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If You Don’t Do These 12 Money-Savvy Moves Now, You’ll Regret 30 Years Later

If You Don’t Do These 12 Money-Savvy Moves Now, You’ll Regret 30 Years Later

No matter how big the income you get from your job or business, if you don’t know how to manage finances, you will never be able to move from point A to point B. Point A is where you are, money-wise, and point B is where you want to be. Before leaving your 30s behind, you should have mastered this bit of money wisdom.

Just to add more to your financial education, here are twelve moves you can do to take care of your treasure house.

1. Save while you can. When parenting necessities and mortgage costs rise, it will be hard to save money. You want to maximize the opportunities you presently have to stash away some cash, even little by little, so when the economically slow years will say hello, you won’t say mea culpa.

2. Plan for long term goals and identify your priorities. Now that your earning power is at its prime, grab the opportunity to plan on buying a house (that’s if you still haven’t), or think about how to implement college savings plan. When you start to have more expenses due to additional parental responsibilities such as the birth of another baby, school-related expenses for your children, or due to a bigger budget for a bigger car, etc., you’ll have lesser capability to put your plans into work.

3. Start a home business. As early as now, try to learn some new skills you can offer as a service and turn it into a business. You can also use part of what you have saved to start a business you can run from home. No, you don’t need to give up your job, not just yet. You need to grow it first and when it reaches a stage when it starts earning even more than what your getting as an employee, that’s the time you can think of slowly leaving work behind.

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Or better yet, start saving buffer cash, so when you finally resign from your job, you have money to spend while building up your baby startup. A business, something you are qualified to operate, is one of the best investments you can have, and a money-savvy move you can’t miss. Just make sure of 2 things: One, you are confident you can manage the line of business you’re planning to put up (because you’ve thoroughly studied it). Two, you’re passionate about the business.

4. Create wise and solid money habits. It’s high time to develop money habits that will help you weather financial storms for the rest of your life. Kerry Hannon, a personal finance expert who wrote “Great Jobs for Everyone 50+,” says that in her 30s, she used up all available credit on her retirement savings accounts and even saved a part of her extra income from freelancing for retirement. She told us, those funds have served her well over the past years as reserved funds to help pay for vacations, emergencies, and more. She says, she still saves apart from retirement accounts scrupulously in her 50s, too. She’s proud to say, it’s a habit she started way back in her 30s.

5. Prepare for contingencies. It’s always wise to prepare for any eventuality. The worse that can happen to you at this time and era is to have a financial bankruptcy. Now, to avoid this you can prepare for one. The thing is, if you prepare, you will have a bigger chance of not having one. Nice paradox, right? Well I think this is the coolest realization for today. But, how do you prepare for one? There are three essential ways: by saving, by educating yourself, and by investing. Saving is self explanatory, but what I meant by educating yourself is reading books, magazines, attending seminars/workshops and talking to mentors about finances. Heck, we take time and make efforts to learn to drive, why not spend time learning how to manage our finances!

6. Want to leave a job? Roll over your retirement. Most people change jobs in their 30s several times, seeking the right spot where to grow and elevate their value for future career moves. However, this can lead to a patchwork of 401(k) plans at a number of past employers. A wiser move is to re-invest them into an IRA or into your next job’s 401(k), tax-free.

7. Save for retirement. The best time to save for retirement is now that you are young and capable. If you start saving when you’re nearing retirement age, that will decrease your chances of accumulating enough funds to have a comfortable life in your twilight years.

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Recently, I read a book about financial planning by Francis Colayco, and I find it full of tips on how to retire with a bank full of cash. In a TV interview, he was asked why some high-income workers find it difficult to save money for retirement. Mr. Francis Colayco explains: “The biggest mistake people with money can make is premature acquisition of assets. They have enough for a down payment, they make the purchase. When asked how they will pay the amortization, they answer, ‘I’ll find a way.’ You can’t think like that, because the agreement you’ve entered into is an obligation that you have to pay whether or not you’ve made any profits. If you have no guarantee that you can pay, don’t make the investment, even if you have enough for the down payment.”

These unwise purchases will hinder you from saving for your future.

8. Get comfortable with negotiation. Learn and start to negotiate for higher salaries. A 52 year old certified financial planner who hails from Park City, Utah, Nancy L. Anderson, says while she has done many financially wise things in her 30s like saving enough college funds for her child, investing in rental property, buying a house, and setting aside 20% of her income, she realized she should have been bolder and asserted her right to get a higher salary. She said “If I’d negotiated a higher salary each time I changed companies in my career, I’d be wealthier today.” Most people move to other jobs approximately 11 times in their lifetime, negotiating for a better salary in those transitions could have accumulated me around $600,000,” she added.

9. Scope out cash for a down payment – prepare for a down payment for your first house. Even if retirement accounts are almost sacred, and many believe it’s not a wise decision to touch them, some financial planners consider it fair to use them as down payment for your first home.

You must justify this strategy by making sure you have enough time to replenish the accounts before retirement. In case you’re 45 or older, better not consider this idea. You must also be strategic with what account to tap. With a 401k, for example, you will incur a 10% penalty on early withdrawals and taxes. With an IRA, the U.S. government waives 10% of penalty on a distribution of even up to $10,000 for people buying a home for the first time. Despite this, you will still pay taxes on the withdrawal. The main point is, in your 30s you must find a way to make a down payment for your first home and look for ways to have enough consistent flow of income to pay for the amortizations. 

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10. Talk about money with your partner. If you’re married, working together with your spouse to be on track regarding finances and settling any disputes early on can prevent conflicts in the future. “People often comingle finances with their partner, and open communication is key. Make sure you talk about your finances and life goals with your partner, and align on how you will get there together,” Suzanna de Baca, Vice President of Wealth Strategies at Ameriprise Financial, suggests.

11. Set a goal for college savings. I know it’s a tough game. You are funding your retirement, and you are also demanded to plan and prepare for your kid’s college expenses. However, you can be practical by aiming to go to a public school for three years and two years at a private school and think of a way to pay the rest using current income. It will also help to have your student assist you in the expenses by encouraging him to take summer jobs. Use the college-cost calculator at Savingforcollege.com to manage scenarios like these. Sandy Block and Jane Bennett Clark, Kiplinger’s Personal Finance magazine say, “To meet 50% of the total cost of four years at a public university, based on the current average annual cost ($17,131) and a 6% inflation rate for college costs, you’d need to save $222 a month for 18 years, assuming a 7% annual after-tax return on your college savings fund. If you covered half of only the tuition bill, you’d need to save $107 a month.”

12. Two salaries equals more taxes  It’s common, couples most often don’t realize one essential thing: they are taxed as a single entity. It’s true, the so-called “marriage penalty” has been diminished by legislation in the past recent years, so the obvious and easy way to reduce liability is for the husband and wife or both earners to save funds into tax-deferred accounts–IRA or 401(k).

Sources:

Business Insider.com, KIMBERLY PALMERU.S. NEWS & WORLD REPORT

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Financial Plan About.com,  

Money MSN.com, Sandy Block and Jane Bennett Clark, Kiplinger’s Personal Finance magazine

Forbes.com, Mitch Tuchman, Contributor

Featured photo credit: *money explore*/John via flickr.com

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Anthony Dejolde

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Last Updated on March 3, 2021

Top 6 Hacks on How To Build Credit Fast

Top 6 Hacks on How To Build Credit Fast

When done right, credit can open doors and provide a lifestyle that you never imagined possible. Anything from flying around the world in first-class and staying at 5-star hotels entirely for free to starting and scaling businesses. It’s also an area where it can be easy to make mistakes and hard to recover from without the right information. In this article, I will break down how you can build credit fast so you can open doors in your life!

When you start to think about improving your credit score, you have to answer three important questions first:

  1. What are you trying to achieve by having good credit?
  2. What really is your credit score?
  3. How is your credit score calculated?

What Are Your Credit Goals?

Having a high credit score is great, but ultimately, your credit score is a tool in your personal finance arsenal that you can use to open doors. The first question you should ask yourself is “what will a higher credit score do for me?”

I work with many clients directly at Freedom Travel Systems to help them fully leverage the power of their credit so they can enjoy free luxury travel and start or grow their business. For my clients and many others, here are a few common goals many credit-savvy individuals have:

  • Free Travel – getting access to travel rewards cards so you can get tons of free travel and even get first-class flights, hotel suites, and luxury amenities all for free
  • Start/Grow a Business – getting access to business credit so you can start and grow a business with 0% or low-interest financing that does not impact your personal credit
  • More Approvals – getting approved for credit cards, auto loans, or mortgages so you improve your lifestyle or build your personal wealth
  • Better Rates – getting better interest rates on any loans you get will save you tens or hundreds of thousands of dollars over your lifetime

What Is Your Credit Score?

Your credit score is simply a 3-digit number that tells potential lenders how reliable of a borrower you are. Keep in mind that lenders, such as banks and credit issuers, stay in business by lending. Their goal is to find the people that have the highest probability of paying them back and they assess this primarily through your credit score.

What’s important to know is that there are two major scoring models used to create your scores. These scores are your FICO Score and your Vantage Score. More than 90% of lenders rely on your FICO score, so when you are checking your score, you want to make sure you see the actual score that the lenders use. And no, checking your own score does not hurt your credit!

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Then enters the 3 main credit bureaus, which are essentially agencies that collect credit information on you. These are Experian, Equifax, and TransUnion. These bureaus then apply a scoring model to the information they have on you and voila, you now have a credit score! Bureaus sometimes have different information on your report, which is why you will see 3 different scores.

How Is Your Credit Score Calculated?

Next, you need to understand how the credit score is calculated. This will provide a high-level overview, but there is more detail to each of these factors alone.

There are 5 main factors in the calculation of your credit score:[1]

  1. Payment History (35%) – This refers to the amount and percentage of on-time payments you have.
  2. Utilization (30%) – This is how much revolving credit you use as a percentage of the total revolving credit issued to you. Note that installment loans like auto-loans or mortgages do not count towards this while credit cards do.
  3. Age of Credit (15%) – This refers to how long your credit history is, primarily your “average age.”
  4. Credit Mix (10%) – This is how many different types of credit you have. For example, there are credit cards, student loans, auto loans, mortgages, personal loans, and lines of credit.
  5. New Credit (10%) – This primarily refers to how many inquiries you have for new credit.

Top 6 Hacks on How to Build Credit Fast

Now that you’ve learned more about your credit score, here are the top 6 tips on how to build credit fast.

1. Don’t Close Your Cards

Many of us are taught that getting a new credit card is bad and having too many will hurt your score. In fact, the opposite is true. You want to have many positive accounts reporting to your credit report. Logically, this makes sense because having more accounts with more on-time payments shows that you are a more reliable borrower. You just don’t want to open too many accounts too quickly since that can hurt your “new credit” factor.

Instead of closing a card, what you should do is simply keep the card open and put a small subscription service on it monthly. Why? Because each time you have an on-time payment, it helps build your payment history, the largest factor of credit.

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If you close a card, you are missing on potential on-time payments, age of credit, credit mix, and also lowering the total credit lent to you so your utilization percentage may go up. If you have an annual fee on a card you don’t like, see if there is a “no-fee” version of the card and downgrade it to that card rather than close it.

2. Use Autopay to Never Miss a Payment

This one is easy to do and easy not to do. Go into your credit card account and set up auto-pay. You can choose to either pay the full amount, the statement balance, or the minimum payment. Personally, I like to set up autopay to pay the minimum payment so that I never get a late payment. Then, I go in and manually pay the statement balance each month by the payment due date.

This helps me personally see my spending and have a manual review of my charges while ensuring, not have to pay interest, and still get the benefit of making sure that I never miss a payment if something goes wrong. Think about it, if you were to have a medical or family emergency, the last thing you want to experience on the back end of that is a late payment and a drop in your credit score. So, set up autopay.

A pro tip is to update your payment due dates across all bills and accounts to be the same so that you can “time batch” the process and have one time a month where you sit down and handle your payments. You can do this by simply contacting the credit card company or doing it online.

3. Get a Credit Limit Increase to Lower Your Utilization

One of the factors that get most people into trouble is using too much of their allotted total credit. Their utilization, which is the percentage of revolving credit they use, goes up, and their score tanks. You should aim for less than 30%, and in an ideal world, less than 10%.

To help drive this down, call your credit issuer and ask for a credit limit increase. This will help increase the total amount of credit extended to you and drop your utilization. Oftentimes, they will only give it to you when your utilization is fairly decent (less than 50%), so work to pay it down as best as possible before doing this. You should ask if the credit limit increase will give you an inquiry as some banks do a hard inquiry while some do not. If they do a hard inquiry, it is often better to just get a new card altogether or pass.

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4. Add Authorized Users to Increase Your Age, Add History, and Decrease Utilization

This is one of the best hacks out there as it helps with the 3 biggest factors of improving your credit: payment history, utilization, and age. This concept is also called “credit piggybacking” where someone with great credit history on a card adds an authorized user (AU) to the card. When the AU gets added, the credit history and information from that card are added to the AU’s report!

This is extremely helpful for people with young credit because it can drastically increase your age of accounts. It can also help many people with limited payment history or high utilization.

Please be aware that anything good or bad on that account you are added to will show up on your report. So, you want to avoid any cards with negative marks or high utilization. That being said, it is a one-way street, so nothing that you do with your credit can impact the primary account holder.

This is so valuable that there are companies that sell AU accounts. I always suggest starting with your family and/or personal network first as there are likely people in your network that can help!

5. Space Out Your Application Strategy

New credit is the smallest factor of credit, but it still matters! If you are looking to build up your credit, you should space out your applications. If you apply for too much credit in a short period, it looks very needy in the eyes of the lenders. For this reason, it is safest to apply for cards slowly over time unless you have really studied more in-depth how this works. A good rule of thumb is once every few months.

If you are in the credit game for the hopes of getting tons of credit card points for free travel, which is what I personally take full advantage of, you will want to familiarize yourself with the different bank rules and card promotions to put together the right application strategy. Applying blindly will waste inquiries and leave tons of benefits on the table!

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6. Review Your Report for Negatives

If you have any negative or “derogatory” marks on your credit report, this will hurt you drastically. They do impact you less as they age, however, you should review your credit report to ensure that everything on your report is 100% accurate and actually yours. Wrong information ends up on credit reports all the time and you will want to take personal responsibility for making sure it is accurate.

The “burden of proof” is on the credit bureau to confirm that any information on your report is in fact accurate. If you find inaccuracies, you can dispute that with them, or you could consider getting a credible credit repair company to help you.

Final Thoughts

There you have it, the top 6 tips on how to build credit fast so you can get closer to reaching your goals. Now that you’ve learned more about how credit score works and how you can improve yours, you’ll hopefully be able to make better financial decisions and achieve your financial goals quicker.

More Tips on How to Build Credit Fast

Featured photo credit: CardMapr via unsplash.com

Reference

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