Start 2019 by Improving Your Personal Finances

With the new year comes the Holiday Financial Hangover. Bank accounts are depleted, credit cards have increased balances and everyone is feeling the pinch. That is why this newsletter will focus on financial tools to manage expenses and budget, ways to improve your credit score, how to save or put that tax return to sound financial use, myths regarding homes loans so you can plan to purchase that 1st home, move-up home, or investment property, and how to make current savings work for you.

Let's get started.

STEP 1: Understanding Finances

Create a budget and figure out where excess spending can be cut. When I was younger, I thought good use of money was going to the local bars and spending $5 (or more) a beer plus food and other entertainment. That time is history and cutting out those activities freed up valuable funds to build savings.

Free Budget & Planning Tools

Getting on financial track starts with understanding budgeting. If you're spending more than you're making then you're going backwards.

  1. Don't use credit cards to fund entertainment as you'll lose more money on interest.
  2. There are no extra funds set aside for emergencies or to apply to savings.

Now onto the free tools. is a free online tool that allows users to connect bank accounts and analyzes spending behavior. Its useful to put into perspective where spending is going and what you can do without.

Microsoft Excel

Microsoft has downloadable Excel templates for household budgets. Users insert in values to understand monthly personal and household expenses without fear of connecting financial accounts. is personal and small-business financial-accounting software, freely licensed under the GNU GPL and available for GNU/Linux, BSD, Solaris, Mac OS X and Microsoft Windows. Its a bit more work to setup than Mint or Excel.

Current Banking Institution

Your online bank account may already come with budgeting tools. I use Bank of America and their budgeting system is pretty robust and doesn't require additional account setup or connectivity to access.

These are just a small sample of what's available in a Google search though the above recommendations are places to start.

If looking for blogs, articles or advice the mainstream media sites like Bloomberg, Yahoo Finance, and MSN Money may provide additional insights into budget creation.

Another recommended website is NerdWallet. NerdWallet allows users to research credit cards, banking, investing and savings accounts.

STEP 2: Improving Personal Credit

Instead of saying "my credit will never be good it's to bad to fix" say " this year I'll take control of my credit and make improvements". Poor credit isn't hard to correct and it doesn't make sense to hire someone to try and improve it for you. Why pay money for something when it can be done yourself.

What goes into credit score?

  • Payment History: 35% of your FICO score is based on payment history.
  • Types of Credit Used: 10% of your FICO Score is based on the different types of credit you have.
  • Pursuit of New Credit: 10% of your FICO Score is based on recent inquiries and recently opened accounts.
  • Length of Credit: 15% of your FICO Score is based on how long you've had your credit.
  • Outstanding Debt: 30% of your FICO Score is based on your outstanding debt.

So, how does a person go from a 530 to a 795?

  1. Subscribe to a credit monitoring service.
  2. Use a credit report to evaluate debits.
  3. Prioritize payoff of collections and debts.
  4. Start the payoff process.
  5. Set up automatic payments on debts.
  6. Decrease the amount of credit used in relation to credit available.
  7. Do not close any credit cards or accounts.
  8. Add additional credit (trade) lines.
  9. Continue to monitor the credit report.
  10. Stay positive through this process.

Read the blog 10 Simple ways to improve your Credit for expanded details on these 10 items.

STEP 3: Use of a Tax Return

Tax Return Time

Tempting as it is to use tax return funds for a vacation, use those funds to pay off high interest debt. Take the credit card, auto payment, student loan, or other bill that has the highest interest rate and apply the tax return to that balance.

In doing so, you'll reduce the balance on that account, or accounts, and save money that would otherwise be consumed by that high interest debt - see Step 2 item #6 and refer to the linked blog post for more details.

Another good use, if you currently own a home, is to use a tax return to complete those unfinished or needed projects around the house. The honey-do list gets smaller and you'll feel good by accomplishing projects around the house.

STEP 4: Loan Myths and Misconceptions

Understanding Home Loan Misconceptions

There are many misconceptions buyers, particularly first-time buyers, have when they're looking into mortgages. The process of applying for a mortgage can feel daunting, but don't allow concerns of tighter lending requirements keep you from pursuing homeownership. Remember, if you have any questions regarding your situation, please give us a call; we're happy to discuss your options with you.

Home Loan Myths

  1. If you prequalify for a loan, you're pre-approved.
  2. You need 20% down.
  3. You need perfect credit.
  4. You can't have any debt to qualify for a loan.
  5. Your income determines how much borrow.
  6. A lender will only consider one of your credit scores.
  7. If you went through a short sale or foreclosure you can't qualify for a mortgage again for seven years.
  8. The rate you've quoted when you prequalify is the rate you'll get when you apply.
  9. Your interest rate is equal to the true cost of your mortgage rate.
  10. Private Mortgage Insurance (PMI) will dramatically increase your monthly payment every month.

Read the complete the Top Misconceptions about Qualifying for a Home Loan blog for more details on each myth.

STEP 5: High Yield Saving Account

Put Current Saving to Work

NerdWallet has a Best Savings Account Section where they've compiled the best yield savings accounts available, their minimum balance requirements and so on. What is the point of a savings account if the funds are being consumed by bank fees.

I personally went with a American Express High Yield just last month and plan to direct funds in the coming months. Bank of America was actually costing $7.98 per month, which factors interest earned minus service fee, to have an account open.