This post is in reply to a previous post on benjaminhowe.com titled "Resource Management." I was going to leave it as a reply but the thoughts held as some good ones to post instead.
Another thought to consider less transactions means less record keeping. It sounds like you are considering work as well as personal, but I find with personal spending the less I spend the easier it is to keep track. Lumping things into one "shopping day" might help because it decreases impulse spending if you are tempted to buy something and it is not "shopping day" I had a similar system to that on the mission that helped me save quite a bit of money. Snacks for example are a lot cheaper when planned instead of just grabbed. I really like quicken and internet banking I make it a point to "balance my checkbook" constantly by constantly I really mean it and more than I should sometimes I will check on the internet review any transactions that have cleared and put them in quicken and make sure it has the same amounts as the bank is recording. Any set expenses you can also put in quicken as soon as they are known and the balancing technique helps to catch ones you might have forgotten and quicken gives you future tidings when you put the bills in ahead of time about where the account stands before and after the bill.
Monday, December 10, 2007
Friday, November 16, 2007
Christmas Cautions
Christmas is a time of year when good spending habits tend to be thrown out the window because "its Christmas" remember the differences of wants and needs and remember that even Christmas doesn't justify wasteful spending. If you have a Christmas bonus coming up consider putting it in savings rather than spending it the same day. I have found that simple living can be easy and much more calm then fighting with finances. Good luck and Happy Holidays
Monday, August 6, 2007
Record Keeping
It is important to budgeting to keep good records of what your expenses are. I like the computer program quicken it allows for managing and tracking of multiple accounts and seeing that I have several accounts it works well to keep all of them in the same place. Another important feature it has is categories so when you record a transaction you tell the program what category of spending it should put it in. If you use the categories well you can print a report at the end of a month or week or however you like and it will do the totals for you.
Other options for record keeping are bank statements, credit card statements, and the good old balancing the check book act. The best way to use the bank statements or credit card statements would be if all your transactions went through that account so you can see by looking at one paper what expenses you had in a month. This is a fine method of record keeping but you will need to note what the specific purchases fit under as far as categories and then sum up the categories yourself. For the balancing your check book approach that is something that should be happening anyway to check against your bank account but to keep track of your expenses with pencil and paper can be tedious and falls by the wayside easily if you don't stay on top of it.
I use the computer program approach as I mentioned before, but I mix it with the bank statement approach with access to online banking this lets me check against the banks record and do a day to day balancing act. It is a good idea when using the computer approach to use online banking to your advantage to keep up regularly on spending then at the end of the month you can look at your reports and compare them against your budget or use them to create a budget.
Other options for record keeping are bank statements, credit card statements, and the good old balancing the check book act. The best way to use the bank statements or credit card statements would be if all your transactions went through that account so you can see by looking at one paper what expenses you had in a month. This is a fine method of record keeping but you will need to note what the specific purchases fit under as far as categories and then sum up the categories yourself. For the balancing your check book approach that is something that should be happening anyway to check against your bank account but to keep track of your expenses with pencil and paper can be tedious and falls by the wayside easily if you don't stay on top of it.
I use the computer program approach as I mentioned before, but I mix it with the bank statement approach with access to online banking this lets me check against the banks record and do a day to day balancing act. It is a good idea when using the computer approach to use online banking to your advantage to keep up regularly on spending then at the end of the month you can look at your reports and compare them against your budget or use them to create a budget.
"Wants" Budgeting Technique 1
I learned this technique when I was in a very structured living system with a set amount of money per month and very little variation to my food expenses and other "needs" expenses so they did not change to much. You take the money left after budgeting needs and you divide it evenly by the number of days left in the month. This gives you your daily allowance of spending. You then update this every day accounting for the spending of the previous day. This system can be involved but takes only a couple of minutes in the record keeping process of spending.
Let me run though an example if after I have budgeted the things I need in a month and I have $150. For convenience the month has thirty day then the first calculation I do is 150/30 and I find I can spend $5 a day for the rest of the month and meet my budget. So on the first day of the month I actually was fine to not spend anything that wasn't in my needs budget and so the 2nd day I still have $150/29 and I get $5.17 that I can spend each day now. This is an evidence of the old saying "a penny saved is a penny earned", because in saving my $5 from the first day I gained money for the rest of the days. If I do spend money over my needs budget or that wasn't included in the needs budget I subtract it from my $150 and my daily spending allowance drops.
Some great advantages of this method:
When you account for your daily spending you will become more aware of your spending habits and will see in what ways you can improve.
Saving money can become a fun thing and seeing your daily allowance grow becomes a reward to good spending habits.
If you take the daily approach you can control a day's spending instead of a month at a time and it is easier to control a day than a month.
At the end of the month you will see the rewards of good spending habits or see ways to improve your bad spending habits.
This encourages good record keeping.
Something to keep in mind: any time you go over budget in any category in your needs note that so you can make changes on the next months budget to compensate.
Let me run though an example if after I have budgeted the things I need in a month and I have $150. For convenience the month has thirty day then the first calculation I do is 150/30 and I find I can spend $5 a day for the rest of the month and meet my budget. So on the first day of the month I actually was fine to not spend anything that wasn't in my needs budget and so the 2nd day I still have $150/29 and I get $5.17 that I can spend each day now. This is an evidence of the old saying "a penny saved is a penny earned", because in saving my $5 from the first day I gained money for the rest of the days. If I do spend money over my needs budget or that wasn't included in the needs budget I subtract it from my $150 and my daily spending allowance drops.
Some great advantages of this method:
When you account for your daily spending you will become more aware of your spending habits and will see in what ways you can improve.
Saving money can become a fun thing and seeing your daily allowance grow becomes a reward to good spending habits.
If you take the daily approach you can control a day's spending instead of a month at a time and it is easier to control a day than a month.
At the end of the month you will see the rewards of good spending habits or see ways to improve your bad spending habits.
This encourages good record keeping.
Something to keep in mind: any time you go over budget in any category in your needs note that so you can make changes on the next months budget to compensate.
Budgeting Basics
Well I'll go over some basic budgeting principles in this post. First when we budget we want to have an idea of how much money we have coming in each month, an easy way to get started on this is to check bank statements or go directly to pay stubs. Depending on your employment pay may vary month to month so it is a good idea to check a few months worth of income and come up with an average you are comfortable with. The average is going to be what you are working with in a month. You then take your "needs" expenses out of this income being Rent, Food, etc. also debt payments fall into this category because they need to be paid no matter what. For more on these "needs" expenses check the needs vs wants posts.
So of our income we are going to reduce it hopefully to a positive number. Some challenges occur in the first subtracting step with items like food, because we don't spend the exact same every month depending on sales or appetites or whatever. I like to have an average idea on the food or other varying expenses by checking a few months of spending. This may be difficult if you don't have a record of spending, sometimes bank statements may be helpful for this or credit card statements if you use credit cards and pay them off. I personally like keeping a record using a computer program Quicken that came with my laptop. I will discuss record keeping in a future post. With records of our expenses we should be able to estimate food expense or if car travel is an important part of our lives we could also estimate gas expenses.
I know starting a budget can be hard and the record keeping is a lot of the difficulty so I would suggest getting started with that as soon as possible. Even without it though you should estimate as best you can your varying expenses and subtract them from your income. Now comes a difficult part the "wants" budgeting. I have never been fond of this because it is hard to budget whims or fancies, but there was an involved method I learned once that was an enjoyable way to do this part. I will elaborate in my next post.
So of our income we are going to reduce it hopefully to a positive number. Some challenges occur in the first subtracting step with items like food, because we don't spend the exact same every month depending on sales or appetites or whatever. I like to have an average idea on the food or other varying expenses by checking a few months of spending. This may be difficult if you don't have a record of spending, sometimes bank statements may be helpful for this or credit card statements if you use credit cards and pay them off. I personally like keeping a record using a computer program Quicken that came with my laptop. I will discuss record keeping in a future post. With records of our expenses we should be able to estimate food expense or if car travel is an important part of our lives we could also estimate gas expenses.
I know starting a budget can be hard and the record keeping is a lot of the difficulty so I would suggest getting started with that as soon as possible. Even without it though you should estimate as best you can your varying expenses and subtract them from your income. Now comes a difficult part the "wants" budgeting. I have never been fond of this because it is hard to budget whims or fancies, but there was an involved method I learned once that was an enjoyable way to do this part. I will elaborate in my next post.
Call for Questions
I have been thinking and something that might be nice for readers would be the option of dropping a question and getting an answer so if anyone has questions let me know. Leave a comment on this post or others and I will check them out and if I don't know the answers I will go find them. Thanks
Wednesday, August 1, 2007
Priorities: Need vs Want
This is an introduction topic to budgeting. We always need to have goals in life to know where we are going so eventually we can get there. In financial situations our goals are our priorities. We have the opportunity to establish what we want our money to do for us and then budgeting is the planning to make that happen. With priorities it is also helpful to distinguish what we need and what we want.
Need is a word that to me is about survival day to day being able to wake up in the morning and live until I go to sleep at night. Under this heading we can see that we don't need as much as we might think. To be alive from day to day we definitely need food and water I will give you that. Also other basic needs would be shelter and clothing to protect us from the elements. Do we need electricity or other utilities? I would say that they help a lot with life especially electricity for refrigeration and gas or electricity for cooking, so I will accept basic utilities as a need as well, but they aren't absolutes. Basic utilities would be electricity, natural gas, water, and I would say telephone access of some sort. Telephone would be a need in emergencies more than anything and could be simply assuring that you had access to a telephone in an emergency.
Another set of needs that does not exactly equate survival, but is necessary nonetheless would include such things such as savings. I also believe in charitable actions as being part of this category. In my religion we believe the first priority is our allegiance to God and in my life this has a Need priority. I believe that God wants me to dedicate part of my income to his work so I do that first.
Want is a word that covers the rest of those things we might buy with our money. If I like to watch movies I might want to buy some and start a collection or I might like tv and decide I want cable or satellite service. These are things that might be fun and enjoyable but that I could live without if I needed to. With future posts I will discuss other wants that we might not notice that can help us with budgeting.
With the ideas of need vs want on the table we can prioritize our expenses to make the most of our money. We begin with needs, for my family this would be Tithing (church donation), food/shelter, utilities, and savings contribution. We can then think of how to best prioritize those things that we want or decide to forgo some of our wants to add to those things we need by increasing savings in the form of food storage or monetary savings.
Need is a word that to me is about survival day to day being able to wake up in the morning and live until I go to sleep at night. Under this heading we can see that we don't need as much as we might think. To be alive from day to day we definitely need food and water I will give you that. Also other basic needs would be shelter and clothing to protect us from the elements. Do we need electricity or other utilities? I would say that they help a lot with life especially electricity for refrigeration and gas or electricity for cooking, so I will accept basic utilities as a need as well, but they aren't absolutes. Basic utilities would be electricity, natural gas, water, and I would say telephone access of some sort. Telephone would be a need in emergencies more than anything and could be simply assuring that you had access to a telephone in an emergency.
Another set of needs that does not exactly equate survival, but is necessary nonetheless would include such things such as savings. I also believe in charitable actions as being part of this category. In my religion we believe the first priority is our allegiance to God and in my life this has a Need priority. I believe that God wants me to dedicate part of my income to his work so I do that first.
Want is a word that covers the rest of those things we might buy with our money. If I like to watch movies I might want to buy some and start a collection or I might like tv and decide I want cable or satellite service. These are things that might be fun and enjoyable but that I could live without if I needed to. With future posts I will discuss other wants that we might not notice that can help us with budgeting.
With the ideas of need vs want on the table we can prioritize our expenses to make the most of our money. We begin with needs, for my family this would be Tithing (church donation), food/shelter, utilities, and savings contribution. We can then think of how to best prioritize those things that we want or decide to forgo some of our wants to add to those things we need by increasing savings in the form of food storage or monetary savings.
More on Q and A Session
This is more from our session with our church leader.
Question: Should we be looking at life insurance and what type?
Answer: Especially if you have children you should consider getting life insurance. This is especially important for the bread winner of the family. Term life insurance is a relatively inexpensive way to go because it does not build a cash value.
I will also discuss insurance more later.
Question: Should we have a will?
Answer: The main reason at our age to have a will was to designate guardianship of our children if we did not have a will covering that then the state decides the fate of the children.
Questions were also raised about budgeting and retirement investing.
With budgeting one of the main points was to review a few months statements if using a credit card approach and budget using the past as your guide, be careful with food purchasing a lot of money can be wasted on nonessential foods, start with set expenses such as church/charitable donations, rent, utilities, and others.
With retirement we discussed the approach of starting good habits now, Aiming for home ownership, IRA accounts and a few other things I will discuss in detail later.
We also discussed government aid programs and the opportunities available to get help with medical insurance, grocery shopping, and home buying. These will be other things I will try and cover in depth as well.
Question: Should we be looking at life insurance and what type?
Answer: Especially if you have children you should consider getting life insurance. This is especially important for the bread winner of the family. Term life insurance is a relatively inexpensive way to go because it does not build a cash value.
I will also discuss insurance more later.
Question: Should we have a will?
Answer: The main reason at our age to have a will was to designate guardianship of our children if we did not have a will covering that then the state decides the fate of the children.
Questions were also raised about budgeting and retirement investing.
With budgeting one of the main points was to review a few months statements if using a credit card approach and budget using the past as your guide, be careful with food purchasing a lot of money can be wasted on nonessential foods, start with set expenses such as church/charitable donations, rent, utilities, and others.
With retirement we discussed the approach of starting good habits now, Aiming for home ownership, IRA accounts and a few other things I will discuss in detail later.
We also discussed government aid programs and the opportunities available to get help with medical insurance, grocery shopping, and home buying. These will be other things I will try and cover in depth as well.
Question and Answer Session
I recently had the opportunity to attend a church sponsored session with a leader in our church where he spoke to some young married couples about financial management and I am going to post a few things covered in that here.
He talked about how April showers bring May flowers meaning that the more we can do early in life the more it will help us later on establishing good habits makes a big difference in life.
3 reasons for credit cards
You get a detailed monthly statement which can help you follow your expenses (Useful in Budgeting)
Very convenient to use
Possible minor benefits such as air miles
I would add to this the concept of improving your credit history
Warnings on credit cards, they are one of the worst ways to borrow money, pay them off every month and do so as soon as you get the bill. He mentioned that missing the payment by even a day can bring all sorts of extra charges that may not even make sense as well as raise interest rates on all of your credit accounts not just the one card you missed. There is a term called Universal Default which means for a late bill payment of whatever type be it utility or credit card or whatever interest rates can go up for everything because of 1 missed payment.
Rule of thumb: Don't spend what you don't have
He talked about how April showers bring May flowers meaning that the more we can do early in life the more it will help us later on establishing good habits makes a big difference in life.
3 reasons for credit cards
You get a detailed monthly statement which can help you follow your expenses (Useful in Budgeting)
Very convenient to use
Possible minor benefits such as air miles
I would add to this the concept of improving your credit history
Warnings on credit cards, they are one of the worst ways to borrow money, pay them off every month and do so as soon as you get the bill. He mentioned that missing the payment by even a day can bring all sorts of extra charges that may not even make sense as well as raise interest rates on all of your credit accounts not just the one card you missed. There is a term called Universal Default which means for a late bill payment of whatever type be it utility or credit card or whatever interest rates can go up for everything because of 1 missed payment.
Rule of thumb: Don't spend what you don't have
Sunday, July 22, 2007
Interest
I realized I hadn't mentioned interest. Working for you or against you interest makes a big difference in today's finance. Creditors use interest rates to charge you money for your credited money and savings accounts work the opposite direction paying you interest on the money you are "lending".
Interest is simple or complicated depending on how you look at it and the number of times it is compounded per year also changes things quite a bit. There are formulas for calculating interest in its many forms the most simple is that Interest = Principal x interest rate x time. Lets say you get "about 5% APR" on a money market account, we could get an idea of your interest in a year simply by multiplying what you have in the bank by .05 and we have an estimate of what you would make in a year. So in this example we would get the interest 1 time at the end of a year, usually this is not used in today's market. Usually accounts award the interest on a more frequent basis, this is called compounding.
I won't go over the math for this but just say that the more often the money is compounding the more interest will be made this is because the interest itself will be making interest. When you are investigating any interest account either as credit or savings you should be able to get an idea for how often the account compounds and often you will see an APY (annual percentage yield) in addition to the APR (annual percentage rate) the APY gives a slightly different rate and should be higher because it contains the compounding adjustments for a years time using this rate you can perform the simple multiplication described above.
Remember with interest you want it to work for you lower rates on credit and higher rates on savings. Examples of different rates would be for loans a credit card would be above 10% many times well above but a secured loan I took out was less than 8%. For savings you might find rates at 2% for some CDs, higher or lower depending on how much you are putting into it, or the amount of time you are putting it in for. Remember the more money or the more time something is subject to an interest rate the interest will grow. Also, APY is going to give you a quick idea about how much you are going to make with your savings.
Interest is simple or complicated depending on how you look at it and the number of times it is compounded per year also changes things quite a bit. There are formulas for calculating interest in its many forms the most simple is that Interest = Principal x interest rate x time. Lets say you get "about 5% APR" on a money market account, we could get an idea of your interest in a year simply by multiplying what you have in the bank by .05 and we have an estimate of what you would make in a year. So in this example we would get the interest 1 time at the end of a year, usually this is not used in today's market. Usually accounts award the interest on a more frequent basis, this is called compounding.
I won't go over the math for this but just say that the more often the money is compounding the more interest will be made this is because the interest itself will be making interest. When you are investigating any interest account either as credit or savings you should be able to get an idea for how often the account compounds and often you will see an APY (annual percentage yield) in addition to the APR (annual percentage rate) the APY gives a slightly different rate and should be higher because it contains the compounding adjustments for a years time using this rate you can perform the simple multiplication described above.
Remember with interest you want it to work for you lower rates on credit and higher rates on savings. Examples of different rates would be for loans a credit card would be above 10% many times well above but a secured loan I took out was less than 8%. For savings you might find rates at 2% for some CDs, higher or lower depending on how much you are putting into it, or the amount of time you are putting it in for. Remember the more money or the more time something is subject to an interest rate the interest will grow. Also, APY is going to give you a quick idea about how much you are going to make with your savings.
Emergency / Short Term Savings
I was actually able to combine these types of savings for the most part so I will cover them together. It is always a good idea to have a certain amount of accessible money for emergencies. I like to have a certain amount in my checking account for immediate emergencies and then another amount in an emergency savings type of account.
First the checking account money is important to have for emergencies that are pay now types. I would call a pay now emergency something like car problems you want to get the bill paid when the car breaks down. Also there are emergencies that may be pay "later" you can have a day or two to transfer the money from your savings account to checking to be available this might be something like injury or losing a job. Your checking account sum should be probably in the range of a months expenses you wouldn't be able to get much interest on that money in a month anyway.
The other emergency short term savings should cover about 3 months expenses just to have a time of recovering in case of problems. Larger amounts of short term savings should be held in an interest bearing account. There are quite a few options for short term savings from interest checking accounts, to savings accounts, even some CD accounts. I personally have been impressed with the opportunities presented by Money Market accounts. These accounts carry restrictions similar to savings accounts but have higher interest rates some are even around a 5% APR.
The choice of savings account type depends on how you like to access your money, how much rollover you might expect, and how much you are hoping to make in interest. Some examples of money market restrictions can be seen here. I am currently holding my short term savings in an internet money market which is at about 5% APR and is not too much of a hassle if you are used to online banking. It gives a decent amount of flexible access and can be accessed for short term needs.
First the checking account money is important to have for emergencies that are pay now types. I would call a pay now emergency something like car problems you want to get the bill paid when the car breaks down. Also there are emergencies that may be pay "later" you can have a day or two to transfer the money from your savings account to checking to be available this might be something like injury or losing a job. Your checking account sum should be probably in the range of a months expenses you wouldn't be able to get much interest on that money in a month anyway.
The other emergency short term savings should cover about 3 months expenses just to have a time of recovering in case of problems. Larger amounts of short term savings should be held in an interest bearing account. There are quite a few options for short term savings from interest checking accounts, to savings accounts, even some CD accounts. I personally have been impressed with the opportunities presented by Money Market accounts. These accounts carry restrictions similar to savings accounts but have higher interest rates some are even around a 5% APR.
The choice of savings account type depends on how you like to access your money, how much rollover you might expect, and how much you are hoping to make in interest. Some examples of money market restrictions can be seen here. I am currently holding my short term savings in an internet money market which is at about 5% APR and is not too much of a hassle if you are used to online banking. It gives a decent amount of flexible access and can be accessed for short term needs.
Introduction to Saving
Savings that little bit of money set away for a rainy day. We all know that we should be saving money for the future not only is it a healthy and safe practice but it is liberating and necessary if we hope to have something to keep us alive later on when we might decide to retire. There are many different forms of saving money for the future and also different types of savings. I will try and go over 3 major types of savings:
emergency savings
short term savings
long term savings
These 3 types of savings are usually handled in different ways and I will go over experiences with all three. One other thing I want to stress is the power of savings to bring freedom and peace of mind into your world. Being able to cover your necessary living expenses for several months for example allows you time to recover from loss of a job, injury, or other losses of income. If you are not able to cover these things not only would you have more worries but may face such things as eviction. We want to control our money so it does not control us. Well on to a little bit of savings then.
emergency savings
short term savings
long term savings
These 3 types of savings are usually handled in different ways and I will go over experiences with all three. One other thing I want to stress is the power of savings to bring freedom and peace of mind into your world. Being able to cover your necessary living expenses for several months for example allows you time to recover from loss of a job, injury, or other losses of income. If you are not able to cover these things not only would you have more worries but may face such things as eviction. We want to control our money so it does not control us. Well on to a little bit of savings then.
Sunday, July 15, 2007
Building Credit
I am sure many of us have heard horror stories about a good person with a good job and no debt trying to get a loan for a house or some other purchase and they are turned down or some other negative thing happens because they do not have a credit history. If you don't have history it is going to be hard to have a good credit score simply because it is a report of your history. Simple approaches can work very well for the problem of building credit. My first experience was very simple it was an overdraft protection on my checking account. I decided to use the overdraft a few times and pay it off promptly even sometimes in the same day. Doing this over the period of only a few months let my credit presence be known and later when applying for a loan I had a good credit score from one little account. A few things to consider about building credit:
You don't have to have large purchases
You don't have to carry a balance for large periods of time
Take advantage of offers early in life for small things to build for later things, students especially have many opportunities with student accounts or credit cards
I do not advise carrying any large amount of debt other than for "necessities" of life principally an affordable home. Building credit helps with future goals such as being able to get a home loan.
You don't have to have large purchases
You don't have to carry a balance for large periods of time
Take advantage of offers early in life for small things to build for later things, students especially have many opportunities with student accounts or credit cards
I do not advise carrying any large amount of debt other than for "necessities" of life principally an affordable home. Building credit helps with future goals such as being able to get a home loan.
Debt
This is a point of warning before any more talk on credit. Debt is a thief of freedom. We value freedom very highly as human beings and even children have a sense of wanting to live their own lives. Debt makes us slaves to our creditors and we will live with much better peace of mind and enjoy our lives when we avoid debt.
Requesting a credit report or Credit Score
There are 3 businesses in the US that monitor credit. Equifax, Transunion, and Experian
The US government has worked with these companies and they now provide everyone to obtain a free credit report once a year. Each company will give you access to your report once a year so you are entitled to 3 reports a year. Some people elect to see all three at the same time or you can space them out over the year to have an updated view of your credit more often. To obtain the free copies of your credit report you can visit http://www.annualcreditreport.com/ which is the site that is listed by the government to access the free reports.
Also available from these companies and others is the opportunity to view your credit score. This service usually comes with a fee and I have not had a use for it as of yet. I took out a small personal loan last year and in the process the lender obtained my score and I was able to ask them the score and hear it in that way, so if you are in that position keep that in mind and when applying for credit you may be able to ask for your score in the process. I have heard that too frequent requesting of your score can have a negative effect on credit and that is one of my reasons for avoiding requesting it. Also, as mentioned in the previous post credit scores are simply a number used by lenders to assess reliability. If you obtain your credit report you can get a feel for what type of a score you might have.
The US government has worked with these companies and they now provide everyone to obtain a free credit report once a year. Each company will give you access to your report once a year so you are entitled to 3 reports a year. Some people elect to see all three at the same time or you can space them out over the year to have an updated view of your credit more often. To obtain the free copies of your credit report you can visit http://www.annualcreditreport.com/ which is the site that is listed by the government to access the free reports.
Also available from these companies and others is the opportunity to view your credit score. This service usually comes with a fee and I have not had a use for it as of yet. I took out a small personal loan last year and in the process the lender obtained my score and I was able to ask them the score and hear it in that way, so if you are in that position keep that in mind and when applying for credit you may be able to ask for your score in the process. I have heard that too frequent requesting of your score can have a negative effect on credit and that is one of my reasons for avoiding requesting it. Also, as mentioned in the previous post credit scores are simply a number used by lenders to assess reliability. If you obtain your credit report you can get a feel for what type of a score you might have.
Credit Score/Credit Report
I know this is something that we hear quite frequently in our day of borrowing money and identity theft.
First lets go over the two terms
Credit Report
A credit report is a list of your credit transactions typically including loans, credit cards or other money borrowed from an official lender. The report has different sections of information that you can review, it may include; a credit summary, detailed account information, inquires made by lenders, any accounts turned over to collections, public record information, and information on your file disputes. In summary it is your history of how you interacted with your lenders and how you managed your accounts.
Credit Score
Using a summary view of a credit report a person receives the all elusive Credit Score. This is a number that is used to predict your credit reliability based on your past experiences. A high credit score suggests that you are a reliable person that has been good with creditors in the past and should continue to do so.
With the two terms better in mind we will talk about what they do. First the Credit Report is a useful tool to you the consumer to get an idea about what things might have and affect on your credit. You get to see your past accounts and check if any information might be suspect. These reports have become an important tool in protecting yourself against identity theft to check that you don't have accounts that you don't know about. For the most part the consumer uses the report or the agencies that give a credit score use it.
Second the credit score, lenders are going to be using this and not the credit report. They don't need every detail of your past experience they simply want to have an idea about the risk they are taking by giving you money. Remember high numbers typically will get you better interest rates and will help you be accepted for a loan.
That is a little bit of explanation about the two Credit watch dogs.
First lets go over the two terms
Credit Report
A credit report is a list of your credit transactions typically including loans, credit cards or other money borrowed from an official lender. The report has different sections of information that you can review, it may include; a credit summary, detailed account information, inquires made by lenders, any accounts turned over to collections, public record information, and information on your file disputes. In summary it is your history of how you interacted with your lenders and how you managed your accounts.
Credit Score
Using a summary view of a credit report a person receives the all elusive Credit Score. This is a number that is used to predict your credit reliability based on your past experiences. A high credit score suggests that you are a reliable person that has been good with creditors in the past and should continue to do so.
With the two terms better in mind we will talk about what they do. First the Credit Report is a useful tool to you the consumer to get an idea about what things might have and affect on your credit. You get to see your past accounts and check if any information might be suspect. These reports have become an important tool in protecting yourself against identity theft to check that you don't have accounts that you don't know about. For the most part the consumer uses the report or the agencies that give a credit score use it.
Second the credit score, lenders are going to be using this and not the credit report. They don't need every detail of your past experience they simply want to have an idea about the risk they are taking by giving you money. Remember high numbers typically will get you better interest rates and will help you be accepted for a loan.
That is a little bit of explanation about the two Credit watch dogs.
Virtual Money
Money is a powerful tool and often an object of desire among humans and it can also be a burden when mismanaged. We all know that money can buy things that we want and that we are going to need it for necessities of life such as food and shelter. Most money used in transactions these days is virtual, meaning we don't actually carry the cash. We use debit cards, credit cards, and occasionally we even still use checks but these are all forms of payment that don't have the cold hard cash at hand.
We also face the daunting beasts of "inflation" and "debt". We hear the words and want to run and hide. Honestly the common person hardly knows what inflation is and even less what exactly causes it. Lets just consider a simple explanation: as time passes the money we are using is going to decrease in value by a hopefully small percentage every year. Simply put prices rise over time and thus cost of living increases and we tend to need more money. With the invisible agent of inflation working against us among other things we need to figure our how to take care of our money so that it can take care of us. Several areas of personal finance exist and I will comment on these and others.
Savings/Investments
Credit
Budgeting
Purchasing
Finance on the Web
I'm sure I will think of other things as I go.
We also face the daunting beasts of "inflation" and "debt". We hear the words and want to run and hide. Honestly the common person hardly knows what inflation is and even less what exactly causes it. Lets just consider a simple explanation: as time passes the money we are using is going to decrease in value by a hopefully small percentage every year. Simply put prices rise over time and thus cost of living increases and we tend to need more money. With the invisible agent of inflation working against us among other things we need to figure our how to take care of our money so that it can take care of us. Several areas of personal finance exist and I will comment on these and others.
Savings/Investments
Credit
Budgeting
Purchasing
Finance on the Web
I'm sure I will think of other things as I go.
Here we go with tidbits of knowledge
Well, I finally figured out something I can blog about and try to contribute something to the www. I am a young married college student that has received some benefit from personal finance practices and maybe can pass some of that on in a simple way that gives some ideas to people trying to get a handle on similar situations. Good luck and I hope something on this site helps.
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