5 Great Financial Resolutions for 2016

5 Great Financial Resolutions for 2016

The new year is a perfect excuse to check in with whatever needs revamping in your life, and your finances are no exception. Health and finance are the two most common resolution categories, but considering only about 8% of people achieve their resolutions, there’s a good chance your resolutions aren’t working for you.

Most people stick to vague, overarching resolution ideas, but don’t have the details to make them happen. Here are five of the best resolutions you can try this year, including the steps to make them happen. Cheers to 2016!

Set a Budget You Can Stick To

The budget is the backbone of your entire financial plan. If you set one resolution this year, this should be it.

But don’t stop at “set a budget.” That’s a surefire way to fail by mid-January. Take action and get specific with your plan!

Create a spreadsheet with percentage breakdowns of what goes where each month. Use the cash-only envelope system. Look into using a budget app like Mint to help you track your spending.

Whatever you decide, come up with savings goals and specific percentages to help keep you from overspending.

Create a Debt Repayment Plan

“Pay off debt” is another resolution that needs an attack plan to be effective. It helps to come up with a debt payoff timeline that you can hold yourself to, and then funnel money at your debt accordingly.

Start with smaller debts first and work your way up. Or choose specific debts to pay off within the year, like your car or credit cards. Don’t forget to look at each interest rate for the specific debt you have, because that can help you decide which to tackle first.

Again, keeping it detailed will help you stick to the goal you’ve envisioned.

It also helps to have a clear reason that you’re paying off your debt. This works for any resolution, but especially when putting your money toward debt instead of something you want to buy.

What drives you to get the debt paid off? What will it feel like when you’re debt-free? Keep those motivations in mind when you’re feeling hopeless about paying off your debt.

Save More Money

The is one of the most common financial resolutions people set, but there’s a reason people don’t stick to it. Once again, it lacks actionable steps!

At the end of the year, really take a look at where you are financially and where you need to be to feel more comfortable. Maybe you’d like to add more money to a 401(k), create your kids’ college funds, or cushion your emergency fund.

Figure out your goal, break it down into monthly savings goals, and factor that into your budget. Then see the next resolution below to ensure your goals are being funded.

Automate Your Finances

This is a simple step that can make a massive difference a year from now. First of all, automating your payments will keep you from missing payments and accruing late fees and penalties.

Second, you won’t be able to drag your feet on those payments. They are automatically coming out of your account, so you can’t delay them to buy something else.

And third, you can set up automatic transfers into your savings account. If you have money coming right out of your paycheck and going to your savings, you won’t look at it like spending money. Even a small amount every month will add up.

It’s helpful to figure out how much you’ll have in a year, as well. Saving $100 might not seem like it’s worth it at first, but if you keep in mind that it will be $1,200 at year’s end, you might be more motivated to keep it going.

Review Your Credit Report (and Maintain a Strong Score)

This is a given each and every year, but it’s also easy to forget about if you’re not making any major purchases. You can check your credit report for free once a year at annualcreditreport.com.

This shouldn’t just be on your radar if you’re buying a house or shopping for a new car, either. Look up your credit report to make sure everything checks out. You’ll want to monitor it for suspicious activity or debts you didn’t realize you had.

You also want to maintain a good credit score. The best place to start is by consistently paying your bills, and then checking over your debts. Aim to keep your credit card balances low (ideally 30% or lower) and pay down your loans as much as possible. Also be mindful of how many lines of credit you have open; be careful not to open or close too many simultaneously!

Keep balances low, pay bills in full and on time, don’t open (or close!) too many accounts at once, etc)

Staying conscious of your overall credit health can help guide your New Year’s resolutions for a much stronger financial 2016.


Heather SwickAbout the Author: Heather Swick is an author, freelance writer, and editor who has worked for news outlets, national magazines and blogs. She is driven to help others achieve their career and financial goals and share her own experiences along the way.

Reduce Your Student Loan Debt Burden Next Semester

Reduce Your Student Loan Debt Burden Next Semester

Student loan debt has become a huge burden on recent graduates, with the average college grad carrying $33,000 in student loan debt in 2014. If you can’t afford to make payments on your student loans, you can try to buy some more time with deferment or forbearance, but you will still pay the price in the long run.

When loan payments are postponed through one of these programs, they still accrue interest. When it’s time to start back up with payments, the balance will have increased even more. If you just avoid or ignore paying your loans, they could go into default. That can cause lenders to take legal action against you and will leave negative remarks on your credit for at least seven years.

This all sounds like bad news for college students with debt — and the reality is, it’s not easy to balance this financial responsibility right out of college. Trying to reduce your student loan burden now while you’re in college is the best solution. Try one (or all!) of these ways to keep your student loan debt burden to a minimum as a college student.

Search for Scholarships

Scholarships are a great way to earn a large sum of money to go toward your education that you won’t be required to pay back. Unfortunately, scholarships are often overlooked and underestimated.

Sometimes, it’s much easier to apply for a quick loan than write an essay, fill out an application, and ensure that you meet other requirements for a particular scholarship. But if you take the time out to search for scholarships and grants and apply for ones you qualify for, you’ll lessen your financial burden in college and not need to rely so heavily on borrowed funds.

Check with your college or university to see if they have a scholarship office or list of current scholarships that are open for applicants. Ask your advisor if he or she knows about any public or private scholarships that you could apply for. And double-check scholarships that you might have applied for in the past but didn’t receive. You may be a more attractive candidate now than the first time you applied.

Don’t forget about private scholarships and grants. You can search online for private scholarships on sites like FastWeb.com or Scholarships.com. When searching online, just make sure the scholarship sites you look at are legitimate. Scholarships.com has a A+ rating with the Better Business Bureau (and you can check with the BBB before sending in your info to any source that claims they provide funding).

Focus on Saving More Money

College can be such a fun experience, but the cost of an extremely active social life adds up on top of the rising cost of tuition and fees. It’s important to learn how to save more and live well on less if it means avoiding extra student loans.

You can get a roommate to help cut your cost of living. You can also get rid of extra expenses like cable and transportation costs by switching to cheaper alternatives, like Netflix and Hulu and walking or biking instead of maintaining your own car.

Invest in a crock pot and cook more easy meals at home, and in batches, so you can have plenty of leftovers for additional meals. Check out thrift stores first when you need clothes, take part in free events around campus, and opt for nights in with friends instead of dropping a lot of cash at bars.

The money you save from cutting your expenses can go straight to the bank to use toward the following semester’s tuition. You don’t necessarily need to miss out on the college experience. You just need to make smart swaps and choose inexpensive options over things that cost more cash than you really have.

If you fund your fun with money you received from student loans, you’re effectively financing your lifestyle — and you’ll have to pay it back one day, plus the interest. Is spending money you don’t have really worth having to pay 5% more than the actual cost when it comes time to repay your student loans?

Increase Your Income

If you make more money during college, you won’t need to borrow as much to help fund your education. Getting a part-time job in college is one of the best ways to earn some money when you’re not in class.

You can also take advantage of other flexible ways to earn money on the side like babysitting for family or others in your neighborhood, tutoring other students, working on campus, or working online.

You can earn a nice income from working online whether it’s becoming a virtual assistant for busy business owners and bloggers, writing for other websites and blogs about topics that interest you, or taking surveys and selling items online via sites like eBay, Amazon, and Poshmark.

Freelancing can even help your future career, and there’s no reason to wait until graduation to start gaining experience. Set up your own blog or profile, connect with influencers in your field, and start pitching yourself!

Empower Yourself to Stop Student Loan Debt Before It Starts

Student loan debt statistics should not be taken lightly. If you’re still in college, you have a few options to take when it comes to lowering your student loan debt burden. Focusing on obtaining public and private scholarships, increasing your income, and saving more of what you have can all help lighten your debt burden upon graduation — and make it that much easier to start your fully independent, adult life on the right financial foot.


Chonce MaddoxAbout the Author: Chonce is a freelance writer who’s passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog, MyDebtEpiphany.com.

How to Manage Your Money with a Variable Income

How to Manage Your Money with a Variable Income

If you’re self-employed or are paid on commissions, then you know very well that it can be a nightmare to manage your money with variable income.

On the one hand, you always have the opportunity to make more money. Just put in a little extra elbow grease or close a few extra sales. But on the other hand, cash flow gaps happen. You could have a slow month, or maybe you weren’t able to work as many days due to illness.

But you can learn to manage your money even with a variable income that ebbs and flows. Start by putting these tips to work for you.

Calculate Your Minimum Acceptable Income

When you’re self-employed you actually have to deal with two budgets: you have your personal budget for all of your living expenses, and you have your business budget for all the services you need to continue making money.

This can get very confusing. To make matters worse, self-employed individuals have been known to sacrifice their personal financial goals in the name of the business. That means they continue throwing all their money into their investment (often on things that are unnecessary) without taking care of their own financial needs.

Here’s the solution: you need to figure out what the bare minimum budget is for both your personal finances and your business finances. Determine what your business needs to run each month and calculate what you need to live on each month. This gives you a number you can use to figure out your bare minimum income goal for each month.

To start, you need to evaluate your current situation and then track your spending. Mint.com can help you figure this out for free. Simply connect your bank accounts, spend time categorizing transactions, figure out where you can cut expenses, and create your two budget categories.

Note that this is the bare minimum amount. Start here, but know that eventually you’ll need to account for taxes, savings, and retirement contributions in order to get a full financial picture.

Determine Your Tax Rate

If you have variable income, there’s a good chance that your income is pre-tax dollars. That’s why it’s up to you to save for taxes as you make money. This is an integral part of managing your money when you have variable income and it’s an area that can get ugly if not properly handled.

The Money Book for Freelancers, Part-Timers and The Self-Employed suggests creating a separate savings account where you sock away at least 15 percent of everything that comes in. This covers the federal self-employment tax when Uncle Sam comes to collect his share.

However, it would probably be wise to sit down with a financial professional to figure out what your tax rate actually is instead of relying solely on a guesstimate. This varies by community, state, how you make your income, deductions, and so on.

Rather than trying to figure it out yourself, create a tax plan with your accountant. They are much better qualified to help you with taxes when you manage variable income.

Pay Yourself First

This applies to everyone whether they have variable income or not. If you want to meet your personal financial goals, you must make sure to pay yourself first. That means you sock away some money for yourself before you pay anything else.

This is a difficult thing for people to do. If you have variable income, you worry that you won’t make enough to cover all of your expenses. Paying yourself first seems like a major risk.

But consider what begins to occur when you do get in the habit of paying yourself first. The most obvious benefit is that you actually begin to grow your savings. This will help cover you during lean months.

The second benefit is that it may actually force you to make more money to cover your expenses. Or, at the very least you’ll be more conscious about the money you’re spending throughout the month because you begin to prioritize your own financial needs above all else.

In essence, it’s not just a new behavior to take on, it’s actually an entire shift in perception. With time you begin to realize that you do have enough to meet all of your needs and it becomes much easier to manage your money.

Allocate Using Percentages Instead of Amounts

One way to make sure you manage your money when you have variable income is to budget using percentages instead of specific amounts. Simply put, if you have variable income it can be difficult to say “I’m going to invest $X into an emergency fund every single month.”

You could do it that way if your income is pretty regular, but what about the months where you make more money? Is it just going to sit there or get spent? Or what about months which are a little leaner and maybe it’s between saving $X and paying the credit card bill?

One way to deal with this is to do all of your budgeting based off of percentages. You already do this for your taxes. Now apply the idea to other parts of your budget, too.

Tiffany “The Budgetnista” Aliche, for example, states how she allots 5 percent of every client payment toward her emergency fund. This allows her to make sure she saves for emergencies without overextending herself due to fluctuating income.

While managing money with varying income is a little more convoluted, it can be done. There are plenty of people who manage varying income successfully and by following our guidelines you’ll be able to do it too.


Amanda AbellaAbout the Author: Amanda Abella is an Amazon bestselling author, speaker and personal finance expert who helps millennials make money their honey through online business. She has built an online brand that touches thousands each month and has been featured in Forbes, The Huffington Post, Seventeen Magazine and more.

How to Afford Your Dream Wedding Without Going Into Debt

How to Afford Your Dream Wedding

It’s easy to get wrapped up in the Pinterest wedding culture. As soon as you’re engaged, there are endless sources of inspiration to get you started on your planning.

Before you know it, your online wedding includes a photo booth, signature drinks, five kinds of desserts, three different wedding dresses, and a string quartet at a French winery.

There’s no requirement that a wedding has to cost the same as a couple of years at a private university, but it can start to feel that way. If you get engaged this season, don’t let your wedding planning get out of hand. Here are some tips on choosing a budget, sticking to it — and still having a wedding you love to look back on.

Stop the Comparisons and Set a Budget

You know a friend who had an open bar, the hottest band in town, and 300 people at her downtown wedding. How are you going to top that?

Here’s the thing: you don’t need to compete with her big day — or anyone else’s! Do you even want something extravagant and expensive, or are you getting caught up in someone else’s ideas of what you “should” do?

Be honest with yourself about what you want, and always ask: do you want those things because they matter to you, or because you want to impress people? Don’t forget that a wedding is really just about you and your future spouse, and everything else is just extra.

It’s nice to throw a party your family and friends will be impressed with, but you also don’t want to start your brand-new marriage with a mountain of debt. Consider what you can really afford, what kind of help you are getting, and what you feel comfortable splurging on. Use that information to set a realistic budget.

Do Your Homework

Speaking of realistic, make sure you study up before envisioning your dream day. Go into it understanding average costs of venues and vendors in your area. Don’t get hooked on an idea that you could never afford.

Also look into peak times and potential discounts. You can get better rates by having your wedding on a Friday or Sunday rather than Saturday afternoon, or by choosing “off” months that most people overlook.

Prioritize Your Wants and Needs

There’s nothing wrong with wanting to splurge on a designer dress or luxe reception venue. But to keep it realistic, you probably want to choose one or two big things that you want to prioritize.

After you know your budget and average costs, then you can determine what matters most to you. If you want the best photographer in town, maybe you forego that photo booth you’d been eyeing. Or if you book the most gorgeous venue, you go easy on the decorations to let the space speak for itself.

You can have what matters most to you if you’re willing to be flexible on other areas.

Make Strategic Cuts

The number one area that can save you money is the guest list. If you’re wanting to save money, take a hard look at who you’re inviting. Are you inviting people because you want them there, or because you feel obligated to include them on the guest list?

You can also look into extras like welcome bags, favors and other sneaky little costs that add up fast. The alcohol you’re offering is often an enormous cost — and it’s not necessary to have a fully stocked, open bar with signature cocktails. Most people are just fine with complimentary beer and wine.

Keep Things in Perspective

Whenever you feel pressured to go over budget on a wedding expense, consider whether that’s really going to matter to you ten years down the road. Would that money be better spent elsewhere, like on a down payment for a house or on a honeymoon?

A wedding is ultimately about you and your soon-to-be spouse, so treat it that way. Throw the party you’re comfortable with, as big or small as you’d like it to be, in the budget you feel good about.

If you’re relaxed and happy on your big day, that is going to matter so much more than extra costs you thought you had to pay. At the end of the day, it’s the people you care about most coming together to celebrate your happiness as you start your life together with the one you love.



Heather SwickAbout the Author: Heather Swick is an author, freelance writer, and editor who has worked for news outlets, national magazines and blogs. She is driven to help others achieve their career and financial goals and share her own experiences along the way.

Focusing on More Than Money This Holiday Season

Focus on more

The holiday season is an exciting time. But it can also be a stressful time as people scramble to round up money to pay for gifts, go on trips, host parties, and so on. This can shift your focus to money-related concerns: maybe this leaves you trying to figure out how to save or earn more money for the holidays, or how to get the best deals on gifts.

While budgeting for the holidays and spending money on gifts is perfectly fine, the concept of money shouldn’t consume you during this special time of year.

The holidays are about more than money. Here are a few ways to help you focus on some other ways to enjoy the holiday season that don’t directly involve personal finance.

Worry About What You Spend Time On

The holiday season should be about slowing down and spending time with people who matter most in your life. Throughout they year, every day can be fast-paced as we pack our schedules with work and other tasks and often put off our relationships with loved ones.

This is one of the best times of year to rekindle your connection with loves ones and spend some quality time together. Invite distant relatives over, visit family members, or you can meet up with an old friend to catch up, share stories and create memories together.

There are many relaxing and low cost things you can do with loved ones like hosting a potluck or a movie or game night.

Give, But Know Your Limits

Giving is an important part of this season. But it’s also important to know your financial limits and avoid trying to buy someone’s love, affection or respect. If your budget doesn’t allow you to purchase a gift for everyone you know, you don’t have to stress out over how to get more money or work through the holidays non-stop.

Earning extra money is great, but not at the expense of your well being. There are quite a few other ways to give without having a ton of money and they just involve a little creativity.

You can give your time by volunteering with an organization to help someone in need. You can also make homemade gifts or cook or bake for people you know. If you have any special talents in the kitchen like being able to make yummy preserves, you can make batches of food items for others to enjoy.

Brainstorm a few ideas of items and services that customize that will add value and meaning to someone else’s life or simply just brighten their day.

Prepare for the Upcoming New Year

Before the year ends, take some time for yourself to relax and reflect on your life and your goals for the following year. Clear your mind from all the busyness of the holiday season and reflect on what you’ve accomplished so far and what you’d like to accomplish in the following year.

Take time out to declutter your home and purge things that you don’t want or need to take into the next year.

Create Traditions and Have Experiences

If you have kids in your family, holiday traditions are probably a must. But even adults enjoy holiday traditions and experiences as opposed to piling up a bunch of material items.

If you ask an adult or child what gifts they received for Christmas 5 years ago or how much money they spent or saved, they probably won’t even remember. But if you ask what their family’s holiday traditions are, they might perk up when they reminisce about the fun experiences they have each year proving once again that experiences and traditions usually outweigh money and gifts.

Play holiday-themed music in your house, bake cookies, attend a free tree lighting festival in your town, go sledding, take pictures to create and send out seasonal e-cards to distant loved ones — or make up a totally new tradition.

Money doesn’t need to be everything during the holiday season, and there are plenty of other areas of your life to focus on during this time. You’ll be able to make the holidays more fulfilling and enjoying this year by taking the time out to reconnect with friends and family, self-reflect, and create some new traditions.


Chonce MaddoxAbout the Author: Chonce is a freelance writer who’s passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog, MyDebtEpiphany.com.

3 Steps to Start Managing Your Money with Ease

3 Steps to Start Manage Your Money with Ease

One of the hardest parts of managing your money is just getting started. While there’s a wealth of information available online, it can feel very overwhelming to tread through it all in an effort to start managing your financial life.

There’s no one size fits all formula. Everyone’s life is far too different for a blanket solution. What works for some, may not work for others.

On the one hand, this is terrifying! It means it’s up to you to figure out your own budget. On the other hand, it’s actually great news; you can completely customize your finances to reflect your priorities, goals, and values.

But you gotta start somewhere. Here are some options you can try to start managing your money.

Try a Formula First

This may seem contradictory considering we just made the bold statement that there is no one-size-fits-all formula for creating a budget, but it’s much easier to at least start with a guide and then customize it as you go along. There’s also no need to try and reinvent the wheel and start from scratch.

Do you try the 50/20/30 budget? How about a zero sum budget? Or, maybe Dave Ramsey’s envelope system? The possibilities are endless!

Just note that this may heavily depend on how you make your money. It’s one thing to be a W-2 employee, and it’s another thing entirely to be a contractor or run your own business. The former has taxes taken out of their paycheck, the latter does not. (And that’s just one of many key differences.)

Which formula you choose to start with may also depend on whether or not you have debt. It’s easy for someone without debt to save 20% of their income toward financial goals. But if you’re in the process of paying off credit card debt, then Dave Ramsey’s methods may resonate and make more sense for you.

Many of these formulas and guides also walk you through the process of actually taking a look at your entire financial situation and getting clear about where you stand. This is crucial step that many people try to avoid when they attempt to figure it all out on their own.

Customize Your Budget According to Your Values

This where the “personal” comes into play in personal finance. Like we’ve already mentioned, everyone has a unique financial situation, which is why it’s up to us to create a viable plan that makes sense for our lives. Once you’ve gotten your feet wet with a known formula, then it’s time to start customizing it.

One way to do this is to take a look at your own values and goals. What matters to you right now? What financial goals are you working toward at the moment?

Retirement? Saving up for your kid’s college education? Buying a house?

These are the kinds of questions more financial planners are asking their clients as they create financial plans that will help their clients reach not only their financial goals, but some of their life goals as well. For some, building wealth is enough of a goal to stick to managing their money. For others, needing to understand a more in-depth “why” they need or want more money is critical.

That’s because at the end of the day, managing your money isn’t just about saving and investing. Money is a tool that helps us attain what we want out of life. By asking yourself what your big-picture goals are, you’ll be able to define what the money will be used for and you’ll be more likely to stick to your plan.

(Don’t just pick financial goals that you think are expected of you, either! Not everyone wants to buy a house — and that’s perfectly okay. Take the time to actually think about what it is you want out of your life and finances, and then adjust your plans accordingly.)

Learn to Manage Your Emotions

According to Gallup findings, half of Americans are still experiencing substantial financial anxiety. While this is lower than it was during the Recession, it’s still a much higher percentage than what we were seeing before the economic downturn.

If you approach your money from a state of fear, then you’re going to hate managing your money. If you hate managing your money, then you’re less likely to actually do it. This is true even if your balance sheets are looking pretty good — and it’s exactly why you need to learn to relax.

Fear also leads people to do some stupid stuff with their money. One example is when the markets are rocky and everyone starts selling their securities despite the fact that common investing wisdom (and decades of data) tells them not to. No matter how many times Warren Buffett tells people to keep their emotions out of investing, many of them don’t. This leads to shaky portfolios and a lot of money lost.

Just like the American stock market, your budget will have up days and down days. It’s how you handle the down days that can make all the difference in whether or not you make progress toward your financial goals. Managing your money has just as much to do with how you manage your emotions as it does with the actual numbers.

There’s a big difference between the person who cries “I’m never going to get out of this debt!” and the person who asks “How can I find ways of making extra money so I can pay down my debt?” The former is defeating, the latter is empowering. Now, who do you think is more likely to actually pay off the debt?

Managing Your Money Doesn’t Need to Be Scary

The act of managing your money doesn’t need to be so scary. You have guides available as starting points, and from there you can customize your plan, get clear on your financial picture, and begin to build a foundation that supports a thriving financial life.


Amanda AbellaAbout the Author: Amanda Abella is an Amazon bestselling author, speaker and personal finance expert who helps millennials make money their honey through online business. She has built an online brand that touches thousands each month and has been featured in Forbes, The Huffington Post, Seventeen Magazine and more.

Unexpected Costs of Buying Your First Home


Unexpected Costs of Buying Your First Home

It’s no secret that buying your first home is expensive. But for many first home seekers, the new homeowner fees can feel crippling. It’s not like it is on TV: potential homebuyers find a home they love, put in an offer, then magically find themselves lounging in their new living room.

There is far more paperwork — and expensive fees — than shown on TV.

The main budget consideration for most people is the down payment. How much should be put down, and what percentage of the house price is acceptable? The down payment is certainly the biggest chunk of change upfront and it’s one you’re probably already familiar with. But don’t forget these other costs that can add up quickly:

Home Inspections

Some are required, some are optional, but they all cost money. The home inspection alone costs about a couple hundred dollars, and costs will vary depending on the inspector you choose, where you live, and the type of property you’re looking to buy.

On top of that, you might have termite, electric, radon or lead paint inspections. Whether or not you’re required to have an inspection, it’s a smart move to make. It is an unexpected cost up front — but a qualified professional can unearth serious problems in the home you’re looking to purchase which could save you exponentially more down the road.

Closing Costs

Closing costs include a broad variety of fees, all paid at your closing. It includes underwriting fees, charges for pulling your credit report, recording fee, appraisal fee, and more.

The cash you need to pay out of pocket at closing will vary from property to property, but you should be prepared to put a few thousand extra dollars on top of your down payment money. A general rule of thumb is to budget your closing costs to add up to about 4% of the final purchase price.

The Cost of Moving

Buying a house may be expensive, but the actual move isn’t cheap, either. First you’ll have to stock up on boxes, tape and bubble wrap — and that can get pricey, fast!

If you can, track down boxes from others who have recently moved. You can also check with retailers and grocery stores and ask if they have any cardboard boxes you can take. You can also wrap breakables in your clothes, which you’d have to pack anyway.

Don’t forget to account for costs like renting a moving truck or hiring movers. It’s going to be very different if you’re moving in town or across the country, so do your homework ahead of time to avoid a surprise massive fee. These costs are fairly easy to research if you can map out each step of your move (whether it’s 5 minutes down the road or 500 miles across the state).

Movers might be expensive, but consider how much stuff you have and how long it would take to move everything. There’s an opportunity cost in play here, too. How much of your own time are you spending if you do it yourself? Could you invest that time elsewhere? Are you risking hurting yourself if you move without professional help?

Evaluate your situation, and then plan to include the costs you plan to take on into your overall budget.

Super Sneaky Unexpected Costs: Meals Out!

Here’s an unexpected costs that many first-time home buyers don’t anticipate: the cost of meals out you’ll purchase while getting settled!

Your first couple days at your new house, there’s a good chance your kitchen won’t be put together. Pots and pans might still be hidden in boxes, plates and cups won’t be washed, and your fridge will be mostly empty. Beyond that, you’ll be slowly stocking up on staples that run up your grocery bill, so be prepared for food expenses beyond your usual.

Once you’re in your home, you will have other expenses to consider as well. There will be lawn upkeep, garbage bills, heating and cooling costs, and subscription expenses you may not have had before buying a home.

The best way to cope with the change is to track everything, mark down when bills are due, and adjust your budget as you get used to your fluctuating home expenses. Soon your upfront costs will level out and you will be used to the financial changes that come along with homeownership.



Heather SwickAbout the Author: Heather Swick is an author, freelance writer, and editor who has worked for news outlets, national magazines and blogs. She is driven to help others achieve their career and financial goals and share her own experiences along the way.

What’s the Difference Between Active Investing and Passive Investing?

Getting to Know Active and Passive Investing

Ready to navigate your way into the foreign lands of investing? Great! One of the first topics to cover is the difference between active investing and passive investing. Which one will be right for you? Let’s dig in and find out!

What Is Active Investing?

Active investing, as its name suggests, involves an active approach to selecting your investments. The idea behind active investing is that by conducting a careful analysis of the investment options (for example, stocks and bonds), you can make an informed choice about what’s most likely to do well within a given market and then reap the benefits.

There’s often research and analysis involved — so if you’re into macroeconomic analysis, technical analysis, or any other kind of analysis, you might be interested in hand-picking your own investments. You can also hire a financial advisor to help you manage investments, if that’s more your style.

What Is Passive Investing?

Passive investing is a much less involved approach to investing. Rather than picking and choosing individual pieces of a market or fund and trading them frequently, you go in on the whole shebang. You’re investing in the total outcome of the entire market or fund. The main task is to choose the index funds that make the most sense for you and your goals over the period of time you’re planning to invest.

How Does the Difference Look in Real Life?

If the difference between active and passive investing is clear as mud for you, here’s an example to help: Ever heard of the S&P 500? Its full name is the Standard & Poor’s 500, and it’s a collection (or an “index”) of 500 individual American stocks.

As an active investor, you may want to study all the companies represented in the S&P 500 and put together a mutual fund that invests in the best 100 individual stocks. As a passive investor, you’d invest in an S&P 500 index fund, which covers all the stocks in the S&P. You’re investing in the entire market.

To make it a sports analogy, active investing is like studying all the MLB teams in the preseason and betting on your pick for which teams would be in the playoffs at the beginning of the season; passive investing is like owning all of Major League Baseball. A winning pick might get you a huge return, but owning the proceeds from ticket sales and licensing is a lot more reliable.

Can I Get a Point-Counterpoint?

There are pros and cons to each type of investing. Let’s break down the key points.

Active investments typically come with higher fees because active management requires a lot more time and movement in the market. You’re actively choosing to buy and sell. The big risk in actively management investments is that they involve a choice, and they require that you have utmost confidence in the chooser (whether it’s yourself or the professional you hire).

Choose well, and your hand-picked mutual fund could outperform the market. Choose poorly, and your returns may fall below what you would have made by sticking with a passive strategy.

Passive investments, on the other hand, are associated with lower fees (because there’s a lot less hands-on work to do). They’re also associated with lower capital gains distributions, which are reported on your taxes; lower distributions mean lower tax bills. Passive investments also carry less risk, because the return is effectively the average return over the investment period. In other words, the proverbial apple cart is much larger and therefore more difficult to tip. This is especially true in the case of long-term investing.

Studies that look into the comparative performance between actively managed investments and passively managed ones show that there’s no major difference in returns over the long haul, due in large part to the higher costs associated with active investments. That’s not to say that every single actively managed portfolio will end up in the same place as a passive fund in the same market; it just means the likelihood isn’t necessarily a given.

All of that said, generally speaking average investors are better served by a passive approach. A single blog post can’t tell you what’s right for your financial future, but having a basic understanding of passive vs. active investing should help you find the right direction. It’s critical to speak with a financial advisor when you’re making investment decisions.


Ashley GainerAbout the Author: Ashley Gainer is a writer and business coach who makes great content for entrepreneurs and small businesses and teaches other writers how to do the same. You can find her online at ashleygainer.com or on Twitter at @AGEditorial, and join her work-at-home tribe of parent-preneurs who are committed to being parents first.

How Can You Build Your Credit Score?

Building Your Credit Score
New to establishing credit and want to build your score? You’ve got the right idea, because your credit score is an important factor that impacts your finances in either a positive or negative way — and your actions help determine the outcome.

Credit often comes into play when you’re making huge life decisions like buying a house or even starting a business. Having a high score is highly sought after because it helps build trust with lenders and keeps interest rates low.

If you’re just getting started with establishing your credit, these tips and techniques will help you hit the ground running.

Pull and Monitor Your Report

Even if you don’t have any accounts open or very few, it’s still important to check your credit report and start monitoring your score each month if you want to build it up. You can access your full credit report annually by going to AnnualCreditReport.com.

Once you pull up your report, you can print it out in detail and review it carefully to make sure all the information is accurate.
If everything looks correct, the next step is to start tracking your actual score. You can do this by signing up for Credit Karma, a free tool to help you track and manage your credit each month. Credit Karma actually tracks your score for you over time and offers Experian and Transunion scores along with suggestions to help build your file.

Be sure to check out the comprehensive review we put together on Credit Karma, too!

Pay Down Any Existing Debt

If you have student loans, credit card balances, or any other debt, it’s best to make consistent payments each month to decrease the amount you owe. Making consistent payments on your debt each month is a must for improving your score.

If you don’t keep up with debt payments, your score will decrease — and holding balances could create negative remarks on your report that could stay active for years. Paying on your debt regularly and on time will not only decrease your balances and reduce the amount of interest you have to pay, but it will also help build your score over time.

Get a Secured Credit Card and Keep Your Utilization Low

One of the best ways to build your credit is to start using a credit card and making monthly payments. If you don’t have enough credit history or a high enough score to qualify for a regular credit card, you can always sign up for a secured credit card to get started.

Secured credit cards are great for building credit because it’s easy to qualify and most companies report the card to all three main credit bureaus each month. With a secured credit card, your limit may be low at first and you will need to put down a deposit to borrow against which will act as your limit.

But if you can spend a little on the card each month and pay the balance off in full, the positive payment history will be reported to the credit bureaus and it will help build your credit file. Most experts recommend spending less than 30% of your utilization. So if your limit is $300, you should only spend up to $90 per month on your secured credit card.

Consider Credit Builder Loan or a Low Risk Installment Loan

If you don’t want to get a new credit card just yet, another option is to take out a credit builder loan. You can take out a small installment loan at your credit union with repayment terms often ranging from six to 18 months.

Credit builder loans are reported to one or more of the three major credit bureaus and they can be made affordable so you aren’t struggling to make payments each month. Even if you have another type of loan with a 0% interest rate, you can still build your credit and demonstrate that you are a reliable borrower.

This option isn’t for everyone and may not make sense for you. It’s important that you never take out a loan you can’t afford to repay in an attempt to build your credit — and borrowing money shouldn’t be your first choice to build credit.

Building a good credit score depends on your ability to make consistent payments on-time without maxing out your credit limit or borrowing more than you can afford to pay back. Remember that building your score and history takes time, and the longer you manage good credit habits the better your score will be.

Whether you decide to start out with a credit card or go another route is solely up to you. As long as you are building your credit by implementing some of these techniques and not tearing it down, you’ll eventually have access to some of the best rewards credit cards and lowest loan rates allowing you to save more money in the long run.


Chonce MaddoxAbout the Author: Chonce is a freelance writer who’s passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog, MyDebtEpiphany.com.

Credit Report Versus Credit Score: What’s the Difference?

Credit Report Versus Credit Score

Whether you’re buying a house, saving for a new car or planning for your financial future, you need to be aware of your credit background. This involves your credit score and credit report, both of which are used to give information about you and your spending habits.

If you don’t understand the difference between the two, you might be surprised when it comes time to apply for a loan or a new place to live. Here are the key facts you need to know when thinking about your credit report versus credit score:

Understanding Your Credit Report

Your credit report sums up your entire history with credit. It collects data from your interactions with lenders, landlords, credit cards and utility companies, to name a few. Information comes from the major credit-reporting companies: Equifax, TransUnion and Experian.

The data these companies collect include:

  • Basic information, like your name, address, birth date and social security information
  • The types of credit you use and when you opened them
  • Balances and availability on lines of credit you opened
  • Payment history on bills and balances
  • Collection agencies you have been sent to, if applicable
  • New credit you have recently opened
  • Tax liens, bankruptcy or court judgment records that are in your name

Your credit report gives a comprehensive picrure of your credit history, but it doesn’t include the number that represents all that data. And that’s where your credit score comes in.

Know Your Credit Score

A credit score takes all of your credit report information into consideration, puts it all through a mathematical formula, and produces a number. The FICO score is the most common and widely used credit score formula.

A FICO score ranges from 300 to 850, with below 400 being a poor score and above 700 being a healthy score. If you have a high score, lenders are more likely to offer you a loan because you have a history of making your payments on time and not taking on too much debt.

Here is what is taken into consideration in a FICO credit score:

  • Your payment history – 35 percent
  • How much you owe – 30 percent
  • Length of your credit history – 15 percent
  • Types of credit in your history – 10 percent
  • Any new credit you have opened – 10 percent

How to Request Your Information

You can order a free credit report once a year from AnnualCreditReport.com. That will allow you to read through your entire history and watch for any suspicious activity. But accessing your credit score this way will usually cost you anywhere from $7 to $12.

Some companies like Credit Karma will give you a credit score for free, but that will only be an estimate — or it will be a number pulled from one of the credit bureaus and won’t be your actual FICO score. Yes, you have more than one score! Each entity generates its own score, but they’re usually fairly close to each other (so it’s okay to use a service like Credit Karma, because it provides a good estimate).

When you check your credit report, you might notice multiple credit inquiries listed. Those inquiries come from lenders obtaining a copy of your credit report after you apply for a line of credit. You might also find inquiries from companies you don’t know. Luckily, your credit will only be affected by reports pulled from the credit you apply for.

That doesn’t mean you should be worried about applying for any credit. The greatest risk to your credit is opening several new credit accounts in a short amount of time, so try to space them out as much as possible.

Keeping Your Credit Healthy

Whether there is a major financial purchase in your near future or not, healthy credit is something you should always strive for. Here are some tips to keep in mind:

Watch your credit balances. Pay down your balances and try to keep them at 30 percent of the credit limit or lower.

Don’t look like a risk. For example, paying less on your debts, suddenly charging up more balances, or generating lots of inquiries during a small window of time are red flags to lenders. If you want to purchase a house, for example, don’t go out and spend $10,000 in credit cards on furniture. That could affect your ability to secure your mortgage and may prevent you from getting the best interest rate available if that activity dings your score.

Be aware of your credit. Don’t forget to request your report once a year and make sure everything lines up with your own records.

When it comes to your credit, knowledge is power. Understanding your credit score and becoming familiar with what’s in your report helps you prepare yourself for major life decisions and purchases, and lets you know when you’ve veered off track. Keeping an eye on your history and preparing for the future are the best tools you have for a happy, successful financial future.


Heather SwickAbout the Author: Heather Swick is an author, freelance writer, and editor who has worked for news outlets, national magazines and blogs. She is driven to help others achieve their career and financial goals and share her own experiences along the way.