Category Archives: Money Management

What Happens When You Have Bad Credit

This post is in collaboration with ValuedVoice.

Your credit score is important, though there are some personal finance enthusiasts who try to ignore it.

The biggest reason people try to brush it off is because some of the factors that make your credit score inch up actually encourage you to interact with debt. Whether you’re paying off an installment loan or paying off your credit card in full every month, there are sections of the PF world that want none of it.

But taking on debt isn’t the only time you’ll need a good credit score. In fact, not having one or having a bad one can negatively impact your life in other ways. To be able to ignore that fact is a privilege.

What is bad credit?

You might know you have bad credit. You know you’ve missed payments and have bill collectors blowing up your phone.

But if you have no idea what your credit score is, you’re going to want to check your credit score and full credit report to get started.

There are lots of different types of credit scores. For today, we’ll focus on one of the most common: Your FICO score.

Your FICO score is three numbers that — in most models — falls between 300 and 850.

According to Experian, you can tell if your credit is good or bad by finding it in the following ranges:

  • Exceptional: 800-850
  • Very Good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Very Poor: 300-579

Bad credit can up your car insurance rates.

According to the Zebra, those with poor credit are charged $635 more per six-month policy terms than those with very good credit.

Why?

Because actuarial scientists have figured out that people with poor credit file claims more frequently. Those claims tend to be for higher dollar amounts.

I think there’s a lot behind those numbers. Important stories that aren’t being told. Stories that would make this practice look overly punitive and perhaps predatory.

Utilities require upfront deposits from those with bad credit.

If you have bad credit, your utility provider is likely to require a deposit before turning services on. The worse your credit or overall ability to pay, the bigger that deposit is likely to be.

Again, with punishing people who have trouble paying their bills.

You may be able to get around this down payment requirement if you have a family member in the area with a history of paying their utility bill on time. Some companies will work with you and waive the fee if the family member vouches for you.

Bad credit can make it hard to get an apartment.

If you’re having trouble paying your bills and are trying to downsize so your monthly burden is more manageable, be prepared.

There are punitive measures in place in the housing sector, too.

To rent an apartment, you will often have to disclose your credit score. If your credit score is Fair or Very Poor, you can expect a higher security deposit.

Which I know you can’t afford because those bills aren’t getting paid. That’s the whole reason you’re trying to downsize.

It doesn’t make sense. But it’s unfortunately true. Should you ever find yourself in a situation where your income is stunted, you’ll ideally want your credit score to be as high as possible given your situation.

Bad credit can make it hard to get a job.

Technically, a bad credit score can’t keep you from getting a job.

But a bad credit history can.

If that sounds like splitting hairs, that’s because it is. Your credit score is derived from your credit report, which contains your credit history.

While employers are allowed to check your credit history rather than your score, odds are that a bad score is going to line up with poor credit history, too.

Not all employers do this. However, if your position requires you to handle a lot of money or very expensive items, they technically can. A poor credit score could keep you from landing jobs in money management positions, or even managing a cash drawer. You could also be rejected if you’re applying for a position where you’d be handling other people’s personal data.

You do have to consent before they can pull your credit report.

Bad credit makes it hard to get a non-predatory loan when you need it most.

And of course, bad credit makes it hard to secure an affordable loan. When you have fair credit, you stand a chance of getting approved for a traditional loan at very expensive rates. But nontraditional loans are even more expensive.

People also start looking to nontraditional loans when they have Very Poor credit or otherwise can’t get approved for a traditional loan.

It’s a frustrating situation to be in: Wanting to catch up on your bills but not being able to because the only financing available to you is ridiculous.

If you find yourself in a situation where you have bad credit, you may benefit from increasing your income — preferably to a level where it’s consistent and stable.

That seems like an obvious goal. But make it a finite one. Once you’ve reached a point where you know how you’re going to put the next meal on the table, take a step back and look at how you can improve that credit score now that you’ve got the means.

Justine’s Investing Journey: Real Estate FTW

Please welcome Justine of Live with Plum! She’s here to share her deep real estate expertise. Enjoy!

Hi, everyone!

I am Justine and I am the Founder of Live With Plum, the homebuying guide for the modern women.

I started Live With Plum after going through my own real estate journey and seeing how few resources there were for homebuyers, especially first-time home owners.

Also, as a single millennial woman of color, there weren’t many stories that looked like mine even though we are a substantial and growing segment of homeowners in America.

I had purchased 4 apartments in New York City by age 30 while working full-time and learned quite a few lessons along the way. Today I want to tell you more about my own home buying journey with a focus on my first transaction and the most recent transaction. My thought process has changed quite a bit since I started!

Through my story, I hope you will takeaway some lessons in real estate investing.

First apartment purchase: Gramercy studio

The first apartment I bought was at 25, just after I graduated from business school. I was eager to lay down some roots as I had spent my early 20s traveling extensively.

After weeks of exhaustive research, I finally found a tiny 300 sqft studio in Gramercy.

My thought process for this purchase was more like a primary resident. But I also took note of the investment opportunity.

Over the years, I’ve come to see how most people, when prioritizing the criteria of their search, purchase only with an eye to live but don’t fully consider the investment side of it. I chose my unit because I wanted to live in it and also could see the rental value.

Size: Studio, 300 square feet

Tiny, tiny apartment but because I was living in it, I prioritized the location over the size. This was definitely a starter apartment for one person.

Location: Gramercy

Because this was my primary residence to start, I wanted a neighborhood that had all the conveniences and entertainment nearby. Gramercy fit that bill as an already established neighborhood but was also one of the most expensive neighborhoods on a per square foot basis in NYC.

Building: Cooperative building

Cooperatives are quite unique to NYC and basically means the building has a lot of power over what homeowners can and cannot do. Most cooperatives have strict sublet policies but I managed to find one with liberal policies.

Fourth apartment purchase: South Bronx 3 bedroom

After completing 3 successful transactions, I was ready to take on more risks. I purchased my largest and most recent property in 2019, which was a 3-bedroom apartment in the South Bronx.

Size: 3 bedroom, 1200 square feet

As I progressed on my journey, I started to purchase bigger apartments as I realized that a studio would have limited appreciation potential in the end, just due to the size limits.

Also, living in a larger apartment allowed me to house hack, which basically means that while I live in this apartment, I decided to rent out 2 of the 3 bedrooms to create additional sources of income.

At the end, the rent (market rate) from my 2 tenants covered the mortgage and homeowner association fees for the apartment, so I ended up living for free. I probably will not continue having roommates in the longer term as I get older and want more privacy, but this is a good way of living within your means in an high cost of living city.

Location: South Bronx

Area-wise, I saw that established neighborhoods meant a more limited appreciation potential therefore I started purchasing in rising neighborhoods instead.

Building: Condominium building

While cooperative buildings are cheaper than condo buildings, there was a limited supply of buildings that allowed for subletting. Also, any renovation work done in a cooperative building required a lot more approvals than in a condo building. From an investment perspective, condominiums made a lot more sense for a passive investor.

What I’ve learned as a real estate investor.

Reflecting back on my journey, I am proud of the work I put in. I absolutely believe that a successful investor is the product of experience and the willingness to test things out. My biggest learnings and advice are:

  • Size: Larger apartments and multi-families allow you to house hack, which is a great way to build up equity on a smaller budget.
  • Location: Either pick the worst unit in the best district if you can renovate, or pick an up and coming neighborhood.
  • Building: Look for building policies that align with your intent. If you need to invest, then do a ton of research and diligence on building policies.

Have you invested in real estate? Share your experiences in the comments below!

How to Reach Your Savings Goals in 2020

This post is brought to you and contributed by an outside writer.

Woman with short brown hair holding tiny white Christmas lights up to her face and shoulders, covered in a blue knit sweater.
Photo by Clay Banks

Ready to finally reach those saving goals that you’ve been aiming for over the last few years?

With the new year just around the corner, everyone is thinking about resolutions and strategies that they can use to change their life for the better. However, while it’s always a good idea to eat healthier and get more exercise, one of the best changes you can make to your usual routine is learning how to spend your money better.

After all, what would you do if your car suddenly broke down tomorrow? Would you take out a personal loan, struggle to find credit, or have emergency savings that you can use? Here are a few ways that you can start to turn things around in 2020.

Have a Target

The most important thing you can do when you want to make a change to your finances in 2020, is have a target. Don’t just tell yourself that you want to save more money. Although that technically is a kind of goal, it’s way too vague. You need something more precise if you want to make a real difference this year.

What do you want to be able to celebrate by the time the next new year rolls around? Maybe you want to have enough cash aside so that you can put a down payment on a new home. Maybe you want to go on a family vacation to some far-off, distant land.

There’s no wrong answer.

Track Your Spending

If you want to put more of your cash towards your future, then you also need to know where your money is going now. Think about where your dollars are going each day. Maybe you’re spending a fortune on fuel for a run-down old car, or perhaps you’re constantly paying for subscriptions to television resources that you don’t use.

Tracking your spending will help you to pinpoint the areas that you can cut costs in, so that you can start making a real difference to your finances. You might even find some opportunities to reduce costs that you never thought about before.

Banish High-Interest Debts

When you start looking at where your money is going each month, there’s a good chance that you’ll see some payments to debt companies in the mix. You might have some loans from places like MoneyWorld that you need to manage, or credit card debts. If that’s the case, take a look at the kind of interest rates that you’re paying, and see whether you can reduce the costs by consolidating your loans.

Consolidating your existing debts into something less expensive can be a good way to keep costs low. The less you have to spend on interest, the more you have to put away towards your savings at the end of each month.

Make Saving Automatic

Why not make saving cash in 2020 an easier process? One of the main problems that people have with saving these days, is that they forget to put money into their savings account after they’re finished paying for all their debts and other bills.

However, if you turn saving into an automatic process, then you’re less likely to forget about it. At the end of each month, arrange for an amount of cash to transfer into your savings account. This will mean that you don’t have to remember to make a deposit.

Additionally, if your money is automatically coming out of your current account and into your savings account each month, you’ll be less likely to spend it. As soon as you check your bank statement, the money you would have spent will already be gone.

Use the 24-Hour Rule

Are you a victim of impulse buying? It’s easy to get that way these days. Purchasing things online and offline is easier than ever thanks to things like one-click purchasing. To reduce your risk of buyer’s remorse, go to all your favorite websites online and remove your personal details from them. Once you’ve done that, you’ll have to go and find your credit and debit cards whenever you want to make a purchase.

This will help you to stick to the rules that you set for yourself about how long you need to leave before making a purchase. For instance, most experts recommend giving yourself 24 hours to think about any significant purchase of more than about $20. You can reduce that cap if you need to, as well.

3 Crucial Steps to Rebuild Your Finances After Recovery

This post is brought to you and contributed by an outside writer.

leaves hanging on a twine line fading from green to  yellow to red.

Drug addiction does more than damage your health and personal relationships. In most cases, your finances will also take a big hit. According to research, more than 27 million Americans between twelve and thirty abuse drugs. This is the most productive age for any economy, making a problem to stay aware not only individually, but also on a societal level.

If you are rebuilding your finances after rehab but feel lost on where to start, these tips will point you in the right direction. 

1. Harness your skills 

The crucial step to make is to get some money coming in. The cost of drugs and other substances is high, so it’s likely the hole you are in is pretty deep.

To get back to the workforce, you need to harness your skills. Did you have a job before addiction took over? Where did you work? What are you good at? These, among other questions, will help you figure out a starting point. OxyContin Attorneys advise that you stay clear of stressful jobs because they are likely to lead to relapse. Instead, find something you enjoy in a structured environment, and one with the opportunity to grow.

2. Create a budget 

Before you create a budget, take an in-depth look at your situation. Accept where you are, and then make plans on how you are going to repay your debts and get yourself out of the red. You may end up trying the zero-sum budget, the 50/30/20 budget or the envelope method. Regardless, budgeting is not easy, especially if you’re trying to get out of a particularly difficult cycle.

You may have to sacrifice more when you start, but with consistency and dedication, you will enjoy the process and see progress. 

3. Commit to the process 

It’s one thing to have a desire to make things work, and a completely different thing to actualize your plans. In some cases, you will find yourself starting, but abandoning ship somewhere along the way. Do not give up. Instead, renew your commitment and do everything in your power to make it happen.

Getting discouraged is easy, but it’s even easier to allow life to get in the way when there is so much to do and such little money. Every financial journey is different, but most are tricky when starting. You’re going to have to make some hard decisions, and you may even make some bad decisions along the way. This is normal.

Eventually things become easier, and you find yourself moving through the world with less and less financial anxiety. 

Rebuilding your finances takes time. Do not pressure yourself into making it happen overnight. The mess was not created in a day, so don’t expect it to disappear magically. Instead, stick to the plan, be honest with yourself, and keep moving no matter what. It helps to sign up for financial classes where you can learn tons of things about how to manage your money, make and stick to a budget, and even how to invest and grow your wealth. 

How to Handle Medical Bills You Can’t Afford

This post is brought to you and contributed by Amara Etter.

Many people think of bankruptcy as the result of people spending above their means on lavish vacations, large houses, expensive vehicles and fine dining.

But the truth is that about two-thirds (66.5 percent) of bankruptcies occurr because of medical expenses, either resulting from the direct cost of healthcare or because people had to take time off work due to an illness. The same research shows only 44.4 percent of bankruptcies are attributable to living beyond one’s means. This just goes to show many Americans experience financial distress because of something they have little to no control over.

Have you ever found yourself wondering how you’re going to pay off your medical bills? Here are some tips for dealing with healthcare-related expenses you can’t afford to pay out of pocket right away.

Review Your Charges Carefully

Medical bills are not always the most fun reading material. In fact, oftentimes they’re convoluted and difficult to understand. This is exactly why it’s so important to read them over rather than assuming everything must be correct simply because they came from a hospital or doctor’s office. Your medical bill may actually include an error like an overcharge — and you can only correct this costly mistake if you identify it.

Here are some steps Investopedia recommends when it comes to reviewing your medical bills:

  • Ask for an itemized breakdown of charges so you know exactly what each procedure costs.
  • Make sure you received all the services and medications listed; ask specifically about any charges you don’t recognize or understand.
  • Ask your healthcare provider and insurance company to audit your bills and correct any mistakes on their end.
  • Ask questions and develop a relationship with the finance departments, as the professionals within can help you navigate the complex process of handling your bills.

Before you start stressing over how you’re going to pay your bills, make sure the charges are accurate.

Try Negotiating Your Bill Right Away

Try negotiating down your medical bills before they become delinquent. Ask if the medical establishment in question has an assistance program — and if so, whether or not you qualify.

You can also ask for a rate reduction based on financial hardship. You may be able to work out a deal where you pay a percentage of the total original sum or work out a payment plan with low or no interest. You never know your options until you ask.

You also may be able to buy yourself some additional time to come up with funds before the hospital or doctor’s office sends your account to collections; it’s important they know you’re trying.

Explore Your Debt Relief Options

Are you already saddled with medical debt? If you’ve ever had to use a credit card to pay off a medical procedure, you know how frustrating and hopeless this cycle can feel.

Before filing for bankruptcy, explore your options. Many Americans have undergone debt settlement through Freedom Debt Relief due to overwhelming unsecured debt — like medical bills and credit card debt. Another option is to work with an NFCC-member credit counselor, who may be able to get you on a Debt Management Plan (DMP) in which the credit counseling agency distributes your monthly payment to creditors in exchange for more favorable terms.

Create an Emergency Fund

Last but not least, try to protect yourself from future medical debt by building an emergency fund slowly but surely. Even tucking away a few dollars a week can help you build up a protective buffer against debt. Having an emergency fund containing three to six months’ worth of living expenses ready to go can help you accommodate medical bills before they turn into staggering debt.

Are you facing medical bills you can’t afford out of pocket? Don’t panic. Review the charges, ask questions, negotiate and explore your options for debt relief strategies. Then focus on building an emergency fund for the future.