ECRA Header

10 Money Rules That Will Keep You Out of The Red

A financially secure future means that debt is eliminated and future debt is a financially sound investment. In this world of continuous inflation this task seems more and more like an uphill battle. Here are 10 guiding rules that can help put you back in the control seat.

1. Rent, don’t buy a home – One of the major financial drains to any person is buying a home, which indeed makes great sense when the real estate prices are rising. When they stagnate or are falling this no longer makes financial sense. You should check whether owning or renting would give you greater benefits by comparing how much you would pay per month in a rented home vs mortgage costs in your own home. Get help with a renting calculator at http://partners.leadfusion.com/tools/kiplinger/home10/tool.fcs.

2. Small is safer – When and if you decide to buy a home, go for a smaller home. The general rule should be that the total mortgage should not exceed 3 times your annual gross income. Your monthly payment should ideally not exceed about 1/3rd of your income. This includes payment of principal, interest, taxes and insurance. All of these costs combined can be the difference between having a home for your future or a financial burden on your credit report.

3. Close mortgage concurrent to retirement– Mortgage payments can cripple you financially if they continue into your retirement period. Plan in such a manner that the complete repayment of your mortgage coincides with the time of your retirement. Pay more while you are still working if it enables you to reach this goal; but take the necessary steps to liquidate this loan by retirement time. Thinking that far into the future ensures that you will not be using the money you are meant to live on, on mortgage expenses. Frugal and cautious financial decisions now will enable comfortable worry free living later.

4. Roth is better – Tax bills are always deferred on savings and investments to the latest possible limit. However, with Roth IRAs and Roth 401(k) plans you can forgo the tax break that you would normally get upfront (on traditional IRA's) and instead have your retirement withdrawals become tax free.

5. Dividends stay steady – The stock market today is too volatile to count upon. It is better to focus on dividends because you can count on these to provide you a predictable and steady income even though they will not make you rich in the proverbial sense.

6. Build a large safety nest egg- It is no longer enough to have about a 2-3 month corpus fund to ferry you over a financially trying time. In these times when nothing is really guaranteed, let alone your job or a steady income from your business; you need a larger safety net. Aim at saving funds to carry you for a year to 18 months. People who have retired should aim at investing 2-3 years finances in short term CDs and mutual funds.

7. Maximize your retirement benefits– Do not collect your Social Security benefits until you are 66 years old if you were born between 1943-1954 and older if you are born later. The safest option is to cash in when you are approximately 70 years old. It is at this age that you (and your spouse) can get the maximum benefits on your retirement plans.

8. Credit Cards are good for you– Your first aim is to keep your credit card usage in close check. However, do not close credit cards in order to achieve this goal. Your FICCO score (credit score) uses the information of your maximum credit vs maximum usage as a ratio to determine your credit worthiness. The optimal goal is to use about 20% of the total credit you have available to you. However, use credit cards with extreme caution. Never charge more than you can realistically pay in full at the end of the billing cycle.

9. Pay attention to your stream of retirement income– No matter how financially secure you are in the prime of your life, you will have trouble during retirement if you do not pay close attention to the projected expenses you will incur during retirement. The reason is simple- the income you receive during the time you work is greatly reduced or eliminated all together once you go into retirement. Invest in an annuity that will assure monthly payments for the rest of your life. For the highest returns you will need to lock in the amount– but seek professional advice in this area so you are able to lock it in when the rates are most conducive for you.

10. Take advantage of all the free money available for your retirement – Yes, you have free money when your employer matches your 401(k) plan. The best plan is to put aside about 15% of your gross income for your retirement plan. This amount includes your employer’s matching grant.

There is, of course, much more to financial planning than these 10 tips. This is designed to be a first step to put you on the right track and ensure that you begin healthy financial planning for your future goals.

5 Rules Than Will Keep Help Increase Your Score High

If you are between the ages of 22-32 years old, you may have already found that getting high point loans is not very easy. It is not because you have a bad credit record, but because you have no credit or too little (length of time using credit) of a credit history. Do not panic. There are ways to boost your credit score in record time. Here are 5 steps that can help you achieve your goal.

1. Save efficiently– Young people often feel that saving for retirement is a middle age obligation and they have plenty of time until they are forced to think about it. Wrong. You need to start saving for your retirement as early as you can; in your 20's is the best time to start. The earlier you start your savings, the more you will have saved with less financial sacrifice now. Savings also look good toward your overall credit score.

2. Emergency fund is a must– Do not count on your parents/ friends every time you are in a financial jam. Establish a solid emergency fund. You will be greatly relieved when you know you have a safety net ready for times of financial crisis. The reality is that if your only plan is to be rescued by others you will find yourself in greater peril. Establishing your own financial plan for emergencies will help you stay on track with expenses even if you do not have a job – and that is what will keep your score high.

3. Keep close track of your credit report– There are three credit score bureaus: Equifax, Experian and TransUnion. You can get one report per year from each on these agencies at AnnualCreditReport.com. While Equifax and TransUnion follow the traditional FICCO score, Experian uses the VantageScore which is a relatively new model. Get one report every three to four months and you will have a clearer picture of your financial outlook. Check carefully and contest any error you find on your report. A clean report goes a long way to building a high credit score.

4. Pay bills on time every time– FICCO score attributes 35% to paying bills on time and VantagePoint attributes 32%. Pay attention to your bills, for this is a crucial part of your credit score. To ensure that you NEVER forget a payment, sign up with your lender’s for payment alerts that are either messaged to your mobile phone or emailed to your account. You can also sign up for automatic debit of bills from your bank account. When using such options, ensure that you check what bills have been paid and the details of these bills so if you are a victim of identity theft you will be aware of it immediately and can take proactive measures to minimize the damage done to your financial life. Many victims of identity theft are not even aware they are victims until there is massive damage done to their finances.

5. Use credit miserly– The credit to credit utilization ratio is the next big scorer on your credit report. This is why you should aim at using about 7-10% of your total credit to keep your score maximized. Do not close credit card accounts just because you do not use them. The credit cards add to your total credit, which in turn allows you a higher amount for credit utilization. For example, if you have four cards with $1000 credit limit and you use $1000 your ratio is 25%. Close two cards and your ratio shoots up to 50%.

Now that you know these credit guidelines, apply them to your day-to-day living and watch your credit score increase over time. Aim for a score above 700 if you are looking to buy a home or making any large purchases through banks.

Resources

The Credit Repair Organizations Act
The Fair Debt Collection Practices Act (FDCPA)
Fair Credit Reporting Act (FCRA)
Consumer Credit Protection Act
The Fair Credit Billing Act
The Equal Credit Opportunity Act (ECOA)

 

Useful links
ECRAonline.org/Blog
Experian
Equifax
TransUnion
Get Your Credit Report and Score
Credit Score "Compass"
Credit Monitoring Service
Debt Consultation
Auto - free quote
Personal - from $100 - $1,500
New Millennium Bank Secured Platinum Visa
New Millennium Gold Visa/MC
Orchard Bank Secured MasterCard
Compare Over 40+ Cards
Compare Over 20+ "Problem Credit" Cards
Help With Your Tax Problems
Legal Documents
Quote of the Day

"Never let what you cannot do stop
you from doing what you CAN do!"
— Stephen Pierce



Apply Now for a Public Savings Secured Visa
2011 ECRAOnline.org. All rights reserved.
The Ethical Credit Repair Alliance
270 Northland Blvd
Suite 210
Cincinnati, Ohio 45246
513 771-1726
Fax: 815 717-7579
Email: support@ecraonline.org
ECRA Logo