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Starting Married Life in Financial Harmony

Spring is a beautiful time of year, one of new life and new beginnings. It is also the start of the wedding season. My wife and I were wed almost two years ago, and I clearly remember how new and exciting those first few months together were. While your first few months together will be filled with many wonderful experiences, there may be some challenges along the way.

Perhaps the biggest challenge you will face concerns your finances. In fact, the single greatest cause of divorce in the US stems from financial difficulties. Because of this, it is important to start your married life on the right foot.

Start with a plan

One of the first things you will need to do is to decide whether or not to combine your finances. My wife and I combined our finances, but that may not be the best answer for everyone, at least not right away. Regardless of whether you combine your finances or not, you should always manage your finances together. The two of you can decide exactly how you want to do this, but it is highly recommended to share in the responsibility so both people know exactly what is going on.

Know how much you earn and how much you owe

Once you have decided how you will handle your finances, you and your spouse will need to have a clear picture of how much the two of you earn and how much you owe. Start with your recent paychecks and other sources of income (keep in mind your taxes may change slightly). Then, list all your recurring bills and expenses. An accurate list will help you both understand your key expenses and hopefully prevent surprises from jumping up and biting you!

Make a budget and decide how to pay bills

Now that you have a plan on how to handle your money together and a definitive list of all income and expenses, it is time to make a budget. Your budget will probably need some adjustments the first few months of living together, so remember to be flexible. When your budget is in place, you will need to decide how you will pay the bills. Will one person handle the majority of the bills, or will both people be responsible? Many people set up a joint e-mail account dedicated to handling e-mail reminders and electronic bill statements. This is a good way to keep all bills and important reminders in one place.

Create financial goals

Now that the two of you are on your way to financial harmony, you should start working on some financial goals. As newlyweds, there are likely many things you will want to do in the near future: buy a house, have children, travel, buy a new vehicle, and many other things. These all take money, and a lot of it! The only way you will achieve these financial milestones is to create a goal to achieve them. This will take a clear objective, a plan, a time frame, and a collaborative effort from you and your spouse.

Marriage can often be very similar to finances: It is not always easy, but it does not have to be hard either. When you are married, you are two people working as one. And your finances should be the same way.

Patrick is the author of Cash Money Life, a blog about personal finance, career management, and self-improvement. He served in the United States Air Force, has traveled to over 35 countries, and is a fantasy baseball champion. He is an active lender at Prosper.

05/29/2008 by in Personal Finance Education

My Bank Wants Me to Buy a $50,000 Car

Seriously. In fact, they were so kind as to send me a pre-approval letter for a $50,000 loan at 3.89%, and a check designed for a car dealership (it is a sight draft to be paid to the dealer and has blanks for vehicle information including make, model, year, VIN, etc.). Check activation only requires a phone call from my end.

It’s great to know that my credit is good enough to get a decent interest rate on a new car and that I am pre-approved for a $50,000 loan. But I have a problem with the way the bank handled this. I don’t need a new car, don’t want a new car, wouldn’t spend that much on a car, and certainly don’t want loan checks sent to my house (this has fraud potential written all over it if it falls into the wrong hands!).

While I didn’t like receiving this offer, I did learn a few things.

How to stop this from happening again

My immediate action was to call my bank and request they never send these offers to my home again. I understand they are doing their job in trying to drum up new business, but I don’t want loan checks sent to my house.

Credit card companies are notorious for sending unsolicited cash advance checks which come with hefty fees attached. I also call credit card companies and request they not send cash advance checks. Both of these are a “convenience,” according to the banks and credit card companies. But all they really do is make it easier for you to spend your money, or ID thieves and opportunists to steal from you. Cancel these checks!

Don’t let anyone tell you how much you need to spend

Wow. $50,000 is way more than I need to spend on a car. My wife and I each bought new cars a couple years ago and spent about $10,000 less than our loan offer… for two cars! When I bought my car, the dealer tried talking me into a larger model car with more add-ons, bells and whistles. Remember, it’s his job to sell, and your job to buy only what you need. I stood firm and bought the car I wanted at the price I wanted.

Don’t let anyone tell you when you need to spend

We’ve had our cars for 2-3 years now and they are paid off. The first thing our bank did after we paid the last loan payment for our car was to offer us another pre-approved car loan. This is probably an automatic action in their software.

Did the customer finish a loan payment? Yes… Great! Send them another loan offer!

No thanks! I’ll buy a car at my pace and when I need it. Not just because you tell me I can afford it!

A Fool and his money are soon parted

It’s your job to be vigilant with your spending. If you let banks and other lenders dictate your spending habits, you will never get ahead in life. Buy what you need, when you need it. But ignore the suggestions of people selling a product. Their only interest is making your money, their money.

Patrick is the author of Cash Money Life, a blog about personal finance, career management, and self-improvement. He served in the United States Air Force, has traveled to over 35 countries, and is a fantasy baseball champion. He is an active lender at Prosper.

05/02/2008 by in Personal Finance Education

Breaking The Spending Addiction

Everyone has a weakness. My weakness is Ruffles potato chips. Seriously. I can eat a family size bag in 2 sittings. But I don’t allow myself to do that. Not only is that unhealthy for my waistline, it is unhealthy for my wallet.

So I avoid Ruffles. I only eat them two or three times a year, and usually only at parties. Otherwise, I know I would buy them at the grocery store every week and probably weigh 20 pounds more than I do now.

I admit I have an addiction to those crispy, salty potato chips. But thankfully, I haven’t developed any serious spending addictions. That’s right, spending can be an addiction. And it can be a tough addiction to break because you can live without potato chips, but you can’t live without spending money.

Here is how you can break your spending addiction:

Know why you spend. Are you bored? Do you spend money for excitement? Do you equate things with wealth or security? Spending money is like any other addiction. It can calm you and make you feel more peaceful. But shopping is not a hobby. It is important to understand your spending habits and why you have them. Otherwise, you will continue on your path without being able to change your habits.

Acknowledge your habits and make an effort to change them. Now that you know why you spend money, you will only be able to change those habits if you are willing to do so.

Know your weakness and avoid them. I know I can’t buy a family size bag of Ruffles every time I go to the grocery store. I would eat the entire bag in a day or two and that just isn’t healthy. So I don’t buy them. It is important to recognize your spending weaknesses as well. Do you go to the mall after work to fight boredom – and come home with a new outfit you will never wear? Do you visit Best Buy once a week to check out the new HD TVs and walk out with a couple CDs or DVDs? How about that daily trip to the gas station? I know people who stop by the gas station on the way to work every morning and leave with a tall coffee and large muffin.

Change your habits. Go shopping with a plan. The mall is a great place to find things you plan on buying, but it’s a horrible place to spend recreational time. The same thing goes for Best Buy. Gas stations are for buying gas. Try stopping only for gas – and paying at the pump. My bet is that you will see instant results in your cash flow.

Hold yourself accountable, but reward yourself as well. Once you identify your areas for financial improvement, hold yourself accountable. Your efforts for change will fall flat unless there is something keeping you in line. You can hold yourself accountable by giving yourself small rewards along the way. The point of curbing your addictions isn’t to turn yourself into a monk, but to allow you to control your spending instead of having your spending controlling you.

It is OK to spend money, and it is OK eat potato chips. But do so with a plan. Know your limits and stick to them. Your wallet, and your waistline, will thank you.

Patrick is the author of Cash Money Life, a blog about personal finance, career management, and self-improvement. He served in the United States Air Force, has traveled to over 35 countries, and is a fantasy baseball champion. He is an active lender at Prosper.

04/28/2008 by in Personal Finance Education

Why You Need a Credit Card

In my opinion, everyone needs a credit card. I know many people have great arguments about why people don’t need credit cards, but I won’t agree with most of them. The key is using your credit card properly, which means only borrowing amounts you can afford to pay off right away. If you follow that method, you will never get into trouble by using your credit cards.

Here are some reasons you need a credit card:

Improve your credit history and credit score. Everyone needs to have some credit history and preferably a high credit score. Credit history and a good credit score is necessary to borrow money at good rates, and can help you rent a house or apartment, get better insurance rates, buy a cell phone, or even get a job. Having a credit card, charging small amounts, and paying it on time every month can help you establish your credit history and get a high credit score.

Consumer protection. If your credit card information is stolen and you promptly report it, you will only be on the hook for the first $50 of the damages – even if thousands of dollars are stolen. Some credit card companies will even waive the $50. This makes it much safer and more convenient than carrying around large amounts of cash.

Internet purchases. Everybody knows the best deals are on-line. From airline tickets, to Amazon, to Ebay, the best deals are on-line. Credit cards are the easiest and most secure method of on-line payment. Sure, you can use a debit card or an on-line payment service similar to PayPal for on-line payments to most places, but these methods do not come with the same protective measures as credit cards. If fraud is suspected, PayPal or your bank will likely tie up the disputed amount of money until the situation is resolved. This can put a serious damper on your cash flow situation!

Rental cars. Many rental companies require a credit card to rent a car. This is so they can charge any outstanding amounts to you in the event of over mileage or damage. Some companies will accept debit cards, but will likely withdraw a large deposit – often around $500 or more – until you return the vehicle and they have inspected it. It may take up to a week after you return the car for you to receive your refund. This can be devastating if you need that money for something else!

Detailed transaction history. If you budget your money (you do, right?), then using credit cards will allow you to download your transaction information in neat categories. How much did you spend on eating out? Gas? Groceries? It is very easy to find out. Just download your information and track it. Then you can make your budget accordingly, or find out where you need to cut back!

Other benefits. Credit cards can provide protection against merchant disputes, increased manufacturer warranties, cash back rewards, reward points, miles, and easy currency conversion.

Use credit cards wisely. Credit cards are a wonderful tool. As long as you treat them with respect and only charge amounts that you can afford to pay off straight away, you will never get into trouble – and you can enjoy all the benefits credit cards have to offer.

Patrick is the author of Cash Money Life, a blog about personal finance, career management, and self-improvement. He served in the United States Air Force, has traveled to over 35 countries, and is a fantasy baseball champion. He is an active lender at Prosper.

03/19/2008 by in Personal Finance Education

Why YOU Need Credit

You hear a lot about credit scores and credit history. It seems like you can’t watch TV or listen to the radio without hearing credit scores mentioned. But do you know why your credit score is so important? Believe it or not, your credit score is probably more important than you realize.

Your credit score plays an important role in:

Borrowing Money: If you do not have any credit history, or if you have a poor credit score, you may not be able to borrow money in any form.

Interest Rates: The interest rates lenders charge is based on several factors; primarily your credit score, credit history, income, and debt to income ration (the amount of your monthly debt payments compared to your monthly income).

You credit score and credit history have a direct relation to the interest rates you will be charged by a lender, if they even offer to extend credit to you in the first place. A good credit score can result in lower interest rates which can save you thousands of dollars over the course of a loan.

Insurance Rates: Almost every insurance company runs a credit check when determining your insurance rates. The higher your credit score and the longer your credit history, the lower your rates will be. This applies to auto insurance as well as homeowner’s or renter’s insurance.

Employment: Many employers will perform background checks when making a hiring decision, many of which include a credit check. If your job deals with financial matters, sensitive information, or requires a security clearance , your credit score and credit history can have a direct impact on your ability to get hired.

Renting: If you rent a home or apartment, chances are your landlord did a background check and credit screening on you. If you have a bad credit score, or no credit history, you may have a hard time finding a landlord who will rent an apartment or a house to you.

Cell Phones: Yes, even cell phone companies do credit checks before they will sell you a cell phone plan. Cell phones require a monthly payment, and the cell phone providers want to know if it is worth entering into a contract with you. If you have a poor credit score, or no history, you may not be able to get a cell phone contract.

In our society, having a credit score and an established credit history is a necessity. If you do not have credit history, you are placing yourself at a financial and possibly professional disadvantage. Now is the best time to begin growing your credit history. The easiest way to do this is to take out a small loan and make regular payments. There is no need to borrow a lot of money to create credit history. Simply borrow an amount that is easy to pay back and make regular payments. Your credit score will increase in a few months time.

Patrick is the author of Cash Money Life, a blog about personal finance, career management, and self-improvement. He served in the United States Air Force, has traveled to over 35 countries, and is a fantasy baseball champion. He is an active lender at Prosper.

03/18/2008 by in Personal Finance Education


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