Tag Archives: Financial Goals

How to Choose the Best Credit Card

Consider something called "e-mail."
Consider something called “e-mail.”

Getting mail was exciting when you were a kid because it was usually something fun like a present or an invitation. And as an adult, sometimes it probably feels like you got accepted to Hogwarts when you open your mailbox, so many letters fly out.  The child inside you gets excited but soon you realize they’re all emblazoned with the Bank of America, Discover, or Citi emblem, not the Hogwarts seal. As a grown up, sometimes it seems like the only people who send mail anymore are the multitude of banks vying for your application for a new credit card account and the occasional magazine company that really, really misses you. When your junk mail reaches the point of utter chaos, it can be so overwhelming that you end up throwing it all away or making a hasty, uninformed decision when you need new credit.

But don’t let the inundation of information overwhelm you, nor the disappointment that you still are not a wizard in training. Whether you’re a first time borrower or a seasoned veteran at getting late notices, it’s a good idea to compare what’s out there to select the best credit card for your needs.

House of Credit Cards
House of Credit Cards

Below is an overview the basic types of credit cards you can choose from based on the benefits each one offers.

Low Interest: The focus of a low interest card is to make it easier to carry a balance from one month to the next without having to make continuous balance transfers or open new lines of credit. A lower interest rate will result in lower fees each month while you pay off your card or accrue new debt that you plan to pay off later. The interest rate on these cards sometimes increases after a promotional period, which makes them useful for balance transfers or short term hardships.

"I found this card in the food court at the mall!"
“I found this card in the food court at the mall!”

Balance Transfer: Balance transfer cards can help you pay down a credit balance that you have been carrying. Many balance transfer cards have a promotional period during which the interest is at zero or low percentage rate. Balance transfer cards are popular for people who want to consolidate their debt in order to make their payments easier or lower, as well as people who have one credit card with a high balance and a high interest rate. With balance transfer cards, there is usually a one-time balance transfer fee added to the total balance.

Cash Back: Cash back cards give you cash in return for making purchases on your credit card and paying off the balance. Cash back cards reward people who are dedicated to paying off their balance each month and the reward can go toward the balance itself or be redeemed in a checking account or a check. Cash back cards often offer special promotions with particular restaurants or retailers, as well as higher cash back percentages in certain categories. Cash back cards are popular for people who like to charge most things on a credit card, but are good at paying off the balance each month.

Diamond-Lighthouse-selling-credit-card-old-dude-chilling-phone
“I’d like to purchase twelve thongs, please.”

Rewards Points: Points cards are similar to cash back cards, except the account holder get points in return for purchases instead of cash. The points can usually be used toward purchases through an exclusive shopping site for cardholders or converted to payments on your credit balance. Some points can be converted to cash. Some points cards offer hotel or airline rewards points, which often offer bonuses for purchasing travel during various times or give a large amount of points to new card holders. Points can be used for free airline tickets or even free hotel stays.

Whether you’re an avid traveler, a lover of saving money, or a fan of getting rewarded for your diligence, you have choices that will suit your spending style and your financial needs. Most banks offer multiple cards, so it may be a good idea to choose the card type that fits your lifestyle first, then compare each bank’s offerings to choose one that makes sense for your financial goals.

Diamond-Lighthouse-selling-credit-card-couple-smiling-African-American
“You ruined my credit…why am I smiling??”

 

How to Make Realistic Personal Finance Goals

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According to Kiplinger, every person needs a steady income, financial reserves, and insurance against catastrophes, whether that’s formal insurance or a large savings or investment account. Whether you already have those things and you want to work toward a more rewarding financial future, or you’re nervous that you don’t have one or all of those things, you’ll need to set financial goals to get where you want to be.

Regardless of your current life stage, your financial goals will be dictated by your life goals. Whether you want to retire early, send your children to college, or travel more, you will need to manage your money well in order to plan for your future. In addition to developing a solid emergency fund, you may plan to have a wedding or purchase a house soon. Automatically depositing a chunk of your paycheck every week or month is one way to pay yourself first and plan for these goals.

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Setting aside money for specific goals is a good idea, but how do you decide how much to set aside, and how often? That depends on your long-term, medium-term, and short-term goals. Long-term goals may be that elusive retirement, while medium-term might be making a large purchase like a vehicle or a house, and a short-term goal might be paying off that pesky credit card. To meet those goals, you need to make them even more detailed and specific.

Applying the SMART method to your financial goals is one way to get a clearer idea of what you really need to do to make your money matters work for you. “SMART” stands for Specific, Measurable, Achievable, Realistic, and Time-Limited.

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The “specific” characteristic directly addresses the thing you want your money to pay for: the house, the college degree, or the new car. It is important to make your goal specific because then it will have meaning. “Measurable” means applying a specific amount to that goal, such as $18,000 for the car or $30,000 for the down payment for your house. Find out how much you will need to reach that goal and apply that amount to your goal.

To figure out whether a goal is “achievable” is a big challenge, and sometimes very closely linked to the “T” in SMART. A financial goal is only achievable if you give yourself enough time to do it. If you want to buy your own island in the tropics, but you only have $10,000 in your savings account, you may need to make it a long-term goal for it to be achievable. If you just want to buy some property that doesn’t necessarily need to be adorned with palm trees, you may be able to make it a medium-term goal with a starting point of $10,000.

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But we skipped the “R!” Well, that’s because you have to know if your goal is achievable and time-limited to know if it is realistic, and that might be the most challenging element of all. For a goal to be time-limited, you simply need to give it a deadline, but how can you tell if that time limit is realistic? Setting unrealistic goals is the best way to shoot yourself in the foot when it comes to financial planning, because you can spend so much time focusing on the dream that you don’t actually see the way your money is really being spent.

Whether or not your goals are realistic depends on how well you prioritize. For example, if you want to buy a house in the next year but pay $600 in rent and $600 in student loan payments while making $2,000 per month, you’ll need to consider where you spend the remaining $800 each month. Does it leave enough to save for the down payment you’ll have to make? Furthermore, do you have good enough credit to get a homeowner’s loan? If you spend all but $50 of the remaining $800 on groceries, a car payment, a credit card balance, medical bills, and utilities and have only decent credit, you may want to re-adjust the time limit on your goal and add another goal to the mix: increasing your credit score.

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Without setting financial goals, you will not be able to pay for the things you want. Without setting realistic goals, you won’t have a clear idea of how to approach the future. So SMARTen up and start setting goals today!

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