You can build a strong credit history if you use credit wisely over a period of time. It’s important not to wait until you need to borrow to think about whether you’ll qualify. Get a credit card. The easiest first step in building a good credit reputation is usually obtaining and using a credit card on a regular basis. If you don’t already have a credit card, you can apply for one that’s issued by the bank or credit union where you have an account. If your application is rejected, you can apply for a retail store card or a gasoline card. While the ways you can use these cards is more limited, using them wisely can help you establish your creditworthiness. As a last resort, you may consider what’s known as a secured credit card, which is typically linked to a savings account you maintain with the issuer. But be careful. Some of these cards have high fees and using one may not always help you get a regular card. Make payments on time. It’s essential to make at least the minimum payment on your credit card bill by the date it is due. In addition to the late   Read more…

The most effective way to handle evolving credit problems is to recognize the danger signals, not ignore them: 1) When your debts, including your mortgage (if you have one), are more than 40% of your monthly income. 2) You’re making only the minimum monthly payment on your credit cards. 3) You’re skipping some payments entirely every month. 4) You’ve borrowed up to your credit limit on one or more of your revolving credit accounts. 5) You’re using savings or investment accounts to pay your monthly bills. 6) You’re putting off essential medical or dental treatment. Losing your job, coping with serious illness, and going through a divorce can threaten your economic security and undermine your ability to keep up with your credit obligations. So can spending more than you can comfortably afford to repay. While you may be able to juggle creditors for a time, sooner or later, you could find yourself in serious trouble. One preventive measure is to build an emergency fund, accumulating at least six months of living expenses in readily accessible accounts. Some combination of relatively short-term certificates of deposit (CDs) and US Treasury bills will generally work. The goal is not to touch the money   Read more…

Buying on time, or paying for something while you’re using it, was introduced by Isaac Singer in 1856 as a way to sell his sewing machines. At $5 down and $5 a month, the average family could afford a $125 machine—otherwise impossible on a typical $500 annual income. When you need money to buy a car, pay college tuition, fix up your home, or for anything else that requires an immediate cash outlay, you are often able to borrow the amount from a lender such as a bank or a credit union. If you know how different types of loans work and the particular features they offer, you will be in a better position to look for the one that will be best suited for you. In some ways, of course, all loans are alike. You borrow money, called the principal, and agree to pay it back over a specific term, or length of time, with interest. But the conditions of the loan can affect how much you can borrow and how much the loan will cost you. Some common conditions include: Paying in installments or in a lump sum, whether the interest charged is fixed or adjustable or whether   Read more…

Arthur Morris originated the installment loan. His Morris Plan,
the first to make credit available to the average citizen, began in 1916 despite common wisdom that lending money to working people was doomed to failure. Today, it’s hard to imagine how the US economy could function without credit. Using credit means being able to buy the things or services you need or want by borrowing the money to pay for them. When you arrange for credit, you agree to repay the lender the amount you have borrowed. You typically pay a finance charge, calculated as a percentage of the amount you borrowed, for the opportunity to use the credit. Loans and lines of credit, of which credit cards are the best-known example, are the types of credit people use most often. Loans allow you to borrow a specific amount as a lump sum and repay over time. Lines of credit give you revolving access to a fixed sum of money. Revolving means that as soon as you repay what you have borrowed, you can borrow it again. Creditors are willing, and often eager, to advance you the principal, or money you borrow, because they make money on the finance charges you   Read more…

The interaction between different financial disciplines is exciting to observe when they’re coordinated to support a family or business in their money goals. But there are other fiduciaries that are often neglected, but nevertheless needed. One such group are the department heads of Human Resources for firms. Surprisingly most HR responsibilities seem to focus on the healthcare arena and do little in the retirement planning area. Many HR heads may not be aware of their fiduciary responsibility to their employees under the jurisdiction of section 404c compliance requirements. This is a serious piece of legislation that dictates the education of retirement plan participants and the oversight of that education falls into the purview of HR. The liability for non-compliance is a significant exposure to HR and the company’s owners. One such remedy available to HR decision makers is the Society for Financial Awareness (SOFA), a 501(c)(3) non-profit based out of San Diego, California. They have qualified educators from the ranks of financial advisers, insurance agents, attorneys and CPAs. It’s strictly instructional. No product or practice is promoted. Educating people on money items is the core competency of SOFA. The courses are conducted in classroom fashion and are formatted to help   Read more…