Monday, June 27, 2022

Why A Good Credit Score Matters

The phenomenon of credit score building is an indispensable part of life. There is a specific process for obtaining and maintaining one. The first step is to apply for and be approved for a credit card. Second, we must spend with the credit card on a regular basis. Lastly, pay off the credit card's recurring bills on time. As we do this consistently and repeatedly, making on-time payments, our credit score will improve over time. Keep in mind that establishing good credit is a lengthy process, and patience is essential in this situation.

"In addition to landing a job and finding a place to live, building your credit score is one of the most important things you can do to start traveling the path of financial success," says Michelle Fox, author of Building Credit Is One of the Most Important Things Adults Can Do. This is especially true when it comes to larger purchases such as a house or car. The higher your credit score, the more likely banks are to approve loans to you.

A credit score is a unique multilateral score that is determined by the consistent amount of repayments on the credit card itself. With this specific credit card, you can spend on anything, however, it will have a limit. That limit is the amount in which the credit card holds for maximum spending power. Michelle Fox notes that “Credit scores range from 300 to 850. A good score is 670 to 739, very good is 740 to 799, and 800 and up is considered excellent.” The goal is inevitably to maintain a credit score of around 780, this allows for banks, mortgage companies, and auto dealers to trust you and they know you are reliable for making those payments on time without delays. A good credit score shows financial honesty, meaning that when companies do audits on our credit reports they can see exactly what our payment history looks like. With a bad credit score, trying to buy larger items like a car and or house will be almost impossible because they can see our bad payment history being late consistently. 

Building up your credit score is essential in the world we live in today; everything revolves around good credit. Learning what to spend and how much to spend is all the difference maker to adhering to sound financial responsibilities. Being financially responsible is understanding the debt game. When you are able to keep your debt low and stay net positive on the recurring bill payments. This all plays into healthy spending habits, which means spending a set amount of money that you can repay back in a timely manner. The easiest way to start is with small expenses like groceries, phone bills, streaming services bills, and internet bills. These necessary expenses that are paid with a credit card will exponentially grow your credit score.

Attaining a good credit score is as important as owning our driver’s license, it is in a sense a part of our financial identity. We must stay vigilant on our spending and our recurring payments so we can splurge on much bigger things that require an immense amount of more financial due diligence. 

Here to help,

Your Financially Fit Team 


Wednesday, June 8, 2022

Coaches Corner Exclusive: FIRE

There is a popular movement right now called FIRE, which stands for Financial Independence, Retire Early.  The basic premise is that if we can save 50-75% of our income, then we can stop working before the traditional retirement age and still do what we want.  This type of financial plan requires very substantial frugality, and not all of us are willing to give up life’s small comforts (like air conditioning!) to achieve early financial independence.

The principle still stands though…what do we want MOST? Do we want to quit our day job? Buy a house? Go back to college? Start a business? Once we had identified what we want most, we may need to make sacrifices to achieve it.

Consider making a list of top financial priorities, and the second list of things to maybe do without if needed. Here are two starter lists:

Necessities:
Shelter

Food

Utilities

Healthcare

Transportation

Phone

Clothing


Luxuries:

Fancy coffee

Name brands

Beauty treatments

Alcohol

Streaming services

Any new item that replaces something I already own


Setting up our own list may help empower us to give up little things, like fancy coffee or manicures, and possibly big sacrifices, like riding the bus instead of buying a car. Of course, somewhere in the middle is a list of our wants. We might be staying in our mom’s basement and have shelter, but still want a place of our own. If we can figure out how to reduce expenses in the necessities list, then in time, we may be able to afford more luxuries. But oftentimes we get it reversed- we first spend money on luxuries before we have even budgeted for our necessities. The smarter approach is to make a budget for all of our needs and some of our wants. We can decide what we will be satisfied with (and without) and use that to guide our decisions. And then remember every time we give something up it is because we want something else more, and we know it will be worth the sacrifice.

People who are wealthy are rarely big spenders, they are generally big savers. 

Decide what you want MOST.

Here to help,

Your Financially Fit Coaches

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Coaches Corner Exclusive: Every Dollar Matters

Lots of us go throughout our lives without ever having any instruction on how to save or spend money. In reality, saving and spending money are just two sides of the same coin. We can either save money now so we can spend it in the future, or we exchange money now for something we want in the present. 

It’s worth exploring what money lessons our family consciously or unconsciously may have taught us. We might find there are financial practices worth reconsidering today. Does what we think and feel about money serve our best interests right now? Or are there some pre-existing money ideas and feelings we may be ready to change?

No matter how much money we make, we can take control of it by deciding what we value most and what we are willing to sacrifice to get it. It is very helpful during this process to remember:

Every dollar only spends once.

If we spend a dollar, it is no longer ours to spend on something else. This is painfully obvious but think about how this reality plays out in our daily choices. With a little planning beforehand, we can:

  1. Figure out what we want most, so we do not spend our dollars on things of lesser value to us.


  1. Then we can save for what we want most, wait for a price drop, and in the meantime, do some research on the best way to make the purchase and maintain the item. A little known fact is that we can enjoy anticipating the purchase as much as actually making the purchase.


  1. In this way, we can more easily live within our income while avoiding unnecessary debt, as much as possible.



Remember, every dollar only spends once!


Here to help,

 

Your Financially Fit Coaches


Monday, June 6, 2022

Surviving Student Loans & Paying Them Off Efficiently

Student Loans are a force to be reckoned with. Although they can help us secure an education, they are also considered a financial burden in many ways. For example, think of student loans as a second rent and an extra mortgage payment. Re-payments can cut deep into our present and future earnings. So, the question is, how can we best pay off our student loans and rid ourselves of the extra payments as soon as possible? The answer, it turns out is simple- pay on time and pay more than the minimum amount required. Reducing the time it takes to pay off student loans pays us back dividends in the long run. Not only will this help shorten the time of our debt, but it can also help increase our credit score.

Attacking our student loan debt requires patience.  Working on paying them off takes a large degree of mental fortitude. We may wonder if we possess that fortitude. The good news is we develop and strengthen our financial fortitude going through the process of formulating a repayment plan and then sticking to it.


The only way to finish off our student loan debt is to pay them off or have them forgiven in some way. What helps this process is to think about student loans as an expense that we budget for accordingly. It might be helpful to make a separate account where we allocate some portion of our money that goes toward the student loan debt each month.  We can make that money untouchable so we can better meet our goal of paying them off ASAP.  Building a separate account may allow us to better monitor how much are paying toward our debt and then estimate when we anticipate having the debt paid off.


​​Refinancing our loans to get a better interest rate can also help us significantly. “Unlike a federal loan consolidation, which combines your federal loans into a single loan, student loan refinancing can work for both private and federal loans” (McClanahan, Aja). Keep in mind, that the best refinancing options are generally offered exclusively to people who have a sufficient credit history because institutions like the consistency of people who pay on time, all the time.


Aja McClanahan, author of How to Pay Off Student Loans Fast recommends we take any tax refunds we receive and use them to pay off a good portion of our student loans. “When your next income tax refund (or any other financial windfall) comes, consider putting some, or even all of it towards your student debt.” Although the high volume of payments may initially appear daunting, beginning the process will encourage us over time to eliminate our student loan debt completely.


Each of these is an idea to keep in mind when approaching our student loan payments. Sticking to applicable principles can help keep us on track and make us happier knowing we are on time, on target, and comfortable with our student loan payment performance as we simultaneously handle our other day-to-day expenses. By exercising financial discipline in our repayment plan, our credit and payment history become more attractive to lenders when we need bigger loans for financial goals in the future. Believing in ourselves and our capability to stick to our financial plans can become a strength that serves us well.  


Here to help,

Your Financially Fit Me Team


Tuesday, May 24, 2022

Why Our Spending & Saving Behavior is Changing in the 21st Century

The idea of saving and spending is rapidly changing in the world we live in today. Our banking and our shopping have been at the forefront of this online transition ever since the early 2000s. Budgeting at its very core is understanding and having knowledge of recurring predictable expenses. For example, this can be a phone bill, electricity bill, water bill, car insurance, mortgage payments, and rent payments. These are all classified as predictable expenses that we can monitor by using a simple and easy-to-understand budgeting method.


Unpredictable expenses, on the other hand, are expenses that we don’t account for. Think of funerals as an example. This is an extreme expense that brings in many spending components. This event can bring in travel expenses and housing expenses, not to mention buying items for a funeral that we hoped we would never need to buy.

Shankar Vedantam, the host of the Hidden Brain Money 2.0 podcast discussed “Why We Bust Our Budgets.” On the podcast, he brought associate professor of marketing Abigail Sussman, Ph.D. in which they discussed in detail why many of us who save and spend money aren’t prepared for our unpredictable expenses. Dr. Sussman explained the importance of planning for unpredictable expenses, “the idea is that even though it's going to be hard to predict what the specific unpredictable expense is going to be, we might still be able to predict that there will be an unpredictable expense.”

For example, we may have a friend or relative birthday coming up and need to buy them a gift. Or we may need to replace the tires on our car. Unlike food expenses that we regularly think about and plan for, these types of unexpected expenses tend to slip our minds when we are planning our budgets. The very nature of their being unpredictable makes us think they don’t come along very often so we don’t need to budget for them. Sussman shares we are likely to overspend when things are unpredictable because we assume it’s a one-time expense. Actually, we have a lot of these “one-time” expected expenses that are easy to overspend on. And in reality, birthdays, holidays, and car repairs actually come along on a regular basis and we can plan for them ahead of time, instead of being blindsided by them unexpectedly.


Sussman also explained why many of us have a habit of overspending on items greater than our budget can sustain. Companies use discounts as a manipulative advantage to keep us spending more. The “25% off or 50% off” on purchases does not help the average consumer when spending. We think we are saving more by utilizing the discounts, however, discounts can do the exact opposite by encouraging more and more spending. We should be more aware of this type of devious behavior during the inflation period. The higher the discounts, the more spending that will occur and the less happy we may be when we leave these stores.

Why do we get tricked into spending more than we intended to? Sussman suggests our excitement to have money plays a role. when we earn more in our pocket, we spend exponentially more because we now have the actual money to spend. This is especially true when we get reimbursement or a refund, like a tax return credit or store credit.

Another way we get tricked is we get comfortable with price transparency. We like when cost structure and price information are broken down into smaller pieces. Sussman explains “…when we look at that breakdown, we think that the company is being more transparent with us, we think that they're giving us more information.” This is an abusive tactic that is often utilized to make us understand why such items cost the way they do and make us feel okay spending more and more.

Understanding company motives when it involves our spending behavior is important. It helps us understand why we are spending so much. We can then combat the tendencies by becoming aware of these tactics before we make purchases.


Identifying the ways we are being tricked into spending more money, as well as making the effort to budget and allocate money for both predictable and unpredictable expenses are important strategies to increase our financial wellness.


If you also want to learn more about how to save more during an inflation period, please click here! If you also want to learn how to budget efficiently, refer to our last blog here for more information.

Here to help,

 

Your Financially Fit Me Team


Monday, May 16, 2022

How To Stay Motivated When You Don’t Have It in You

Many people struggle to maintain consistent motivation in various of their lives, including finances. Staying on track, meeting deadlines, setting goals, and even planning financial goals may all be mentally taxing. We have a tendency to compare our productivity to that of others which doesn't help us. However, attempting to improve our own consistency can. Remember that motivation stems from an inner resolve of the will. It is the idea of becoming something larger than our current selves, of imagining and working toward what we might become.

Here are 5 steps to find our inner drive and keep lighting it on fire. 
1. Do What Comes to Mind.
Do whatever is essential, even if you start with a very minor day-to-day task. It is critical to begin small and work our way up. Even something as simple as making our beds at the start of the day will help set the tone for improved productivity. The art of making one's bed in the morning inspires one to tackle more during the day. We must begin somewhere, and what better way to begin strengthening our drive for achievement than by making our beds in the morning?

                                                                                                        2. Defeating Mental Blocks. 
It is critical to identify our mental roadblocks. What is holding us back right now? Are we prepared? What is preventing us from moving forward? Are we scared of failing? These are reflective questions that we can honestly and freely ask ourselves. Speaking truth to ourselves can help us find solutions to our mental blockages more easily. Clearing the mind before engaging in serious thinking is always beneficial to this process. Another factor in efficiently keeping motivated is the environment we are immersed in. A chaotic, unpredictable, disorganized, and congested setting will demotivate any action for achieving a productive capacity. Consider incredible athletes as an example. We assume they built up their setting to get effective results. We absolutely can do the same to set up our environment for success to defeat our own mental obstacles.

3. Flexibility can help. 
The pandemic has changed the way we spend our lives during the last few years. Not only that, but it has provided a new viewpoint on how to live more efficiently. We think more deeply about why we do what we do and why we achieve certain goals. This also relates to many of us with our jobs and how they connect with the ideals we believe in. James M. Diefendorff, Ph.D., a University of Akron professor of Industrial organizational psychology suggests that we “try to structure our day to ensure that some of those ‘best day’ activities can be experienced at least some of the time.” Knowing what excites us is key because if we can repeat the activities that excite us, we will want to find other activities that excite us even more.

4. Break Down Goals. 
Setting a goal that may become unrealistic to achieve over time can be stressful. Why is this the case you might ask? Research by David Zald, Ph.D., the director of the Center for Advanced Human Brain Imaging finds, “when the workload you shoulder seems too heavy or the or the rewards too far off, the obvious but hard-to-see-when-you’re-in-it solution is to break that big goal into smaller tasks.” Goals should always be split into smaller sub-goals; doing so allows us to narrow down and outline the steps needed to accomplish the end result. 

5. Fighting Fatigue.
Being driven has a cost, and that cost is fatigue and overworking to the point of quitting. It is tough to maintain motivation for an extended period of time. We can, however, combat fatigue by adjusting our mental and physical levels. As an example, consider the nature of exercising.  We may increase our weightlifting repetitions on some days while lowering them on others. Blending mental and physical efforts allows us to take rests to refresh our bodies and minds.
For more information on maintaining your drive click here!
Feel free to also refer back to our previous blog that dwells deeper on burnout. Burnout may also cause demotivation and loss of drive if we happen to experience it more than we would like to. 

Sincerely, 
Your Financially Fit Me Team 




   





Wednesday, February 23, 2022

How to Cope with Inflation and Rising Prices in 2022

 In January of 2022, Inflation hit an annual rate of 7.5% which is the highest it’s been in 4 decades, and about 3x more than what it should be. As inflation increases, the value of money decreases, so 1 dollar becomes worth less over time as prices increase. Having a high inflation rate means that this decrease in value is happening more rapidly than usual. For those of you who have been feeling like your paycheck isn’t stretching as far, know that it is a real problem across the nation. Prices are rising and consumers are learning to cope. 


The Wall Street Journal recently released an article about tips from the 1980s for surviving inflation. What we are experiencing now is significant, but 1980 had it much worse. Through the ’70s inflation rates climbed, reaching a whopping 14% in 1980, and people who remember what that was like have shared some of their stories and tips. Below we have made a summary of the lessons they taught.

  1. How to manage rising electric prices:

    One good way to combat increased utility costs is to turn down your heater at night (to about 65 degrees). Using more blankets at night and wearing warm clothes at home can help reduce your monthly expenses. That way, you’re using the majority of your heating costs for the times you’ll benefit the most from them. As well, some energy companies charge different amounts for energy consumption at different times of the day or at different times of the month. Look into your energy provider to see if they charge more during “peak hours” and try to avoid watching TV and having lots of lights on around those times.

  2. How to manage rising gas prices:

    While gas prices are high, It is good to drive as fuel-efficient as possible. This means coasting down hills, accelerating slowly, not driving over the speed limit (because driving faster tends to consume more gas), and using cruise control while on long trips. While this isn’t a perfect solution, it does stretch your time between fill-ups. You could also consider carpooling with coworkers, taking the bus, or biking to work when possible to cut costs.

  3. Postpone expenses that aren’t necessary right now, and take care of what you have so it lasts.

    Simply being frugal can go a long way. If there is something that you want, but your budget is tight, consider whether it is really a necessity at this time. Do you have something right now that you could use instead for the time being? By making what you have last, you avoid the cost of replacing old items. This could include things like learning to patch clothes or doing a clothing swap with friends instead of shopping.

  4. When you do need something, try to buy used.  Thrifting can still save some money.

    When there is a necessary purchase that comes up, make sure to check out the used market, both online and in-person, to get a feel for your options. While some things shouldn’t be purchased used, most things are just fine. Often sites like Facebook marketplace and craigslist offer low-cost items that are still of decent quality. You can also look for garage sales, moving sales, and traditional thrift stores.

  5. Know that it’s okay to negotiate things you’re buying, especially with large purchases.

    One woman shared that telling her personal story helped her to get lower interest rates on her car loan. As well, working to keep your credit score up by only making purchases you can pay back quickly will give you a better chance in your negotiations.

  6. Saving money on food:

    The first rule of thumb is to eat out less often. Eating at home is almost always cheaper than eating out, but it’s more important when money is tight. As well, there are lots of things you can do to save money at the grocery store. First, always shop with a list, and stick to it! It’s easy to impulse purchase unnecessary foods when shopping and having something to be accountable to can help. The second is to buy value brands. Often the “off-brand” items that are of similar quality cost a lot less than well-known brands.

  7. Finding entertainment at home:

    Going out for date nights and time with kids doesn’t have to stop, but spending money on these outings should be reconsidered. Get creative with at-home hobbies, entertainment, and dates. Working on projects or learning something new can be a fun way to spend time with family. You can also consider playing games or having a picnic at your local park. When it’s cold, try making hot cocoa and s’mores, reading stories together, going on lunch dates instead of dinner dates, or playing board games.

  8. Long term investments

    Though not mentioned in the original article, long-term investments are also a g

    ood way to protect your finances from the effects of inflation. What types of investments a person chooses to work with is a very individual decision, but Financially Fit offers resources to learn about different types of investments and accounts. If you’d like to learn more about this, view our website for information on working with FFE.
If you have questions about inflation and want to understand it better, check out this blog post to learn about the basics of what inflation is and how it affects you. If you’d like to view the original Wall Street Journal article, click here. Feel free to reach out with any questions, and check out our social media for weekly financial advice.

Here to help,
Your Financially Fit Team.