2-7 years.¹ If the loan amount is relatively large, this can mean large payments as well, without the flexibility you have with a credit card in regard to choosing your monthly payment amount.

An advantage over using a personal loan instead of a credit card is that interest rates for personal loans can be lower than you might find with credit cards. But many personal loans are plagued by fees, which can range from application fees to closing fees. These can add a significant cost to the loan even if the interest rate looks attractive. It’s important to shop around to compare the full cost of the loan if you choose to use a personal loan to navigate a cash crunch. You also might find that some fees (but not all) can be negotiated. (Hint: This may be true with certain credit cards as well.)

Before you borrow, make sure you understand the interest rate for the loan. Personal loans can be fixed rate or the rate might be variable. In that case, low rates can turn into high rates if interest rates continue to rise.

It’s also important to know the difference between a personal loan and a payday loan. Consider yourself warned – payday loans are a different type of loan, and may be an extremely expensive way to borrow. The Federal Trade Commission recommends you explore alternatives.²

So if you need a personal loan to cover an emergency, your bank or credit union might be a good place to start your search.


¹ “Personal Loan Calculator 2021,” Nerdwallet, Jul 19, 2021, https://www.nerdwallet.com/article/loans/personal-loans/personal-loan-calculator

² “What To Know About Payday and Car Title Loans,” Federal Trade Commission, May 2021, https://www.consumer.ftc.gov/articles/what-know-about-payday-and-car-title-loans

Is A Personal Loan A Good Idea?

It’s no secret that life is full of surprises. Surprises that can cost money.

Sometimes, a lot of money. They have the potential to throw a monkey wrench into your savings strategy, especially if you have to resort to using credit to get through an emergency. In many households, a budget covers everyday spending, including clothes, eating out, groceries, utilities, electronics, online games, and a myriad of odds and ends we need.

Sometimes, though, there may be something on the horizon that you want to purchase (like that all-inclusive trip to Cancun for your second honeymoon), or something you may need to purchase (like that 10-years-overdue bathroom remodel).

How do you get there if you have a budget for the everyday things you need, you’re setting aside money in your emergency fund, and you’re saving for retirement?

Make a goal. The way to get there is to make a plan. Let’s say you’ve got a teenager who’s going to be driving soon. Maybe you’d like to purchase a new (to him) car for his 16th birthday. You’ve done the math and decided you can put $3,000 towards the best vehicle you can find for the price (at least it will get him to his job and around town, right?). You have 1 year to save but the planning starts now.

There are 52 weeks in a year, which makes the math simple. As an estimate, you’ll need to put aside about $60 per week. (The actual number is $57.69 – $3,000 divided by 52). If you get paid weekly, put this amount aside before you buy that $6 latte or spend the $10 for extra lives in that new phone game. The last thing you want to do is create debt with small things piling up, while you’re trying to save for something bigger.

Make your savings goal realistic. You might surprise yourself by how much you can save when you have a goal in mind. Saving isn’t a magic trick, however, it’s based on discipline and math. There may be goals that seem out of reach – at least in the short-term – so you may have to adjust your goal. Let’s say you decide you want to spend a little more on the car, maybe $4,000, since your son has been working hard and making good grades. You’ve crunched the numbers but all you can really spare is the original $60 per week. You’d need to find only another $17 per week to make the more expensive car happen. If you don’t want to add to your debt, you might need to put that purchase off unless you can find a way to raise more money, like having a garage sale or picking up some overtime hours.

Hide the money from yourself. It might sound silly but it works. Money “saved” in your regular savings or checking account may be in harm’s way. Unless you’re extremely careful, it’s almost guaranteed to disappear – but not like what happens in a magic show, where the magician can always bring the volunteer back. Instead, find a safe place for your savings – a place where it can’t be spent “accidentally”, whether it’s a cookie jar or a special savings account you open specifically to fund your goal.

Pay yourself first. When you get paid, fund your savings account set up for your goal purchase first. After you’ve put this money aside, go ahead and pay some bills and buy yourself that latte if you really want to, although you may have to get by with a small rather than an extra large.

Saving up instead of piling on more credit card debt may be a much less costly way (by avoiding credit card interest) to enjoy the things you want, even if it means you’ll have to wait a bit.

How To Save For A Big Purchase

The average U.S. household owes over $6,913 in credit card debt.¹

Often, we may not even realize how much that borrowed money is costing us. High interest debt (like credit cards) can slowly suck the life out of your budget.

The average APR for credit cards is over 16.20% in the U.S.² Think about that for a second. If someone offered you a guaranteed investment that paid 16%, you’d probably walk over hot coals to sign the paperwork.

So here’s a mind-bender: Paying down that high interest debt isn’t the same as making a 16% return on an investment – it’s better.

Here’s why: A return on a standard investment is taxable, trimming as much as a third so the government can do whatever it is that governments do with the money. Paying down debt that has a 16% interest rate is like making a 20% return – or even higher – because the interest saved is after-tax money.

Like any investment, paying off high interest debt will take time to produce a meaningful return. Your “earnings” will seem low at first. They’ll seem low because they are low. Hang in there. Over time, as the balances go down and more cash is available every month, the benefit will become more apparent.

High Interest vs. Low Balance
We all want to pay off debt, even if we aren’t always vigilant about it. Debt irks us. We know someone is in our pockets. It’s tempting to pay off the small balances first because it’ll be faster to knock them out.

Granted, paying off small balances feels good – especially when it comes to making the last payment. However, the math favors going after the big fish first, the hungry plastic shark that is eating through your wallet, bank account, retirement savings, vacation plans, and everything else.³ In time, paying off high interest debt first will free up the money to pay off the small balances, too.

Summing It Up
High interest debt, usually credit cards, can cost you hundreds of dollars per year in interest – and that’s assuming you don’t buy anything else while you pay it off. Paying off your high interest debt first has the potential to save all of that money you’d end up paying in interest. And imagine how much better it might feel to pay off other debts or bolster your financial strategy with the money you save!


¹ “2020 American Household Credit Card Debt Study,” Erin El Issa, Nerdwallet, Jan 12, 2021 https://www.nerdwallet.com/blog/average-credit-card-debt-household/

² “Average credit card interest rates: Week of Sept. 22, 2021,” creditcards.com, Sep 23, 2021 https://www.creditcards.com/credit-card-news/rate-report/

³ “Debt Avalanche vs. Debt Snowball: What’s the Difference?” Ashley Eneriz, Investopedia, Apr 28, 2021, https://www.investopedia.com/articles/personal-finance/080716/debt-avalanche-vs-debt-snowball-which-best-you.asp

Why You Should Pay Off High-Interest Debt First

If you come into some extra money – a year-end bonus at work, an inheritance from your aunt, or you finally sold your rare coin collection for a tidy sum – you might not be quite sure what to do with the extra cash.

On one hand you may have some debt you’d like to knock out, or you might feel like you should divert the money into your emergency savings or retirement fund.

They’re both solid choices, but which is better? That depends largely on your interest rates.

High Interest Rate. Take a look at your debt and see what your highest interest rate(s) are. If you’re leaning towards saving the bonus you’ve received, keep in mind that high borrowing costs may rapidly erode any savings benefits, and it might even negate those benefits entirely if you’re forced to dip into your savings in the future to pay off high interest. The higher the interest rate, the more important it is to pay off that debt earlier – otherwise you’re simply throwing money at the creditor.

Low Interest Rate. On the other hand, sometimes interest rates are low enough to warrant building up an emergency savings fund instead of paying down existing debt. An example is if you have a long-term, fixed-rate loan, such as a mortgage. The idea is that money borrowed for emergencies, rather than non-emergencies, will be expensive, because emergency borrowing may have no collateral and probably very high interest rates (like payday loans or credit cards). So it might be better to divert your new-found funds to a savings account, even if you aren’t reducing your interest burden, because the alternative during an emergency might mean paying 20%+ rather than 0% on your own money (or 3-5% if you consider the interest you pay on the current loan).

Raw Dollar Amounts. Relatively large loans might have low interest rates, but the actual total interest amount you’ll pay over time might be quite a sum. In that case, it might be better to gradually divert some of your bonus money to an emergency account while simultaneously starting to pay down debt to reduce your interest. A good rule of thumb is that if debt repayments comprise a big percentage of your income, pay down the debt, even if the interest rate is low.

The Best for You. While it’s always important to reduce debt as fast as possible to help achieve financial independence, it’s also important to have some money set aside for use in emergencies.

If you do receive an unexpected windfall, it will be worth it to take a little time to think about a strategy for how it can best be used for the maximum long term benefit for you and your family.

Save The Money Or Pay Off The Debt?

Our parents, uncles, aunts, and maybe even our grandparents tried to warn us about credit cards.

In some cases, the warnings might have been heeded but in other cases, we may have learned the cost of credit the hard way.

Using credit isn’t necessarily a bad thing, but it may be a costly thing – and sometimes even a risky thing. The interest from credit card balances can be like a ball and chain that might never seem to go away. And your financial strategy for the future may seem like a distant horizon that’s always out of reach.

It is possible to live without credit cards if you choose to do so, but it can take discipline if you’ve developed the credit habit.

It’s budgeting time. Here’s some tough love. If you don’t have one already, you should hunker down and create a budget. In the beginning it doesn’t have to be complicated. First just try to determine how much you’re spending on food, utilities, transportation, and other essentials. Next, consider what you’re spending on the non-essentials – be honest with yourself!

In making a budget, you should become acutely aware of your spending habits and you’ll give yourself a chance to think about what your priorities really are. Is it really more important to spend $5-6 per day on coffee at the corner shop, or would you rather put that money towards some new clothes?

Try to set up a budget that has as strict allowances as you can handle for non-essential purchases until you can get your existing balances under control. Always keep in mind that an item you bought with credit “because it was on sale” might not end up being such a great deal if you have to pay interest on it for months (or even years).

Hide the plastic. Part of the reason we use credit cards is because they are right there in our wallets or automatically stored on our favorite shopping websites, making them easy to use. (That’s the point, right?) Fortunately, this is also easy to help fix. Put your credit cards away in a safe place at home and save them for a real emergency. Don’t save them on websites you use.

Don’t worry about actually canceling them or cutting them up. Unless there’s an annual fee for owning the card, canceling the card might not help you financially or help boost your credit score.¹

Pay down your credit card debt. When you’re working on your budget, decide how much extra money you can afford to pay toward your credit card balances. If you just pay the minimum payment, even small balances may not get paid off for years. Try to prioritize extra payments to help the balances go down and eventually get paid off.

Save for things you want to purchase. Make some room in your budget for some of the purchases you used to make with a credit card. If an item you’re eyeing costs $100, ask yourself if you can save $50 per month and purchase it in two months rather than immediately. Also, consider using the 30-day rule. If you see something you want – or even something you think you’ll need – wait 30 days. If the 30 days go by and you still need or want it, make sure it makes sense within your budget.

Save one card for occasional use. Having a solid credit history is important, so once your credit balances are under control, you may want to use one card in a disciplined way within your budget. In this case, you would just use the card for routine expenses that you are able to pay off in full at the end of the month.

Living without credit cards completely, or at least for the most part, is possible. Sticking to a budget, paying down debt, and having a solid savings strategy for the future will help make your discipline worth it!

¹ “How to repair your credit and improve your FICO® Scores,” myFICO, https://www.myfico.com/credit-education/improve-your-credit-score


¹ “How to repair your credit and improve your FICO® Scores,” myFICO, https://www.myfico.com/credit-education/improve-your-credit-score

How to live without credit cards

Some could say “never!” but there might be situations in which using a credit card may be the option you want to go with.

Many families use credit with good intentions – and then life happens – surprise expenses or a change in income leave them struggling to get ahead of growing debt. To be fair, there may be times to use credit and times to avoid using credit.

Purchasing big-ticket items. A big-screen TV or a laptop purchased with a credit card may have additional warranty protection through your credit card company. Features and promotions vary by card, however, so be sure to know the details before you buy. If your credit card offers reward points or airline miles, big-ticket items may be a faster way to earn points than making small purchases over time. Just be sure to have a plan to pay off the balance.

Travel and car rental. For many families, these two items go hand in hand. Credit cards sometimes offer additional insurance protection for your luggage or for the trip itself. Your credit card company may offer some additional protection for car rentals. You might score some extra airline miles or reward points in this category as well because the numbers can add up quickly.

Online shopping. Credit card and debit card numbers are being stolen all the time. Online merchants can have a breach and not even be aware that your credit card info is out in the wild. The advantage of using a credit card as opposed to a debit card is time. You’ll have more time to dispute charges that aren’t yours. If your debit card gets into the wrong hands, someone might be quickly spending your mortgage money, food and gas money, or college tuition for your kids. Credit cards may be a better choice to use online because the effects of fraud don’t have an immediate impact on your bank balance.

Legitimate emergencies. Life happens and sometimes we don’t have enough readily available cash to pay for emergencies. Life’s emergencies can range from broken appliances to broken cars to broken bones and in these cases, you may not have any other viable options for payment.

Using credit isn’t necessarily a bad thing. In fact, if you plan carefully, you may reap several types of benefits from using credit cards and still avoid paying interest. You’ll have to pay off the balance right away to avoid finance charges, though. So, always think twice before you charge once.

Some credit cards offer consumer benefits, like extended warranties, extra insurance, or even rewards. There are some situations in which using a credit card may come in handy.

When Is It Ok To Use a Credit Card?

Americans owe $807 billion in credit card debt.¹

You read that right: $807 billion.

At this rate, it seems like more and more people are going to end up being owned by a tiny piece of plastic rather than the other way around.

How much have you or a loved one contributed to that number? Whether it’s $10 or $10,000, there are a couple simple tricks to get and keep yourself out of credit card debt.

The first step is to be aware of how and when you’re using your credit card. It’s so easy – especially on a night out when you’re trying to unwind – to mindlessly hand over your card to pay the bill. And for most people, paying with credit has become their preferred, if not exclusive, payment option. Dinner, drinks, Ubers, a concert, a movie, a sporting event – it’s going to add up.

And when that credit card bill comes, you could end up feeling more wound up than you did before you tried to unwind.

Paying attention to when, what for, and how often you hand over your credit card is crucial to getting out from under credit card debt.

Here are 2 tips to keep yourself on track on a night out.

1. Consider your budget. You might cringe at the word “budget”, but it’s not an enemy who never wants you to have any fun. Considering your budget doesn’t mean you can never enjoy a night out with friends or coworkers. It simply means that an evening of great food, fun activities, and making memories must be considered in the context of your long-term goals. Start thinking of your budget as a tough-loving friend who’ll be there for you for the long haul.

Before you plan a night out:

  • Know exactly how much you can spend before you leave the house or your office, and keep track of your spending as your evening progresses.
  • Try using an app on your phone or even write your expenses on a napkin or the back of your hand – whatever it takes to keep your spending in check.
  • Once you have reached your limit for the evening – stop.

2. Cash, not plastic (wherever possible). Once you know what your budget for a night out is, get it in cash or use a debit card. When you pay your bill with cash, it’s a concrete transaction. You’re directly involved in the physical exchange of your money for goods and services. In the case that an establishment or service will only take credit, just keep track of it (app, napkin, back of your hand, etc.), and leave the cash equivalent in your wallet.

You can still enjoy a night on the town, get out from under credit card debt, and be better prepared for the future with a carefully planned financial strategy. Contact me today, and together we’ll assess where you are on your financial journey and what steps you can take to get where you want to go – hopefully by happy hour!


¹ “Average Credit Card Debt in America: 2021,” Joe Resendiz, ValuePenguin, Jul 9, 2021, https://www.valuepenguin.com/average-credit-card-debt

Are You Unwinding Yourself Into Debt?

Couplehood can be a wonderful blessing, but – as you may know – it can have its challenges, too.

In fact, money conflicts are behind 41% of divorces.¹ The age-old adage that love trumps wealth may be true, but if money is tight or if a couple isn’t meeting their financial goals, there could be some unpleasant conversations (er, arguments) on the bumpy road to bliss with your partner or spouse.

These tips may help make the road to happiness a little easier.

1. Set a goal for debt-free living. Certain types of debt can be difficult to avoid, such as mortgages or car payments, but other types of debt, like credit cards in particular, can grow like the proverbial snowball rolling down a hill. Credit card debt often comes about because of overspending or because insufficient savings forced the use of credit for an unexpected situation. Either way, you’ll have to get to the root of the cause or the snowball might get bigger. Starting an emergency fund or reigning in unnecessary spending – or both – can help get credit card balances under control so you can get them paid off.

2. Talk about money matters. Having a conversation with your partner about money is probably not at the top of your list of fun-things-I-look-forward-to. This might cause many couples to put it off until the “right time”. If something is less than ideal in the way your finances are structured, not talking about it won’t make the problem go away. Instead, frustrations over money can fester, possibly turning a small issue into a larger problem. Discussing your thoughts and concerns about money with your partner regularly (and respectfully) is key to reaching an understanding of each other’s goals and priorities, and then melding them together for your goals as a couple.

3. Consider separate accounts with one joint account. As a couple, most of your financial obligations will be faced together, including housing costs, monthly utilities and food expenses, and often auto expenses. In most households, these items ideally should be paid out of a joint account. But let’s face it, it’s no fun to have to ask permission or worry about what your partner thinks every time you buy a specialty coffee or want that new pair of shoes you’ve been eyeing. In addition to your main joint account, having separate accounts for each of you may help you maintain some independence and autonomy in regard to personal spending.

With these tips in mind, here’s to a little less stress so you can put your attention on other “couplehood” concerns… Like where you two are heading for dinner tonight – the usual hangout (which is always good), or that brand new place that just opened downtown? (Hint: This is a little bit of a trick question. The answer is – whichever place fits into the budget that you two have already decided on, together!)


¹ “10 Most Common Reasons for Divorce,” Shellie R. Warren, Marriage.com, Jul 14, 2021, https://www.marriage.com/advice/divorce/10-most-common-reasons-for-divorce/.

Tips on Managing Money for Couples

Three simple words can strike fear into the heart of any millennial:

Student.

Loan.

Debt.

The anxiety is not surprising: Members of the Class of 2017 had an average of $29,900 in student loan debt.¹

Nearly $30 grand? For that you could travel the world. Put a down payment on a house. Buy a car. Even start a new business! But instead of having the freedom to pursue their dreams, there’s a hefty financial ball and chain around millennials’ feet.

That many young people owing that much money before they even enter the workforce? It’s unbelievable!

Now just imagine adding car payments, house payments, insurance premiums, and more on top of that student debt. No wonder millennials are feeling so terrible: studies show that graduates with debt experience lower life satisfaction than those without.²

Now is the time to get ahead of your debt. Not later. Not when it’s more convenient or feels less shameful. You have the potential right now to manage that debt and get out from under it.

So how do you get out from under your debt? Sometimes improving your current situation involves more than making smarter choices with the money you earn now. Getting out of that debt ditch means finding a way to make more.

There are 2 things you can monetize right now:

  • Your education
  • Your experience

Both have their own challenges. You may not have spent much time in a particular field yet, so not a lot of experience. And what if you’re working a job that has nothing to do with your major? There goes education.

Two speed bumps. One right after the other. But you can still gain momentum in the direction you want your life to go!

How? A solid financial strategy. A goal you can see. A destination for financial independence.

Debts can become overwhelming – remember that stat up there? But with a strategy in mind for the quick and consistent repaying of your loans, so much of that stress and burden could be lifted.

Contact me today. A quick phone call is all we need to help get you rolling in the direction YOU want to go.

¹ “A Look at the Shocking Student Loan Debt Statistics for 2018.” Student Loan Hero, Jan 27, 2021, https://bit.ly/2de72OP.
² “The Devastating Psychological Burden of Student Loans,” Mark Travers Ph.D., Psychology Today, Dec 16, 2020, https://www.psychologytoday.com/us/blog/social-instincts/202012/the-devastating-psychological-burden-student-loans.

Headed in the Right Direction: Managing Debt for Millennials

It’s no secret that making purchases on credit cards will result in paying more for those items over time if you’re paying interest charges from month-to-month.

Despite this well-known fact, credit card debt is at an all-time high, rising another 0.3% this past year.¹ The average American household now owes over $$6,741 in revolving credit card debt.² Add in an average mortgage of over $200,000, plus nearly $90,000 of non-mortgage debt (car loans, college loans, or other loans) and the molehill really is starting to look like a mountain.

The good news? You have the potential to handle your debt efficiently and deal with a molehill-sized molehill instead of a mountain-sized one.

Focus on the easiest target first.
Some types of debt don’t have an easy solution. While it’s possible to sell your home and find more affordable housing, actually following through with this might not be a great option. Selling your home is a huge decision and one that comes with expenses associated with the sale – it’s possible to lose money. Unless you find yourself with a job loss or similar long-term setback, often the best solution to paying down debt is to go after higher interest debt first. Then examine ways to cut your housing costs last.

Freeze your spending (literally, if it helps).
Due to its higher interest rate, credit card debt is usually the first thing to tackle when you decide to start eliminating debt. Let’s be honest, most of us might not even know where that money goes, but our credit card statement is a monthly reminder that it went somewhere. If credit card balances are a problem in your household, the first step is to cut back on your purchases made with credit, or stop paying with credit altogether. Some people cut up their cards to enforce discipline. Ever heard the recommendation to freeze your cards in a block of ice as a visual reminder of your commitment to quit credit? Another thing to do is to remove your card information from online shopping sites to help ensure you don’t make mindless purchases.

Set payment goals.
Paying the minimum amount on your credit card keeps the credit card company happy for 2 reasons. First, they’re happy that you made a payment on time. Second, they’re happy if you’re only paying the minimum because you might never pay off the balance, so they can keep collecting interest indefinitely. Reducing or stopping your spending with credit was the first step. The second step is to pay more than the minimum so that those balances start going down. Examine your budget to see where there’s room to reduce spending further, which will allow you to make higher payments on your credit cards and other types of debt. In most households, an honest look at the bank statement will reveal at least a few ways you might free up some money each month.

Have a sale. To get a jump-start if money is still tight, you might want to turn some unused household items into cash. Having a community yard sale or selling your items online can turn your dust collectors into cash that you can then use toward reducing your balances.

Transfer balances prudently.
Consider balance transfers for small balances with high interest rates that you think you’ll be able to pay off quickly. Transferring that balance to a lower interest or no interest card can save on interest costs, freeing up more money to pay down the balances. The interest rates on balance transfers don’t stay low forever, however – typically for a year or less – so it’s important to make sure you can pay transferred balances off quickly. Also, check if there’s a balance transfer fee. Depending on the fee, moving those funds might not make sense.

Don’t punish yourself.
Getting serious about paying down debt may seem to require draconian measures. But there likely isn’t a need to just stay home eating tuna fish sandwiches with all the lights turned off. Often, all that’s required is an adjustment of old spending habits. If your drive home takes you past a mall where it would be too tempting to “just pick a little something up”, take a different route home. But it’s important to have a small treat occasionally as well. If you’re making progress on your debt, you deserve to reward yourself sometimes. All within your budget, of course!


¹ Steele, Jason. “Debit card statistics.” creditcards.com, June 25, 2021 https://bit.ly/2JB9cGE.
² “Does Using a Credit Card Make You Spend More Money?.” Kiviat, Barbara. Nerdwallet, Jul 27, 2020, https://www.nerdwallet.com/article/credit-cards/credit-cards-make-you-spend-more

Handling Debt Efficiently – Until It’s Gone

We’re using debit cards to pay for expenses more often now, a trend that seems unlikely to reverse soon.¹

Debit cards are convenient. Just swipe and go. Even more so for their mobile phone equivalents: Apple Pay, Android Pay, and Samsung Pay. We like fast, we like easy, and we like a good sale. But are we actually spending more by not using cash like we did in the good old days?

Studies say yes. We spend more when using plastic – and that’s true of both credit card spending and debit card spending.² Money is more easily spent with cards because you don’t “feel” it immediately. An extra $2 here, another $10 there… It adds up.

The phenomenon of reduced spending when paying with cash is a psychological “pain of payment.” Opening up your wallet at the register for a $20.00 purchase but only seeing a $10 bill in there – ouch! Maybe you’ll put back a couple of those $5 DVDs you just had to have 5 minutes ago.

When using plastic, the reality of the expense doesn’t sink in until the statement arrives. And even then it may not carry the same weight. After all, you only need to make the minimum payment, right? With cash, we’re more cautious – and that’s not a bad thing.

Try an experiment for a week: pay only with cash. When you pay with cash, the expense feels real – even when it might be relatively small. Hopefully, you’ll get a sense that you’re parting with something of value in exchange for something else. You might start to ask yourself things like “Do I need this new comforter set that’s on sale – a really good sale – or, do I just want this new comforter set because it’s really cute (and it’s on sale)?” You might find yourself paying more attention to how much things cost when making purchases, and weighing that against your budget.

If you find that you have money left over at the end of the week (and you probably will because who likes to see nothing when they open their wallet), put the cash aside in an envelope and give it a label. You can call it anything you want, like “Movie Night,” for example.

As the weeks go on, you’re likely to amass a respectable amount of cash in your “rewards” fund. You might even be dreaming about what to do with that money now. You can buy something special. You can save it. The choice is yours. Well done on saving your hard-earned cash.


¹ Steele, Jason. “Debit card statistics.” creditcards.com, June 25, 2021 https://bit.ly/2JB9cGE.
² “Does Using a Credit Card Make You Spend More Money?.” Kiviat, Barbara. Nerdwallet, Jul 27, 2020, https://www.nerdwallet.com/article/credit-cards/credit-cards-make-you-spend-more

The Advantages of Paying with Cash

Credit cards aren’t free money — that should go without saying, but millions of Americans don’t seem to have received that memo.

Americans now owe a record $820 billion in credit card debt.¹ If you’re not careful, credit card debt could hurt your credit score, wipe out your savings, and completely alter your personal financial landscape.

Before you apply for that next piece of plastic, here’s what you need to watch out for.

Low interest rates. Credit card companies spend a lot of money on marketing to try to get you hooked on an offer. Often you hear or read that a company will tout an offer with a low or zero percent APR (Annual Percentage Rate). This is called a “teaser rate.”

Sounds amazing, right? But here’s the problem: This is a feature that may only last for 6–12 months. Ask yourself if the real interest rate will be worth it. Credit card companies make a profit via credit card interest. If they were to offer zero percent interest indefinitely, then they wouldn’t make any money.

Make sure you read the fine print to determine whether the card’s interest rate will be affordable after the teaser rate period expires.

Fixed vs. variable interest rates. Credit cards operate on either a fixed interest rate or a variable interest rate. A fixed interest rate will generally stay the same from month to month. A variable interest rate, by contrast, is tied to an index (fancy word for interest rate) that moves with the economy. Normally the interest rate is set to be a few percentage points higher than the index.

The big difference here is that while a fixed rate may change, the credit card company is required to inform its customers when this happens. While a variable APR may start out with a lower interest rate, it’s not uncommon for these rates to fluctuate.

Low interest rates are usually reserved for individuals who have great credit with a long credit history. So, if you’ve never owned a credit card (or you are recovering from a negative credit history) this could be a red flag.

Of course, you could avoid these pitfalls altogether if you pay off your credit card balance before the statement date. Whatever the interest rate, be sure you’re applying for a credit card that’s affordable for you to pay off if you miss the payoff due date.

High credit limits. While large lines of credit are usually reserved for those with a good credit history, a new cardholder might still receive an offer for up to a $10,000 credit limit.

If this happens to you, beware. While it may seem like the offer conveys a great deal of trust in your ability to pay your bill, be honest with yourself. You may not be able to recover from the staggering size of your credit card debt if you can’t pay off your balance each month.

If you already have a card with a limit that feels too high, it may be in your interest to request that the company lower your card’s limit.

Late fees. So you’re late paying your credit card bill. Late payments not only have the potential to hurt your credit score, but some credit cards may also assess a penalty APR if you haven’t paid your bill on time.

Penalty APRs are incredibly high, usually topping out at 29.99%.² The solution here is simple: pay your bill on time or you might find self paying ridiculous interest rates!

Balance transfer fees. It’s not uncommon for a cardholder to transfer one card’s balance to another card, otherwise known as a balance transfer. This can be an effective way to pay off your debt while sidestepping interest, but only if you do so before the card’s effective rate kicks in. And, even if a card offers zero interest on balance transfers, you still may have to pay a fee for doing so.

Whatever type of credit card you choose, the only person responsible for its pros and cons is you. But if you’re thrifty and pay attention to the bottom line, you can help make that credit card work for your credit score and not against it.

¹ “Key Figures Behind America’s Consumer Debt,” Bill Fay, Debt.org, May 13, 2021, https://www.debt.org/faqs/americans-in-debt/

² “What is a penalty APR and why should you care?” Lance Cothern, CPA, Credit Karma, Apr 6, 2021, https://www.creditkarma.com/credit-cards/i/penalty-apr-late-payment

Watch Out for these 5 Credit Card Red Flags

### How do you handle job stress?

Sticking to a solid workflow? Meditation? A stress ball in each hand?

Whichever way you choose to lessen the stress that 80% of American workers experience, there’s another stress-relieving tactic that could make a huge difference:¹

Relieving financial stress.

Studies have found that money woes can cost workers over 2 weeks in productivity a year!² And this time can be lost even when you’re still showing up for work.

In short, you’re physically present at a job, but you’re working while ill or mentally disengaged from tasks. It can be caused by stress, worry, or other issues – which, as you can imagine, may deal a significant blow to work productivity.

So what’s the good news?

If you’re constantly worried and stressed about financing unexpected life events, saving for retirement, or funding a college education for yourself or a loved one, there are financial strategies that can help you – wherever you are on your financial journey.

Most people don’t plan to fail. They simply fail to plan. Think of a well-thought out financial strategy as a stress ball for your bank account!

Contact me today, and together we’ll work on an financial strategy that fits you and your dreams – and can help you get back to work with significantly less financial stress.


¹ “Workplace Stress,” American Institute of Stress, https://www.stress.org/workplace-stress.

² “The Real Costs of Employee Financial Stress—and How Employers Can Help,” Greystone Consulting, https://graystone.morganstanley.com/the-parks-group/articles/graystone/thought-leadership/financially-stressed-employees

Money Woes Hurt More than Your Bank Account

We all know credit cards charge interest if you carry a balance. But how are interest charges actually calculated?

It can be enlightening to see how rates are applied. Hopefully, it motivates you to pay off those cards as quickly as possible!

What is APR? At the core of understanding how finance charges are calculated is the APR, short for Annual Percentage Rate. Most credit cards now use a variable rate, which means the interest rate can adjust with the prime rate, which is the lowest interest rate available (for any entity that is not a bank) to borrow money. Banks use the prime rate for their best customers to provide funds for mortgages, loans, and credit cards.¹ Credit card companies charge a higher rate than prime, but their rate often moves in tandem with the prime rate. As of the second quarter of 2020, the average credit card interest rate on existing accounts was 14.58%.²

While the Annual Percentage Rate is a yearly rate, as its name suggests, the interest on credit card balances is calculated monthly based on an average daily balance. You may also have multiple APRs on the same account, with a separate APR for balance transfers, cash advances, and late balances.

Periodic Interest Rate. The APR is used to calculate the Periodic Interest Rate, which is a daily rate. 15% divided by 365 days in a year = 0.00041095 (the periodic rate), for example.

Average Daily Balance. If you use your credit card regularly, the balance will change with each purchase. So if credit card companies charged interest based on the balance on a given date, it would be easy to minimize the interest charges by timing your payment. This isn’t the case, however—unless you pay in full—because the interest will be based on the average daily balance for the entire billing cycle.

Let’s look at some round numbers and a 30-day billing cycle as an example.

Day 1: Balance $1,000 Day 10: Purchase $500, Balance $1,500 Day 20: Purchase $200, Balance $1,700 Day 28: Payment $700, Balance $1,000

To calculate the average daily balance, you would need to determine how many days you had at each balance.

$1,000 x 9 days $1,500 x 10 days $1,700 x 8 days $1,000 x 3 days

Some of the multiplied numbers below might look alarming, but after we divide by the number of days in the billing cycle (30), we’ll have the average daily balance. ($9,000 + $15,000 + $13,600 + $3,000)/30 = $1,353.33 (the average daily balance)

Here’s an eye-opener: If the $1,000 ending balance isn’t paid in full, interest is charged on the $1353.33, not $1,000.

We’ll also assume an interest rate of 15%, which gives a periodic (daily) rate of 0.00041095.

$1,353.33 x (0.00041095 x 30) = $16.68 finance charge

$16.68 may not sound like a lot of money, but this example is a small fraction of the average household credit card debt, which is $8,645 for households that carry balances as of 2019.³ At 15% interest, average households with balances are paying $1,297 per year in interest. Wow! What could you do with that $1,297 that could have been saved?

That was a lot of math, but it’s important to know why you’re paying what you might be paying in interest charges. Hopefully this knowledge will help you minimize future interest buildup!

Did you know? When you make a payment, the payment is applied to interest first, with any remainder applied to the balance. This is why it can take so long to pay down a credit card, particularly a high-interest credit card. In effect, you can end up paying for the same purchase several times over due to how little is applied to the balance if you are just making minimum payments.


¹ “Prime Rate,” James Chen, Investopedia, Jun 30, 2020, https://www.investopedia.com/terms/p/primerate.asp

² “What Is the Average Credit Card Interest Rate?,” Adam McCann, WalletHub, Oct 12, 2020, https://wallethub.com/edu/average-credit-card-interest-rate/50841/

³ “Credit Card Debt Study,” Alina Comoreanu, WalletHub, Sep 9, 2020, https://wallethub.com/edu/cc/credit-card-debt-study/24400

Understanding Credit Card Interest

Americans owe over $399 billion in credit card debt¹, and credit card interest rates are on the rise – now over 16.17%.²

So if you’re on a mission to reduce or eliminate your credit card debt (go you!), you may be thinking you should close out your credit cards. However, you need to know that doing that may have several effects, some of which may not be what you’d expect.

There are times when canceling a card may be the best answer:

1. A card charges an annual fee If you’re being charged an annual fee for the privilege of having a certain credit card, it may be better to cancel the card, particularly if you don’t use it often or have other options available.

2. You can’t control your spending If “retail therapy” is impacting your financial future by creating an ever-growing mountain of debt, it may be best to eliminate the temptation of buying on credit.

Then there are times when closing a credit card may not make much difference, or could even hurt your score:

1. Lingering effects: The good and the bad Many of us have heard that credit card information stays on your report for 7 years. That’s true for negative information, including events as large as a foreclosure. Positive events, however, stay on your report for 10 years. In either case, canceling your credit card now will reduce the credit you have available, but the history – good or bad – will remain on your credit report for up to a decade.

2. The benefits of old credit Did you know that one aspect factored into your credit score is the age of your accounts? Canceling a much older account in favor of a newer account can actually leave a dent in your score, and we know that canceling the card won’t erase any negative history less than 7 years old. So it may be best to keep the older credit account open as long as there are no costs to the card. Another point to consider is that the effects of canceling an older account may be magnified when you’re younger and haven’t yet established a long enough credit history.

Credit utilization affects your credit score Lenders and credit bureaus not only look at your repayment history, they also look at your credit utilization, which refers to how much of your available credit you’re using. Lower usage can help your credit score while high utilization can work against you.

For example, if you have $20,000 in credit available and $10,000 in credit card balances, your credit utilization is 50 percent. If you close a credit card that has a credit limit of $5,000, your available credit drops to $15,000 but your credit utilization jumps to 67 percent if the credit card balances remain unchanged. Going on a credit card canceling rampage may actually have negative effects because your credit utilization can skyrocket.

If unnecessary spending is out of control or if there is a cost to having a particular credit card, it may be best to cancel the card. In other cases, however, it’s often better to use credit cards occasionally, and make sure to pay them off as quickly as possible.

¹ “2020 American Household Credit Card Debt Study,” Erin El Issa, Nerdwallet, Jan 12, 2021 https://www.nerdwallet.com/blog/average-credit-card-debt-household/ ² “Average credit card interest rates,” Kelly Dilworth, creditcards.com, Jul 7, 2021, https://www.creditcards.com/credit-card-news/rate-report/

The Effects of Closing a Credit Card