Yesterday, Today and Tomorrow

Every dollar that passes through our fingers has a destiny.  It is used to fund our lifestyle either yesterday, today or tomorrow.  Think about it.  We are either paying for the purchases of yesterday through payments, enjoying the comforts of today or preparing for our tomorrows by saving. 

YESTERDAY:
The purchases of yesterday might be something of lasting value like transportation that gets us back and forth to work so that we can continue earning dollars in the future or it might be those impulse purchases that some slick salesman made us believe we couldn't live without one more moment.  Yesterday purchases include the meal that we charged so we could go out with our friends or the gas we purchased when we were short on dough. 

Sales people know that we are short sighted generally, so when it comes to larger purchases, rather than talking about the price, they will often discuss the monthly payment.  Whether it is furniture, appliances, computers or cars, sales people know they can get their commission today if we will commit to piling on a bit of debt.

Those purchases of yesterday add up quickly if we are not careful.  In Bank On we discuss the magic of compounding, but our credit card companies have learned that lesson too and they can use that compounding against us unless we have a plan to minimize our reliance on debt.  If you are finding that the yesterday is stealing from your today and tomorrow, you might want to build a debt snowball by visiting www.powerpay.org.  At powerpay.org, you can create a secure login, list your debts and find out how a debt snowball can dramatically reduce your repayment time saving you both time and interest.

TODAY:
Our lifestyle has a cost.  The things we buy today can keep us from moving ahead on our financial goals.  We live in a culture where we are encouraged to get what we want now and let the future take care of itself.  The pair of shoes that catches our eye, the night out on the town, the camp for our kids all can wear away our cash. 

Sometimes, little things can be a spending leak that diverts our funds from the important to the trivial.  For instance, how often do you make an extra purchase at the gas station or buy more than what was on your list at the store?  Even vending machines at work add up over time. 

To get control of your spending leaks take the challenge of tracking your expenses for a month.  If you are diligent about tracking every single dime, you will be amazed at the potential leaks that will be uncovered in process.  You can find a Spending Tracker under our Worksheets section of this blog. 

Finally, one of the "today" expenses that may need some careful management are the fees we pay.  Every late payment, every overdraft transfer, and even some services come with fees.  We all pay fees of some sort, but the trick is to manage well so you don't pay for services you don't need.  Check out the worksheet for When Are Bills Due under the Worksheets section of this blog. 

TOMORROW:
The savings we earmark from each paycheck buys us opportunity and perhaps even time tomorrow.  Think about it; when you have an emergency savings established, you have options when it comes to funding those unexpected and unplanned expenses.  Savings also allows us to purchase larger items without having to finance them.  We can buy at a discount and never pay interest.

If I lose a job and have emergency savings, I have bought myself some security and perhaps even extra time so that I can find the next job that meets my career goals rather than needing to take the first thing that comes along.  Savings buys us time to recover from the unexpected without having to incur unnecessary fees.  We have time to regroup and plan for replenishing our safety net without having to go into crisis mode.  Nearly every financial crisis we face can be lessened or avoided altogether with that savings safety net in place.

We also need to have savings for those periodic expenses that come along like personal property taxes, back to school, birthdays, holidays, car maintenance and the like.  Savings keeps the periodic from becoming a budget buster.

After our basic savings is in place, having an investment plan to prepare for the long term like retirement is essential.  Few of us can work until the time we pass and most of us don't want to.  Preparing for retirement and later life expenses allows us to have greater opportunity to enjoy life in the future.  Savings and investing is like having an added layer of insurance to protect us in the future. Savings is flexible too.  Unlike insurance that only covers specific hazards, savings can be used to cover any hazard that comes our way. 

They say Cash is King.  With savings in place we can allow our money to begin working for us rather than stealing interest and opportunity from us along the way.  To get started on your savings plan, check out the resources at www.americasaves.org or get your Ballpark Estimate for retirement at www.choosetosave.org/ballpark.

What's Your Money Personality?

How we make financial decisions tells us a lot about our personality.  
Are you a CASH person or an ASSET person?  Take this quiz to find out:

Question	Yes	No
1.       I save money out of each paycheck
2.       I use my credit card when my account is low
3.       I pay more than the minimum payment on my credit card bill each month
4.       I have more in savings now than I did at the beginning of the year
5.       I use my credit card each month without paying off the balance in full
6.       I contribute to my retirement each month
7.       I have at least one housing payment (rent/mortgage) saved in a savings account
8.       My credit card balance is more than 50% of the limit
9.       I have had an overdraft payment or late fee in the last 6 months
10.   I am prone to make purchases on impulse

Scoring:

Give yourself a point if you answered “Yes” to: 1,3,4,6,7

Give yourself a point if you answered “No” to: 2,5,8,9,10

Results

1-3 Points:  CASH PERSON:  You are a cash person.  You generally use all the money coming to you each month and then some.  You enjoy life and don’t mind spending a little to have the things you want.  You are a risk taker and believe that the future holds great things for you just around the corner.  You also may be putting your financial future at risk by incurring too much debt and sacrificing savings.  It is good to have fun, but take time to put your cash flow on a plan so that you can continue enjoying life well into the future.  Many cash people focus on today because they do not have written goals for their future.  Check out Bank On’s S.M.A.R.T. Goals to build a forward moving financial plan.  Call us at 757-385-3551 if you want help getting started. 

4-6 Points:  BALANCED PERSON:  You are a balanced person when it comes to managing your money.  You enjoy a good meal out now and then, but you keep your spending in check and manage to save a little for your future.  While you are on a good path, building a good working spending plan will allow you to reach your goals faster and let your time and money work for you rather than against you. 

7-10 Points:  ASSET PERSON:  Just like the nursery rhyme where the king is in the counting house, counting out his money, you like to see your savings grow!  You assess needs and wants critically to minimize the amount of debt you owe.  While that sale item is tempting, you know how to exercise power over your financial choices.  Great work!  To take your financial plan to the next level, review your credit report at www.annualcreditreport.com for accuracy, then get on the fast track to reducing your debt using a debt snowball at www.powerpay.org.

Improving Your Credit Score

Your credit score (FICO^® Score) is a number between 300 and 850. This number is calculated through a formula which takes several variables into account, including, ‘accounts owned’ (30%), ‘length of credit history’ (15%), ‘new credit’ (10%), ‘payment history’ (35%), and ‘types of credit’ (10%). As you see, each variable has a corresponding weight, with payment history affecting your score the most. If you would like a deeper understanding of each category, you can view this information on the MyFico (http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx) website.

Your overall credit report is used to factor in the importance of each factor in your credit score calculation.  Your credit score is calculated only from information available on your credit score. For a credit score to be calculated, your credit report but have at least 1 account that has been open for 6 months or more and at least 1 undisputed account that has been reported to the credit bureau in the past 6 months. If these 2 things are relevant to you, you should have a credit score.

 

It is a common myth that your current credit score will hurt your chances of getting a loan or new credit forever. As your financial situation changes and new information is added to your bank and credit bureau files, your credit score will change gradually.

To begin improving your credit score, there are several steps you can take. A good first step will be to check your credit report. Since your credit score is calculated based on your credit report, you should review your credit report to make sure the information there is accurate and contains no errors. If you made a payment on time but it appears as late on your credit report, you should get that resolved immediately. Also confirm that the outstanding amounts that you owe are correct and up to date. If you find any errors on any of your three credit reports, be sure to dispute them to the credit bureau immediately.

Several other ways to improve your credit score include- reducing the amount of debt you owe, keeping the balances on credit cards low and setting up automatic payments or payment reminders to ensure timely payments. You can find more great tips on improving your credit score at http://www.myfico.com/CreditEducation/ImproveYourScore.aspx.

Once you are able to raise your credit score you will be able to receive lower interest rates on new loans and credit cards, have more credit available to you and will appear to be a better candidate for a job or new apartment.

Why Check Credit

What is a credit report?

A credit report is a statement combining all of the information from your different credit, loan and payment reports into a single document. There are three nationwide credit reporting companies in the United States- Equifax, Experian, and TransUnion. When you make or miss a payment on a loan or credit card, the lender reports this information to the credit reporting companies. There is also personal information on your credit report- current and previous residences, whether you’ve been sued or if you have filed bankruptcy. 


To receive your credit report, you will have to provide your full name, address, social security number and date of birth. If you have moved in the last few years, you will also have to provide your previous addresses. When you view your credit report, you will see:

• A list of companies that have given you credit or loans
• The total amount for each loan or credit limit for each credit card
• How often you paid your credit or loans on time, and the amount you paid
• Companies that have asked to see your credit report within a certain time period
• Your address(es) and/or employers
• Other details of public record

Why should I check my credit report? And how often?

The information on your credit report strongly affects whether you will be able to get a loan or credit but it may also affect your ability to rent an apartment or get a new job. Another good reason to check your credit report is to ensure the information is accurate, complete and up to date. If you see anything that is incorrect or possibly identity theft, you should get that repaired immediately.


You receive one free credit report annually from each of the three credit reporting companies (www.annualcreditreport.com). It is recommended to check each of the three credit reports each year. It is also a good idea to check your credit report prior to applying to for a loan, credit card or insurance. By staying a step ahead of the lenders, you are able to ensure your credit report is accurate and may receive a lower interest rate.


How long will negative information stay on my credit report?

The credit reporting companies can report most negative information for seven years and bankruptcy information for 10 years. If you have any criminal convictions, there is no time limit on that information being reported.


What if there is an error on my credit report?

If you spot an issue on your credit report, no matter if it is a small issue (such as the misspelling of your name) or from a long time ago, you should still correct the error. Both the information provider (lender, company or organization) and the credit reporting company are responsible for correcting inaccurate information once they are notified.


I have more questions about my credit report, where can I find trusted information?

If you have additional questions, head to www.annualcreditreport.com. While there, you can access frequently asked questions, the steps to resolve an issue on your credit report and much more.