Financial Education Videos
Watch Consolidated Credit's free financial education videos to build a better financial outlook.
Budgeting Made Easy: A Stable Financial House
A good budget provides a framework for financial stability and success. You build a stable money management structure that allows you to reach your financial goals. All of your monthly expenses should fit somewhere into that structure so you can avoid taking on high interest rate credit card debt for things that should be covered by cash.
Here’s a quick look at how a balanced budget works.
Building a budget starts by laying the foundation and adding up your total monthly income. Expenses should be separated between one of three levels – fixed, flexible and discretionary.
The first level is where all your needs with a fixed cost live. That’s any need with a cost that stays the same every month. The next level is where needs with no fixed cost live. In other words, things you can’t live without but the cost can vary from month to month. The final level is where your wants live. You know, the things that aren’t necessary but make life fun.
Credit card debt payments can live in one of two places in your budget, depending upon how much debt you have. If you have low balances and pay off what you charge at the end of every month then credit card payments live with those other flexible expenses. However, if you have large debts to pay off make big payments every month until you’ve paid it off in full.
Discretionary expenses are where all the fun and frills live in your budget. And this is where you should start if you need to make cuts to scale back. Savings often gets treated like a discretionary expense and shoved in with the rest of your wants, which means it can get lost in the mix or cut entirely. But really, savings should move in with your fixed expenses. Decide how much you can save each month and make that a set cost in your budget that you pay to yourself every month.
Once you’ve constructed a budget, you have to maintain it to make sure it stands up over time. Every few months compare your actual spending to what you planned to spend. This will make sure you’re keeping everything within the structure you set. This ensures that your financial house can hold all of your monthly expenses so credit cards don’t have to cover what’s been left out.
If you see you’re overspending consistently somewhere you may need to work on your budget again to make sure it’s not too bloated to fit the foundation. In some cases this may mean you have to cut something to make room. Eliminating debt or adding income will give you the ability to add these expenses back once you have room to fit them in.
For more advice about budgeting and managing money visit consolidatedcredit.org.
Take Down Credit Card Debt
Debunking 5 Financial Myths
Debunking five financial myths. Five misconceptions that could be costing you big.
Our number one myth is that making monthly minimum payments means you’re responsible and you’re dedicated to paying off your credit card debt. But the truth is minimum payments keep you in debt longer and the downside is the more paying you make, the more interest you’ll pay. For example on a $1,000 debt if you had a 15% interest rate you’d pay over $850 in interest.
You should be devoting as much money as possible to pay down your debts. Even an extra $10-$20 a month can help reduce your debt faster. It’s also a good idea to pay the monthly minimum plus whatever interest was charged to your account that month. But the best way is to pay off your balance in-full every month.
Our second myth is that you don’t need 20% when getting a mortgage. The truth is most traditional fixed-rate mortgages require 20% down and the downside is that if you have less than that you’ll be stuck paying private mortgage insurance and your payments will be more. For example, with 3% down on a $150,000 mortgage, your private mortgage insurance would be over $100 a month.
If you have less than 20% to put down, find out about down payment assistance options. You can always visit our housing section for more information. The best way is to save up that 20% down so you can qualify for the home you really want.
Our third myth is that budgeting is time-consuming and a hassle, but the truth is new technology and apps make budgeting very easy and the downside of not using a budget is that you’re flying blind without really knowing where your money is going. And the cost for not knowing where your money is going can be overdraft fees, bounced checks and more.
A better way to get into the budget habit is to check if your bank offers free money management software. The best way to budget is to find a third-party secure platform, like PowerWallet.com, where you can integrate all of your accounts together.
Myth number four: There’s nothing wrong with running up credit cards as long as you don’t go over the limit. The truth is the amount of credit used is a key factor in your credit score. Never use more than 20-30% of your limit, if possible. The downside is if you’re using 50% or more of your credit limit you’re probably decreasing your credit score. The costs to maxing out your credit can be many. One of the biggest is connected to your credit score, because the better your credit score is, the less you’ll pay in interest on just about everything.
So never charge your credit cards up to the maximum limit and only try to charge about 20% of your available balance, but the best way is to pay off your credit cards every month and never carry a balance.
And myth number five is that your credit report is an accurate picture of your credit history. The truth is credit reports have mistakes and errors, and that may decrease your score. The downside is that a low credit score makes it hard to qualify for the best terms and rates on loans and credit. The cost of many mistakes could take hundreds of points off your score.
You should review credit reports from the Big 3 – Equifax, TransUnion and Experian – once a year to make sure everything is accurate. The best way is to get your credit reports for free via annualcreditreport.com.
We hope we’ve debunked some common money myths for you. If you’ve already gotten into trouble because you didn’t have the knowledge you needed, we can help. Call Consolidated Credit today or complete our online application to request a free consultation with a certified credit counselor.
The Game of Good Credit
Come on down! You’re the next contestant on the Game of Good Credit!
Achieving good credit is a game of strategy. You have to play tactically if you want to win.
Let’s begin with the basic gameplay of how to go from the starting point to winning the game of good credit so you can maximize your credit score. The overall goal in the game is to move forward from the starting point, taking the right steps to reach your credit goal.
Each step you take can have a positive, negative or neutral effect. You want to make smart moves that boost your score, while avoiding traps that set you back. Positive actions like making payments on time and keeping your credit utilization low help move you forward. And doing things like paying off a credit card in full can give you a big jump up the board. But actions like paying late or allowing an account to go into collections can set you back and put you farther away from your credit score goal.
As you play the Game of Good Credit, keep in mind that even if you have to make a really bad move it doesn’t mean you’ll have bad credit forever. You may just have to start again to begin moving forward toward the score you want. Most negative actions set you back for 7 years. Although some things like Chapter 7 bankruptcy can set you back longer. But if you have a setback, you can start to move forward immediately!
The BEST move you can make is to pay your bills on time – this is the biggest factor in calculating your score. Each time you pay a credit card or loan on time it’s a positive action that lets you move forward. If you’ve had setbacks, start making payments on time to move forward again. But keep in mind that the amount of credit you use affects how quickly you can move up the board.
Credit utilization is the second biggest factor in calculating credit scores – that’s the amount of debt you have relative to your total available credit. The less debt you have, the faster you can advance towards better credit. So by keeping your debt low and making payments on time you can forward to get closer to your credit goal.
Length of credit history is the third biggest factor in your score – creditors believe people who have been playing the game longer are better at it. So don’t close your oldest accounts or let creditors close them due to inactivity, because this can actually set you back. Keep accounts in good standing and you’ll get an extra boost on your way to a winning credit score.
The number of times you apply for new credit within a six month period is a factor in your credit score. If you try to take too many new credit moves at once, you can actually get set back. Only draw a new loan or credit card when you really need it, and don’t apply for credit cards in quick succession. That way getting new credit will be a neutral action that doesn’t set you back.
The type of credit and number of accounts you have also has an impact on your ability to win the game. If you pick up a diverse variety of debts along the way like a mortgage and other loans along with a credit card or two, you’ll have an easier time reaching your goal.
We have a few tips that can help put the big win within reach. Be aware that you can be penalized paying late as well as for moves that you didn’t actually take. This happens when negative items appear in your credit report by mistake – the credit bureaus think you made a bad move when you really didn’t. If this occurs, you have the right to dispute the item to have it removed. If you’re successful with a dispute, you’ll move up the board.
Additionally, players often think asking for help will set them back from reaching a winning credit score. But using services like credit counseling if you’re having trouble can actually help you move forward faster instead of setting you back. Completing a debt management program helps you eliminate credit card debt and may aid in helping you build a positive payment history. It can also help you avoid major setbacks on the board like debt settlement and bankruptcy. So you can get the help you need and still reach your ultimate credit goal, allowing you to win at the game of good credit to improve your financial standing overall.
Make the move to Consolidated Credit and let us help you develop a winning strategy to help you eliminate debt so you can achieve your credit goals.
Penny Wise, Pound Foolish: How to Save Everyday
Be penny wise when it comes to saving and avoid pound foolish actions that lead to debt.We get it – saving money is usually easier said than done. When you compare the money you have available to save now versus how much you need to accomplish major financial goals in your life, the task can seem so daunting that you’re unmotivated to even try. On the other hand, you’d be surprised just how fast savings can add up when you’re dedicated about saving money everyday in your budget. A few dollars here and there can become big money when its set aside effectively and put into the proper savings accounts. So even though it may seem like an uphill battle, the hardest part of developing an effective saving strategy is really taking the first steps to reduce costs in your budget so you can set aside as much money as possible each month.
Making sure savings are used effectivelyThe video above – and other upcoming videos in the Penny Wise, Pound Foolish series – lay the groundwork for how to find extra cash in your budget and avoid overspending so you can save as much as possible. However, setting the money aside is really just first step in developing an effective saving strategy. In other words, if you’re just diverting all the money you set aside into a standard savings account with an interest rate of less than .05% then you’re really not saving effectively. Instead, you need to organize your savings and allocate it for specific purposes. And at least some of that money should be diverted into savings and investment tools that grow at a faster rate so you can actually save effectively to achieve your long-term goals. So let’s say you make $3,000 per month after taxes. In an ideal financial world, you want to set aside 10% of that income every month, so you save $300 every month. With a strategic saving strategy you might divide that money thusly:
- $100 is transferred to a Roth IRA to support your retirement goals
- $50 is put into your regular savings account to get pooled in with your financial safety net or rainy day fund for emergencies and unexpected expenses
- $50 is put into a holiday savings account so you can have a cash-only Christmas without credit card debt
- $100 is put into a Money Market Account, which has a higher interest rate than your standard savings account