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Money 101 | 5 basic money rules you can live by forever

Published: Monday, October 09, 2017 @ 7:59 AM

The concept of personal finance can be intimidating, especially if you’ve never learned much about it (which is the case for most people). And very often, when you try to learn, the Internet is full of so much clutter these days, it can be difficult to know whom to trust.

But here’s the good news: if you know nothing about money (or even if you know a lot), there are really just a few basic things you need to understand in order to start taking control of your financial life. Once you grasp these concepts and apply them to your own life, you will begin to see a much brighter financial future.

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Regardless of how much you’re making, there are five golden money rules to always live by — fundamental guidelines that will allow you to take, and maintain, control of your finances — both now and over time. Write these down and keep it somewhere you’ll see it, because these are essential money rules you can live by forever.

5 golden money rules you can live by forever

1. Spend less than you make

You’ve probably heard it before, and while it sounds like a simple concept, it can take people years and even decades to finally realize the impact this idea can have on their life (some people never do).

The reality is, until you learn to spend less than you make, you will never truly reach financial freedom — the ability to make your own decisions, when you want to make them, without having to rely on someone else’s approval (like say, from the bank, other lender or someone else).

The longer you continue living paycheck-to-paycheck, the more difficult it becomes to break the cycle. So the earlier you learn to spend less than you make, the sooner you’ll be able to have a confident and empowered relationship with money.

And it’s not about the amount of money you make, it’s about adjusting your habits and lifestyle in order to improve your life both now and down the road. So when you do start making more money, you can really benefit from the added income, rather than waking up one day and realizing you have no idea where it all went.

Once you start making small changes to your spending routine, you will quickly realize how big of an impact it can have on every aspect of your life. Each step you take, like paying off a debt or getting closer to a savings goal, will give you even more motivation to keep going, because you’ll be able to see the increasing control you have over your own life and your own money.

The hard part (which really doesn’t have to be that difficult)

Living below your means requires you to pick and choose. Maybe you take one less vacation or limit how much you go out to eat. Or maybe you go to dinner with friends, but eat before you go so you aren’t stuck with a big bill when everyone splits the check. You can have a social life without draining your wallet — it just takes some prioritizing.

Decide what’s most important to you and start saving for those things. A few examples may be building an emergency savings fund, paying off debt or buying a house or a car. By making your goals a priority, you give yourself a much better chance of reaching them — and on your own timeline, which is key. Because when it comes time to buy a house and you realize you wasted a lot of money that could have been saved for a down payment, having to put it off won’t be a very pleasurable situation.

Bottom line: If you want to get on the quickest path to reaching your goals, you have to start living below your means — and the best way to do that is to start paying attention to what’s going on with your money so you can keep your priorities in line.

2. Have a plan

The only way to get control of your spending and saving, and actually reach your goals, is to create a plan and track everything.

First, you need to set goals. Figure out what your priorities are for both the near and long-term future and then start putting money away for each of them.

If you don’t know why you’re saving, it often gets put on the back burner. So identify what your big goals are and then start taking steps to reach them. Write them down and put it somewhere you’ll see them — as a reminder of what you’re working for!

Once you’ve identified your goals, create a budget and identify expenses you may be able to reduce. Here are a few examples:

  • Subscriptions: You likely don’t need all of those monthly subscriptions and by cutting some of them out, you can put more money toward your goals.
  • Cable bill: Look for a cheaper plan or alternatives to traditional pay TV.
  • Cell phone plan: Consider a discount wireless provider or at least a cheaper plan that gives you only what you need.
  • Insurance: Frequently re-shopping your insurance policies is the best way to get the best deal.
    • Best car insurance companies
    • Best home insurance companies
  • Shopping, entertainment, extra spending.

Finally, once you’ve created a budget with your goals in mind, the only way to actually make it all work is to track everything — every dollar that comes in and every dollar that goes out.

3. Get out of debt

This is primarily about consumer debt, like credit cards, because this is the type of debt that will prevent you from reaching your big goals in life. While paying off student loans and other debts may still be a big priority for you, credit card debt typically carries the highest interest rates and also has a bigger impact on your credit score.

Here are a few reasons getting out of debt is crucial to improving your short-term and long-term financial life:

  • Carrying debt will cost you a lot of wasted money in interest charges over time.
  • It can damage your credit score, which impacts your ability to make big purchases, like a car or house — since your credit score is a big factor used by lenders to determine your mortgage rate, car loan rate and interest rates on other loans.
  • Debt can cause a lot of added stress on every aspect of your life.

So when it comes to getting out of debt, it’s important to get your cards with the highest interest rates paid off first.

Paying off credit card debt that’s several thousand dollars or more takes time — and it also takes discipline. Setting a goal of paying down debt in 60 months (five years) or less typically works best for most people. If you can set a goal of three years, that’s even better! But anything greater than 60 months and people tend to lose their focus. And once you start making progress toward paying off your debt, you may find that you can make it happen a lot quicker than you thought.

Creating a budget and reducing your expenses will help you find the extra money you need each month to put toward paying down debt.

Then start putting the most money toward the credit card with the highest interest rate — this is the one that will cost you the most money in interest over time. So take any extra money you have each month (from reducing bills etc.), and put more toward that card and slightly less toward the other cards. When you reach a zero balance, do not close the account. This only hurts your credit score. Just let it sit at a $0 balance and move on to paying off the next card.

Bonus tip: While you’re trying to pay off debt, it’s important to not take on any new debt. If you find this to be difficult for you, then start paying for things in cash. It’s a lot harder to part with $10 when it’s in your hand and it’s all you have left for the day (or week).

RELATED: Follow this #1 rule to avoid big credit card debt

4. Save and invest

A dollar today is worth a lot more than a dollar tomorrow.

The earlier you start saving, the more time you have to build up the funds to cover an emergency and reach your big spending goals (again, think a car or down payment on a house). On top of that, the earlier you save and invest, the more time your money has to grow.

Here are some basic guidelines on starting to save and invest.

Emergency savings: More than 40% of Americans experienced an unexpected emergency expense over the past year or had a family member who did — and a majority of people don’t have the money to cover the cost. The best way to save for unexpected financial shocks is to have two separate emergency funds: a rainy day fund and an emergency fund. This is money you want to keep somewhere you can access quickly and easily, like in a savings account.

  • A rainy day fund is money you might dip into every once in a while to cover an unexpected expense, like a medical bill or a car repair.
  • An emergency fund is a bigger, longer-term savings fund. This money should be able to cover at least three to six months worth of living expenses in case you can’t work for a period of time, for whatever reason.

Here’s how to start building your emergency savings.

Automate your savings: Pay yourself first. Otherwise, you’ll get to the end of the month and realize you’ve spent what you intended to save. So using your budget, figure out how much you can save each month and have the money directly deposited into your savings account and/or other retirement savings accounts.

Start investing: If you have extra money after saving for an emergency and other short-term savings goals, start investing. Compound interest is one of the most powerful financial forces, because it allows the money you invest now to be worth a lot more down the road. Money saved today is worth a lot more than money saved tomorrow — and this is true for money in a savings account, as well as money in short- and long-term investments.

Here’s a simple investing example: You invest $1,000 today and earn an annual 5% gain, so $50. That $50 is added to the principal amount of your investment, and then next year, you earn a 5% gain on $1,050, so you earn $102.50. And so on …

5. It’s about YOU!

The decision to take control of our financial life is up to you, because no one is going to do it for you.

The most important thing to understand about taking control of your money — and ultimately reaching financial independence — is to know that YOU are the only person who can make it happen. Of course there are others who will help you along the way, providing guidance and motivation — and in fact, that support is a key part of the process, because surrounding yourself with people who support you and whose goals are aligned with yours is the best way to keep yourself on track.

When you decide to make your financial well-being a priority, you’ll quickly discover that certain relationships and other aspects of life will empower you to reach your goals — and it’s important to hang on to them — because you’ll also discover that there are some things in your life that need to change.

Giving yourself the best chance at financial success means living a life that involves the right people, habits and behaviors. It’s about figuring out what really matters to you and your ultimate happiness, because no one can decide that — or accomplish it — except for you.

5 surefire ways to get to retire earlier than you thought

Published: Monday, October 23, 2017 @ 11:27 AM

The following are five surefire ways to get to retirement quicker Set clear goals for yourself and track your progress Working hard and being disciplined is the most reliable ways to retire early Streamline your spending and scale back on luxuries Cut your housing expenses Put your money to work - wisely

Retirement can seem like a difficult goal to reach, so the thought of achieving it early may seem downright impossible.

But getting to retirement quicker doesn't require genius-level investing knowledge or extreme deprivation. With a plan, hard work and discipline, you may be able to get there sooner rather than later.

RELATED: House hunters, here are 5 secrets to getting the best home loans

The following are five surefire ways to get to retirement quicker:

Set clear goals for yourself

Consumer adviser Clark Howard recently shared advice from Chris Reining, who decided in his late 20s that he wanted to retire early. By the time he turned 37, he was able to reach this goal.

Howard said he thought setting clear goals was one of the most important things that Reining did. He labeled his investment account "Retire early" so he could see the words every day. In addition, Reining tracked his progress by using a spreadsheet you can get on his website. He wanted to save up 25 times his annual expenses before retiring.

(Getty Images/iStockphoto)

Work hard

The Forbes Finance Council recommends working hard and being disciplined as the most reliable ways to retire early.

This can be achieved through a high-paying job combined with saving as much of your income as possible. Another path is starting your own business.

Reduce spending

Forbes quotes a blogger who retired early and says that streamlining your spending is an important step toward achieving this goal. It's not glamorous or complicated, but it works.

He suggests scaling back on luxuries and investing your savings in a low-cost index fund. When you accumulate 25 to 30 times your annual spending in this type of account, you can quit working for the rest of your life.

This Wednesday, Sept. 6, 2017, photo shows a new home for sale in a housing development in Raeford, N.C. On Thursday, Sept. 21, 2017, Freddie Mac reports on the week’s average U.S. mortgage rates.

Cut your housing expenses

If you're like most people, your home is your biggest expense, so it's also your biggest opportunity to save, according to Money.

Housing costs take up about a third of the average budget, so Money recommends not taking out the biggest mortgage you can get. Live in a more modest-sized home when possible, and in some cases, homeowners can purchase a two-family home, living in one side and renting out the other.

Put your money to work - wisely

CNBC talked to Scott Alan Turner, who had more than $70,000 in debt at age 25, yet managed to turn things around and retire by age 44.

He put his money to work and although he made some mistakes in the beginning, he evolved into what he calls a boring investor. His savings are automatically funneled into low-cost index funds, which Warren Buffet calls a surefire way to build wealth.

5 key things you should know about car insurance

Published: Thursday, October 19, 2017 @ 2:46 PM

The following are five things you probably don't know about auto insurance It may cover more than you realize Your car's contents were stolen or damaged? Too bad Other drivers in your house need to be listed on the policy Your rates could go up because of an accident that wasn't your fault You may be missing out on some discounts

Car insurance isn't something you probably think about often, but it's an important tool in protecting your assets.

It pays to learn about your policy before you need it so you can take advantage of its benefits and avoid any unpleasant surprises.

Whether you're shopping for a new policy or are wondering about the specifics of your current coverage, you may be surprised by what you find.

RELATED: 5 ways you can make bank with your wheels

The following are five things you probably don't know about auto insurance:

It may cover more than you realize.

If your car is damaged when a rodent chews through some wires, your expenses will most likely be covered, according to the Motley Fool. Your auto insurer may also pay for damage suffered when your car hits a pothole, and, although you probably won't need it, damage from a riot or meteor. And if you're involved in legal action as the result of a vehicle accident, your car insurance may also provide help with some legal costs.

RELATED: 8 ways to get the cheapest car insurance possible

Your car's contents were stolen or damaged? Too bad.

If you're like many people, you might have several expensive items – your phone, laptop and navigation system – that you often leave in your car. Unfortunately, if you're in an accident and these items are damaged, you're probably on your own when it comes to replacing them, U.S. News & World Report warns. The same is true if your car is stolen while the items are inside.

Other drivers in your house need to be listed on the policy.

In most cases, a car insurance policy provides coverage for you and other people who don't live with you but may occasionally drive your car, according to Business Insider. But if you have other drivers in your home, they will need to be listed on your policy as well. Otherwise, they probably won't be covered if they drive your car and are in an accident.

Your rates could go up because of an accident that wasn't your fault.

The Consumer Federation of America (CFA) found that many companies will raise your rates if you open a claim, even if you're not at fault. The practice is illegal in at least two states (California and Oklahoma), but drivers who live elsewhere are not protected. Companies vary in how much they'll raise your rates, and the CFA found that moderate-income drivers often face higher increases than higher-income drivers do.

You may be missing out on some discounts.

You might be getting a discount for being a good driver or because you're in a certain age group, but you may be missing out on some less-obvious discounts. According to Fox Business, some insurance companies offer discounts if you belong to certain professional groups, are a graduate of a certain college or belonged to one of its affiliated fraternities or sororities. 

Numbers don’t lie: 5 things to know about your FICO score

Published: Tuesday, October 03, 2017 @ 10:37 AM
Updated: Tuesday, October 03, 2017 @ 10:37 AM

To get into the all-important "good credit" score range, experts recommend these five strategies Check and re-check your credit report Avoid quick-fix promises Delinquent payments can seriously damage your FICO scores Pay off more of what you owe Apply for credit cards one at a time

With the 2017 hacking of credit bureau Equifax, credit scores have been in the spotlight recently. But credit scores are important every day for adults who earn or borrow money, especially the FICO score, which is used by 90 of the top 100 largest U.S. financial institutions. 

RELATED: Equifax data breach: What to know

Just what is a FICO score? The short answer: the global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries, created by Fair Isaac Corporation. The average adult has FICO scores from each of the three main credit bureaus: Equifax, TransUnion and Experian. FICO scores are based on amounts owed (30 percent), new credit (10 percent), length of credit history (15 percent), payment history (35 percent) and credit mix (10 percent).

A low FICO score might contribute to a lender's decision to deny you credit and could increase the cost of an auto loan by almost $5,000, according to Consumer Reports. A high FICO can save you thousands annually on everything from reduced credit card interest to the size of the deposit you must pay for electric utility service.

RELATED: Uber isn't everything: 7 other lucrative part-time side gigs 

To get into the all-important "good credit" score range, Consumer Reports and myFICO.com recommend these five strategies:

Atlanta-based consumer credit reporting agency Equifax reversed a decision to include forced arbitration language in its terms of service for its free credit monitoring products after a public outcry earlier this month. The company said a breach of its computer systems had exposed the Social Security numbers and birthdates of up to 143 million U.S. consumers. (Dreamstime/TNS)(The Atlanta Journal-Constitution)

Check and re-check your credit report

Request one free credit report from a different reporting agency every four months through AnnualCreditReport.com and check for errors, according to Consumer Reports. If you find an error, dispute it with the credit bureau. Pay particular attention to make sure no one has incorrectly listed a late payment on any of your accounts or miscalculated amounts owed on any open accounts. "Hard pull" credit inquiries, which are made by potential lenders with your permission, can lower your FICO score slightly, but this is different. When you check on your own credit, there's no penalty. 

Avoid quick-fix promises

According to myFICO.com, so-called "quick fix" efforts to repair your credit history are the most likely to backfire, so consumers should be leery of any advertisements or credit counselors claiming they can improve your credit score fast. Depending on the reason for a low score, you may need 12 to 24 months before any efforts (except for error corrections) start showing on your score. You can accelerate the improvement by enrolling in a debt-management program and making payments on time, but there's no instant fix.

(Contributed by nestiny.com/For the AJC)

Persistently pay your bills on time

Even if you are only missing payments by a few days, delinquent payments can seriously damage your FICO scores, particularly since you can't fix previous missed or late payments. If you have missed payments, get current and stay current so you can demonstrate that the problem is in the past. Accoding to myFICO, older credit problems count for less and will fade as your new on-time payment pattern starts showing up on your credit report. Some older versions of FICO keep collection accounts on your credit report for up to seven years even if they're paid off, but the most current versions of FICO ignore any collections when the balance is zero, according to Consumer Reports.

Pay off more of what you owe

The "amounts owed" category makes up 30 percent to your FICO score calculation. Unlike payment history, you can address it immediately, but you'll need financial discipline: "The most effective way to improve your credit scores in this area is by paying down your revolving–credit card–debt." Don't close unused credit cards as a short-term plan to up your scores, since it may just increase the percentage of available credit you are using - a no-no for high credit scores. The same goes for opening a new credit cards you don't need: while it will increase your available credit, it could negatively impact the average age of your credit accounts and damage your FICO scores.

Apply for credit cards one at a time

When you apply for multiple credit cards at the same time, you generate several "hard pull" requests for your credit history, which can hurt your FICO score, according to Consumer Reports. This advice only holds true for credit cards, not house, car or student loans. 

MyFICO also reminds consumers that while FICO scores are important, they're not the be-all and end-all. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you even if your score is low - or decline your request for credit even though your score is high.

To get started improving your FICO score, access myFICO's estimator tool, which helps you approximate your score range without any identifying information. It also offers a direct link that allows you to file an online credit report dispute and gives more detailed answers to the question "What is FICO?"

Disney theme park attendance drops as prices rise

Published: Sunday, June 04, 2017 @ 12:12 PM

Sunday marks an increase in prices for single-day tickets to Walt Disney World theme parks during certain times of year—as well as an addition of expiration dates on all tickets.

Could the House of Mouse be faltering?

In a rare reversal of attendance growth, a new report says fewer people came to 13 of 14 Disney theme parks worldwide in 2016 than in the year prior.

That’s according to independent numbers from the Themed Entertainment Association (TEA) and engineering firm Aecom. Disney does not share official attendance data for the majority of its properties.

Here’s a wild guess — maybe Disney’s endless march of increased ticket prices had something to do with the traffic decline!

Read more: How to visit Disney World for free (or close to it)

You can still save money on Disney if you know how!

Back in February, Disney jacked up its peak pricing strategy in a continuing effort to shift the price of a day pass based on demand.

It’s called “seasonal pricing,” and there are three periods: Value, regular and peak.

  • Value period pricing for the Magic Kingdom became $107 for adults and $101 for children — an increase of $2.
  • Regular period pricing became $115 for adults and $109 for children — a $5 increase.
  • Peak pricing, meanwhile, remained steady at $124 for adults and $118 for children.

Meanwhile, the price of an annual pass also increased in February. The Silver Pass is now priced at $419, the Gold Pass at $559 and the Platinum Pass at $679.

The peak pricing strategy seems to be working from a profit standpoint. Disney’s theme park unit enjoyed operating income of $3.3 billion in fiscal 2016. That’s a 9% increase from the year prior.

So don’t shed a tear for the House of Mouse just because guest traffic slowed down last year!

Disney Theme Parks is still the #1 theme park group in the world. According to the TEA report, Disney had twice the annual attendance of its next nearest competitor, the British-based theme parks operator Merlin Entertainments. And it had more than three times the attendance of the #3 competitor, Universal Parks and Resorts.

When you’re planning a Disney trip, you need every possible advantage on your side to save money. So don’t overlook these areas of savings…

Figure out the cheapest places to stay

If you want to stay on the property, try renting a timeshare. MouseOwners.com has resources for both owners and potential renters. MouseSavers.com also features a lot of info on how to save on the experience.

If you’re going to Disney World, you might consider off-site hotels around Orlando like the Four Season Orlando and Hard Rock Hotel. They’re luring more visitors than ever with competitive rates, water parks and complimentary transportation to area theme parks. Off-site may also turn out to be more affordable, especially if the family has a car.

One caveat to staying off-site: You’ll only be able to book FastPasses 30 days out from the start of your trip.

Know about the military discounts

If you’re military, you have earned the right to save on your Disney trip! ShadesofGreen.org is a special program offered for military personnel and families in partnership with Disney. Discounted lodging generally starts at $95 a night. Other discounts on park admission, dining and transportation are available too.

Use the free FastPass+ option

FastPass+ enables guests to reserve a spot in line at favorite rides prior to their trip. Once guests receive their theme park tickets, they can log into My Disney Experience on the Disney website or app and make an itinerary of preferred rides and attractions. This feature allows families guaranteed access and short wait times to some of the hottest attractions. Visitors who master FastPass+ can minimize the wait times and maximize the time they spend playing in the parks.

If you’re staying on a Disney property, you can begin lining up your FastPasses as soon as 60 days out from the start of your trip.

Have the right gear

Take ponchos from the dollar store with you for afternoon and evening thundershowers instead of buying overpriced ones at the park. Sure, they won’t have cute characters on them, but they’ll help you keep more of those other kinds of characters — like Washington, Lincoln, Hamilton, Jackson and Franklin — in your wallet!

Have the right reading material

Money expert Clark Howard has long recommended that you get “The Unofficial Guide to Walt Disney World,” not any of the official publications that come from Disney. This manual is updated yearly and tells you all kinds of money and time-saving tips that the parks don’t want you to know.

Go when it’s quiet

Even though the new dynamic demand pricing initiative won’t let you steal a deal, you’ll still want to plan your trip during a quieter time of the year if possible. You can get a sense of expected crowd sizes on sites like TouringPlans.com and WDWPrepSchool.com.

In general, fall is one of the best times for Florida vacations each year. Disney World offers discounts to Florida residents that fill the parks with daytrippers at that time of year. That creates some traffic, but not as much as you would have encountered over the summer. The real time to book, though, is during the first two weeks of December. Almost nobody goes on vacation at that time.

Use an app to plan your time in the park

A lot of families planning trips to the House of Mouse find it easy to coordinate all their planning in one app. TouringPlans is one great option, as is Trello. Give them a try!

Easiest way to schedule your kids’ free time this summer

Other stories you might like from Clark Howard:

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