Most Americans want to better budget and manage credit and debt wisely. But the problem is, they don’t know where to start or how to use a number of free tools available to them.
So if you missed my interview on Street.com, here are five personal finance tips — as well as five of my favorite free online resources — that can help anyone with budgeting, and keeping tabs on their credit and debt too.
Tip #1: Check your credit reports regularly
Your credit rating determines everything today — the loan rate you’ll get on mortgages, credit cards or auto loans; as well as the rate you’ll pay for auto insurance.
Your credit even affects your ability to rent an apartment and get a job. The Society for Human Resources says that nearly 60% of all employers do credit checks before making hiring decisions.
By law, you’re entitled to get a free copy of each of your credit reports once a year from Equifax, Experian and TransUnion, which are the “Big 3” credit reporting agencies.
Unfortunately two-thirds of all Americans haven’t seen their credit reports in the past year, according to a survey from the National Foundation for Credit Counseling.
Website Resource: http://www.AnnualCreditReport.com
This is the federally-mandated website where consumers can get truly FREE credit reports — without having to buy anything or sign up for any kind of trial offer or credit-monitoring service.
You also don’t have to give up your credit card information to get these free credit reports.
Tip #2: Pay attention to your credit card habits
Let’s be honest. Most of us don’t regularly scrutinize our credit card bills. As a result, we’re not as conscientious about our spending patterns or our fiscal habits as we should be.
Failing to routinely review your credit card statements also means you could miss certain questionable charges – like items that are duplicate billing or potentially fraudulent charges made without your knowledge or authorization.
Website Resource: CapitalOne.com
Capital One recently became the first major bank to offer a free electronic service, called Second Look, to help customers spot unnoticed or unwanted credit card charges.
Second Look sends you an email about about duplicate charges, subscriptions that automatically renew, or even unusual increases in certain utility bills and other payments.
Second Look alerts you to credit card items that may be red flags, so you can be a smarter consumer.
There’s no need to sign up. It’s now automatically available to some cardholders and will soon roll out for nearly all customers with Capital One branded credit cards.
Tip #3: Create a realistic budget
Many people dread to hear the word “budget.” But if you don’t have a realistic budget, you’re probably over-spending and likely have cash flow problems.
To make a realistic budget, write down ALL your expenses, even the “little” ones or those that don’t occur each month.
Then factor in some “fun” funds, which is money to spend on something you like or want to do each month. By adding in these costs, you’ll stick to your budget without feeling deprived.
A budget isn’t something to be feared. It should be welcomed.
A budget helps you stay out of debt, know where your money is going, and allows you to reach your future financial goals — like buying a house or starting a business.
Website Resource: http://www.Mint.com
This free, online budgeting software service is a snap at helping consumers keep their budgets on track.
Mint will even send you email or text alerts about your spending to make budgeting easier.
Tip #4: Handle student loans properly
Student loan debt in America is a fast-growing problem. The total amount of college loans outstanding in the U.S. now exceeds $1.2 trillion, more than credit card debt.
In fact, the average college grad from the Class of 2014 left school with more than $33,000 in student loans, according to Edvisors.
If you go into delinquency or default on a student loan, it can create major financial problems, including negative marks on your credit, problems getting jobs or even getting your wages garnished.
Website Resource: http://www.nslds.ed.gov
This is the website for the National Student Loan Data System. If you’re confused about your college debt, or don’t even remember how many loans you took out and who you owe, this is the place to start.
The NSLDS database is free to use and it gives you 24/7 access to an itemized list of all the federal loans you received, including info about the loan status (in deferment, default, repayment, etc.), loan amount, date, the amount cancelled (if any), as well as the outstanding principal and interest you owe.
Tip #5: Give yourself a raise with a “windfall”
Anyone trying to better budget or become debt-free really has to use “windfalls” carefully.
A “windfall” is any “extra” money that one comes into, outside of your normal paycheck.
It could be a year-end bonus on the job, an income tax refund check, or even life insurance proceeds or a settlement from a divorce.
These big chunks of money can go a long way toward knocking out debt that would otherwise take years to pay off.
For example, the IRS says the average tax refund check tops $3,000.
If you get such a windfall, you should use it to pay down debt. Don’t blow the money!
As a bonus: by lowering your debt, you also boost your credit rating.
Website resource: www.IRS.gov
If you do happen to get a big tax refund check each year, realize that you’re actually giving the government an interest-free loan.
A better strategy is to adjust your W-9 withholdings at work, so that your employer takes less money out of each one of your paychecks.
The result is that you’ll boost your paycheck, giving yourself an instant raise!
The typical person getting a $3,000 tax refund check (which the IRS says is about average) can get about $250 per month put back into his or her paycheck by adjusting their withholdings.
Again, you should use that extra cash each month to eliminate debt. The IRS’s website, www.IRS.gov, has detailed instructions on how to adjust your withholdings.