Introduction To Investing

What is Investing?

Investing is, simply put, storing your money in a place that will help it grow. There are many different options when it comes to investing, from the stock market and retirement accounts, to real estate and any number of other avenues.

The main thing about it, is that it needs to be something that allows your money to earn you more money over time. Usually, it is done over a long time frame, like years or decades. Statistically, the stock market creates gains over time, and real estate appreciates (or becomes more valuable, so it can be sold for more money).

Generally, holding a lot of extra money in something like a shoebox, or a savings account, isn’t a great long term strategy. The reason being, that money won’t grow much. As inflation occurs, it could actually become worth less. Think of how much farther a dollar went 20 years ago, and you will see what I mean. You want your money to grow at a rate that overcomes inflation (which tends to be around 3%).

I won’t try to tell you which investment avenue is right for you. That involves a lot of different variables. A Financial Advisor could possibly help, and I encourage you to seek one out if you can’t choose on your own, or don’t want to.

What I will say, is the sooner you decide how to invest your money, the better. If you want to have money for retirement, it is important to start planning and saving for it now. Investment money grows over time, so the more time=the more money. Even if you are investing in a business, they take time to grow. So, learn, decide, and then, as Nike says, Just Do It!

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Best Ways To Make Your Money Grow

Ways to Make Your Money Grow


First, I have to say that I am not a licensed Financial Advisor, and as such, I will not tell you specifically what you should invest in. I will tell you a little about what is out there, so you at least have an idea where to look if you find that you have extra money and want know the best way to grow your money.

No risk, Low Reward

The easiest and least risky place to put extra cash is in a savings account. Look for accounts that pay the most interest if this is the way you decide to go. Savings accounts have no risk, as the money you put in just stays there and earns a minimal amount of interest. It won’t make you rich, but it is accessible and safe.

Retirement Accounts and Compound Interest

If you are working and your company offers retirement savings accounts, this is another way to save. Typically, these are 401K or 403b accounts. The way they work is that you decide what percentage of your income before taxes are taken out you want to save, and the money comes out automatically each payday. The remaining amount in your paycheck is then taxed as usual. It isn’t tax-free, though, because whenever you later withdraw from the account, the money is taxed at your current tax rate. The idea is that you could be at a lower tax rate in the future when you are retired, and so you could potentially save in taxes. The money also grows over time, usually more than it would in a savings account. It goes into an account at whatever firm your employer has chosen, such as Fidelity or Lincoln Financial, and it is invested in a variety of different investments, like stocks, bonds, and mutual funds. The stock market has historically made more money than inflation alone, so the idea is that your money will grow over time by being invested in these accounts. They also grow due to the idea of compound interest. The way compound interest works is basically that each month the money you put in earns interest, and then the following month the money and the interest it earned both earn interest, and this process continues, multiplying your money over time. In the case of investing, compounding interest is a great way to gain money over time. It is also the reason large purchases bought with large loans end up costing way more than the original purchase. The money you borrow has interest added each month, which has interest the next month and so on. Compound interest is a double-edged sword, so using it in your investments is to your advantage.

One other advantage to workplace retirement accounts is that many companies offer what is called matching contributions. This means that for a certain percentage of your earnings that you invest, your company will put the same amount into that or another retirement account for you. For example, if a company offers a 4% matching contributions, that means if you put 4% of your income into a 401K, they will also put that same amount into an account for you to access at retirement. You can still contribute above that amount, but only the first 4% would be matched by your employer. It is free money, and a good rule of thumb is that if you are contributing to a workplace retirement account, you want to at least contribute enough to get the whole matching funds. If they offer 4% or 5% or whatever, you want to contribute at least that amount. This maximizes your free money.

There are limits to the amount of money that one can save in each type of retirement account, so be sure to look up and be aware of these limits. They change periodically, so you need to keep up to date.

Individual Retirement Accounts

For those earning money, but their employer doesn’t necessarily offer retirement accounts, there are also individual retirement accounts, or IRAs, including Traditional and Roth, that are opened in a brokerage by you. They are similar to 401K and 403b in that the money is put into an account and invested in a diverse portfolio designed to gain money over time. The difference is usually you have already paid the taxes on the amount you put in, so that money won’t be taxed again when you take it back out. You will pay taxes on whatever money is earned, however. You don’t need an employer as you can open these accounts on your own. There are multiple avenues to take to invest in these types of accounts, from automated low fee, to in person Financial Advisors in different companies. Always look at all your options and the fees versus the benefits before deciding which one might be right for you.

Other Ways to Invest

Beyond the traditional investments through employers and IRAs, there are almost endless other ways to invest money. They all come with their own set of risks and benefits. You could invest in real estate by buying rental properties, or just invest in a fund called an REIT or real estate investment trust that takes money from a bunch of investors like yourself and puts it into a bunch of different real estate transactions or even real estate stocks in order to hopefully gain interest and or dividends, which are bits of money each month from the overall earnings.

Step by Step Retirement Investing Guide with DiversyFund

You could use investment apps, like Stash or Acorn to put small amounts of your money into the stock market and watch how it performs. Starting your own business is investing in yourself. Doing a quick online search will show you a multitude of options. Do your research before choosing what suits you best. Most likely, you will want to invest your extra money somewhere, though, so you can take advantage of the compound interest that will grow your money over time.

The younger you are able to start, the better, since the longer the money is invested the longer it has to grow. Even small amounts invested regularly can grow to quite astonishing amounts over time. Starting when you are in your 20s vs yours 50s can literally mean hundreds of thousands of dollars difference.


Investing extra money can be a great way to really grow your cash over time. The younger you start, the more your money can potentially increase.

Compound interest can make your money into a snowball that gets bigger the longer it is invested. This works in reverse as well, as it can increase debts that are not paid down in a timely fashion.

Each investment avenue comes with its own set of risks and benefits. There may also be charges and fees. Always research any investment you are considering thoroughly before putting your money into anything. Seek the advice of a Financial Professional, such as a CPA or Financial Advisor if you aren’t sure.

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Introduction to Debt

Debt: A Four Letter Word

If you are like me, you probably cringe when you hear the word debt. It feels heavy. It is a burden. Many of us are buried under it. With skyrocketing costs and compounding interest, it can feel like it always grows and we can never get out of it.

I once had almost $90,000 in student loans, and when added together with my spouse’s loans it was closer to $140,000. The payments were astronomical. Then we bought a car, and a house. The amount of debt was in upwards of 3.5xs our annual income combined. The payments took more than 2/3 of our monthly earnings.

We felt like we would never get anywhere. It seemed hopeless. Our payments barely covered the interest most months.

It is Possible to Get Out of Debt

This is what set me on my mission to find a way out. Pursuing the American Dream had us drowning. I needed to find a life raft. It took me countless hours of research, and a lot of trial and error, to find a way that worked for us. I did find it, though. I set us on a path toward financial breathing space using determination, perseverance, a bit of sacrifice, and different methods I had learned. The result is that we no longer have student loan debt, and our car and home could be paid off within the next 2 years, if all goes as planned.

That lead me here. To this desire to help others who have found themselves in a similar scenario. I want to share with you what I have learned, so you don’t have to suffer as much. I want you to know it is possible, and you can do it, if you want to. That is what this website is all about. I hope it helps you. I envision it building a community of people with different ideas that we can all share to help one another.

You don’t have to pay off all your debt to get into a place where it won’t overwhelm you. It is up to you. Use this website as a place to learn and pick and choose what works for you.

To Financial Space and Joy in Life,



Introduction to Credit

What is Credit?

Credit is a measure of how trustworthy you are with your money. It shows a record over time of how well you meet your financial obligations. This is reflected in a credit score. The better your credit score, the more likely a company will see you as an acceptable risk to take, and will lend you money. A company, say a loan company or a credit card company, extends you the privilege of using money you do not have. In exchange, they charge you extra each month in the form of interest. Then, you make payments that are designed to pay off the interest, then the original loan amount, over a set period of time.

Interest and the 0% Interest Trap

Credit isn’t free, unless there is a 0% interest rate. In fact, any time you use credit with interest above 0%, you will ultimately pay much more for whatever it is that you are buying. Even if the interest rate is 0%, beware of fine print. Often these are introductory offers that come with stipulations. Many times, the stipulations include having to pay in a specific amount of time, and if that doesn’t happen, then a lump interest sum is added to the amount you owe from that point on. So, say you had a 0% interest loan on a $1,000 mattress. The fine print shows that you have 6 months to pay for that 0% interest, but if your payments extend longer, the rate reverts to 22%. They would add $220 to your balance at 6 months, and from then on, whatever your balance was at the end of the month would also have 22% added to it. It would be extremely easy to get behind if you could not afford to pay the extra each month, or were unable to pay in the allotted 6 month initial period.

Credit cards work similarly, and are an easy way to get yourself in over your head. Many come with the introductory low interest rate. Wracking up a huge balance for that rate, though, is a dangerous game. You will have to pay it off in the specified period of time, or the debt snowballs as it did in the mattress example. After the introductory period, any remaining balance is usually subject to a pretty hefty interest rate, that compounds, or gets charged based on the amount you owe, plus any interest owed, each month. The minimum payment that the credit card company requires will never cover all of the interest and the amount you owe. They are in it to make money. In fact, paying the minimum could make your total debt grow. If at all possible, never carry a balance from one month to the next. If you pay a credit card off every month, you will not be charged interest, and your credit rating will improve over time.

What is Credit Utilization?

Credit utilization can be a term that refers to how much of your credit limit you are actually using, or utilizing. In other words, your current balance relative to the amount you could charge. A credit scoring company, such as FICO, looks negatively on someone who utilizes a high proportion of their credit line and keeps a balance. Credit utilization could also define how you are using your credit to increase your credit score. Utilizing credit in a way that it helps you and does not hurt you could be termed credit utilization. Using credit to pay other long term debts off, such as student loans and mortgage payments increases your credit score. It is improved by having accounts of different types, and paying each as agreed. Be careful that your total debt, both overall (excluding mortgage generally) and monthly does not exceed 1/3 of your income. This is called the debt to income ratio, and plays a large factor in your score. The lower your debt in relation to your income the better. There is a balancing act in how many accounts in good standing is too many or not enough. You want a mix of account types, but be sure your balances on rolling credit, such as credit cards, remains very low. Ideally, 0 each month. On regular loans, paying on time every month and a little extra each payment will add to your credit score.

A Warning from My Own Story

Credit allows you to buy things that you could otherwise not afford to pay for all at once. It should be seen as a tool and a privilege. Good credit can help you to get things such as nice cars and a nice home. Bad credit can affect nearly every aspect of your life. A person with bad credit can lose job opportunities, or be denied housing. In my life, I have been in a predicament where I did not have good credit, because I had let my student loan payments lapse. My partner at the time also had a rental eviction on her record. We could not find a single person to rent to us, and we ended up homeless briefly until a friend took us in. I never want that to happen to you, so please heed my advise. Protect your credit!

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Easy Ways to Build Credit


What is Credit?

Credit, and the credit score that goes with it, is a measure of how well you meet your financial obligations. You gain credit by having things like loans and credit cards (which really are a type of loan with a rolling or changing balance), and paying those off as agreed. The longer you have an account that remains in good standing, the better your credit will become over time. Factors that go into your score look at your overall financial health, including your total debt amount related to how much money you make and how much debt you have access to (your credit limit). The amount of time you have had credit and used it wisely, as well as the different types of accounts that you maintain also affect your score. There are some easy ways to build credit, but overall it takes time and careful money management.

Ways to Build Credit With No Credit History

When you are first starting out, it can feel like a catch 22. No one wants to give you credit, because you don’t yet have any. There are some ways around this. One of these is to get a loan, be it for a car or a small personal loan for something else, with someone else that already has established credit as your co-signer. This means that if you were to not make the payments, that person would then be responsible. Usually, it is a parent that will do this for you. Then, make sure to make the payments each and every time, on time. Your credit will slowly improve.

If that is not an option, there are things called secured credit cards which may be available to you. These work by having you actually send the credit card company a certain amount of money which they hold and they issue a credit card with a limit of that same amount, or sometimes slightly higher. Essentially, they have no risk, and you then have a credit card that you can use to make purchases and pay them off, thus building your credit.

Pitfalls of Credit Cards

Beware when opening and using credit cards, as it can be quite easy to lose track of how high their balances get. The interest rate will also probably be extremely high for those just starting out, so if you get behind in your payments or do not pay your balance off each month, your bill could end up getting bigger every month instead of smaller. Many people ruin their credit and get in dire financial straits using credit cards. It is always a good idea to keep close track of your credit card balance, and pay it off every month. If you find you cannot pay it off every month, at least pay more than the minimum payment so the interest doesn’t make your balance skyrocket, and then pay it off as soon as possible.

The thing to remember about credit is that it takes a long time to build it, and a second to ruin it. If, for instance, you did like I did and paid my student loans as agreed for a number of years and then ran into some difficulties and didn’t pay for a little, your credit would go straight down the tubes. The longer the debt isn’t paid, the lower your score goes. If a debt is actually so far behind that it gets sent to a collection agency or goes into default, it will take years and money for your credit to recover.

I will say it again-you want to avoid late payments and missed payments on any of your financial obligations if at all possible. A good idea is if you are having any kind of difficulty paying, you should immediately call the company that has your debt and ask them about what options they have to help. Often, they will offer a temporary waiver or forbearance. They might even cancel some of the debt or drop the interest rate for you. This goes for many types of debt, from credit card companies, to loan companies, and even the Internal Revenue Service for taxes. Communication can go a long way in saving your credit!


It is important to build credit, and to use credit wisely. It can be a double edged sword to have a loan or a credit card, because both charge interest on your purchases. This means you end up paying more for whatever you buy. Credit cards may have a period before interest starts accruing, usually 30 days, but loans usually do not. If you want to minimize the amount of interest you pay, you must pay extra on each payment for loans, and pay off your credit card balance every month.

Remember-it takes a long time to build credit, but only moments to ruin it. Think carefully and use it wisely.

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Personal Budget Tips

Budget isn’t a Bad Word

Does the word budget make you cringe? Maybe it brings up feelings of constraint, or even memories of past failures. Have you tried to set up a personal budget but then found you couldn’t stick to it? We have all been there. Maybe your past attempts at making a budget were actually just too strict. A workable budget shouldn’t feel like a shackle. It should feel like an accomplishment and a daily, reachable goal. Learning how to create a budget and make a financial plan should make you feel empowered and will help you reach your financial goals.

Start Small

When I was first learning how to budget my money, I started small. I knew how much I made each month, so I took the money I had and divided it up into envelopes. The first one was Rent. Then Groceries. Phone. Gas. Insurance. Household Items. It wasn’t a perfect system. I often had to move money from one envelope to the next. Really, though, isn’t that what budgeting boils down to? It is making a plan that shows you what money you have and where it is going. It is dynamic. You can change the categories and the amounts that go into each one to make it as comfortable as it can be, and according to your goals. Even in this simple manner, it taught me a lot about where my money went.

My next step was to keep a piece of paper in my wallet that kept a running checking account balance. It started at the beginning of the month, and subtracted and added in order all my bills and income, so I would have an idea of what my account should look like if I was on track. It also made sure I didn’t miss a bill. I actually still use this method because I find it is such a reassurance to be able to glance at a piece of paper and see that I am where I want to be each month. My categories have expanded to include savings for emergency and vacation and entertainment, as well as a lot more bills since I own a house now instead of renting an apartment that had all utilities included. I don’t have to use the envelope method anymore because I have a steady income and the amounts that come out of my checking account are pretty consistent.

Using Credit Cards Responsibly

Once I was able to have a credit card, I began to use it to help me budget. I paid all my recurring monthly bills directly out of my checking account, using the methods I above. The rest of my spending when on a credit card that I paid off at the end of each month. I still use this method today. I like this method because it means that I don’t have to carry cash or worry about not having enough at the grocery store, and it also automatically categorizes my spending. I can just go to my credit card company website and it will show me how each transaction was categorized and show me overall spending categories. This feeds right into my next topic, budgeting software.

One word of caution before the software topic though, and that is that credit cards should only be used if you are able to pay them off every month, or for emergency purchases that you could not afford otherwise. They can help your credit if they are used wisely, but can be a black hole of debt if they are not paid off each month, as interest will accrue and your balance with skyrocket. Check out my pages on credit and debt to read more about this.

Budgeting Software

An invaluable tool for me once I could afford a computer and internet was budgeting software. There are a number of different ones out there, many of which are free. I personally love Quicken, Personal Capital and Mint. They take a little while to set up, maybe a couple hours depending on how many accounts you have, but they are an invaluable way to keep track of your money. The great thing is that you can see a snapshot of each account, the transactions that have come into and gone out of each one and their current balances. This includes your checking, savings, investment accounts if you have them, and credit cards. At any given moment you can look and see if you are spending more than you are making. It is also a great way to make sure no one has gotten a hold of your account information and is making unauthorized purchases, because you can see them all. I have caught many a fraudulent charge this way, and was able to call my credit card companies and get the charges written off and a new card sent to me.

One of my favorite features of Mint, other than it being a free app, is that there is a place in it where you can set up a goal. Say you want to save for a vacation, or pay off a debt. You can set up a goal in Mint, and each time you move money into an account set up for that purpose (a savings account usually), it will log it and keep a running total showing you how much progress you have made. There is also a lot of information on about financially related topics. It has an area that shows you ways to save. You can see trends in your spending, like what categories you tend to spend the most in. There is a budget tab that allows for you to see if you are meeting your budget goals or adjust specific category amounts. You can even see your current credit score.

Quicken is a full service finance software. It isn’t free, but it is quite comprehensive. It has all the features of Mint, and more. It allows you to customize many of it’s features, including things like spending goals. It provides bill reminders and can forecast your account balances based on upcoming bills. It is also linked to TurboTax, so if you are using the two together, taxes become quite simple.  Quicken has different subscription options, including ones for small business and investing. I used Quicken to help me manage my money when I wanted to pay off my student loans, and I met my goal. I don’t think I could have done it without it.

Personal Capital is another free app that works similarly to Mint. It shows a snapshot of all your accounts, with the added ability to connect you directly with one of their financial advisors, if you so desire. I find that it synchronizes easier than Mint at times, as Mint seems to not always update each account when I sign in. It does not have a goal set-up feature, but is a nice, simple app for tracking your spending and cash flow.

Tips about Budgeting

One thing that I feel is important is a simple tip: Always budget based on less than what you actually make. Don’t try to budget every penny you make. This would set you up for failure. Some months you may not make as much money, or you may have an unexpected expense. If you had budgeted every bit of money you brought in, you would instantly be in a budget shortfall. That can lead to feelings of inadequacy or failure, even despair. Rather, by budgeting always for less than your actual expected income you give yourself a little buffer. Then, you are setting yourself up for success, because most likely you will find that you still have a little extra money at the end of the month, or at least didn’t fall short. Even if you end up spending every penny because you just don’t make much money in relation to your bills, budgeting this way sets the stage for savings later as your income increases.

On a similar note, it is a great idea to overestimate your spending as well. If a bill is not exactly the same every month, then try to put aside more than you think it will really cost for that category each month. If you find at the end of the month that you consistently have left over money you can adjust how much you put aside, or put it into savings. It is a lot better to expect a big bill and end up with a small one than the other way around. If your bills don’t equal your income, remember to account for Fun Money. It is important to feel like you have some money that is just for your own enjoyment. Once in a while it is ok to give yourself a little reward. Just be sure it doesn’t happen so often that it gets you off track.


Budgeting doesn’t have to be scary, or feel too restrictive. It should be a way for you to learn about yourself and your money habits. It is a tool to help you reach your financial goals. It is dynamic and changes as your needs change. A good budget is a way to invest in yourself, and it is an accomplishment in itself.

Set yourself up for success by setting your budget based on less money than you actually make, and higher bills than you actually pay. Save whatever is left after a little reward for yourself and you will meet your goals.

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Just Starting Out: All About Checking and Savings Accounts

Savings Accounts Are Not All the Same

One of the first steps I took on my financial journey, just after getting my first job, was to open a savings account. At the time, a person had to be 18 to have a checking account, and I was only 16. My savings account was really just a place to put my money that made me feel slightly more grown up than putting it in a piggy bank or under my mattress. It did come with an ATM card, though, so I felt very grown-up every time I opened my wallet and saw it there. I was allowed to take out money up to 6 times per month, which was plenty, considering I was only making $3.75 per hour and the ATMs made you take out $20 at a time.

Had I known anything at all about money, I would have shopped around for a high-interest rate savings account at least. The one I had earned something along the lines of 0.01% interest, which is pennies. These days, a high interest savings account, such as the one at earns about 1% interest. Not much, but still much better than a regular savings. It is always a good idea to shop around for the best rates, but when doing so make sure to watch out for any fees or introductory offers that expire after a short period.

Speaking of fees: Beware of Bouncing Money that Multiplies and Destroys

Once I was old enough to open a checking account, I immediately did so. I wanted to be able to write checks and have an actual debit card. The difference between a debit card and just an ATM card linked to my old savings account was huge. It meant that I could make a purchase with just a swipe and a signature (if it had the Visa or MasterCard logo on it), or just a pin code. The money immediately came out of my account. It was like magic!

The problem was, even though the money came out immediately every time I made a purchase, and I diligently kept track of every one like I was supposed to do and subtracted it from my balance, I didn’t account for little hidden fees. So, one day, I made an ATM withdrawal and took out the last $20 in my account. I had something like 20cents remaining. There was no minimum balance requirement (another thing to know before opening an account). I thought I was fine. Turns out, that ATM had a $0.50 fee for every transaction. When that fee was charged, my account became overdrawn, meaning I had accidentally taken out more than I had in the account. To make matters worse, there were a couple checks I had written that I didn’t think people would cash right away that went through before I had time to get to the bank to deposit more money. What followed was a snowballing disaster! The bank charged me $25 for each transaction that didn’t have the funds covered in the account, including the initial $0.50 cent ATM fee. I ended up being charged $75 in fees, plus the amount of the outstanding checks. I was in deep!

Luckily, I had the money within a few days, so I went to the bank to pay my debt, embarrassed and humiliated. I thought that would be the end of it, with a lesson learned to watch for fees. The bank, however, informed me that I had to pay the money, but they were also closing the account and had reported me to Check Systems. Check Systems was the entity that people saw on your credit report when you overdrew accounts, and it made a person into a very bad credit risk. The worst part was it lasted for 7 years. During that time, it was next to impossible to open another checking account, as most banks would see that on my credit and deny a new account. It was only several years later that an all online bank finally took a chance on me and let me open an account. I had to send them money through the mail. Scary! And I had to wait days for it to show up in the account. I knew I had to do it, though, in order to rebuild my checking account reliability and my credit.

Points to Remember

When it comes to savings accounts, shop around for one that will pay you the most interest on your money. That is free money, and it is always a good thing.

Always find out about any fees associated with an account or even with a transaction before you open accounts or perform a transaction. A little mistake with a checking account can hurt you for many years.

If there is a service called Overdraft Protection offered for your checking account, it is worth it to have it. This may have saved me a lot of money and years of strife. It is basically a little insurance plan saying they won’t immediately charge you and/or close your account if you take out more than you have, as long as you pay it back in a specified time frame.

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Good Debt, Bad Debt

Good Debt vs Bad Debt

You may be surprised to find that not all debt is the same. Whether debt is a good or bad thing can depend on the circumstances surrounding it. The type of debt also affects your credit score in different ways.

Basically, good debt is something that gives you access to an asset that should become more valuable over time. A mortgage is the prime example. Although it is usually a person’s largest chunk of debt, it falls into the good debt category because it gives that person control over a very large asset-their home. A home’s value usually rises over time, and could eventually make that person more money than their original mortgage loan. This is also one of the reasons that people like to invest in real estate. The difference between what a person pays for a house and what they rent it out for each month or what they eventually sell it for can be significant over time. Many people have made their fortunes in real estate by taking advantage of this. Of course, it isn’t a sure bet. Nothing really ever is when it comes to investing. Anyone who paid attention during the 2008-2009 mortgage crash knows this. If you buy a house that is over priced or values in the area drop significantly and it becomes worth less than you owe, you can become “upside down” in your mortgage. That debt would then become negative, at least until the market changed again. Luckily, it usually does if you wait long enough.

Examples of bad debt are debts that show a pattern of spending more than you make, or buying things that do not grow in value. Car payment debt is bad debt. A new car loses significant value immediately after being bought, and used cars continue to lose value over time in most cases. While it may be a necessary debt given the cost of cars these days, it is not considered a positive debt. Paying it off as quickly as possible should be a priority.

Credit card debt that is not paid off every month is also bad debt. If you don’t pay credit cards off every month, they accrue interest. That interest accrues more interest the next month and so on, until people can get quite overwhelmed with credit card debt. Many people fall victim to the ease of credit card use and do not pay attention to the balance as it rises each month. It is very easy to lose track of spending and find yourself in a situation where it is extremely difficult to pay off your balance. Always pay close attention to your credit card balance, and do your best to pay it off every month.

Mixed Good and Bad Type Debt

If credit cards are paid off every month, they can be considered positive debt, as this shows a pattern of strong financial management. This helps build your credit if you have a high limit and very low or no balance at the end of each month. This is called rolling credit. A couple accounts of rolling credit in good standing are major players in building a person’s credit score.

Student loans are an example of a mixed type of debt. While you are paying on them, if you do so every month and pay as agreed, they help to build your credit. However, their often substantial size counts against you, as it affects your debt to income ratio, which is important for your credit score.

If you default on your student loans, it will have a massive impact on your credit score. Take great pains to make sure this never happens. Always contact your loan holder if you anticipate having difficulty paying your payments on time. They may have options to help decrease or defer payments. Once your student loans are paid off, however, they help your credit because they show that you have met a significant financial obligation over a long period, assuming you did not have any late payments or defaults. Consolidating student loans can often help people lower their payments and simplify how they pay their loans, thus enabling them to benefit eventually from paying the loans off. If your payments are high each month due to several loans or you are having trouble keeping track of them all, consolidation may be a good option for you. It may even have a lower interest rate, which can save you a significant amount of money over time.

Debt To Income Ratio

Someone who owes a ton of money each month or overall, but does not make a lot of money has a high debt to income ratio. Banks and credit bureaus do not like this at all. It looks like you can barely make your payments on paper. Banks and other credit companies will be less likely to offer you loans, and more likely to give you steeper interest rates if they do offer you credit. You want to do whatever you can to not take out loans that you do not need, including credit card debt (which is a rolling loan). Paying on time and keeping loan balances low helps your credit.

Take Aways

Some types of debt are worse than others when it comes to their effect on your credit score. A mortgage, while a large debt, will not be looked at as negatively as a credit card balance. Student loans with high monthly payments hurt your debt to income ratio, but paying them off helps your credit score in the end. Car payments are always bad debt and should be paid off as quickly as one can manage.

Always pay your debts on time, every time. If you are having a hardship, contact the company, as they almost all have programs to help under these circumstances. Contacting them before you miss a payment can save your credit. Not doing so can hurt you for years to come.

What Does Being Wealthy Mean to You?

I have been thinking about what it means to be wealthy. Once upon a time, people in America may have considered themselves wealthy if they could afford a home, a car, an education for themselves and their children and their basic day to day needs. Has that changed today? It seems that we continually compare ourselves to others when we think of wealth, or even financial well being. We are bombarded with the lifestyles of people who have money in the millions and seemingly not a care in the world.

What does being wealthy mean to you? Does it mean you have enough money to meet your needs, with a little left over for fun? Does it mean you have to have so much money that you can buy whatever you want, whenever you want, without thinking about it? Does it mean not having to work now or in the future?

Is wealth only defined by the amount of money you have? Could it also include a broader definition, such as wealthy in the way of health, love, and happiness? Could you be financially poor, but emotionally wealthy at the same time?

Even though this is a finance website, I can’t help thinking about the relationship between money and happiness. When we ask ourselves what we truly want in life, the answer is usually to be happy. What we believe will enable us to be happy is much more complicated, as it is unique to each individual. We all want to meet our basic needs, such as having a home, our health, food, and love. However, meeting the basic needs doesn’t always make us happy. In fact, not having our basic needs cannot even prevent some people from being happy anyway. There are extremely poor people who would say they are happy, and very rich ones who would say they are not. To be wealthy, then, in life is not just about money. Money is just a part of it.

When we begin to examine our financial plan, the first thing we need to decide is what is our ultimate goal? Are we hoping to make enough each month to meet our bills and save for retirement, or do we want our money to grow so we can quit work and perhaps leave a legacy? Those are very different paths, and require different approaches. The first requires a steady job and retirement plan and perhaps a monthly budget. The second requires early investing, multiple income streams, perhaps owning ones own business and a lot of planning and calculated risk taking. It is important to know what you want, so you can make an appropriate plan to achieve it. It is very difficult to hit a target you cannot see.

I believe it is important to define personally what being wealthy means to you. Make money a part of it, but remember that it isn’t everything. It is true that money cannot buy happiness, but it does make some things in life a lot easier. Aim for a happy life, and make money a tool to help you get there.

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Lifestyle Inflation


I have been spending a lot of time, lately, thinking about the brain’s tendency to never be satisfied. I actually read a scientific article all about how the brain is actually made that way. It is the underlying reason that humans strive to be, do and have More, even when it could be argumented that they have Enough, or even More Than Enough.

In America, we call this striving for the American Dream.  Think about 50 or 60 years ago. What did that mean? What did someone have to attain to have achieved it? A home of their own. A decent job for at least one spouse that could make ends meet. Maybe a car. A kid or two.


Now what does it mean? Maybe the same for some. I would say, though, for most of us, it is much more than that now. It isn’t just having a home, but the best home. A fancy car with all the bells and whistles. Each and every new gadget. New clothes. Electronics. The list goes on. Don’t forget retirement with enough money to travel. Savings accounts. Cell Phones.

With built in obsoletism in electronics, and inevitable cheap construction on almost everything else, chances are we don’t just get anything once, either. Then there is inflation. Everything costs so much money. Supposedly, wages keep up to match those inflated prices, but I remain sceptical about that. My dad bought the house we grew up in for less than $60,000, 30 years ago. At the time, he made about $100,000 a year as a machinest, working a lot of overtime. I make less than that now as a nurse with over a decade of experience, and my house was $169,000 8 years ago. If I were to buy it right now, it would be about $350,000. I could not afford the payments on that. My own house. Ironic. If I sold it, and used all the extra money toward another house, most likely I would end up with a house just like it and a mortgage higher than I have now.

Thinking about this helps me resist the urge to give in to what is now termed “lifestyle inflation.” That is when you keep increasing your lifestyle to meet the amount of money you make. In other words, we spend what we make. Constantly upgrading, or rebuying, as the case may be.

I know many people who have now bought their 3rd or 4th home. They sold each one, and moved in to the next, more expensive, fancier one. Subsequently, their mortgages have not ever gone down. Some even pay more now. While in some cases they also make more money, it doesn’t seem to even out.  In fact, many pay a very large proportion of their income directly to their house, without even making extra payments. The same goes for cell phones and countless other gadgets. I could pay more for the newest, fanciest version every year or two. I could spend all my money on Stuff. I choose not to.

Do I ever look around at all the big, beautiful houses and wish I could have the same? Sure. Truth is, I probably could. If I want to spend all my money for it. To me, though, it seems like a lot to pay, when what I have now serves the function just fine. A new house wouldn’t make me sleep better, or cook more delicious food. A new phone won’t change how I connect with people any better than the one I use now. It wouldn’t change my worldview or give me new experiences. I would rather spend my extra money on life experience. Travel. Time with friends or family. Experiencing new things.

How does one resist Lifestyle Inflation?

I make it a rule to make myself wait for new purchases, especially large ones. The bigger it is, the longer I wait, usually. I often find that if I wait a bit, the desire wanes, or I come up with reasons that I don’t really need it.

I always ask myself if this is a Need or a Want. Will it truly make my life better? Is it worth giving something else up to have it? Could that money be better used to enrich my life in some other way? Will I still have whatever it is in a year, 5 years, a decade? I tend to think things are worth more if I see myself wanting or having it longer.

I also ask myself Why I want it. Is it because everyone else has it? Is it really stupendous and unique. Will it make my life easier or happier for any extended amount of time?

Last, I consider where the money for it will come from. Do I have leftover money at the end of the month, when all the bills are paid? Did I already put some money into savings or investments? Will it have to come out of Savings that I may want to use for something truly wonderful, or even for emergencies?

Take Aways

It is a natural part of the Human condition to always want the newest, shiniest toys. We are programmed to always want more. That goes for stuff and even internally. We are rarely satisfied for long. And, that is ok. It is also what drives the human race to devise new and fantastic technology, and improve our lives. It is important to know this about ourselves, so we can consciously redirect how that internal drive manifests itself in our lives. Instead of accumulating unnecessary things, try to steer that drive toward experiences or self-improvement. Things are temporary. They are not who you are. Choose them wisely, and always leave yourself a little Financial Space at the end of the month if you can. You will find that you have a lot less stress about money if you see some of it going into savings, to be used to truly enrich your life or cover for life’s unexpected events.

For helpful products and services, visit my Resources page.