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Tired of paying home loan PMI? Try refinancing

As daunting as refinancing your home loan can seem, I’ve found it can pay off in big savings on interest and other benefits.

My husband Joe and I are refinancing right now, and the biggest benefit for us is that we get out of paying private mortgage insurance (PMI).

Private mortgage insurance typically is required when you take out a mortgage and make a down payment that is less than 20 percent of the cost or appraisal value of the house you’re buying. Before we moved and bought our house three years ago, we had to sell our last house at a loss. So, much of the money we would have used for a down payment had to go to pay off our other mortgage.

PMI is costing us over $100 a month. Blogger Travis from My Personal Finance Journey recently refinanced too, partly to get out of PMI, which, he writes, “is like flushing money down the toilet each month.” I agree.

Joe and I are able to get out of paying PMI because we recently did a huge remodel that upped the value of our house. Our home used to be part of a B&B and only had a kitchenette. We created a real kitchen next to a more spacious living room in an open floor plan.

The increased home value means we have more equity, which could have gotten us out of PMI with our current mortgage company. However, our lender wanted us to jump through a bunch of hoops, including paying for an appraisal and writing them a letter.

So, we started thinking about refinancing. We were fed up with our mortgage company’s customer service anyway, and we knew we could reduce the term of our loan from 30 to 15 years and get a much better interest rate. Also, we were considering getting cash out so we could paint the exterior of our Victorian home. Flaking paint has made this a top priority because we want to protect the wood siding.

We shopped around and found a good deal with our own bank, a 3.4 percent interest rate for a 15-year term — much better than the 4.5 percent we’re paying for a 30-year term. With a better interest rate and no PMI, our monthly payment will be almost the same as it is now, and we’ll pay off our house in half the time.

So, how do you know if refinancing is right for you? Personal finance blog Get Rich Slowly offers five reasons to refinance: . lowering your interest rate, shortening the term of your loan, lowering your monthly payment, switching to a fixed-rate from an adjustable rate loan or tapping home equity cash for a home improvement.

One other factor: How long do you plan to stay in the home? Closing costs typically add up to several thousand dollars, so it might not be worth refinancing if you think you’ll move in a few years. For us, this was a wild card: We’re here for my husband’s job and don’t know what will happen in the future. We’re gambling that we’ll stay here for a while.

We decided not to pull equity cash out of our new loan. That’s because our home appraised for a bit less than we had hoped, meaning we would end up with paying PMI again if we took the cash out. By applying for a home equity line of credit (HELOC) instead, we were able to accomplish our goal of freeing ourselves from PMI.

A HELOC is a loan in which the borrower’s home serves as collateral. With a HELOC, you typically can borrow an amount equal to or less than 85 percent of the equity in your home.

Also, our bank is having a HELOC special with 1.99 percent APR for a year, so it makes more sense to go that route.

If you do refinance, financial planner Hank Coleman on DailyFinance.com †lists some common mistakes people make when refinancing. These include not shopping for the best deal, settling for the lender’s appraiser (a mistake we made, unfortunately) instead of hiring your own and not knowing that you can change your mind within three days of closing.

All in all, if you’re doing it for the right reasons, refinancing a mortgage can be a great financial move.

 

Millennials’ frugality launches the 50 Percent Club

In April, I admired how millennials seem more frugal than their predecessors.

I’ve noticed that my younger friends and coworkers drive older cars, share cars with their spouses, refrain from eating out for lunch. They remind me of my parents, who grew up during the Depression. And their backgrounds aren’t so very different.

That’s because millennials grew up and came of age during the Great Recession. This generation watched their parents get laid off five to six years ago. They started or finished college when job prospects were thin on the ground.

And millennials have a disadvantage the older generations didn’t have: They carry a greater burden of debt coming out of college because of student loans that average about $29,000 for the graduating senior. And that’s not including credit card debt. They are putting off buying a house, even getting married.

Yes, the younger generation is definitely more careful with money and the future than I was when I was their age. I admire them.

Now, some of them have taken their frugality a step further.

There is a movement among some of the younger financial bloggers to save not 10 percent, not 25 percent, but 50 percent of their income.

Started by Kathleen O’Malley of Frugal Portland and Latisha of Young Finances and called the 50% Club, the idea embodies the fiscal psyche of millennials. Stuff does not capture their attention the way it did for previous generations.

And that’s what really strikes me; they are intrigued by the idea of less stuff. Says Romeo Jeremiah of Life and Personal Finance Reflections: “I realized that I didnít have to replace televisions, clothes, furniture, cellphones, or cars as often as I did in the past. And I also realized that these things didnít bring any additional happiness.”

And these millennials aren’t earning small change. For example, Kathleen plans to save $75,000 a year by combining efforts with her fiance.

So, what’s the point of saving all this money? What do they plan to do with it? In the case of Latisha, she wants to travel the world. Lauren Bowling says on LearnVest that she plans to put her money into retirement. Likewise for Kathleen, who is also using some of the money to invest in non-retirement funds.

When I think back to my late 20s and early 30s, I shudder. I was spending huge chunks of money on eating out with friends. I was making $30,000 a year, and spending $50 a week on eating out, or almost 10 percent of my gross income. If I had invested that in dividend stocks, I would have more than $200,000 today, enough to buy a house outright in some markets.

The millennials have that figured out. They are paying down their debt to save for a house, or retirement, or to raise babies, or just to travel.

For my husband and me, we do set aside 60 percent of my take-home for our millennials’ college funds, but saving 50 percent of our combined income is just not in the cards. Not now, anyway.

For now, I have to admire from afar.

 

How about an emergency fund that’s fun to save for?

Everyone knows that having an emergency fund is important, although socking money away for burst pipes or car transmission failures is no fun.

But recently I discovered the idea to start a twist on an emergency fund called a “freedom fund.”

Just as catastrophes happen in life, so do opportunities. But it can be easy to pass them up due to lack of money or time.

I sometimes find myself stressing out when I get a spontaneous invitation — for example, to visit a friend in another city — that’s not in the budget. I’ve also dismissed or put off dreams due to money. (I’ve been saying for years that someday I’ll take a week off for my own little writer’s retreat and work on essays by the beach.)

It’s funny, but I got the idea for a freedom fund while watching too many episodes of “House Hunters International.” Seeing couples do things many people only dream of — moving to places like Italy, Costa Rica and France for a year or more — got me thinking. In many episodes, the house hunters mention having saved up to pay for their experience. In one episode, a couple of pro bloggers had created a fund to move to Colombia and find online work.

So, I pitched the idea of a freedom fund to my husband, Joe, and he loved it, partly because it makes saving a lot more fun. It’s pretty easy to put money away when you know its sole purpose allows you the freedom to enjoy life more, do what’s important to you and fulfill goals.

I immediately started an account and made some cuts to our budget. We’re adding the money we save from the budget cuts each month, and we will sock additional money away whenever we can — for example, if we get a small windfall or sell something on Craigslist.

On the personal finance blog Get Rich Slowly, Lisa Mueller explains that it took her a while to realize that saving, in addition to being a way to build wealth, can be a path toward freedom and flexibility. For Mueller, a freedom fund has allowed her to:

  • Quit a 9-to-5 job.
  • Take a class.
  • Take time to think about what she wants out of life.
  • Enjoy the summer.
  • Connect with friends.

That’s exactly what I’m hoping to get out of our fund — to make our money work for us a little more instead of the other way around.

Blogger Jay at The First Million is the Hardest writes that he saved for a long time without knowing what he was saving for. Then he started a freedom fund with the aim of quitting his 9-to-5 job. He plans to invest his money to build an income stream that could replace his salary.

Alexa Von Tobel, founder and CEO of the personal finance site LearnVest, writes at Inc.com that her freedom fund allowed her to launch her business.

The possibilities of a freedom fund are unlimited. I’m a freedom-fund newbie, but I think everyone should start one. If we have to save for brake pad replacements and the like, we also should stash money away for the stuff that feeds our souls.

 

Paying for college or retirement: It’s not all or nothing

You’ve heard it before: You can take out a loan to go to college, but you can’t take out a loan to retire.

Financial planners will tell you not to sacrifice your retirement to pay for the kids’ college. The kids have plenty of time to pay back a student loan, they say. You’re doing them a favor by being well-funded in your retirement, they claim.

While that’s all true, it doesn’t mean you have to leave them to completely fend for themselves if you have the means to help them. Often, with a little belt-tightening, you can help your children and still build your nest egg.

The alternative is difficult, especially in 2014. It’s not easy to look your 17-year-old in the eye and tell him he will likely have $29,000 in student loans by the time he graduates, and that’s not including credit card debt. The pundits don’t advise you on how to explain to your child that he may have to defer buying a house or having children because he will be strapped with debt right out of the gate.

Every generation claims they had it rougher than the current one. I believe it’s flipped this go-around. Students pay tens of thousands of dollars every year for tuition and living expenses. My tuition in 1985 was $300 a semester. It’s now about $5,000 a semester for in-state tuition at the school my kids hope to go to, The University of Texas at Austin.

When I graduated in 1985, I didn’t owe a penny. I was able to work my way through college, getting grants and scholarships to supplement my income. For my husband, it was the same.

Not so today.

These days, grants are hard to come by and scholarships are incredibly competitive. The recent graduates I know are saddled with $30,000 to $40,000 in student loans.

The troubles of the millennial student are hitting home for me. You see, I’m the mother of two millennials, and my eldest starts college in a year.

It goes against the grain for me not to help my kids with college in some fashion. My grandparents gave my parents cars when I was growing up. My parents lent money to my husband and me so we could afford a house in an out-of-reach Austin market in 2000. Giving our kids support at key points in their lives is an important part of my family’s tradition. If our children are responsible citizens, if they work and get good grades, we help them out. That’s just the way we do things. (In fact, Peter Anderson of Bible Money Matters cites a study that shows kids who don’t help pay their way actually have lower GPAs.)

And we’re not alone, according to a 2014 Sallie Mae study. Future students can count on two-fifths of their college expenses being financed by parents, relatives and friends.

That’s not to say that my husband and I plan to blow our retirement on supporting the kids in college. This isn’t an all-or-nothing venture. Nowhere does it say that you have to pay for all of your kids’ college, and there is plenty of gradation between paying nothing and paying a part.

But, in the Mohammad household, things are going to be tight for the next few years while the boys do their studies, and that’s OK. I see it as our coming-of-age gift to them, the last great present before we send them out into the world. To minimize their debt as they prepare for adulthood will be immeasurably rewarding.

The boys still may have to take out some loans. We aren’t comfortable raiding our retirement for college, because the pundits are right: You can’t take out a loan for retirement. But hopefully, our contribution will make a dent.

My eldest plans to go to community college his first two years while living at home to save money. My other boy is shooting for a Navy ROTC scholarship, which would at least pay for tuition. I’m immensely proud of them for making plans to avoid loans. They seem to grasp that this isn’t free money, and there are consequences to having a stack of loans upon graduation. If we can help to offset loan costs with our contribution, it’s money well spent.

So, yes, we’ll be helping our children pay for college. †I’ve always found that generosity has a way of paying you back tenfold.

 

Late library fine? Expect collections

Last month, I checked a huge stack of magazines out of our library for some fun summer reading. I was late returning them (oops), but figured I’d pay my fine next time I stopped into the library.

Last week, though, I got an unpleasant surprise: a letter from a collection agency called Unique National Collections, which specializes in collecting money for libraries. I owed $52.

Fretting about the damage the collection could do to my credit, I spoke to a Unique employee, who told me I had 125 days to pay up before the collection would be reported to the three major credit bureaus, Experian, Equifax and TransUnion. The representative also told me it’s common for libraries to send accounts to Unique right away. This means the first notice a consumer gets about a fine could be from the collection agency.

I did a little research and found that Unique calls its process of collecting fines the Gentle Nudge. The Gentle Nudge consists of a “120-day series of letters, calls, skip tracing and credit reporting.” The process “effectively and courteously prompt(s) patrons to return materials to the library and resolve overdue fines/fees” — and does so without alienating patrons, according to Unique’s website.

To me, getting a letter from a collection agency before I even knew what I owed felt like anything but a “gentle nudge.” I work hard to maintain a high credit score, and it seemed aggressive for the library to send my account to collections without even sending me a courtesy email first.

But late library patrons across the country can expect to get similar letters. According to DailyFinance.com, an increasing number of libraries are using collection agencies for fines.

For example, the New York Public Library might send any fine over $50 to collections. The Boulder Public Library, in Colorado, will send an account to collections, and charge a $15 collection fee when checked-out items become more than five weeks overdue. The collection agency will contact the library user several times over 17 weeks before reporting the account to the major credit bureaus. The Montgomery County Public Libraries, in Maryland, give patrons several chances to pay up before resorting to a collection agency. First, the library notifies the customer via email or postal mail when items are 21 days past due. If the patron doesn’t respond in two weeks and the fines total $25 or more (or are 60 days past due), the library will send another letter. If the library user still doesn’t respond, the account is sent to collections.

If that happens to you, it can severely damage your credit — even if it’s for a few dollars. A collection is a collection, whether it’s for a library book or an unpaid credit card bill, according to personal finance site Learnvest. And as MSN Money points out, even a small amount sent to collections can have a big impact on your credit score. MSN Money mentions one consumer who had an overlooked $5 bill sent to collections, causing her score to plummet by 96 points, from 785 to 689. And collections typically remain on your credit report for seven years.

Want to avoid having your credit marred by a library fine? Every library’s policy is different, so check with your library.

Personal finance blogger Carson Brackney of Personal Finance Analyst, who had a forgotten $37 library fine turned over to collections, says if you’re going to use a library to save money on books, be vigilant about returns so your frugal habit doesn’t do you more harm than good. If you have trouble remembering to return items, consider Library Elf, a free reminder service to avoid fines altogether.

If your account does get sent to collections, pay right away. Act fast and you might be able to keep that collection from being reported to the credit bureaus. I sent a check immediately to avoid wrecking my credit.

 

Should I get an EMV card for my overseas travels?

I’m planning a family trip to Jordan this summer, and like a good traveler, I sat down one recent Friday and called our credit card companies. I wanted to know if we needed EMV cards, also known as chip-and-PIN or chip-and-signature cards, to make purchases in Jordan.

We will be with family, which means expenses will be minimal, but I wanted to make sure we’ll have a card we can use as a backup.

After calls to four card issuers who gave me four different answers, I realized this wasn’t going to be easy. It begins with the fact that there is no universal system for secure cards. Every country is different, and there are even differences within the same country.

Chip and PIN refers to a technology that makes credit cards more resistant to data theft, requiring a personal identification number for payment to be accepted.† It’s common in other parts of the world, including Europe and parts of Asia. But not in the U.S.

You see, the less-secure magnetic-stripe card dominates in the U.S. (although that will change over the next 16 months, when merchants will need to have appliances in place that take the chip cards). Chip-and-PIN cards are hard to get for U.S. cardholders, although some companies offer a similar chip-and-signature card (which is less secure than chip and PIN, but still safer than mag stripe).

However, as handy as it is to know what kind of technology a country’s merchants have, it isn’t necessary, says Doug Johnson, vice president of risk management policy for the American Bankers Association. For example, Johnson used his chipless card throughout London last week without any problem. “It’s at the discretion of the retailer,” he says. “The exception is when it isn’t accepted.”

As expirations come up, debit and credit cards are being issued with the chip, Johnson says.

Still, even if your current card will usually be accepted, here are some card tips for you before you go overseas:

1. Tell your card issuer when you will be traveling. That lessens the likelihood your card will be rejected for security reasons.

2. If you want to know whether the magnetic stripe is accepted in your destination, search or start a thread on a site like CreditCardForum.com or flyertalk.com and find someone who has recently traveled to your area. If you want to avoid the possibility that your card will be rejected, ask your issuer for a card with a chip in it, says Johnson.

3. Bank of America advises that you allow for extra time when traveling abroad, because unless you have a chip-and-PIN card, you will need to go to attended train terminals in some regions, such as Europe.

4. Most American issuers are releasing chip and signature cards. While you may run into some self-service kiosks that require a PIN, the signature cards will work with most international merchants.

5. Keep a list of your card numbers, PINs and the issuer’s contact information separate from your wallet or purse in case of theft or loss.

6. Clarify which phone number to call the issuer in case of an emergency. The overseas number is usually different from the one for domestic calls. In some cases, it’s the “collect” number on the back of the card.

7. Does the issuer charge a foreign transaction fee? Capital One in particular is known for not charging these fees, but others can charge upward of 3 percent, Bankrate.com reports.

8. Bank of America advises you to have two forms of payment in case one is rejected. For example, carry both a debit and a credit card.

I’ve learned from a co-worker who recently traveled to Jordan that the magnetic stripe is still accepted there. But just in case, my husband received a chip-and-signature card from one of his issuers.

 

How I cut cellphone costs in half

For a long time, I felt I was paying too much for cellphone service. I was right: Last year, I switched to a pay-for-what-you-use service and cut my bill in half.

When we switched cellphone providers, my husband and I were in the midst of paying off a massive student loan debt and some credit cards, and we were trying to cut costs wherever we could. So, it hurt to fork over $135 a month to T-Mobile for moderate cellphone use. Neither of us watches movies on the phone or texts constantly.

One trick I learned while trying to save was to look at yearly expenses to get a better idea of the real cost. As the personal finance blog Get Rich Slowly points out, recurring monthly expenses are “potential money sinks.” And looking only at the per-month cost can make the amount you pay seem like less of a budget buster.

So, I did the math and found we were paying $1,620 a year for cellphone service. I asked T-Mobile if they could give me a better deal. I explained my situation and told them I thought I was paying far too much and was considering breaking my contract. They told me I was stuck: They couldn’t do any better. Using a tip I’d found online, I asked to speak to their “customer retention” specialist, who I had heard had extra power to negotiate. No luck.

So, I researched and came across a company called Ting that doesn’t use contracts and calculates your bill each month based on the amount of talk time, texts and data you use. Ting has categories from extra small (no usage) to extra large, and you pay based on which one you fall into. So, if you use 1,000 minutes of voice time but don’t send any texts, you’d pay $18 for the time you talked and nothing for texts. If you suddenly took up texting and sent 500 the following month, you’d pay $5 for texts that month.

Joe and I were hesitant to switch, partly because we had to buy our own phones with Ting. Choosing from a variety of price points, we picked decent Samsung smart phones for about $250 each. We also worried the service would be bad, even though Ting uses Sprint’s network.

But it’s been over a year, and our service is as good as it was with T-Mobile. Our bills fall between $60 and $75 a month, saving us over $800 a year (minus the cost of the phones, which we plan to keep for several years.)

If we had broken our T-Mobile contract early, we would have had to pay an early termination fee of $50 to $200, depending on how much time we had left. We waited to avoid the fee, though Ting offers a credit of 25 percent of your early termination fee with another carrier.

Now, I don’t think Ting makes sense for everyone. In fact, very heavy data users might find it costs more than going with a traditional carrier, though Ting did lower its rates this year.

But if you’re a moderate cellphone user, you might be able to save quite a bit by exploring non-traditional options. Other bloggers, including J.D. Pohlman at Pohlman’s Personal Finance blog, have also been happy with Ting.

Or, GoBankingRates.com offers three alternative cellphone companies that could help you save. For example, Republic Wireless offers unlimited calls, texts and data for $19 a month. The company is able to offer low rates because your phone will switch to Wi-Fi whenever that’s available.

That could cause some hassles, though. According to CNET.com, Republic offers a lot of bang for your buck. But, switching between available wireless and cellular might cause service quality issues , according to Xaprb.com. Also, having to enter passwords to connect to password-protected Wi-Fi could be annoying. And, you might need to look into downloading privacy apps if you’re worried about security or privacy issues with public Wi-Fi.

If you want to save on cell service, CNET suggests also looking into Virgin Mobile, Tracfone or T-Mobile’s prepaid plans.

In any case, I think it’s a good sign that there are many more cellphone plan choices than there were just a few years ago. If you think you’re paying too much for cell service, you probably are — like I was — and looking into alternatives can help you save big.

 

What exactly you should shred for security reasons

I’ve owned a shredder for about five years, and the excitement of having a new shredder wore off long ago. Now, destroying documents is a chore I often put off.

That’s partly because using a small home shredder can be annoying: Feeding documents takes time, and the waste collection tub fills up quickly.

But it’s also because I’m never sure what needs to be shredded, and I tend to err on the side of shredding too much. Somehow, even junk mail addressed to “resident” finds its way to the pile by the shredder. I recently went through my to-shred box and saw that only a quarter of what was in there needed to be destroyed.

So, I set out on a mission to find out: Exactly what should you shred, and when? Here’s a handy list of items that should get shredded before being tossed:

  1. Credit card offers. It’s a good idea to shred credit card offers or applications, according to DailyFinance.com. While card offers don’t always contain all of the information a stranger might need to get credit in your name, they could tempt an unscrupulous family member.
  2. Pay stubs. Your pay stubs contain personal information that an ID thief would love to get his hands on. Keep your pay stubs until you get your yearly W-2 wage and tax statement from your employer. Check the W-2 for accuracy, then put your stubs through the shredder, certified public accountant Rob Seltzer recommends.
  3. Health insurance explanation of benefits. When you visit the doctor or have a procedure, you get an explanation of benefits (EOB) form from your insurer that contains sensitive medical information, such as which health care provider you visited, when and why. Professional organizer Suzanne Kuhn writes that you should keep EOBs for a year if you don’t qualify for a deduction, the bills have been paid in full and you are no longer being treated for the condition. You need to keep the documents considerably longer otherwise.
  4. Doctor bills. When you no longer need medical bills for your personal records, you should put them through the shredder, according to DataShield, a document destruction company.
  5. Statements you no longer need. Keep canceled checks that support tax deductions or any you think might be helpful, says BB&T. Otherwise, they take a lot of space. Keep statements for about three years.
  6. Old tax returns. Once you’ve kept a tax return for the recommended three to seven years, you definitely want to shred it, according to H&R Block. A tax return contains reams of sensitive information, including your Social Security number.
  7. Expired IDs. Don’t leave your old driver’s license, passport or other picture ID lying around: shred them instead, DataShield recommends. It says even expired IDs can be useful to criminals. (First make sure your shredder can handle these items, though.)
  8. Old insurance documents. Keep current insurance policies, but shred your old ones, Consumer Reports recommends.
  9. Investment statements you no longer need. Keep your annual investment statements as long as you own the investments, but shred monthly and quarterly 401(k), IRA and other statements when new ones arrive, Consumer Reports recommends. Also, says BB&T, keep investment records to to support your tax returns. “Documentation of purchases and sales (either confirmations or brokerage statements including the information) must be kept for three years past when you report the sale on your tax return.”

Now that I know what to shred, I plan to stay more on top of my document shredding and recycle all paper clutter that doesn’t contain sensitive information. I hope shredding regularly will make the task much less of a hassle.

 

I’ve proven you can make credit mistakes and recover

You would think with my current credit scores that I have always been a model credit citizen. But nothing could be further from the truth.

In fact, I am a testament to the fact that you can improve your score to good and even excellent ratings just by following a few simple rules.

Twenty years ago, I was vaguely aware of Equifax, one of the three credit bureaus (the other two are Experian and TransUnion), and I had never heard of FICO, the credit score company most lenders use when assessing your creditworthiness.

Here are some of the things I was doing wrong 20 years ago:

Living without a budget. This was at the heart of all of my money problems. I didn’t have kids, so I didn’t worry about the expenses of future years. I had enough money to travel and eat out, so there was no thought about saving. I just socked away money in my 401(k), and that was that. I remember my best friend telling me one January weekend that she couldn’t hang out because she needed to draw up her budget for the year. Until then, it had never occurred to me to do such a thing.

Using my credit card as a loan. Later, after we had kids, we incurred a fair amount of credit card debt. We weren’t buying extravagant items, and now we had a budget, but it wasn’t realistic, so we always seemed to have a balance on at least one card. Because we did that, we were paying ridiculously high interest rates. Mary Hiers of Mint talks about the forgotten items we fail to budget for, such as the annual power washing of your driveway and charitable donations. Make sure you include EVERYTHING when you draw up your budget.

Taking out a cash advance on my card. I only did this once, but that’s one too many times. You incur interest rates immediately with cash advances. Never a good plan.

Paying bills once a month. Most of my bills came at the first of the month in those days, so it was usually OK. But my card bills were high by the end of the month, something Eric Rosenberg of NarrowBridge avoids by paying twice monthly. And there were times when I was late on a bill, usually when I was overseas. I suffered for this when I applied for a loan in 1994. To this day, I don’t know what my score was, but the lender expressed concern about three late payments, likely reasons my interest rate wasn’t that great.

Only in recent years have I known what my score is, and I now pay more attention to my credit reports. The reality is that lenders care deeply about your score, so there are a few things you have to pay attention to. Here’s what I’ve learned over the years:

Pay on time, every time. Even if you have to make a minimum payment on a card, do it by the due date. No exceptions.

Pay in full. Don’t let yourself get behind on card bills. If at all possible, pay your card off every month. If you must have a balance, keep your credit utilization ratio to 30 percent or lower.

Use your credit cards. Don’t cut up your card and don’t lock it in a drawer. If you don’t want to think about it, put a small, recurring, automatic charge on it each month, such as your gym bill.

Follow these three simple rules, and you’ll see a noticeable uptick in your credit score within a year.

I made a lot of financial mistakes when I was younger, but I am proof that you can recover and enjoy an excellent credit score.† It’s only a matter of following three simple rules.

 

5 money tips for organizing group excursions

A few months ago, my husband, Joe, told me that tickets were going on sale for the Phish Summer 2014 tour. He floated an idea: Invite a few friends to go to the concert in Orange Beach, Ala., then, spend the next day by the ocean.

Before I knew it, I was agreeing to Joe buying seven tickets on our credit card, even though we were carrying 0-percent interest credit card debt, and I really didn’t want to use our credit cards until that was paid off. “Please? Everyone will pay us back right away,” he said sweetly.

So, Joe bought the tickets. Weeks went by, then over a month. I started to wonder about the Phish tickets, and I asked Joe about it. “Oh, could you draft up an email to ask people to pay us back?” he requested. A money argument ensued.

Within the next two weeks, one of our friends backed out of the trip and the rest paid us back — two via PayPal, two with cash and one with a check. Then — you guessed it — the check and the cash sat on the bookshelf in our front hall for another two weeks. (Also, someone might have swiped a bit of the cash to buy lunch.)

When it came time to reserve the vacation rental, and to pay the required deposit by credit card, I told Joe someone else in the group would have to use their plastic. Luckily, one of our friends volunteered.

Planning a summer trip with friends or family? Group vacations can be a fun bonding experience, but coordinating the money can cause hassles and even credit card debt with interest.

If you’re planning a group trip, here are five tips for dealing with the finances to avoid the inconvenience and added expense:

  • Keep it small. CreditKarma.com recommends keeping group trips to three or four people to reduce headaches. With a smaller group, the expenses are, presumably, less of a burden for one person to put on a credit card.
  • Set a budget in the planning stages. Maybe you’re sitting around at a happy hour with friends and, before you know it, someone has proposed a trip and you’ve agreed to go without knowing how much it will cost. Instead, do the reverse: Set a budget first and get input from everyone in the party before making any reservations, recommends travel blogger Heather Yamada-Hosley, writing for Lifehacker.
  • Think carefully before volunteering your credit card. If you have credit card debt or a history of iffy money management, it’s probably not the best idea to volunteer your card to pay a large group expense — even if you will get reimbursed. As you can see from our checks-and-cash-in-the-front-hall example, it can take some time and wrangling to collect money owed, deposit it, wait for the deposit to post, then pay your credit card bill. On the other hand, if you have a rewards card with no balance on it — and plenty of money in the bank just in case — you might decide getting the points or miles for the group expense looks pretty good, and that you’re willing to take the chance someone could flake out.
  • Create a kitty for small expenses. If you’ll be taking taxis or grabbing group lunches or ice cream on the fly, get everyone to kick some cash in to create a group fund, Lifehacker recommends.
  • Consider a travel-planning tool. The online travel planning tool Travefy allows you to plan group trips and handle the splitting of expenses. One caveat: Travefy charges a 1.5 percent fee for collecting and distributing funds, plus the sender has to pay a fee of 2.5 percent plus 30 cents for using a debit or credit card. But you might decide it’s worth it to simplify group payments.

And finally: Communicate with your fellow travelers, from the planning stages through the journey home, Yamada-Hosley writes. I agree — and next time Joe proposes a group trip, I plan to talk it through fully before either of us pulls out the credit card.

 
 
     


 
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