Category: Saving Tips
The best ways to build excellent credit are much different in your 20s than in your 50s.
Your age often affects how you balance your budget, saving for retirement and assess your investments. But it must also be a factor in managing your credit score.
The length of your credit history affects your FICO score highly, which lenders use to determine the ability of a borrower to repay a loan. While it is important to pay your bills on time and keep your balances low at all ages, there is more than most consumers can do to improve their scores so they can get better loan terms.
Here are nine steps to help you build excellent credit for your life.
1. Request a credit card
John Ulzheimer, president of consumer education for SmartCredit.com says that consumers generally get into the game of credit between the ages of 18 and 22, if the restrictions of the CARD Act makes it increasingly difficult for persons under 21 to get their first credit cards. Regulations aside, it is best to get a credit card as soon as possible because the debit cards will not increase your credit score.
Most beginners get their first credit card by getting a parent or guardian to co-sign the application or the application of a secured card, which requires customers to deposit money in advance that correspond to their lines of credit and minimize risk of failure. Either strategy can be effective as long as you understand that the real trick is to use these cards responsibly.
2. Do not apply for every credit card
“Construction Loan is not the same as building a large balance,” Ken Lin, CEO of Credit Karma.com said. Do not make the mistake many beginners make credit by opening a store card credit to all businesses visited during Christmas, for example.
Tom Quinn, expert in consumer credit for Credit.com, said that consumers should only apply for credit when they need it. A large number of credit inquiries over a short time can cause your score to go down, “he said. It can also make it much easier to run a pile of bills you can not pay.
Instead of a wallet full of credit cards, Lin proposes to add a new credit card once a year to your arsenal until you have collected three or four cards you can always pay on time.
He also suggests finding cards that are not annual fees, as any card you open at this stage should remain open for at least five years. These cards determine the length of your credit history, which represents 15% of your total credit score, so choose a card with a low to no annual fee, it is easy for beginners to keep soaring accounts opened in the long term.
3. Start watching your credit score
Beginners should be extremely diligent credit during these formative years. FICO score attempts to predict whether you’ll pay a loan on time and the first indications that you may not be particularly damaging.
“Consumers in their 20s should be aware that their credit ratings are more volatile and will react differently to payment delays and excessive credit card debt that consumers with credit files of increasing,” said Ulzheimer.
If you’re spending tons of time and gas mileage hunting down coupon deals, think again. Here are some more common financial traps when we aim to be too frugal.
Falling for ‘Free’
It’s one thing if we go for a no-strings-attached free promotion, but buy-one-get-one-free deals or “free shipping with a $150 purchase” advertisements are just marketing gimmicks to get us to spend money we really shouldn’t. As behavioral economist Dan Ariely writes in his best-selling book Predictably Irrational, when something is free, it suggests to the consumer (incorrectly, as it happens) that there is no downside. Unless you had already budgeted for those two hand lotions from Bath and Body Works, that third free bottle is not really a deal.
Overdosing at the Dollar Store
Dollar-store stocks have been outperforming the broader market lately, as consumers seek bargains. But not everything in a dollar store is worth the price tag – and according to Consumer Reports, some items found at dollar stores can actually be dangerous. For example, researchers found that extension cords, lamps and other items may have fake UL labels certifying their safety. Over-the-counter remedies like aspirin may also be on shelves past their expiration date.
Buying in Bulk
The per-unit cost of an item at a Sam’s Club or Costco may be less than at a grocery store, but unless you can consume it all, it’s a waste of money. And although this might be a stretch, I have to think that the growth in the storage-unit industry is thanks to our culture’s obsession with excess. Today, one in 10 households rents a self-storage unit – up 65% over the last 15 years – for which they pay more than $8 per square foot. Are your bulk-buying habits leaving you crowded out of your house?
At the beginning of April, the TLC show Extreme Couponing launched its second season. The coupon experts live in homes filled with gallons of housecleaning supplies, closets filled with dry goods and cabinets bursting with toothbrushes, toothpaste, dental floss and anything else you can find down aisle 7 in CVS. Much of this stuff they got for a fraction of the price – maybe even for free. But I do wonder if all this running around and stocking up is really efficient. After adding up all the hours and gas mileage spent hunting down coupon deals, what’s your net profit? And do you really need 18 boxes of laundry detergent just because your coupon let you save 75%?
Dollar menus and fast food may satisfy your hunger for less today, but over time this behavior can carry a much higher price tag. A report by the Cancer Project found that most items advertised on Value Menus are high in saturated fat, sodium and cholesterol. And many items were linked to an increased risk of cancer. And researchers at the Dept. of Agriculture found medical costs stemming from obesity-related problems are about $10,000 higher than they are for those with a healthy weight.
Making Repairs Yourself
Sometimes it’s just cheaper to pay a professional, especially for services that take up a lot of your quality time or that require some serious expertise. Some big examples: reflooring or recarpeting your house, changing your car’s oil and estate planning.
Though today’s shopping traps may look more sophisticated than in the past, their aim is the same as yesterday’s misleading advertising — not to save me money but to get me to spend more. For new and experienced shoppers, here’s a look at eight of the most common shopping traps to avoid in malls.
A recent shopping trap involves giving customers a coupon at the end of a purchase. The coupon may become active in the next day, week or month, tempting shoppers to return and buy more than they had initially planned. This shopping trap can be avoided by searching for online coupons that can be applied that very day and then bringing them along.
Another gimmick that mall stores have been using recently is scratch cards reminiscent of lottery scratch cards. To lure shoppers into the store, the scratch cards are handed out to passersby. There are no losing cards, which grants everyone the joy of a win. And once the shopper enters the store with a $5 scratch card, he is likely to fall into the shopping trap of buying something he wasn’t planning on buying that day at all.
Save 15% on $75
Coupons that only come into effect when the consumer spends enough money are becoming more and more common in mall stores. Typically, the offers are made to club members — shoppers who signed up to receive coupons in the mail. Though reserved for repeat customers, such coupons present an obvious shopping trap, one that’s irresistible to someone who likes that store enough to become a club member. Seasonal shopping, four times a year, can help shoppers buy everything they need at one time and make use of such coupons only when they need them.
Save 15% Today
There isn’t a store in a mall that doesn’t offer 15% at the time of checkout if you’ll apply for the store credit card. I’ve even come across instances when the proverbial “would you like to save 15% by applying for our card today?” has been replaced with a tantalizing “would you like to save 15%?” This shopping trap should be avoided for the simple reason that spending cash is psychologically more difficult than swiping a plastic card.
Cash Back or Rebate
Some store cards will offer you a rebate or cash-back bonus for every dollar you spend. Such bonuses are low, typically earning you $1 for every $1,000 spent, money which you can only spend by revisiting the store. Then, once back, you’re likely to spend far more than your measly rebate.
Up to 50% Off
Mall stores often try to lure us in with tempting sale signs, such as 50% off. But when words like “up to” or “no more than” come before or after the number, the appeal changes drastically. Then, it’s easy for us to fall into the shopping trap of paying a higher price, especially since the item we’ve spent time choosing is probably on sale too, though not for the higher (poster-perfect) amount. To avoid this shopping trap, read all signs carefully.
Buy 1 Get 1 at 1/2 Price
I’ve found this shopping trap in a wide range of mall stores. The buy 1 get 1 free promotion is one we’re all so familiar with that stores use it to get our business. This can become a shopping trap when the second item is not actually offered for free but for half its price. Mall signs will typically present the “half price” in small numbers that can easily be missed or mistaken for shorthand for buy 1 get 2. Once more, the way to avoid this shopping trap is to read signs carefully or ask the store clerk for clarification.
Sale Rack Misfit
Sale racks may be great for bargain hunters, but they can also be terribly disappointing when a full-price item accidentally ends up on them. Rather than try on clothing you may be unable to afford, it is best to compare the price tags of surrounding items on a sale rack. Most likely, sale items will have a sticker on them to indicate the price reduction. The full-price misfit will then become glaringly obvious.
Paying off certain types of debt can lift your score much more than others.
Millions of consumers have fallen out of favor with the credit scoring gods. Some lost their jobs or were just overwhelmed by mounting debt. Others got caught up in the real estate bubble or had major medical bills. Whatever the reason, the rising number of foreclosures, short sales, late credit card payments and the ultimate credit sin — bankruptcies — have left black marks on credit reports most everywhere. So what can these people do to repair their credit?
Assess Your Situation
Before you even start to think about rehabilitating your credit, make sure that you can pay your bills on time and not do any more harm. If keeping up with your credit card bills is still an issue, then call the issuer, explain your situation and try to negotiate payments you can afford. Ask the issuer how that will be reported to the major three credit bureaus: Not paid as agreed, which can hurt your score? Or will the new terms say that you are now paying as agreed?
“You have to get in writing that this is what they agreed to do,” said Mechel Glass, director of education at CredAbility, a nonprofit consumer credit counseling agency. Ditto for other providers, like utility companies.
Then, assess all the damage by getting a free copy of your credit report from each of the three major credit reporting bureaus through annualcreditreport.com. Each of the major credit bureaus — Equifax, Experian and TransUnion — generate their own FICO scores based on the data they collect. Two versions of your FICO score are also available for $19.95 each.
How far your credit score has fallen will depend on where it started, as well as the frequency and severity of your credit mistakes. If you had almost perfect credit, but because of the loss of a job your credit card bills ended up at a collection agency, you can expect to lose anywhere from 80 to 150 points from your FICO score. A short sale or foreclosure? Both, Mr. Ulzheimer said, “would turn a FICO 790 into a FICO 590 overnight.”
The coffee chain is hiking prices on its fancy drinks, but these insider tricks can save you cash.
Starbucks announced Wednesday that they’d be raising prices soon, apparently due to higher bean costs. “Over the last six months a highly speculative green coffee market and dramatically increased commodity costs have completely altered the economic and financial picture of many players in the coffee industry,” said Howard Schultz, the chairman, president and CEO of Starbucks.
“And while many, if not most, coffee roasters and retailers began raising prices months ago, we have thus far chosen to absorb the price increases ourselves and not pass them on to our customers. But the extreme nature of the cost increases has made it untenable for us to continue to do so and we have been forced to take the steps we announced today,” Schultz added.
Not everything’s going up: Starbucks expects to maintain its popular $1.50 tall brewed coffee, but will probably raise the price of more labor-intensive and larger-sized beverages.
But if you want to save some bucks at Starbucks, there’s no shortage of official advice everyone already knows …
• Get a free Starbucks card that earns you free drink customization, free coffee and tea refills, and a free drink on your birthday.
• Keep your Starbucks cup and bring it back at any time for 50-cent coffee refills.
• Bring your own reusable cup and Starbucks will nick 10 cents off the price in recognition of your eco-consciousness. And as regulars learned long ago: If you order a tall drink and bring a very big reusable cup, you get some extra beverage for free.
• Use their free (for two hours) Wi-Fi to answer email, surf and connect online.
But then there are the secrets Starbucks doesn’t want its baristas to reveal. Here’s what one barista in the southeastern U.S. — who wishes to remain anonymous — told us…
‘Poor man’s latte’
If you want an iced latte but don’t have latte cash on hand, “You can order the espresso over ice in a big cup,” suggests our barista. “Then you can walk right over to our condiment bar and use our carafes of whole milk, half and half, and nonfat.”
While the prices vary according to Starbucks and state — and they’re going up yet again — our barista says, “It’s way, way cheaper. You’ll save a lot of money.” In general, she says, only about “one customer every couple hours” has figured out how to buy straight coffee and espresso and use the free condiments to mix their own beverages — and they never get called on it. “We can’t do anything about,” she says. “What are we going to say? Don’t use our milk and syrups that we put out for everyone?”
Drink what you want, be careful what you eat
Customers know the drinks are brewed right in front of them, but what about those muffins and cookies in the glass display? “The food gets delivered to us every morning, frozen from the factory,” says the barista. “Our seasonal pastries are really good — pumpkin cream cheese muffins at Halloween and peppermint brownies at Christmas.”
But, she says, “There’s no point buying bananas or bagels from us, because they’re cheaper elsewhere and taste better.” In fact, in many big cities, cunning street vendors set up their fruit stands as close to a busy Starbucks as they can. Look for them.
Working at Starbucks but not for Starbucks
In the past, some self-employed coffee addicts spent hours at Starbucks, which became their home office away from home. Now with the free unlimited Wi-Fi, that’s likely to happen even more. Starbucks frowns on this but doesn’t do much to stop it — especially if you follow these four simple rules:
• Go to the same store each time, tip the baristas well so they ignore your extended stay.
• Refresh your coffee every couple of hours (for either 50 cents or free, but still leave a modest tip).
• Don’t take business calls inside the store.
• Don’t sit in the comfiest chair or seize the best table.
Also realize that with free Wi-Fi is an invitation to high-tech scammers who now see easy pickings. At least, that’s what some experts are warning. So be careful out there.
One thing that Starbucks does want you to know
Starbucks will soon launch an in-house Digital Network, being billed as a place for customers to share information, download the occasional free song and get free premium content. The company is teaming up with Yahoo! to allow Wi-Fi users access to sites they’d otherwise have to pay for — such as the Wall Street Journal and the New York Times. It will also feature content from USA Today, Zagat and others, as well as films from SnagFilms, which has an online library of more than 1,600 documentaries.
Something to occupy your time while you drink your self-serve, discount iced latte.
It’s possible to spend a lot less money without making big lifestyle changes.
We all know how to spend less and sacrificing. To eat unless you buy fewer clothes to cut back on vacations, savings through sacrifice can be effective, but painful. So if you are looking for ways to save money, why not start with money saving tips that are relatively painless?
With a little imagination, you’ll find many ways to reduce expenses without making major changes to your lifestyle. To begin, here are eight ways painless to save money.
1. Get healthy: As someone who has struggled to stay healthy, I realize that eating healthily and staying fit is easier said than done. But for those who are in good shape, you can save lots of money on life insurance plans and individual health insurance. As a bonus, you’ll feel better and have more energy.
2. Rethinking Auto Insurance: Each year, a review of your auto insurance policy for potential savings. For example, consider increasing your deductible, which reduces premiums. For older vehicles, to evaluate whether you really need collision coverage, which covers damage to your car when your vehicle hits or is hit by another vehicle or object. And make it a habit to compare quotes car insurance per year, which can be done online in minutes.
3. Improve your credit score: Of all the ways to save money without pain, improve your credit score is probably the most important. From home loans and car loans, credit cards and auto insurance, a good credit score can save you a small fortune. Over a lifetime, the savings can easily reach tens of thousands of dollars.