Automate and Save in 2021…with Bola Sokunbi
January and February are all about new year’s resolutions, goal setting, advice to save etc., and while everyone sets goals and makes plans, by mid-Feb into March most people have fallen off with their new goals (studies continually show this) because – well it’s hard. Here’s a solution…achieve your savings goals by automating your finances.
• When you automate your finances you don’t have to “think” before you “save.”
• You don’t need to have mental battles with yourself when you are faced with temptation.
• You can set it and forget it and let those savings towards your goals “actually” happen.
• It’s also a great approach for anyone who is starting over or starting fresh with savings.
How to automate your finances
• You can automate your retirement contributions through your employer if your employer offers a retirement savings plan
• You can automate savings for emergencies or other goals via deductions from your payroll into a dedicated account
• You can alternative set up automatic transfers with your bank into a savings account if you don’t want to do it via your employer
• If you have an inconsistent income, you can set reminders on your calendar to schedule transfers to savings when know you’ll be making a deposit or receiving a confirmed payment
• You can automate bill payments and debt repayments by signing up for automatic debits from the creditor or service provider.
Farnoosh Torabi, personal finance expert and host of the “So Money” podcast
Kindergarten & Elementary Schoolers:
• A this age, you can teach your kids the basics of money because they’re socializing with the outside world, and may begin to want things that other friends have
• Saying “no” to their wants too often can send the wrong message
• Instead, teach principles of financial planning by helping them create strategies incl. wish lists, saving and donating
• They will start comparing your family’s experiences/financial choices with the ones they see in their friend’s families. It’s important for them to have context about your family history, the way you were raised, and your values.
• How you frame things matters; you can talk with them about money without getting into your personal dollars and cents
Tweens:
• Allowance – Meet your kids where they’re at, but this may be time to start an allowance
o Get creative – don’t give allowance for jobs they should already be doing (making their beds, loading dishwasher)
o Allowance should be earned by “jobs” which support the house they live in (cleaning garage, shoveling, babysitting etc.)
o How much? Some parents choose to give $1 for every year the child has aged. (ex. An 8-year-old will get $8 a week in allowance)
• Goals – Before setting up an allowance, talk to them about their goals. Teach them to allocate funds (spend, save, donate or invest)
• Investments – I often hear parents say the wish they’d been taught about the importance of investing when they were young…
o Have kids track a public company they really like, and research it – make it a family project!
o Give a few shares to them for a birthday present or holiday gift
o It’s not about getting rich off investment at this point, it’s about getting familiar and comfortable with investing
• Jobs – Not old enough for a “real” job – tweens can begin taking on neighborhood work (babysitting, mowing, dog walking) to earn money for things that aren’t in the “needs” category that you cover
o Look on community Facebook groups / Mom Groups for postings that you can help verify and feel secure about
Teens:
• If COVID has affected finances, don’t hide it, be honest with them. They are likely already aware; they can sense it.
• Empower them to feel like they’re involved
• Time to talk about college – earlier you start the better
o Are you able to help with college? Are you able to pay for college? Will loans be on your teen to pay?
o Manage expectations (teens think “I’ll take out loans, and go where I want” – it’s more complicated than that)
• Money talks are key at this stage because they reinforce the point that money is not a taboo topic
College Students:
• This is when first money mistakes are made
• Credit Cards – Add them as an authorized user on yours and give them a limit – set alerts so you know when they spend (you also will have the ability to cap their spending, and shut off their card if need be)
o Helps them build their own credit with training wheels
o If they open their own cards and accounts, make sure they keep on top of it
• Mobile Banking – Encourage them to download mobile banking apps and check-in to make sure everything is in the clear
o Make checking a ritual …. Wake up, check email & social media, and check banking app
Can be “scary” because they “don’t even want to know how low balance is” – put a positive spin on it – it’s fun to see your balance go up. If they are expecting a deposit – make sure it’s processed – and beware of fraud.
For more check out Farnoosh’s tips CLICK HERE
Total Credit Makeover with Rebecca Jarvis
5 steps to a total credit makeover… We show viewers how to improve credit scores so they can get best deal on new mortgage, auto loans, and credit cards.
STEP 1: Check your credit report
Your credit score is a 3-digit number lenders use to determine whether you can pay your bills.
From 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent
If you have a strong credit score – it could mean you get better deals on mortgages, auto loans and credit cards – so you pay less money. If you have bad credit, it means you pay more and get worse deals – or no loans at all.
First thing to do is check your credit report – you can do this for FREE at:
Annualcreditreport.com
This will include information on where you live, how you pay your bills, whether you’ve been sued. AND ultimately what that means for your credit score.
When you locate the report you’re looking for two things:
1. Your credit score.
2. To make sure there aren’t any errors on your report.
STEP 2: Correct Errors
FTC study found one in five Americans has an error that was corrected on credit report after disputed.
A mistake on your credit report can seriously impact your credit score and as a result make it more expensive to borrow or even keep you from getting credit.
Good news is that you can correct this and dramatically improve your score. But it’s on you to find them…
You’re entitled to a free report every 12 months from each of the three major credit bureaus: Equifax, Experian and TransUnion. Use AnnualCreditReport.com to request those reports and then check them for mistakes, such as payments marked late when you paid on time, other common errors include: misspellings, the wrong middle initial, the same account listed twice. Lastly, some errors are fraud – an account that’s gone into collections, for e.g. that someone else opened in your name. That’s identity theft.
In each case, if you find an error, you want to correct it quickly. This means reaching out to both the lender (the bank or credit card company with wrong info on your report, for e.g.) and the credit bureaus. Experian, TransUnion and Equifax in writing. Their websites all have links to this information. You can look up “disputing an error on my credit report”
It helps to have your driver’s license, passport, birth certificate, Social Security number and other identifying documents on hand before you reach out to a lender or a credit bureau. And have a list of errors ready to go.
Generally it takes about a month to fix an error and once it’s done, your credit score should go up immediately.
STEP 3: Pay Bills On Time
Your payment history is the biggest single factor in determining your credit score. If you can get up to date on paying your bills, you can dramatically improve your score.
Consider this: one recent late payment can cause as much as a 180-point drop in your score, depending on your credit history and the severity of the late payment.
Beyond budgeting, controlling your spending, two things you can do to get on top of this.
1. Set up autopay, so you never forget to make a credit card payment
This could help you develop a consistent payment history over time. It might not help you raise your credit scores fast, but it could protect your scores from declining fast, which will likely happen if you miss a payment.
2. Pay twice a month
Instead of making one big payment at the end of the month, try splitting it up into smaller payments every two weeks. This could help you sneak in a few extra payments each year and save money on interest charges.
STEP 4 Talk to your lenders
Sometimes they will waive a one-time late payment. See if they can.
Ask for a credit limit increase
For the best credit scores – you don’t want to use more than 30% of the credit available to you.
That means, if you have $10k worth of credit, you don’t want to use more than $3K
This is what’s known as your utilization rate.
And one way to improve that rate, is to increase your credit limit.
You can ask your lenders to do this.
Warning: this only works out in your favor if you don’t feel compelled to use the newly available credit. I also don’t recommend trying this if you have missed payments with the issuer or have a downward-trending score. The issuer could see your request for a credit limit increase as a sign that you’re about to have a financial crisis and need the extra credit. I’ve actually seen this result in a decrease in credit limits. So be sure your situation looks stable before you ask for an increase. That said, as long as you’ve been a great customer and your score is reasonably healthy, this is a good strategy to try. All you have to do is call your credit card company and ask for an increase to your credit limit. Have an amount in mind before you call. Make that amount a little higher than what you want in case they feel the need to negotiate.
Negotiate a lower interest rate
Another thing you may try and negotiate, to pay off your balances faster, is ask for a lower interest rate.
STEP 5: Become an authorized user on someone else’s account
If you’re new to credit and can’t qualify for your own credit card, becoming an authorized user on someone else’s account can be a great way to get started. But it’s a double-edged sword: If the person who owns the account has healthy credit, it can help you establish a positive credit history over the long run. On the other hand, if they miss payments or carry high credit card balances, that could also reflect poorly on you. That’s why it’s important to pick someone you trust who has a longer credit history and higher credit scores than you do, and who overall has a positive credit history.
What are biggest Pitfalls to avoid?
● Don’t cancel your credit card after you pay it off — unless you have a good reason to do so. Closing your credit card will hurt your length of credit history, so it’s better to leave it open, even if you’re not using it anymore. Of course, if having a card tempts you to spend more, or it comes with an expensive annual fee, you might want to rethink this conventional wisdom.
● Don’t apply for a bunch of new credit cards just because you want to increase your credit utilization. Even though this might help lower your credit utilization ratio, it could also make you look like a risky borrower thanks to the new hard inquiries on your reports.
● For the same reason, don’t take out a loan just to improve your credit mix. Only apply for a new loan if you actually need it.
● Don’t carry a balance on your credit card just so you can build credit. Carrying a balance can lead to unnecessary interest charges, and it might actually hold your scores down by increasing your credit utilization ratio.
When it comes to building credit, it’s easy to get overly focused on ways to raise your credit scores fast. The truth is that building credit takes time. So take a step back and make sure your strategy doesn’t do more harm than good.
