Category Archives: Personal Finance 101

Yes, You Can Rebuild Your Credit – Here’s How

 

credit

Roughly 47 percent of employers pull credit reports before hiring new employees, according to the Society for Human Resource Management. It’s not uncommon for employers to rescind an offer or decline making one after seeing a poor credit score. Some speculate employers fear such employees are financially irresponsible or prone to suspicious behavior. Poor credit can also prohibit you from getting a credit card, getting a low interest rate on a home loan or securing an auto loan.

So how can you restore your credit to good standing? Banks and big financial institutions make building credit quickly seem like a complex mystery. But all credit building really boils down to is borrowing money and paying it back on time. The hard part is finding credit-building opportunities, especially for those with poor credit scores and mounting debt. Here’s some help:

Use Your Rent

Sites like Experian and TransUnion will include rent data on your credit report. Unfortunately, you can’t just log in and report that information yourself. Instead, your landlord can use an agency like RentReporters to report the data for a small fee. But small and independent landlords may not opt to do this for you and are under no obligation to do so. But there’s another option. Pay your rent through WiliamPaid.com for a small fee and the activity will show up on your credit score.

Get a Credit-Builder Loan

Scout around for a local credit union offering credit-builder loans of up to $1,500. Credit unions typically offer lower interest rates to their customers and are easier to secure loans through than traditional big banks. Customers put the money loaned into a savings account to accrue interest and make regular payments on the loan until it’s paid off. After the loan term ends, collect the interest or reinvest.

If you can’t take out a credit-builder loan, reevaluate your spending and income potential. Those receiving regular annuity payments may get a few hundred dollars a month, which in turn gets spent on bills, groceries and a social life. Your money may serve you better if you sell annuity payments for a lump sum of cash now, and then you apply that money toward a credit-builder loan, a secured credit card or any outstanding debt you have.

Get a Secured Credit Card

Unlike traditional consumer credit cards, a secured credit card requires cash collateral upfront. If you add $400 to the card, that’s exactly how much you can spend, unless the creditor extends a line of credit for good payment activity. Secured credit cards usually carry annual fees and offer less flexibility than traditional cards.

Experts suggest charging 10 percent or less of the amount on a secured card each month to further boost your score. The ratio of debt verses what’s left on your card can inch up points on your score. But this also works in reverse. If you have a $400 secured credit card and charge $390 on it, the high ratio of debt verses your credit line can actually deduct points from your score. But within a year of responsible use, you should see your credit score improve enough to apply for other traditional credit cards with higher limits.

Peter Galvin is a retired financial planner who has enjoyed writing and spending time with his three children since his retirement in ’09. 

The Economy’s Up! So Why’s the Market Now Tanking?

Unemployment figures are down – by some estimates, we will have regained all the 7.9 million jobs lost during the recession by next spring. GDP numbers, too, are up; the economy grew at a sharp 3.6% pace in the third quarter, faster than even most experts had anticipated. So why has the stock market lost over 2% of its value this week? Shouldn’t this good economic news be boosting stocks (and our 401ks)?

Opposites day

In these market conditions, up is down and down is the new up. Since the Fed began pumping money into the economy to fight the recession via a process known as quantitative easing (QE for short), markets have been accustomed to the extra support. But now that the economy seems to be on the mend, it’s likely the Fed will soon begin unwinding QE, and markets are scared of going without the extra boost. So in a bit of a twist, good economic news is now sending stocks down, while disappointing numbers can send the market on a tear.

Is it really so scary?

There’s an ongoing economic debate about the underlying health of the economy. Once QE is gone, will it falter and dive into recession again? Are the good GDP and unemployment numbers inflated due to QE? Are stocks now overvalued?

True, the market has been on a tear since its 2009 lows, but its growth has been typical of post-recession market increases. Company profits, too, have been growing at a healthy clip, up 39% from their recession lows, and most stock valuations do not seem to imply a bubble – yet.

Plus, Janet Yellen, the incoming successor to current Fed chief, Ben Bernanke, is committed to using the Fed’s available tools for boosting employment. That means QE is likely to continue at least through next spring or summer, and that any unwinding will be gradual and measured.

But is it enough?

Still, valid questions remain regarding the market’s reaction, and as the famed investment manager, Bill Gross of PIMCO notes, it really could go either way — but not as abruptly as you might think. He argues that an unwinding will probably be gradual, as would be a market reaction.

So, does that mean you should get out? Sadly, I (like everyone else) don’t have a crystal ball, but indications are that a full-out collapse is unlikely. There’s too much momentum in the underlying economy, a few more safeguards in our economic system now than there were in 2008, robust corporate profits, and a Fed determined to avoid it. That doesn’t mean we won’t experience declines — perhaps even sustained – but simply that barring hysteria or other unforeseen events, any declines will probably be more muted. And if you believe that the economy is healthy enough to withstand the removal of QE, there’s even an argument for continued growth.

Unless you’re an active trader (which we don’t recommend), this is all a moot argument, however. Someone invested for the long-term is unfazed by market gyrations. Just remember: If you’d pulled all your money from the market in 2008, you would have never experiences the dramatic 160%+ gains since. Staying the course on a strategy of index funds with some diversification based in your risk tolerance remains our recommended approach, no matter which way the stock market winds blow.

Holiday Credit Advice From The Money Coach

 

We spoke recently with NYT best-selling author & personal finance expert, Lynnette Khalfani-Cox about the proper use of credit cards during the holiday season. Check out this video for her tips and advice on the best credit card rewards for the holidays, managing your credit score, and other ways to maximize your credit bang for the buck.

 

 

 

 

How to Invest Your First $1,000

How to Invest Your First $1,000 :: Mint.com/blogSaving $1,000 is a big deal. Investing it for the first time is an even bigger one.

Once you’ve reached this milestone, you might feel excited to watch your investment grow as well as terrified you could lose it all.

But investing doesn’t have to be intimidating, and it’s not as complicated as you think.

Ready to invest your first $1,000? Here’s a guide to making it simple and rewarding.

Ask This Key Question

Before you start weighing all your investment options, start with one question: When do you plan to use the money?

That’s right, it’s not about buying up the trendiest stocks. It’s about choosing the best option based on how soon you plan to spend your money.

This is crucial due to a key factor: risk. A general rule of thumb: the sooner you plan to cash out, the less risky investment you should choose.

A strategy based on your risk tolerance and time horizon will better protect you against losses.

Let’s look at short- and long-term scenarios and options for both.

Minimize Risk for Short-Term Investing

If you’re looking to invest for a year or two with a short-term goal in mind, like a down payment on a car, you likely don’t want to risk losing money.

In this case, options other than the stock market may be best, including:

  • Certificates of Deposit. These often come with a guaranteed return over a certain term combined with very little risk of loss since the FDIC backs them.
  • Treasury Direct I Savings Bonds. These are bonds issued by the U.S. government. The current rate on these bonds is 1.18% per year, and it’s possible this will increase. They’re also considered very safe against loss.
  • GE Interest Plus. Rates for these accounts are about 1% on $1,000 invested, which is higher than many savings accounts offer today.

Short-term options are low risk but also offer lower returns.

[Related Article: What Is a Stock? (infographic)]

This is a tradeoff compared to the risk of losing a big chunk of your investment in the stock market and no longer being able to make your car down payment.

Focus on Growth for the Long Term

Long-term investing — over decades, rather than just a few years — is a whole different ballgame. The most common long-term case is saving for retirement.

When you’re young, you have a relatively long investment time-horizon increasing your ability to take risk and weather the ups and down of the market over many years.

Rather than the conservative options above which return only about 1% annually, you’re now looking to create an investment portfolio to deliver you the best long-term performance possible .

Asset allocation is the single most important decision you can make when constructing your portfolio.

[Related Article: Mint’s Top 5 Investing Tips]

Studies show that over 80% of a portfolio’s variance over time is due to its asset allocation. Typical asset allocation for a younger person saving for retirement might include just three asset classes: $600 in U.S. stocks, $200 in international stocks and $200 in bonds or equivalents.

How much to invest in each should be determined by your willingness to see your portfolio rise and fall in value as you head to retirement. Free tools like Jemstep’s Portfolio Manager can help you find an asset allocation strategy that’s custom-tailored to your needs.

Next you need to evaluate and select the vehicles that are best suited to deliver strong results. A good place to start is “pooled vehicles” like mutual funds and exchange traded funds (ETFs).

[Related Article: How to Pick ETFs]

Pooled vehicles reduce the amount of time you have to spend researching individual stocks, and help you diversify and spread the risk.

With $1,000 to invest, a good place to start is with low transaction cost index ETFs (Exchange Traded Funds) as they are tax efficient and have low operating expenses.

You can also find ETFs with no transaction fees at brokers such as Charles Schwab, Fidelity or Vanguard.

When investing for the long-term in the stock market, keep these considerations in mind:

  • Use retirement accounts for tax advantages. Investing in a Roth IRA means your money can typically be withdrawn tax free in retirement. These accounts can be created in minutes with nearly any brokerage firm like Charles Schwab or Vanguard.
  • Monitor investments, but not too closely. There’s a misconception, especially among first-time investors, that you must be actively watching the stock market constantly. This just isn’t the case. Your initial $1,000 does require some attention, but this could simply be on a monthly or yearly basis. As you invest more and your situations changes, the complexity of managing increases and you may want to use a tool  like Jemstep Portfolio Manager to help guide your investments strategy and monitor and adjust your portfolio on an ongoing basis.Investing your first $1,000 is exciting, but a realistic approach will serve you best no matter how long you plan to let your money grow.
  • Before careful of the following, especially when you’re just getting started:
  • Buying individual stocks. This often isn’t the best way to get started. Picking stocks is more complicated and often riskier, as well. With only $1,000, it’s harder to get good bang for your buck while still diversifying your holdings.
  • Funds with high expenses. Mutual funds get a lot of buzz, but if you’re not careful, they can eat away at your earnings with high expenses.
  • Too good to be true” investments. The goal isn’t to turn your $1,000 into millions. Don’t chase pipe dreams of multiplying your money many times over with risky investments or borderline scams that make unrealistic promises.

Maybe most importantly, don’t wait!

The earlier that  you invest, the more time your money can spend growing. Getting started is more important than finding the perfect fund or stock.

What is your strategy for investing your first $1,000? 

How to Invest Your First $1000” was provided by Mint.com

Mint is a free personal finance tool that brings all your financial accounts together online or on your mobile device, automatically categorizes your transactions, and helps you set budgets so you can achieve your financial goals.

5 Ways to Get More Done — By Doing Less

5-Ways-to-Get-More-Done-By-Doing-LessTony Schwartz, CEO of The Energy Project, garnered national media attention this year after writing an opinion piece called “Relax! You’ll Be More Productive” for The New York Times. In it, he argues that though running ourselves ragged is par for the course in our culture, we are actually cheating ourselves of the one resource we can control: Energy. Though energy, like time, is finite, Schwartz argues that it’s a renewable resource that we can all control—by taking strategic breaks, resisting the urge to be non-stop, and ultimately, optimizing our productivity. While few would argue against a theory that advocates more sleep, vacation, and “me” time, the challenge is that it’s easier said than done. But, with some self-awareness, and strategic change in your own ideology—it can be. Here are some expert tips on how and why relaxing and doing less could be the key to boosting your productivity.

Look calm, instill confidence.

Though more responsibility presumably leads to more stress, a study of stress hormone (cortisol) levels among military leaders and corporate executives published in the Proceedings of the National Academy of Sciences of the United States of America (PNAS) confirmed the exact opposite. Compared to their subordinates, cortisol levels of such high-ranking leaders were nearly 30 percent lower. By the same token, you can help your own stress levels, and your career by taking control of how you react to high-pressure situations. Body language research by social psychologist Amy Cuddy indicates that maintaining non-verbal postures that communicate relaxation and ease (like feet up on a desk with hands behind your head) can actually boost the perception of confidence others have in you, while at the same time, lowering the cortisol levels in your body.

Clear workspace, clear mind.

Having a cluttered desk doesn’t just make you feel frantic and distracted—it can hinder your career. In a national study conducted by CareerBuilder, nearly 40% of workers reported having a negative perception of a person with a paper-strewn desk, and nearly 30% of hiring managers surveyed said it would cause a person to be passed over for promotions. The same goes for having multiple windows open on your computer screen, and keeping your email and instant messaging functioning at all times. Mary Czerwinski, one of the leading authorities in the field of “interruption science” has researched the impact of multi-tasking at companies like Microsoft. Her studies revealed that workers took 15 minutes on average to return to serious mental tasks after they stopped them to respond to incoming email messages.

Recognize that not all breaks are created equally.

You’ve probably read that getting away from your desk periodically, taking a brisk walk, or hitting the coffee shop can clear the cobwebs and boost your workday productivity, but in the May 2012 issue of Harvard Business Review, Portland State University professor Charlotte Fritz shared findings that tell a different tale. According to her research, only breaks that are in some way related to work actually boost productivity during the workday. The rest, according to Fritz, actually make you less productive because they distract you from the work at hand. Be strategic the next time you take a workday break: Take your coffee with a side of co-worker and talk about a current project, or participate in a conference call while taking a walk outdoors. To that end, Fritz also found there is a strategy to maximizing the rejuvenating power of taking vacations: Because a very long break can be counterproductive to stress management when you return to a pile of “to do’s”, you’ll benefit more from three shorter trips away from work each year than one long one.

Redefine what is worth your time.

Because our culture rewards and enables expert multi-taskers, many of us form the belief that doing “nothing” is shameful and lazy. But, Debra K, a self-described  “former chronic workaholic super human overachiever” turned author, and host and executive producer of the PBS documentary The Journey into Wellbeing®, says that all overachievers can be reformed to find more balance—but it starts with redefining what is productive, in regards to emotional payoff. Instead of trying to tackle a monstrous list of “to do’s” like errands and weekends chores, she recommends identifying what takes the least amount of work, but offers the most reward for  your effort.

Put yourself on your to-do list.

Debra K says one her “aha moments” in managing overachieving tendencies was scrutinizing her to do list—and noticing that while it was full of tasks and energy spent on building “others” business, success, happiness and well being, there was no place reserved on it for her own well-being. She says, “It was almost shocking to realize I had put myself at the bottom of my own priority list, but a big step in reducing my chaotic overworking was to move myself to the top of it.” Because making her own mental and physical wellness a priority stemmed from a place of self-care versus selfishness, she was able to feel “okay” about setting personal boundaries, and taking time to rejuvenate. Debra K also suggests literally setting a timer on your phone or computer a few times a day to remind yourself to power down, and simply, relax.