Young people in their 20s don’t think of life insurance as something that’s a necessity for themselves. Yet they are at the perfect age to buy a term or whole life insurance policy to take care of outstanding debts in case they die prematurely. And because young people are far more likely to carry a heavy debt load straight out of college, they need something to protect family members who co-signed for the loan. Or leave money to cover any expenses including the funeral and unpaid credit card bills. These are thoughts that no one likes to think as they’re a bit morbid, but it is a reality of life.

Young adults have the benefit of being in what’s known as a low-risk pool for insurers. They’re far less likely to have serious or life-threatening illnesses, and insurers reward that with lower premiums. The same goes for term or whole life insurance. And even though term life insurance only lasts for so long, it’s still worth buying while young. One reason is that life circumstances change over time. Someone who’s single in their 20s may be married in their 30s and raising a family. In the event they have an untimely passing in their 50s, they may still have a term life insurance policy in effect that benefits those who survive.

Take the quiz below to see how much you know about the benefits of getting life insurance at a young age. You might be surprised at what you learn!

How To Use Credit Cards Wisely

Credit cards can be a great financial tool for everyday expenses and building a healthy credit score. Sometimes it can be a tool of financial independence or an instrument of debt. This depends on how you use them. Here, we will explore some pro tips on How To Use Credit Cards Wisely to Avoid Debt.

Many credit cards offer rewards, cash back, and miles on purchases that make people spend more and more. 

However, this convenience of credit cards leads to debt quickly. According to Nerdwallet’s annual report, around 47% of U.S. households have outstanding credit card balances. 

In this blog post, we’ve covered some pro tips on how to use credit cards responsibly to take advantage of all benefits while staying debt-free. 

 

 

1. Create a Budget (Master the Mindset)

Before considering a credit card, it is very important to create a monthly budget and stick to it. This will help you in tracking your income and expenses. This budget will be your financial roadmap of expenses and savings. Try to manage funds for everyday expenses like rent, groceries, utilities, or travel. Never spend more than you earn.

Once you determine your financial needs, you get a clear picture of how a credit card fits in your needs. Remember, a credit card is not a money machine. Use it carefully to avoid debt.

 

2. Pay Your Balance in Full (Avoid Minimum Payment)

Paying your balance in full each month is the best way to use a credit card wisely and avoid extra charges every month. But, make sure you are able to pay the payment in full each month. This will not save your money but also put a positive effect on your credit score.

In case, if you leave a card balance, try to keep it under 30% of your credit limit. This is because minimum payment is a trap of temptation. However, it seems manageable, but over time it becomes an iceberg of debt. 

If you keep paying only minimum, this can accumulate years of high-interest payments turning your small purchases into larger expenses.

Pay Your Balance in Full is the best way to use a credit card responsibly.

 

3. Don’t Skip Payments (Set Up Payment Reminders)

 

Have you ever thought about What Happens If You Stop Paying Credit Cards?

Do you skip payments or have a large credit card balance to pay? Paying you balance on time is the best way to use a credit card responsibly. If you keep skipping payments, it will ruin your credit score.

Build a debt repayment plan and pay as much as you can each month and don’t use your credit card until you pay off the whole balance. You should not carry a balance. 

You can take advantage of balance transfer of any 0% intro offers to pay your debt faster. You can set up automatic payment reminders for your upcoming credit card bills. This will ensure you never miss a payment and keeps your credit score improving.

 

 

4. Understand Rewards Programs and Benefits

Most cards come with rewards programs that offer reward, cash back, points, miles, and other perks. Check the reward benefits and choose a card that best matches your needs. 

Credit cards that offer rewards may help you save. If you spend a lot, you might get cash back and can build wealth from it. You can transfer your rewards as savings automatically deposited in a checking or savings account

Your credit card network can also be a great source of income as sometimes it refers you to special offers. This can be a smart way to use your credit card. 

 

 

5. Monitor Your Statements Carefully (Like a Hawk)

Checking your monthly credit card statements is very important for any fraud transactions, suspicious activity or billing errors. Regularly check your monthly for unauthorized charges, unusual spending or any fraud purchases from your credit card.

 

To monitor your credit card statements regularly, you can set up purchase notifications in your credit card mobile app. This can help you in spotting the transactions that you don’t recognize. 

 

6. Keep a low Credit Card Utilization Ratio

If you are unable to pay your balance in full each month. But, try to keep a low credit utilization ratio. Generally, the credit utilization ratio is the percentage of the credit amount currently in use. For example, if you have a credit limit of $1,000 and you spend $500 on purchases, then you have a 50% credit utilization ratio. 

 

If you use a high percentage of your credit limit, it can be harder to pay off debt. If you skip payments, it can negatively affect your credit score. Plus, you will keep paying more and more interest over time.

So, keep your credit utilization ratio below 30% of your credit limit. 

 

7. Limit the Number of Credit Card You Have

 

Many people prefer to keep more than one credit card because many credit cards offer attractive benefits, but keep in mind that applying or opening too many accounts of credit at once will open our doors for debt. Also, this will negatively impact your credit score. So, try to limit the number of cards you have.

Only apply for cards that you can manage responsibly.

 

8. Negotiate Interest Rates

If you have a large balance, multiple cards, and are struggling with high-interest rates, try to negotiate about interest rates with your credit card issuer. They may lower your interest rate, if you have a positive payment history. 

 

9. Beware the Cash Advance Trap

However, cash advance is tempting, but it is a shortcut to debt. Because, the cash advance always comes with high interest rates and charges. 

It seems like a quick fix, but the high charges will make you fall into a debt trap. Use cash advance facility if you are facing a real financial emergency, otherwise avoid cash advance at all costs.  

 

Conclusion on How to Use Credit Cards Wisely

It is very essential to learn how to use a credit card responsibly to manage your expenses. It can prevent you from debt and help you in earning rewards and other perks. By implementing above said strategies, you can master the art of using credit cards wisely. 

To use a credit card wisely and avoid debt, don’t skip payments, make payments in full and reduce credit utilization ratio, etc. 

Remember, credit cards are a financial tool, but like any other tool, they require responsible use.

 

 

Do you run a small business?

Do you struggle with managing your company’s finances? Are you able to set aside for yourself and your family without disrupting the cash flow of your business?

A recent survey revealed that about 41% of small business owners in the United States face cash flow struggles. These problems affect small business owners beyond the financial aspect. Around 56% said that the struggles had a consequential emotional impact.

There is also the question of how should you pay yourself as the business owner.

The answer can be very tricky. There are certain factors that you need to consider especially when you are the boss.

If you want to know how to pay yourself as a small business owner correctly, continue reading below.

How to Pay Yourself the Right Way

Regardless if you are running a small business or a freelancer who works alone, you need to pay yourself. If you have people working under you, you need to set up a payroll system. If you are doing things by yourself, there is payroll for self-employed people.

1. The Structure of Your Business

First, you must consider the structure of your business.

The most common structures include sole proprietorship, partnership, limited liability company (LLC), corporation, and cooperative. The corporate structure has five types, namely, the C Corp, the S Corp, the B Corp, the close corporation, and the non-profit corporation.

If you’re starting small with a few trusted friends, an LLC might be the better option. It ensures everyone has a firm grasp on the company’s finances and ownership. This guarantees no one can out-profit the other, an issue that can happen in a traditional partnership.

We advise that you sit down with your trusted accountant regarding your payroll options in relation to your business’ structure.

2. Identify the Appropriate Payment Method

There are two common types of payment methods that small business owners tend to use: the owner’s draw and the salary.

If the structure of your company falls under a sole proprietorship, LLC, or partnerships, the IRS considers you as self-employed. Hence, the owner’s draw is the one for you. This is because you are not paid through traditional wages.

Keep in mind, however, that you still need to pay your individual taxes even if the owner’s draw is not taxable upon withdrawal.

Traditional salaries, on the other hand, work for C Corps and S Corps. Salaries are recurring payments. Unlike the owner’s draw, the IRS imposes taxes on salaries.

3. Compute an Amount

Now that you have determined that suitable payment method, you can move on to the amount of pay you should receive.

To avoid overpaying or underpaying yourself, you need to look closely into your daily duties. Determine an amount that equates to your daily business tasks. You should also consider how the amount impacts your business’ long-term growth.

Review your profit and loss statements and zoom into your monthly net profit. Take out your desired pay from the net profit. Do you find the pay fair and justifiable?

Identify the major duties you have in relation to your business operations. Find out how much you would pay if you hire someone else to do those things. The amount can serve as a guide to how much pay you can take from the profit.

There are online resources you can use for your computations. You may also consider services that help manage business cash flow.

You should also consider looking at the standards set by the industry.

How much do your competitors pay for services? How much do they pay their employees? How do they break down salaries and how do factors like hours worked, experience, and seniority in the company come into play?

4. Schedule Your Payroll

You need to follow a payroll schedule even if you only have one or two employees working for you. The usual pay schedules among companies in the United States are twice a month, bi-weekly, or weekly.

Majority of the states follow a basic payroll calendar. If your state enforces one, then you should abide by all means.

Not many companies consider one important factor: collaborating your schedule with local, regional banks. Some banks are strict in releasing credit cards or loans to employees and require a weekly or bi-weekly direct deposit account. You can support your business and manage cash flow by sticking to the schedule your local banks abide by.

5. The Mode of Payment

Lastly, you need to determine how you are going to get your paycheck. You can deposit your salary directly into your bank account. You can also write a check if you wish to.

Which modes of payment should you prioritize?

Direct bank deposits should be the primary method available. You should also consider methods such as PayPal. PayPal is great for people hoping to save money since it’s always online and you can’t simply withdraw the cash from an ATM.

As mentioned, checks should be an option for those who prefer a more traditional method.

Bonus Tip: Fragment Your Pay

One extra tip is to fragment your own pay. It’s likely you already have a spreadsheet of different bills to pay, employees to pay, and personal desires to purchase. You should set your account to automatically pay these things out upon receiving your own pay.

This guarantees you won’t forget to pay out anything. The money left in the account is purely a surplus you can spend on business expansion and personal wants.

Grow Your Business and Eliminate Debt, Today!

Taking your small business to the next level requires patience and the thirst for learning. The same thing goes for eliminating your family’s debt. Following these tips should help you pay yourself, keep your business afloat while also guaranteeing steady growth and expansion.

If you are struggling in both areas, we encourage you to get in touch with us. Simply fill out our contact form and take the first step toward becoming debt-free. Don’t hesitate to speak with the professionals to get back on solid ground!

The average American credit score has risen steadily since the Great Recession. The national FICO score average is now 704. If you have good credit, your main concern should be avoiding mistakes that may lead to this score getting lowered.

By finding out what hurts your credit score, you can use this information to keep your credit in good shape. Without good credit, you will find it hard to do things like getting approved for car or home loans.

Not only will you need a good credit score to make these larger purchases, you will also need to save money. One of the biggest trends in the world of savings is the 12-week challenge. This challenge requires you to save between $100 and $150 a week for 12 weeks.

The following are some of the things you need to avoid when trying to keep your credit score high.

1. Missing Payments is What Hurts Your Credit Score the Most

If you are like most consumers, you have a number of credit card minimums and loan payments to make each month. While keeping up with these payments may be difficult, you need to avoid missing one by mistake.

Not only will missing a credit card or loan payment lead to additional late charges, it can also hurt your credit score. A payment that is over a month late can lead to a credit score being reduced by nearly 90 points.

The last thing you want to do is significantly reduce your credit score due to a mistake. This is why you need to get organized when it comes to when payments are due.

2. Avoid Maxing Out Your Credit Cards

Did you realize credit card utilization accounts for nearly 30 percent of your credit score? This means that the lower your credit card balances are, the higher your score will inevitably become.

Practicing a bit of restraint when it comes to credit card spending is vital. Maxing out one or more credit cards is a horrible idea that could cost you dearly.

Higher credit card balances will lead to your monthly minimums increasing, while your credit score decreases. Maxing out your credit cards can reduce your credit score by up to 45 points.

3. Too Many Hard Inquiries Can Affect Your Credit Score

Every time you attempt to get a loan or a new credit card, a hard credit inquiry will usually be performed. Lenders need to pull your credit report to ensure you are a good candidate for a new loan or credit card.

Applying for a number of different loans or credit cards in a short time frame can lead to a number of hard credit inquiries being generated. Instead of hurting your credit score with the inquiries, you need to be selective about applying for new lines of credit.

Doing some research before applying with a particular company is a must. With this research, you can figure out which lender offers the best terms on the loan you need. Once you have this information, you can apply for one loan instead of a handful of them.

4. Steer Clear of Charge-Offs and Collections

Having unpaid debt can affect your credit score in a negative way. If you avoid making an attempt to pay a particular debt, the company that holds this debt may sell it to a third-party collection agency.

While this may not sound like a big deal, it can actually hurt your credit score. In some instances, a company will classify your debt as a charge-off. Basically this means that a company is removing the debt from their books due to it being unpaid for a long period of time.

Checking your credit report regularly can help you find issues with unpaid debt. Taking out a personal loan to pay off these debts is a good option. If you are looking for information about the best personal loans on the market, you can read more here.

5. The Damage Done by Bankruptcies and Foreclosures

Being unable to pay your debts will put you in a very compromising position. Often times, people who are unable to make these payments will have to file for bankruptcy.

If you are unable to pay your mortgage, the bank may decide to foreclose. A bankruptcy can lower your credit score significantly. The negative mark left by a bankruptcy can stay on your credit report for up to 10 years.

A bankruptcy or foreclosure can lower credit scores by up to 240 points. Contacting your creditors and letting them know about your financial hardship is a step in the right direction. Usually, lenders will offer a reduced payment plan designed to help you avoid foreclosures and bankruptcies.

6. Debt Consolidation Should Be Avoided

Some consumers think that consolidating their debt into one easy to make payment is a good idea. While a single monthly payment may be helpful for you, it can be damaging to your credit score.

Generally, companies that offer debt consolidation loans will have to pull your credit report. This means you will have a hard inquiry, which as previously mentioned can lower your credit score.

Paying off mounds of credit card debt can be a daunting task. By doing this on your own without the help of a consolidation loan, you can avoid affecting your credit in a negative way. Meeting with a financial advisor is a great way to get a plan of action when attempting to pay off debt.

Focus on Keeping Your Credit Score High

Getting low-interest rates on loans and increasing your buying power is easy with good credit. Now that you know what hurts your credit score, you can avoid making these mistakes. Keeping your credit card utilization low and your savings high can benefit you and your family.

Looking for more information on paying off your debt? Be sure to check out our article on how to create a debt avalanche.