Financial Independence

Is Interest Rate and APR the Same Thing?

If you’re in the market for a mortgage, car loan or considering a different credit card, you pay attention to the low rates advertised. Interestingly though, it’s never mentioned what kind of rate the ad is referring to: the basic interest rate or the annual percentage rate (APR). Only one rate tells the full story of how much borrowing that money will cost you. It’s the APR. Here’s the difference: Interest rates reflect the cost you pay each year to borrow $25,000 for a car or $100,000 for a home. It’s a percentage of that principal and it’s determined by many factors, namely how much it costs the lender to borrow money from the Federal Reserve, as well as your credit score. APRs represent the real cost to you in repaying the required amount each year. This rate includes the interest rate on the principal (above) plus any extra interest…

How to Stop Procrastinating With Your Money in 4 Easy Steps

Personal finance prosperity requires a long-term plan, dedicated effort and regular check-ins to maintain focus. It takes work to reach financial goals. Millions of Americans complain about high debt, low savings and a paycheck-to-paycheck lifestyle that seems difficult to escape. But if you take the time to get your money systems setup, you can relax as your money goes to work for you. Here are some easy-to-follow tips to avoid putting off getting your finances in order.   Start a Budget Already Do you know you should budget but don’t think you have the time to put one together? Wrong! Anyone can budget in the time it takes to check your email. And you can do it on your smartphone or laptop. Popular budgeting apps Mint (free) and YNAB (paid) connect to your bank accounts, credit cards, loans and other financial accounts to summarize everything in one convenient dashboard. Both…

Do I Need Debt to Boost My Credit?

Much like no news is good news, no debt is a good thing. But what happens to your credit score when you don’t have debt? The answer is complicated. The short version is no debt can pose a challenge to someone looking to land an excellent credit score. Credit scores are intended to report your credit risk. In other words, they reflect how you have handled debt in the past. But having a high credit score is more complex than simply carrying debt. Understanding the factors that impact your credit score are important. There are many different strategies you can use to increase your score. [Spoiler alert: Going into debt simply to boost your score should be your last resort.] What Factors Impact My Credit Score? A combination of factors creates your overall credit score. Payment history has the biggest impact on your score and recent credit has the smallest.…

How to Turn a Financial "Don't" into a "Do"

A lot of financial advice is framed as things you should never do. Here are a few “don’ts” you’ve probably heard more than once: Don’t borrow money from your retirement plan. For instance, see 4 Reasons You Should Never, Ever Take a 401(k) Loan. Don’t take a loan or use your credit cards to fund your dream to… [fill in the blank — start a business, go back to school, relocate, etc.] Don’t borrow money from (or lend money to) family or friends. Here’s a quick take from financial advisor Dave Ramsey on why this is always a bad idea. Don’t accept a lower salary when changing jobs. Don’t rent when you can buy. For instance, David Bach, co-founder of AE Wealth Management, believes that millennials should buy, not rent. Do all these “don’ts” and others like them really apply to every person and every situation? Of course not. But…

How to Improve Your Credit Score

Your credit score: most days you probably don’t think about it at all. But at pivotal milestones throughout your life, a good credit score suddenly becomes crucial. Your credit score affects your ability to buy a new car, qualify for student loans, get approved for an apartment or even land a job. With a good credit score, you’ll be able to finance a vehicle, get approved for an apartment with a safety deposit, and pass an employment background check. And with an excellent credit score, you’ll find yourself eligible for the lowest interest rates, with better chance of approval for loans and rentals, access to the best credit cards, higher credit limits, easier mortgage approval and so much more. No matter where you are in life, it’s worthwhile to put in the effort to move your credit score from bad to good, or from good to excellent. So where do you…

Ready to Buy (and Insure) Your Vacation Home?

There’s something so enticing about the idea of owning a vacation home. It’s the vision of a special place that feels both familiar and an escape at the same time. It is a place to make memories. And a place your hard-earned dollars translate not only into luxury, but a return on investment. However, like all large purchases, a vacation home isn’t something you should jump into without lots of thought and number-crunching. Here are five things you need to consider before making an offer on a vacation home:   Practicality Okay, so being practical is probably the furthest thing from your mind when you’re dreaming about a vacation property. But you need to make sure your choice is the best one for your lifestyle. Is the location somewhere you’ve visited often? Can you travel there easily from your primary residence? Are there activities you’ll be able to enjoy as you…

Need to Control Your Spending? Try Zero-Sum Budgeting

Do you have a solid idea about where your money goes each month? You probably can list the big-ticket items – rent or mortgage, car payment, maybe even utilities or other fixed expenses. But hundreds of other dollars have a way of vanishing and you may wonder why your bank account looks a little thin by month’s end and why your savings don’t grow as much as you’d like. Some financial advisors recommend zero-sum budgeting as a way to track your money, resulting in finding big and little ways to cut expenses to a more reasonable level. This budgeting system is popular with millions of people. Zero-Sum Basics You assign a job to every dollar you make in order to prevent waste and maximize the use of your income. The premise of zero-sum budgeting is that you use your last month’s income to pay this month’s expenses. So, you probably…

Personal Finance Habits for Your 50s

After reaching important financial milestones in your 20s, 30s and 40s, things should calm down a bit in your 50s. If you followed good financial practices, you should have sizeable and growing retirement savings, shrinking debt and a clear path to retirement. And if you are off of your ideal plan, be sure to put the right habits in place right away to get yourself on the right track. While you can’t go back in time and change past spending and savings habits, you can start the right habits today. Start with these five personal finance habits for your 50s to get started. Pay Off Non-Mortgage Debt While the average debt for American households overall is on the rise, you should be working hard to fight that statistic for your own family. In your 50s, you should be saving and swelling credit card debt loads can crush those savings rates…

Are You Being Careful With Your 401(k)?

In time where traditional pensions are all but extinct, 401(k) accounts are key to many people’s retirement strategies. You just set them up, make sure you put money in and that’s it. Right? Trick question. A 401(k) needs management in order to be the retirement nest egg you want it to be. Your employer put it in place for you, but it’s up to you to make it work for you. There’s plenty of information out there on managing a 401(k) and the mistakes people make with their accounts. Even the IRS has some definite opinions on how you should go about making 401(k) decisions. We’ve assembled some of the more common things people don’t realize about their 401(k) accounts, along with some resources to help you make the most of yours. It Costs You Money to Have a 401(k) “Employer-provided” doesn’t mean “100 percent employer-funded.” There are personal costs…

Healthy Habits to Help Reach Your Financial Goals

Living a long, full and happy life is a goal most of us share. Taking time to align your financial, physical, professional and social aspects of your life is important. The idea is to get each area to work in concert to reach your goals. Here are a few ways to keep your eyes on the prize and incorporate healthy habits across all areas of your life to help reach financial success. Use Technology to Set Goals Identify what you are trying to accomplish to increase your odds of success. Then use widely available tools and technology to help you make your plan. Maybe you want to network more effectively, start adding more cardio into your workouts or save enough to retire before you turn 60. Define what you’re really looking to accomplish and set realistic goals. For example, if you are looking to improve your training practices, use BMI…

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