The Basics of Money and Credit

In this series, Our team shares their thoughts on the basics of Money and Credit. These topics are typically covered with new customers.

First, let’s start with the basics of credit.

What is Credit?

Credit is other people’s willingness to let you use their money that you will repay sometime in the future.  It is a privilege, not a right. By “other people,” we typically mean banks, credit unions, and credit card companies.

“Credit” can be used interchangeably with “loan.”

How do you earn credit?

To earn the trust of the lenders in the form of “credit, you need to demonstrate you can borrow money and pay back on time. Check out a good article by Nerd Wallet: How to Build Credit

What are the types of credit?

Categorized by how the credit is extended and how it is paid back, credit falls into the following three categories:

Installment Loan: require regular payments, usually monthly, until the principal is paid off. Car loans, student loans, and mortgage all fall in this category.

Revolving Credit: includes bank credit cards, store credit cards, and home equity line of credit. You are required to pay at least the minimum payment by the due date. You can pay the minimum amount, the full payment or anything in-between. You can keep using the credit as long as you pay the minimum and stay within the credit limit.

Service Credit: used for monthly utility bills, such as electricity, gas, and yes, your cell phone bills. You set up an account, use a service and get billed by the service provider.

What Are the Advantages of Credit

You can get instant gratification, “buy now and pay later”;
Usually, no interest is charged when credit card bills are paid in full by due date;
Credit cards are safer to carry around than large sum of cash around;
Keep record of how you spend money so you can analyze your spending habit;
Some credit cards offer “bonuses” such as cash back or frequent flyer miles.

What Are the Disadvantages of Credit

Interest costs can be very high. How high? 15-20% for unpaid credit card balance is very common.
If you only pay the minimum each month, then the pay-off period will extend to very long
Since you owe so much money to other people already, you may not have much buying power left in the future

What is a Credit Report?

Lenders do not take your word for it when they come to determine whether to extend credit to you; instead, they pull your “credit report”.  It is kind of like your “school report” but lists different things. It describes your past use of credit, such as being on time in paying back debt, types of credit accounts opened, number of loans applied for, and a number of outstanding balances.

Three companies, called credit bureaus, gather information about you and give it to lenders. These three companies are:

Equifax (www.equifax.com)
Experian (www.experian.com)
Trans Union (www.transunion.com)

You can order your credit report once a year to check for errors or see if your identity has been stolen. Following the directions that come with the report, you can fix the errors.

What are Credit Scores?

Sometimes referred as a FICO score, a credit score is a three-digit number that describes your trustworthiness, or your future bill-paying behavior. It ranges from 300 to 850.  Lenders look that the number and decide whether to give you a loan and on what terms if any (interest rate, down payments, etc.).

These factors affect your credit score:

Previous payment history
Amount money owed
Number of recent credit inquiries
Length of credit history

These are only a few of the money basics we go over with new clients. If you have any questions or need help in any of the areas we discussed here, please don’t hesitate to reach out for a Free Initial consultation with one of our counselors M-F 9am-5pm pst at 854-888-0321

Too Much House? Tips to Simplify and Save Cash

Homeownership is considered a cornerstone of the much-desired American dream. However, we each embark on a path toward fulfilling this dream at different rates, surrounded by different circumstances. If we get caught up in chasing a dream that’s not within our current means, then we run the risk of serious financial hardships in all parts of our lives.
You may have heard of the phrase “buying too much house.” This refers to consumers who purchase a home that they cannot afford to maintain. It’s important to remember that a mortgage only represents a portion of the costs associated with homeownership. You also need to account for regular upkeep and maintenance, utility costs, insurance, taxes and association dues.
For most Americans, a home purchase will be their largest investment. It’s central to their safety, security and livelihood. In order to help protect this investment, we’ve compiled five tips for reducing home-related costs that could save you thousands of dollars.

Be Mindful of Utilities – The larger the house, the higher the utility costs. When house hunting, take mental notes of the room size, window placement and locations of the AC and heating units. Would it be difficult to heat or cool the entire home? If you’re already established, you can reduce your utility bills by using energy efficient light bulbs, sealing cracks around windows and doors, and unplugging electronics that aren’t in use, such as cell phone chargers. To reduce water costs, only run the dishwasher or clothes washer when you have a full load. You can also reduce outside watering costs by replacing grass or plants with rock and gravel gardens.
Get a Roommate – Getting a roommate is a quick way to reduce your rent/mortgage and utility costs. If you place an ad for a roommate, check their credit report and perform a background check. The fee associated with these reports will be well worth the peace of mind and potential hassles in the long run. In addition, a roommate should always sign a lease. This protects both parties.
Refinance – If you’re financially stable, have a good credit rating and have at least 20% equity in your home, then you should consider refinancing. This can reduce monthly mortgage payments, and in some cases, eliminate mortgage insurance. The amount of money you can save depends on your total refinancing costs, whether you plan to sell your home in the near future and the effects of refinancing on your taxes. Talk with a lender or credit counselor before making this move.
Barter for Services – Maintenance and upkeep can be quite expensive. Consider bartering for these types of services with your own time, talent and experience. For instance, you can trade babysitting or yard work for plumbing. You can also barter house cleaning for house painting. Use your imagination. What do you need? How can you benefit others?
Sell & Downsize – If you are already suffering hardships from “too much house” or perhaps the kids have moved out, it may be time to reevaluate your housing needs as opposed to your housing wants. Do you need a pool? Do you need two guest rooms or a separate office? Is it easy to maintain the yard? If not, examine the current real estate market to determine whether it’s the right time to sell and downsize. You could use the profit from a home sale to pay off debts or reinvest into a savings or retirement account.

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Stretch Your Entertainment Budget with Gift Cards

It’s hard to believe, but nearly $1 billion in gift cards go unused every year. If you received gift cards during the holidays, don’t let them become part of that statistic. Make the most of gift cards by using them to stretch your entertainment budget throughout the year. Check out these ideas for how to get the most bang for your buck from gift cards:

 

Consider them Cash- Remember, gift cards are essentially cash. If you lose them, it’s like throwing money away. Keep track of your cards and their available balances. Keep them together in one place so you always know where they are.

Read the Fine Print- Some gift cards have restrictions or fees associated with them. For example, some retailers will begin to charge a monthly surcharge if the card isn’t used within a year from date of issue. Those fees can quickly eat up the card balance. If you find you have any of those cards, make sure to use them first.

Plan Ahead- Take inventory of your gift cards, then plan ahead how you are going to use them. Map out birthdays, holidays and other special occasions, then designate the gift cards you will use to celebrate. Restaurant gift cards are perfect for celebrating Valentine’s Day, date nights or a girl’s night out. Or plan a get together and use general use gift cards, such as those from Target or Amazon, to pay for party supplies, food and drinks.

Stretch the Value: Because gift cards are used like cash, they can be combined with coupons, special pricing and other offers. If you have movie gift cards, for example, use them for matinee pricing, rather than full price evening tickets. With restaurant gift cards, check the menu online before you go and decide what you are going to order so you don’t make decisions on impulse.

Trade, Sell or Regift- If you find yourself with gift cards you know you’ll never use (you’re a vegan but you are clueless brother gave you a gift card to a steakhouse),  don’t let them go to waste. Ask friends or coworkers if they’d like to trade gift cards, sell them on CardCash, Raise or Gift Card Granny, or consider regifting them to someone who will use them. If you go the regifting route be sure to confirm the card still has the total amount on it before passing it along.

Gift Cards: How to Make the Most of Them

Since 2007, gift cards have been the most requested gift – you probably have received gift cards also. And what is not to love about gift cards? They give us the chance to shop, dine out, or enjoy activities guilt free, whenever we wish. But surprisingly, more than $2 billion dollars’ worth of gift cards went unused in 2012. Don’t let your gift cards fall into that statistic. Here are some times to make the most of your gift cards throughout the year.
Keep it Close-A gift card will not do any good sitting in a drawer or filing cabinet. Place it in your wallet immediately when you received it so you have it with you when you need it. But remember, gift cards should be treated like cash and aren’t replaceable if lost or stolen, so keep them secure.Know the Terms-Fees and terms of use vary widely among gift cards. Some cards are assessed a fee for non-use after a period of 12 months. A few months of these fees can quickly diminish or eliminate a gift card’s balance. If you’re not sure of the card’s terms, it is best to use it right away.
Sell or Trade-So you got a gift card for the best steakhouse in town but you are a vegan – what do you do? Sell or trade it for a card you’ll actually use. You can do it informally by trading with a friend, co-worker or family member. Or sell fit cards you won’t use to a site (like Gift Card Granny) for up to 93% of the face value. Granted, you’ll lose a few dollars, but it’s better to have the cash than let the card go to waste.
Keep Track of the Balance-If you don’t use the gift card’s full amount in on go, keep track of the balance. You can always check the balance over the phone or online. But the easiest way is to simply wrap the receipt listing the remaining balance around the card and keep them together in your wallet.
 
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Save Your Money – Plan a Spending Freeze

A spending freeze is just that – not spending any disposable income for a day, a week, two weeks or longer. A spending freeze can help you learn how you have been spending (or wasting) money in the past, and add extra money to your savings account once you’re done. If the thought of not spending any money for a week or longer seems like too much, consider this: it is easier to work through a spending freeze voluntarily, rather than living through one forced by lack of emergency funds.
Before you start a spending freeze, there are a few things you should do first.
Spot Check Your Finances- Make sure the payments you do make, utilities, ect., are the best deal possible. Devote some time to shopping auto insurance discounts, trim your cable TV costs, and ask about any savings or budget plans offered by your utility companies. Review statements for unnecessary fees, and reconsider all ot the monthly auto-pays you have in place. Eliminate services you don’t use any more, or that are just not worth the money.Update Your Monthly Budget and Savings Goal- Set a goal to save a specific amount and have a definite plan for the money once it is saved. Update your monthly budget to determine how much you expect to save during your freeze. Then, write down your plan for the money you’ll save during your freeze. Temptation to spend will be easier to face if you can picture paying off the credit card balance, making a healthy deposit to your savings, or paying for that small home improvement project with cash.
Stock Up and Prepare­- Make sure you have basics on hand to last through your freeze – running out to the store for toothpaste or laundry soap will be hard to avoid if you run out, defeating the purpose of your freeze. Take a complete inventory of your pantry, freezer and fridge and plan meals around what you already have. Grocery shop ahead of time – and plan some flexibility for days that don’t go according to plan, to prevent last minute pizza orders because your planned dinner that day just did not work out.
Have you ever used a spending freeze to save money? What did you learn from your freeze?  What is the longest time you have gone on a spending freeze?
 
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Is Financial Stress Affecting Your Health?

It is no secret that excessive stress of any kind can take a toll on your health. But financial stress can be especially damaging as it can have a number of secondary effects across all facets of life.
Take a look at the potential health risks of financial stress and start taking steps to manage them.
Cutting Corners on Food- Trying to make ends meet often means healthy eating takes a back seat to buying food that is cheap and filling. Unfortunately, this can lead to long-term health issues caused by too much processed food and not enough frest fruits and vegetables.A Better Way- You can stretch your food budget to include healthy, fresh foods by:

Shopping with coupons and money saving apps
Establishing and sticking to a food budget
Cooking meals at home
Getting involved in a local co-op or CSA share

Using Negative Coping Behaviors- Drinking alcohol, smoking, or overeating as responses to financial stress are not uncommon, but they are unhealthy. All of these so-called stress relievers are only short term fixes that make the real issue. Plus, they can be expensive and cost you more in the long run in the form of higher insurance premiums and health care costs.
A Better Way- Try Healthier outlets for stress management, such as:

Exercise- Even a quick walk around the block can calm your nerves and clear your head.
Conversation- Talking things out with a supportive friend or family member can help you determine your options.
Get Creative- Try writing in a journal, sketching, painting or other creative pursuits to channel excess stress

Losing Sleep- There are a few things that can keep you up at night, like wondering how you are going to pay all of your bills this month. Not getting enough sleep can have a number of negative side effects, including weight gain, inability to concentrate and weakened immunity.
A Better Way-  Get free help to get back on track. NBP credit counseling will help you:

Determine the total amount of debt you owe
Develop a budget and stick to it
Make a plan to pay off debt
Avoid incurring additional debt

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Getting Organized on a Budget

If you find yourself spending too much time looking for car keys, the right sweater, your cell phone or other necessities, it is time to get organized. A disorganized home doesn’t just cost you time and stress, it also costs money. Think of the times you couldn’t find something and bought it new, only to discover you already had it if you had only known where to look. It is possible to get organized without spending hundreds on a trip to the Container Store. Here is how.
Make Sure Everything has a Place- Designate a specific place for everything- keys on a hook by the door, for example, or the cell phone charger always plugged into the same outlet. After you use an item, take a minute to put it back where you found it. That minute will save you time and frustration you might spend searching for it later.
Sell and Donate to Create Space- While you are organizing, take time to set aside any items you no longer need. These unused items are robbing you of precious spack and making it harder for you to find the items you do need. Consider offering things you no longer use to family or friends, donating them to a favorite charity or selling them. You can host a garage sale or use sites like eBay or Craigslist to easily sell gently used items.Contain the Clutter- Use multi-sized containers and drawer organizers to group smaller items so they don’t get lost or create chaos in your cabinets or on shelves. You can get creative and use shoeboxes, empty tissue or cereal boxes, or plastic tubs to store items. Additionally, you can find low- cost containers at dollar or discount stores.
Practice the “One in, One Out” Rule- A great way to minimize clutter is following the ‘one in, one out” rule. This means that when you bring in something new, like a pair of shoes or a toy, you have to get rid of an item in that same category. It not only helps cut down on clutter, but makes you think twice about what you are willing to give up to bring in something new.
Organizing on a budget can be fun and rewarding. Get creative and find the tools that work best for you. You can also enlist to help of family and friends, and even generate a little extra cash to put towards an emergency savings or paying down a debt.
 
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Get a Side Job and Make Extra Money

Finding extra money in your budget to pay down debt, contribute to an emergency savings account or even take a well-deserved vacation can be difficult. But if you think a surprise inheritance from a long-lost wealthy relative or winning the lottery are the only ways you will ever see extra cash, think again. There are plenty of side jobs that offer decent pay in exchange for just a few hours of your time and effort. They key to  making a side job really payoff is putting the extra money you make towards a specific purpose, rather than just rolling it into your regular bank account.
Here are a few money-making side jobs to consider:
Mystery Shopper- Retail stores, restaurants, car dealerships and other businesses want honest, constructive feedback on their products and services, and they hire mystery shoppers to provide it. The most successful mystery shoppers provide thorough, detailed feedback to help business improve. Unfortunately, scammers have capitalized on the popularity of mystery shopping, so you have to investigate mystery shopping opportunities to ensure they are legit. The best way to do that is by starting with the Mystery Shopping Providers Association, which requires businesses to adhere to mystery shopping code of ethics.Focus Group Member- If you want to get paid to give your opinion (and who doesn’t?) focus groups are a great way to make some extra cash. Register with a local market research company, and when they have a client who is looking for opinions from those in your demographic group, you will receive a call to come in. Focus groups generally last 1-3 hours and most pay in cash or check the same day.
Tutor- If you are a math whiz or a grammar guru (or just a general smarty-pants) use your brain to make some extra money by tutoring. Register with a local learning center and you will be called on when a student needs some help learning your area of expertise.
Pet-sitter- Everyone with pets has the same dilemma: who is going to care for them when they are out of town? That is where you come in. If you love animals and don’t mind being away from home for a few nights, offer your services as a pet sitter. Do some research into the going rates for kennels and other pet sitters in your area, and price your services accordingly. (Not into pets? Offer house sitting services to those who want their place to look lived-in while they are away).
Artist- Whether it is making jewelry, knitting, sewing, painting or any other creatively crafty endeavor, you can make it pay by becoming a seller on Etsy. This online marketplace for hand-made and vintage goods can be a great source of extra income. And you will get paid to do something you love.
 
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5 Little-Know Facts About Credit Cards

Living a cash-only lifestyle is one of the best ways to avoid overspending and staying out of debt. But to do things such as purchasing airline tickets or renting a car, having at least one credit card is almost a necessity. Plus, using a credit card responsibly can help build a positive credit history. But how much do you really know about these little rectangles of plastic we keep in our wallets.
Here are five interesting or little known facts about credit cards you can bring up the next time there’s a lull in the conversation (a few of them might even save you money, too):
Charge plates where the precursor to credit cards- Used until the early 1960s, charge plates were small, aluminum or white metal embossed plates about the size of dog tags. They had a paper or cardboard backing with the merchant’s name and customer’s signature, and were often kept on file at the issuing store. The clerk would have to retrieve a customer’s charge plate from a file when they wanted to use it.The first general-use credit cards were sent unsolicited…To residents of Fresno, California by Bank of America in 1958. These BankAmericards were maed of paper and had a credit limit of $300. By late 1959, more than 2-million people throughout California had received one of these cards. And not long after that, 20% of those accounts became delinquent, costing the bank nearly $9 million dollars. The Federal Truth in Lending Act eventually made it illegal to send credit cards unsolicited, however, the practice of spending pre-approved applications for credit cards is still alive and well.
$50 is the maximum liability for unauthorized use- If your credit card is lost or stolen and used without your consent, you’re on the hook for $50 maximum. You can thank the Fair Credit Billing Act for this rule, which also says that once you report a card as lost or stolen, you are not responsible for any transactions that occur following the report. So it is really important to let the card issuer know immediately if you lose track of your card for any reason.
You can’t use your credit cards overseas…unless you request a version that has a microchip, rather than a magnetic strip. European credit cards use chip-and-pin technology for added security, which makes our magnetic strip cards incompatible with their card readers, Chase, Citi, and US Bank are among the card issuers who offer cards with a chip. Just be sure to request your new card well in advance of your trip to be sure you receive it in time.
Your card might be declined if…You are getting dangerously close to your spending limit. Gas pumps automatically authorize a $50 sale (even if your actual transaction amount is lower), so if you have less than that available to charge, your transaction will be denied. Restaurants will typically authorize an amount equal to the total amount on the bill plus 25% gratuity. If you think your card might not be able to handle it, pay with cash to avoid the embarrassing “Excuse me, but your card was declined…” speech. (If you are at or near your max on one or more cards, credit counseling can help you budget and get your spending back on track).
 
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Stock Your Pantry to Save Money

There’s a persistent myth that healthy eating is too expensive or time consuming. Many assume a quick stop at the drive-thru for selections from the “dollar menu” is an easy way to save money on food. It is not. Preparing your own food at home is always going to be less expensive and a much healthier habit.
Whether you are an experienced home cook or just starting to pan and prepare meals at home, a well-stocked pantry will make meal planning much easier and help you stick to your food budget. Start with this list of pantry staples and modify it to match your family’s tastes and dietary needs.Dry Goods:

Brown or white rice, quinoa or couscous
Dry pasta
Cereal
Crackers
Popcorn
Nuts and seeds (don’t overbuy, high oil content can cause them to turn quickly)
Dried beans

Canned and Jarred Goods

Pasta sauce
Canned tuna, salmon or chicken
Peanut, almond or other nut butter
Tomatoes (keep paste, sauce and diced on hand for different uses)
Canned vegetables
Canned beans
Canned soup (for quick meals)
Chicken or vegetable broth
Canned fruit
James and fruit preserves
Pickles

Baking Needs

All-purpose flour or whole wheat flour
Sugar/Brown Sugar/Powdered Sugar
Baking powder
Baking soda
Cornstarch
Old-fashioned oats
Chocolate chips
Raisins, dried cranberries or other dried fruit
Pure vanilla extra
Honey, maple syrup or agave nectar
Yeast

Condiments and Spices

Ketchup
Mustard
Mayonnaise
Soy sauce
Oils
Barbeque sauce
Vinegars
Salt
Black pepper
Garlic powder
Onion powder
Cinnamon
Ginger
Nutmeg
Cumin
Chili Powder
Oregano
Basil
Parsley

 
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