Simple Ways to Save Money

Many people are on a tight budget. However, in order to break out of the norm and achieve success, you have to take a chance, a true entrepreneurial risk. Ninety-nine percent of the time, you have to make a monetary investment in order to change your situation. Therefore, the question becomes, “how can I make a monetary investment if I do not have the money to do so?”

Interestingly enough, the easiest way to make more money is not by earning a larger salary (because we all know that if getting a bigger paycheck was so easy, everybody would do it) but by cutting costs. This leads us to the topic of the article, “simple ways to save money.”

Step one: cut your costs. Some people have a very limited income, but have a top of the line cellular phone, the best cable package, and eat at a restaurant several times a week (including breakfast, lunch, and dinner). Reevaluate your situation and cut out what you do not need. Do not buy the $400 cell phone when a $100 cell phone will be sufficient. Do not get the unlimited minutes plan for $150 per month, when a smaller plan for $50 per month is all you need. Get rid of all the movie channels that cost $2 extra per channel per month on you cable bill. Bring lunch to work, and do not run to your local coffee house every morning to buy a $3 cup of coffee.

Taken individually, all of these costs seem insignificant. However, if taken together, you could be saving well over $100 per month on your expenses. This money could then be used for investment purposes, thus creating an income stream. Therefore, not only have you saved money, but the money that you saved is actually making you additional money.

Another good way to save money is to automate the process. Many banks will automatically take a portion of your paycheck and put it into a savings account at no charge (you will have to fill out some paperwork, but everything is usually very easy and takes almost no time to complete). By doing this, you are guaranteeing that you will save some money every month and makes the savings process easy for you. Keep in mind, every little bit can help you. Therefore, something as small as $50 per month is a good starting point if that is all you can afford. If you can do more, by all means, save more!

Just remember, you want your money to work hard for you. Therefore, put your money into a banking institution that pays you a good interest rate. There are many Internet sites (such as www.bankrate.com) that will give you the interest rates of the banks in your area as well as national banks. This way, you can choose the best option for you.

Start saving and you will soon see a difference. Once you have a little capital, keep your eyes open for investment opportunities that can help you achieve success.


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Companies that Improve your Credit Report for a Fee

It is true that many companies exist that will claim to clean up your credit report for a fee. Some of these companies are less than ethical and some are outright scams, however, there are many legitimate companies that will clean up your credit report for a small fee. Many people believe that all of these credit repair companies are cheats that take your money and do no work to help you out. This is simply untrue. The company that I used to clean up my credit report definitely did its job, and has helped me raise my credit score over 100 points over the course of one year.

Many skeptics argue that everything that these companies do can be done yourself for less money. This is 100% true, however, I do not see how that is relevant. I can make dinner at home for less money than going to a restaurant. However, under the skeptics logic, I should not go to the restaurant because it will cost more than making dinner at home. The point is, if you use a credit repair company, you are paying for experience and convenience. Of course you can do everything yourself, however, if you pay a company to take care of the problem, this means less work for you and, if the company is reputable and experienced, faster results.

Does this mean that you should use a credit repair company no matter what? No, you should not use one of these companies no matter what. If you decide that your credit report needs to be repaired, you should analyze your situation and decide which option (paying a company to do it or doing it yourself) is best for you. Either way, if done correctly, the results will be worth the time and money.


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Can Student Loans be Discharged in a Chapter 7 Bankruptcy?

First of all, what is Chapter 7 bankruptcy? Chapter 7 bankruptcy is also sometimes called “liquidation bankruptcy.” This is the bankruptcy option that cancels your debts. It is available to individuals, but does not cancel every debt that a person has. For example, a home mortgage is not a dischargeable debt. Could you imagine the amount of abuse that would take place if a home mortgage was a dischargeable debt? It is not hard to imagine a person buying something like 10 properties, filing for bankruptcy, having the mortgages discharged, and selling all the property for a large chunk of cash.

As with home mortgages, student loans are not dischargeable in a bankruptcy proceeding. I know the attraction that student loans bring. I have been there and done that. I have borrowed over $100,000 in student loans in pursuit of my Bachelor’s degree and my law degree. Student loans are relatively easy to get, pay quickly, and have a low interest rate. As a result, many students borrow more money than they actually need. This creates a problem when students have to repay the loan upon graduation or at the end of ten years, whichever comes first.

Students are shocked when the repayment period begins. Student loans can add up, and if you do not have the diligence to track your borrowing and cut your costs, you can end up in some serious trouble when the repayment period begins. Consolidating your student loan is a popular option that most students utilize in order to save on interest expenses. Although consolidation will save you money, it is not the “end all” solution to borrowing too much money. The truth is, there is no answer. The only way to solve the problem of borrowing too much money is to prevent it from happening. Remember, bankruptcy will not help you because student loan debt cannot be discharged in this way.

Watch your borrowing and keep track of your expenses. Save money wherever you can and only borrow what you need to live. Borrowing too much will burn you in the long run and will be a difficult obstacle to overcome, especially since many graduates start to accumulate big expenses (such as a home mortgage, a car, marriage ceremony, a new baby, etc.) soon after graduation.


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Explaining Compound Interest

Compound interest is a great financial tool that can help you achieve a good chunk of wealth. There are many financial calculators that show you how compound interest can help grow an investment. The only thing you need to be aware of is that if you are relying solely on compound interest as you return on investment, you should be focusing only on the long term return. Usually, people use compound interest as their return on investment for investments such as individual retirement accounts (IRAs) and savings accounts.

Simple interest is calculated using a simple formula: Principal x Interest Rate x Time. So, for example, let us say that you deposit $1,000.00 in an account for one year that yields a 4% interest rate. Therefore, your return for the year would equal $1,000.00 X 4% or .04 X 1. This equals $40. Therefore, at the end of the year, your account balance would be $1,040.

If you wanted to figure out how much interest you would make per month, the formula is the same (Principal x Rate x Time), however, your “time” would change from 1 to 1/12. Since there are 12 months in a year and you want to figure out the return per month, you would use 1/12. Therefore, your equation would be $1,000.00 x .04 x 1/12. This equals about $3.33 per month.

Under simple interest, after 1 month, your principal investment of $1,000.00 would now be $1,003.33. Even though your principal increases, under simple interest, you would still calculate the interest based upon the original $1,000 investment. Compound interest is different in that you return increases as your principal increase. Therefore, after the first month, instead of calculating the interest on a principal amount of $1,000, you would calculate interest on the new principal amount of $1,003.33. Therefore, under simple interest, in month 2, you would have $1,006.66 in you account. However, under a compound interest account, you would have $1,006.67. I know that one cent is basically nothing, however, that is why compound interest is a long term investment. At the end of one year, under simple interest, your account balance would be $1040, however, under compound interest, your account balance would be $1040.69.

As you may notice, you get about $0.69 more under a compound interest scheme. Over the years, this number adds up significantly. In fact, the difference could be thousands of dollars. The point is, use compound interest as a safe, guaranteed, long term return on investment.


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What Does a Credit Score Mean to You?

There are many frequently asked questions by people who are not entirely clear as to the significance of a credit score. These people understand that a high credit score is good because it will help them get loan approvals and lower interest rates, but these same people do not know how high their credit score needs to be in order to obtain these advantages.

A FICO score ranges between 300 to 850. Obliviously, if you have a credit score of 850 you have nothing to worry about. You have reached the pinnacle of credit worthiness and will get the best interest rate and best loan, guaranteed. However, what if I have a score of 720? Will a score of 720 get me a better interest rate than a score of 715? A score of 720 is higher than 715, thus, many would conclude that a 720 would get favorable interest rates and loans. However, such is not the case. Lender will treat a score of 715 and a score of 720 the same. Why?

In addition to being scaled between 300 to 850, most lenders create credit score categories. These categories have various different names depending on the lender, but generally, the credit scores are broken into 5 categories and have names similar to (1) Poor; (2) Fair; (3) Average; (4) Good; and (5) Excellent. The lender will then take your score and put it into the appropriate category. Once you are placed in a particular category, you are given interest rates and loan terms based upon that category.

Generally, a lender’s ratings are as follows: (1) Poor is equal to credit scores 619 and below; (2) Fair is equal to credit scores 620-659; (3) Average is equal to credit scores 660-720; (4) Good is equal to credit scores 721-749; and (5) Excellent is equal to credit scores 750 and over. So, what is the point I am making? The point is, a score of 715 is not different from 720 for lending purposes. Therefore, you do not need to worry about these couple of points when applying for a loan. The only thing you should worry about is the point difference between the categories. In other words, if you have a 720, you should try to boost your score a couple of points so that you can get the more favorable terms and interest rates given in the “Good” category.

Additionally, remember that your credit score is based upon the time it is pulled. Therefore, your 720 today could be 718 or 725 tomorrow. Everything such as paying a bill, taking out a loan, getting a new credit card, getting a larger credit line on an existing credit card, and/or having a credit card for more than three years will affect you credit score. Because many people do at least one of these things several times per month, your score will thus change several times per month. This is one of the reasons why lenders do the category system.

The point is, take care of your credit score, do not worry about the points in the same category (because, based on our example, a 660 will get the same rates and loans as a 720), and strive to get your score into the highest category.



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The Importance of Building a Good Credit History

There are many reasons as to why people should strive to build a good credit history. First and foremost, a good credit history is an important financial asset to possess in order to obtain the big loans (i.e. a mortgage, a car loan, and/or a college loan, to name a few) in life. Additionally, beyond qualifying for these kinds of loans, the interest that you will have to pay for any such loan is an important factor to consider when getting the loan. If your credit is good, your interest rate will be lower and thus, make the loan a more attractive option for you.

Of course, these loans will not be a concern to some people. Some people rent (however, renting a place by yourself does require a credit check, therefore, if your credit report is bad, you may be denied the lease. If you do rent and do not want to have your credit history checked, you are going to have to have roommates, or have the apartment rented in the name of another person who is willing to be the primary tenant on the lease and who trusts you enough to make the monthly payments on time.). Some people buy cars for cash, get scholarships to college, or never go to college, and some people will never take out a loan. There are not many of these people. However, if you are one, or are striving to become such a person, there is another reason as to why you should have a good credit history.

What started in a minority of companies is now basically common practice. Many companies will check the credit history of all new employee applicants. These companies believe that the credit history of a person can determine, among other things, the responsibility level of a person and the true intention as to a person’s reason for applying for a job. A bad credit history will not be the end-all factor that prevents you from getting a job, however, many companies take your credit history into consideration when determining who to hire. Do not start with a disadvantage because you have a bad credit history.

Even though some of you may think that debt is evil and that there is no possibility of you ever taking out a loan or otherwise using credit and therefore do not care about your credit history, remember that there are many companies out there that check your credit. If you do not strive for a good credit history because of the financial benefits, at the very least, a good credit history could get you the job that you want. Therefore, a good credit history is in your best interest.