Streamline your finances in 8 steps

1.Use direct deposit

2.Get overdraft protection

3.Put your bills on automatic

4.Use personal finance software

5.Set up reminder

6.Consolidate your credit cards

7.Consolidate your accounts

8.Set up a filing system that works

According to financial columnist, Liz Pulliam Weston, these easy banking tips will make your financial life much easier. Another great tip is to become friends with one of the bankers at your nearest branch. They can really help you in time of need, and will usually provide better service for someone they know and like.

Don’t Buy What You Don’t Need

Have you ever purchased something that you used once then threw it in the back of your closet or garage? Most people don’t ever think how much money they loose by purchasing things they don’t really need. Sometimes buying your “wants” can be self-satisfying but extremely expensive when used only a few times. Here is a great example that has happened to at least ten people I know. You ever buy a shirt that you think will look great, wear it twice, and then you never wear it again. Try to apply this to other things in your life.

Before you head off to college and decide to get a fancy computer make sure you read this article. Consumers need to learn to shop for good deals that will save hundreds of dollars by going to websites like these: FatWallet, Woot, and NewEgg for electronics. Shop around for good deals online, and don’t buy things you don’t need.

Tags: Budgeting

Turn $1 a day into $67,815

MSN Money has a great article about using the change rattling in your pocket to make big time bucks. By using the super power of compound interest and Roth IRA you will be able to transform your change into a great nest egg for retirement. Read it and tell me what you think. Do you have anything to add on to this article? What other mutual funds or individual stocks have performed higher than 10% per year?

Tags: IRA’s

A Quick FICO Minute

Here is another great question from a subscriber. “I am trying to get rid of some credit cards that I no longer use. I currently have five credit cards. The ones that I want to close have a zero balance. Which ones should I keep, or should I just keep them all?”

Even though I have an answer for your question, this is pretty much a personal issue. I will have to assume a few things on the credit cards you want to close. First, you probably no longer need or want them anymore. Second, these credit cards are not the oldest ones in your repertoire.

When you close down credit cards most people think that it will automatically increase your credit score. Well, I have some news for you. Most of the time it will actually decrease your score. The reason for the decrease can be easily explained with some simple math.

Let’s just say you have $5000.0 of credit card debt and you have four credit cards. Two credit cards with $2000.0 credit limit and the other two have a $3000.0 credit limit which means that you are using 50% of your eligible credit ($5000/10,000). If you were to close your two $2000.0 credit cards you would be left with an eligible $6000.0 credit limit, but your debt ratio just went up to 83.3% ($5000/6000). *Remember that your debt ratio plays a key role in your FICO score*

Let’s take the same situation as described above with a different issue. Let’s say your two $2000.0 credit cards were open in 2007 and the other $3000.0 ones were opened in 2011. If you decided to close both of the $2000.0 credit cards and keep the others opened your credit score would probably go down a bit just because you closed four years of credit history. This will also affect your credit score, because the length of your credit history will change.

Before you start calling the credit companies and cutting up your cards make sure you look at the downside of it. If you do have to close some down make sure they aren’t the oldest ones in your wallet/purse unless they have a yearly fee. See, there are some good reasons why having several credit cards can be beneficial.

Tags: Credit Cards, Credit Score

Save, or Pay it Down?

Here’s a great question from a subscriber that I received in an email. “Should I save using the online savings account, even though I have credit card and student loan debt?”

My opinion is that you should pay down debt first and save later. If your credit card APR is at 14.5%, and the highest APY on a savings account is 5.15% it should be an easy decision what you should do. When you have credit card debt that is over the savings rate you should be paying down the credit card balance. The only time you should be saving while in debt is when it’s a low balance student loan of <$20,000.0 with a <6% interest rate, or if the company you work for offers a matching 401(k) program (only contribute the minimum amount that will give you the highest match possible).

Even if you have $2000.0 of credit card debt and you think you have something to save for. Pay off your balances then save double.

Example:

Credit card #1- $2000.0 at a rate of 9% with a min. payment of $40.0
Credit card #2- $1000.0 at a rate of 14.7% with a minimum payment of $20.0
Saving $100.00 a month in a online savings account
Assume you have $400.0 a month to apply to this example

My advice:

1. Pay your minimum payment on credit card #1 (Yes, the one with the higher balance) $40.0
2. Stop saving the $100.0 and apply it to credit card #2
3. Pay off $360.0 on credit card #2 till its fully paid off
4. After credit card #2 is paid off, pay off entire balance on credit card #1. All $400.0 until that balance is paid off.
5. After both credit cards are paid off apply the $400.0 to your savings account

It should take you eight months to pay down the balances, and at the end of the year you will already have some good money saved up with no credit card debt. YES!

Remember this statement: you can never be rich if you’re always in debt.

Tags: Credit Cards, Debt

Are You Getting a BIG Tax Check?

Is getting a huge refund check really a good thing? Most people think that it is, but you need to stop looking at it as a big payout and begin viewing it from a different angle. When you get a huge refund that means you’ve been paying too much in taxes over the past year. This also means the government has been getting some good interest on your money. If you are receiving, or paying more than $500.00 a year on taxes, consider going to your payroll department to change your tax withholdings.

Example: if you were supposed to get a $2500.00 tax check, have your payroll department help you modify your tax withholdings so that you get an extra $208.33(2500/12) per month. After you change your tax withholdings, you put the additional money into your savings account (avg. of 5%), and at the end of the year you will receive an extra $75.00. Do yourself a favor and stop giving more money away than you have to.

Are You Losing Your Change?

Most people have a loose coin bucket in which they throw their change at the end of the day. After a few months of accumulating your pounds and pounds of change, you decide to go to a supermarket to cash it all in. It feels so nice losing five pounds of change and converting it into little pieces of paper that you can easily slip into your pocket. Now let me ask you a question. Have you ever willingly paid an additional 8%-10% on something for no apparent reason? If not, stop using automated cash counting machines in supermarkets.

Go to YOUR bank! They provide FREE paper rollers and usually supply you with a quick counter which makes your change counting easy. After about ten minutes of work you can save a ton of money. I went to the bank about three months ago and it took me around twelve minutes to count, roll, and deposit $246.87. If I had gone to a coin counting machine they would have deducted $19.75-$24.68 from my total after around ten minutes of labor. Man, wouldn’t life be incredible if you could make $20-25 for every ten minutes of labor? Now go ahead and start saving wisely. A penny saved is a penny earned. — Benjamin Franklin.

Trying to Save $40.00 a Month?

Have you looked at your bills and said “God, I hate paying so much!?!” Well if you have a regular landline phone get either VoIP or just cancel your phone service and use your cell phone. VoIP is a lot like your regular phone service but is MUCH cheaper. Only catch is you need to have high speed cable internet. Consider this MCI current unlimited calling plans start at $49.99; while Vonage.com is offering the same plan with more features for $24.99! That’s twenty five bucks by just switching to VoIP and you can still keep your old phone number. Do the research and you will see the value. Save your money for something like a down payment on a new car or even better put it in your online savings account!

Don’t Be Cheap

Buying “quality” instead of “quantity” is something that people just don’t do much anymore. They would rather something cheap and hope that it will last as long as a high-quality item (it never does). Your average person will buy something like a computer, for instance, and believes that the $300.00, bottom of the line computer will last as long as the $700.00 one. What they don’t understand is that you will probably end up buying nearly three of them while the $700.00 computer just needs some minor tweaking over the years.

You can usually apply this concept to nearly anything you buy. Instead of always buying the cheapest equipment, consider reading consumer reports and reviews of items before you make a purchase. Sometimes investing in a more expensive item might save you a ton of money in the future. Stop being “economical/extremely cheap“, and become an educated buyer.

Two Ways to Make IRAs HUGE

Most people invest a certain amount of money each week or month into an investment plan such as a Roth IRA, or traditional IRA. This investment strategy is called dollar cost averaging (DCA). Here is a formal definition explained by Investopedia “The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.” This system can make you a ton of money if share prices are low when you buy and high when you retire and sell your shares. Here is a model that shows how DCA can sometimes be a negative.The best approach by far is value-cost averaging (VCA). Investment-FAQ explains it as “a strategy in which a person adjusts the amount invested, up or down, to meet a prescribed target.” You will end up killing two birds with one stone with this approach. You will balance your portfolio, buy more shares when prices are low, and buy fewer shares when prices are high.

Example:
You want to contribute $100 per month in a mutual fund.(1^st month)

You contributed $100 End of month balance $70
(Share price decrease)
(2^nd month) You contributed $130 End of month balance $240
(Share price increase)
(3^rd month) You contributed $60 End of month balance $310
(Share price increase)
(4^th month) You contributed $90 End of month balance $400
(Share price has no change)

You contributed $380 but your mutual fund balance is $400. Nicely done!

Even though value-cost averaging requires you to spend ten minutes a month looking at the performance of your stocks or mutual funds it is still more efficient approach than dollar cost averaging. Being a little more proactive can make you a lot more money. But whether you choose DCA or VCA the most important thing is that you are contributing to your nest egg. So give yourself a pat on the back and picture the mansion you will buy later on.