54 Shares
Debt – Savings – Loans – Investments – Credit Scores – Credit Cards – Mortgages – Covid Relief – Education – Retirement
Make a plan for getting your personal finances under control…
Do you want to eliminate debt? Buy a house? Retire? Get a loan? Increase your credit score? Most of us have some personal finance issues to address…
77 % of Americans say they feel anxious about their financial situation, and most worry about retirement, cost of living, and debt
What’s your situation??
Here was mine: In 2014, I was a newly widowed woman with a mortgage + car payment totaling more than my take-home pay, and my husband’s year-long illness left me with medical bills over $25,000. Panicked? Yes! Resolved to be debt-free? Yep. When I retired in 2018, 3½ years later, my house and cars were paid off, and I had a substantial savings account that I used to travel for most of 2019. How’d I do it? Here are 10 considerations for you to ponder.
Update January 4, 2021; Originally published July 14, 2020
According to ConsumerFinance.gov, “…there is wide variation in how people in the U.S. feel about their financial wellbeing. The average financial well-being score is 54 on a scale that falls between zero and 100. About a third of all adults in the United States have financial well-being scores of 50 or below…”
1. Eliminate Debt – Most Important!
My recommendation #1: work to become debt-free. Easy to say, right? But, how to do it? First off, be aware of how much debt you have, what it costs you, how much you pay it each month, and how long it will take to pay it off.
More about mortgage debt below.
For instance, say you have $10,000 of debt, and are paying 12% interest on it; if you pay $300 per month, it will take 3.4 years to pay off, and you will spend a total of $12,225. However, if you pay $500 per month, it’ll take less than 2 years to pay off, and your total spend will be $11,213–a savings of over $1000.
To help with figuring out how to get rid of this ball + chain, here’s a link to a free debt calculator, so you can input your own exact debt scenario. You’ll also find an article with many practical methods for reducing debt.
2. Put Money Away – Savings
It’s soooo booooring, right? We’ve heard it all our lives: save your money; invest in yourself; have an emergency fund. If you find that it’s tough to save, having a goal and playing with the numbers can be very inspiring! In my case, my goal was traveling the world, and my savings led to a tremendous amount of travel in 2019-2020.
Here’s a scenario: Let’s say you already have $1000 saved – awesome! Now, if you can add just $100 to that amount each month, in 5 years, you could have almost $7500! And, if you can add $150/month instead of $100, the total would be over $10,500!!!...$3000 extra. You can do this! Play around with other amounts using this: Savings Calculator. You’ll also find articles with advice and inspiration below the calculator.
3. Invest those Savings!
A great strategy for beginning investors is Certificates of Deposit, which are very safe investments with a higher interest rate than your regular bank account. I found this article, an excellent overview about CDs, and how to compare them. I never knew this much about CDs! I’m thinking of doing a CD ladder…
If you’d like to try your hand in the stock market, you can get fractional stock shares of big name stocks for only $5! I had some extra cash sitting around (b/c, you know, no traveling!), put $1000 into some fractional shares in August 2020, and my returns have been 17-31% (July 2021)! Find out more about fractional shares of stocks.
4. Credit Scores
Credit Scores – a very complicated subject with a great deal of misinformation around – check this Ultimate Guide to Credit Scores, with WHY you should care about your score (hint: lower interest rates on loans and debt; job applications; housing applications), how to improve your score, and much more.
- What’s your score? You should know – Check your free credit report!
- If you have little credit (you’re young, or have used cash primarily), you need to get some credit established; credit boosting worked for my daughter – she didn’t have bad credit, just not much history.
- If you have good credit, you can make some excellent income by helping others with credit boosting.
- Fair Credit? It may be worth looking into a service that can boost your credit.
- If you have bad credit, you instead need a credit repair strategy. There are companies that can help with credit repair, consolidating debt, and debt counseling: Repair Your Credit.
5. All about Mortgages
Your mortgage is usually the biggest debt you’ll ever have in your lifetime. Analyze whether you should you rent, or own your home here.
Curious about how much house you can afford? Check your home loan limit. Boost your credit score before applying, to get the best rates. When it’s time to apply for a mortgage, you’ll need to consider whether or not to pay Mortgage Discount Points.
If you do make the move to home ownership, I suggest paying extra on your mortgage every month if at all possible to save massive amounts of money. Did you know that, if you pay an extra $500 per month on a 30 year mortgage, you could save $87,500!!! AND pay off a 30 year mortgage in only over 18 years. (This example is for a $260K loan; check this extra payment mortgage calculator for other mortgage amounts for your specific situation.) Any extra amount will be worth it!
Analyze whether a 20-, 15-, or 10-year mortgage might be possible for you, vs. the traditional 30-year mortgage.
And, if you currently have a mortgage, with the ultra-low mortgage rates right now, you may be wondering, “Is it worth refinancing?”…this is an important decision; research it carefully.
Lastly, if your ability to pay your mortgage has been impacted by the Covid-19 pandemic, this info from Fannie Mae may help.
6. Credit Cards
Note: Owning credit cards does not mean that you are in debt – the key is to pay them off on time each month.
My followers know that I’m into credit card hacking; (opening cards that have large sign-up bonuses of points that can be used for travel and lodging). Not only did this increase my credit score, but it definitely helps with travel. And, you can use your cards for this side hustle to make extra income each month!
I owned a ton of points and miles from credit card hacking; I opened 15 credit cards in 2 years – and increased my credit score significantly.
From November of 2018 through May of 2019, I traveled overseas, through 14 countries in Europe and Africa. Later, in the summer of 2019, I took 2 river cruises in Europe, and also traveled to Puerto Rico, Chile, Egypt, and Germany in 2020 – all with my savings and credit card points. I can help you travel more economically as well!
When you do have credit cards (here are some credit card suggestions), please pay them off in full each month. The interest rate can be quite hefty, and can negate your savings and debt-reduction strategies. When you find some credit cards you’re thinking of getting, you can use this table to compare them. There’s also detailed information in the article, on how to avoid credit card debt – which is crucial. If your credit score isn’t great, you can find ways to increase it using secured credit cards to start with.
7. Buying a Car
There is wonderful, complete information on how to buy a car, including whether to buy or lease, to get new or used, info on loans, and calculators for loans and amortization. Read this before your next vehicle purchase!
8. Personal Loans
If you think you need a loan, try to think twice. Unsecured debt can be costly, and tough to eliminate; but sometimes it cannot be avoided. Look at this chart to see how much debt has grown among certain age ranges in just one year:
If you do need a loan, here is a Loan Calculator to use, and loads of info on how to handle your loans, different types of debt, and what happens during bankruptcy.
9. Education
Here’s an article that addresses many aspects of financing a college education. Not only is there a calculator to help parents stay on track for saving for college tuition, but there’s information to consider about textbooks, housing, budgeting, and much more.
10. Retirement
Retirement planning is an enormous topic that many don’t consider until later in life. With everything else going on–family life, getting out of debt, saving money, buying a home, etc., etc., etc., it’s natural to put off thinking about the ‘next stage’. No matter what stage of life you are in, this is something to consider. The sooner you start saving for retirement, the better.
There are so many aspects to retirement planning…including when, where, how you want to retire, and what your vision is. Because we love calculators, naturally there is a retirement calculator here as well.
My wings have been clipped temporarily by the pandemic, which has grounded me now for awhile. It’s given me more time to save up money, think about my investments, find more side hustles, and dream about where to go next!
Updates to this Personal Finance article
When I retired, I leased out my house to add to my income while traveling. Now, according to the Wall Street Journal, interest rates are rock bottom, and the housing market is booming because of it. Since I’m not traveling, my money was piling up in my bank accounts, and not earning much in interest. I put some in CDs, some in the stock market, and now I’m thinking of purchasing a second investment property to take advantage of the low mortgage rates. All the research I’ve done for this has been added to this article in the Mortgage Section.
In summary: My friends and family have been amazed at how I bounced back financially so quickly, and have been able to travel while getting my finances under control. Thus began ‘Travels With Suz’ – not only to showcase my travels, but to help others to figure out how they can become financially independent in order to follow their passions.
I hope that you enjoyed this article about Personal Finance; has it given you a new idea, or prompted you to think about this a bit more? Do you have anything to add? (I’m always looking for new info!) Please let me know in the comment section. Have fun out there, and SAVE!
Did you sign up for my newsletter yet?
54 Shares
