Author: Sara Rathner

A Scarcity Mindset Can Cost You Mentally and Financially

Posted on by Sara Rathner

We all saw it at grocery stores in 2020. The shelves, once brimming with toilet paper and hand soap, were bare. We hid in our homes, deep-cleaning every surface, occasionally braving the threat of COVID-19 to hunt down the last remaining bottle of hand sanitizer in a 50-mile radius. We felt out of control, so we controlled what we could: the contents of our kitchens and bathroom cabinets.

Today, this fear of scarcity plays out differently, due to rising prices, a volatile stock market and whispers of a looming recession. We’ve simply rolled one set of worries into another, continuing to assume all our resources are scarce, whether that’s true for us or not.

If the current situation has you avoiding any long-term planning or fearing spending any money, even on things you need, you’re experiencing a scarcity mindset. This basically means you view your resources — like money, food and employment opportunities — as limited. And when you’re concerned about access to these things, it’s natural to want to grab onto whatever you can.

At times, this impulse is useful. “It helped humans survive back in the day when we faced existential threats from nature,” says Courtney Cardin, co-founder of Aura Finance, a financial wellness and investment platform that’s currently in the private testing phase. “Everyone who’s here had an ancestor who benefited from a scarcity mindset.”

But when a scarcity mindset isn’t rooted in a real need to avoid hungry lions or preserve a season’s worth of food without refrigeration, it can work against you, persuading you to make financial choices that aren’t actually in your best interest.

The emotional and financial effects of a scarcity mindset

Factors beyond your control, like inflation or supply chain shortages, can limit your access to the things you need and make it harder to achieve your financial goals.

“You can imagine it’s not a very pleasant place to be, to be kind of on guard, thinking that you’ve got to keep everything that you have, that you’re going to lose it in some way,” says Susan Greenhalgh, an accredited financial counselor and founder of Mind Your Money LLC in Providence, Rhode Island. “That’s kind of a vigilant standpoint, and that’s a very difficult standpoint to enjoy life from.”

The ongoing stress can cause you to hold onto cash in a savings account because you’re afraid to invest, potentially limiting your ability to grow your net worth over time. Or you could take the opposite approach, spending money like there’s no tomorrow because you worry items you need will disappear from stores. When you’re anxious about the short term, it’s hard to plan a few years — or even months — ahead.

You may even make ineffective or risky moves to try to lock in some wins. “Every product you see out there is a potential solution for you,” says George Blount, founder of nBalance Financial, a financial therapy and wellness practice in Boston. “The lottery’s going to look a lot better. Cryptocurrency is going to look a lot better.” But cryptocurrency may or may not be a good fit for your overall financial picture, and only one lucky person won that billion-dollar payout. Unless you’re reading this from a lounge chair on your new superyacht, it probably wasn’t you.

How to put your fear to work

Though anxiety feels awful, it can be a productive emotion that spurs you into action. Reading through some recent bank and credit card statements, for example, can give you a better sense of where your money goes each month and where you might be able to cut back on spending.

Setting up automatic money transfers into an emergency savings account can help you feel more confident that you’ll be able to handle an unexpected expense. Or perhaps you update your resume because you’re worried about layoffs at your company. Whether or not that ends up happening, you’ll be prepared to job hunt at a moment’s notice.

What’s not productive is obsessively tracking stock prices, falling for get-rich-quick schemes or constantly monitoring the news. There’s a lot of yelling, often by people who don’t totally understand what’s going on but have opinions about it anyway. Give yourself the time and space to determine what you truly need and value, so you can set appropriate money goals and make a plan if things don’t go the way you hope they will.

“We’ve got to stop and get quiet and figure those things out,” Greenhalgh says. “Once we do that, when we have our mind to our money connection, we can dampen the noise out there a little bit.”

Sara Rathner writes for NerdWallet.

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How Debt-Related Stress Affects Body and Mind

Posted on by Sara Rathner

Being in debt feels like you’re always a step behind. It doesn’t help that debt is spoken about as something that’s your fault — too much online shopping, or too many pricey pitchers of mimosas at brunch.

“In our culture, in our country, we have a lot of noise about debt,” says Lindsay Bryan-Podvin, an Ann Arbor, Michigan-based financial therapist and author of “The Financial Anxiety Solution.” “We make it mean a lot about who we are, our character, our willpower.”

In reality, debt isn’t always the result of things you can control. For example, 58% of debts in collections as of 2021 were medical debts, according to the Consumer Financial Protection Bureau.

Regardless of the reason you’re in debt, it hangs over everything, affecting how you feel physically and mentally, and how you interact with others. Here are stories of people who’ve tackled debt and managed the stress that comes with it.

‘I can’t sleep, thinking about it’

Debt-related stress can be the source of several physical concerns, like elevated heart rate and blood pressure, insomnia and digestive issues. Over time, it can worsen. “The research shows that long-term stress can lead to depression,” says Thomas Faupl, a licensed marriage and family therapist in San Francisco.

Claudia McMullin’s business, Hugo Coffee Roasters, suffered financially as a result of the pandemic. “COVID hit and I lost all my businesses overnight,” she says, referring to her coffee shop and roasting company, both based in Park City, Utah. “I did not have a cushion to survive. I had to immediately raise funds as fast as possible.”

McMullin got some help from Small Business Administration loans, like the Paycheck Protection Program, that became available at the onset of the pandemic. In a moment of desperation, she applied for a loan from a financial technology company. The company offered loans that were easy to qualify for, but it charged a high interest rate. McMullin estimates she owes around $18,000 a month on her debts.

“I’ll get in the car and go to the office, and my stomach will clench,” she says. “I can’t sleep, thinking about it.”

McMullin is taking drastic action to pay down her debts as soon as possible. She decided to cash out her IRA, a move that can result in taxes and penalties. Still, her decision left her feeling liberated, so she’s at peace with any resulting financial consequences.

“I haven’t had as many stomach aches this week now that I’ve made that decision,” she says.

‘I knew that this is something I was going to fight for’

Junaid Ahmed and his wife experienced a roller coaster of emotions when they learned that not carefully reading their mail cost them thousands. Her student loan provider put her on an interest-only payment plan several years ago, which the couple didn’t initially notice when they reviewed loan statements.

“Admitting that I didn’t look at the mail isn’t something to be proud of, but a lot of people are in the same situation,” says Ahmed. While his wife felt embarrassed, he got mad. “I knew that this is something I was going to fight for,” he says.

Ahmed is running for Congress to represent his Chicago-area district. He advocates for canceling student debt.

‘We both were finally crumbling under the weight’

Debt can get in the way of maintaining relationships. For Kristin Stones, debt was a dark cloud that hung over her marriage from the outset. “My husband and I got engaged like five seconds after we started dating and neither of us had anything to our names,” says Stones, the founder of Cents + Purpose, described as “an online community dedicated to sharing practical personal finance content.”

They struggled to afford their bills, using credit cards to bridge the gap before paychecks came in. After having kids, they worked opposite shifts so one parent was always home. “We had a moment. Things were really, really bad. I think we both were finally crumbling under the weight,” she says. Her husband broached the subject of divorce. “That was the first time in 15 years that either of us had said that word.”

They enrolled in Financial Peace University, a course developed by personal finance personality Dave Ramsey, putting the enrollment cost on a credit card because they couldn’t afford it. Over time, they paid off all debts except for their mortgage.

Ways to reduce debt-related stress

  • Find your people: Talk to friends and family, a nonprofit credit counselor, or even strangers on social media and online forums. Accountability partners can be a source of support. For Stones and her husband, enrolling in a financial course gave them the tools they needed to tackle debt. “Finding a community of other people helps to normalize and validate that you are not a bad person,” Bryan-Podvin says.
  • Know the numbers: Listing your debts and monthly bills can bring up a lot of bad feelings. But it can also help you spot opportunities, like expenses you can trim or debts you can negotiate (which is sometimes the case with medical debt). For Ahmed, it even spurred him to run for office.
  • Focus on self-care: An expensive yoga studio membership may not be in the cards, but there are free ways to indulge in self-care, like meeting a friend for a walk or trying meditation apps. If debt-related stress is making you physically ill, make time for your health.

This article was written by NerdWallet and was originally published by The Associated Press.

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article How Debt-Related Stress Affects Body and Mind originally appeared on NerdWallet.

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Forget the Fed, Pay Off Your Credit Card Debt

Posted on by Sara Rathner

The cost of everything keeps creeping up. And if you happen to have credit card debt, that’s about to get a bit more expensive too, thanks to a series of interest rate increases beginning this month.

With inflation at its highest rate since the early 1980s, the Federal Reserve is adjusting interest rates to hopefully restabilize the U.S. economy. In short, the Fed changes the federal funds rate, which alters the prime rate — that’s the rate banks charge customers with high credit ratings. Credit card issuers add onto the prime rate to set their interest rates, so when the prime rate goes up, so does what you’ll pay when you’re in debt.

Got all that? Great. Now forget what you just read and pay attention to this part: If you have significant credit card debt, it doesn’t really matter what the Fed is doing. Your credit card debt has always been, and will continue to be, expensive.

The true cost of credit card debt over time

If you have a $5,000 balance remaining on your credit card from month to month, and your interest rate is 16%, you’ll spend $800 in interest over the course of a year. If your interest rate increases to 16.25%, that translates to only an extra $13 in interest over a year.

Technically, that means it’s not so much a rate hike as it is a gentle uphill slope. But $800 was already a lot, and that’s without accounting for the fact that you’ll still need to spend additional money you might not be able to pay back. The bills don’t stop just because you’re in debt.

This is why squeezing a stress ball while watching the news isn’t helpful in this case. What is helpful is facing money issues head-on.

“The hardest part is ripping off the Band-Aid and really just adding up the numbers to see how much you owe,” says Akeiva Ellis, a certified financial planner and founder of The Bemused, a financial literacy brand for young adults. “But if you’re able to make it to that point, it’s really all about making a plan. Don’t let your debt overwhelm you. The sooner you can face the numbers and devise a plan to pay it down, the easier you’ll breathe.”

How you can pay less interest

Shop around for better deals

The average U.S. FICO score increased to 716 by August 2021, and that increase was more prevalent for those with lower credit scores. (FICO scores of 690 or higher are considered good credit.) “It may happen that when you applied for the account that you have, your credit score was lower,” says Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling. He recommends checking your credit report and score to see whether you’ve moved into a higher score range. If that’s the case, you may be able to negotiate a better interest rate on your credit card.

Consolidate your debts

That higher credit score might also make you eligible for a balance transfer credit card with a no-interest promotional period, or a lower-interest personal loan. These can both give you a reprieve from high interest, but note that it depends on the terms you can qualify for. And in the case of balance transfer cards, the interest rate will go right back up once the 0% period ends.

Revisit your budget

The more money you can apply toward your monthly credit card payment, the sooner you can get out of debt. But that’s easier said than done in a time of higher prices. “The interest rate hike doesn’t live in a vacuum,” McClary says. “Other things continue to happen that increase financial pressures on every American.” If you don’t know where to begin, McClary recommends getting budgeting help from a financial counselor or a nonprofit credit counseling agency. “Anything people can do to be proactive, they’ll thank themselves for later.”

Use a debt repayment method

This can help you stay organized and motivated, especially if you have multiple debts at the same time. Ellis suggests the debt avalanche repayment method, where you list your debts in order from highest to lowest interest rate, make minimum payments on all of them and apply any extra money in your budget to the highest-interest debt first. Once you pay that off, focus on the next debt on the list, and so on. “For most people, credit card debt is their most expensive debt,” Ellis says. “So it is something that usually I’d encourage people to focus on first.”

This article was written by NerdWallet and was originally published by The Associated Press. 

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article Forget the Fed, Pay Off Your Credit Card Debt originally appeared on NerdWallet.

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Get Skills — Not Bills — at an Unpaid Internship

Posted on by Sara Rathner

Every summer, students flood offices as unpaid interns, soaking up knowledge and seeking positive references as they take lunch orders and organize storage closets. But this reliance on unpaid work leaves behind students who can’t afford to work for free. Between temporarily relocating to another city, buying and maintaining office-appropriate attire, and paying for everyday costs, it can cost thousands of dollars to add a few lines to your resume.

According to Carlos Mark Vera, co-founder and executive director of Pay Our Interns, a nonprofit fighting to end unpaid internships across the country in all sectors, unpaid internships disproportionately harm specific populations. Women work for no pay more often than men, and compared to white interns, Black and Latino interns take on debt more often during their internships. “It really does create this glass ceiling for people of color,” Vera says.

Vera, who is still paying off the credit card debt he amassed when interning at the White House seven years ago, was inspired to launch Pay Our Interns after a conversation with a younger college student who was skipping buying groceries to afford dry cleaning for his internship clothes. “I think this whole grind/hustle mentality is so ingrained, that you have to pay your dues,” Vera says. “It’s daring to imagine how things could be.”

Sadly, unpaid internships are still the norm. Perhaps the Great Resignation will inspire employers to pay interns for their labor, as they should. But until then, if an unpaid internship would help you gain experience, here are some ways to soften the financial burden and limit how much you put on your credit card to get by.

Know your rights

The U.S. Department of Labor has guidelines on what constitutes a legal unpaid internship — your work can’t displace that of a paid employee, for example. If you suspect your internship is in violation, you can file a complaint to the Department of Labor or your state labor agency. You may be entitled to back pay.

Seek scholarships and specialty programs

Many universities offer scholarships specifically for unpaid internships, depending on your school and major. You need to apply and funding isn’t guaranteed, but the effort can pay off.

You can also find paid opportunities through specialty programs created by nonprofits and professional organizations. For example, Black and Latino aspiring financial planners can apply through the BLX Internship Program to be placed in a paid internship at a fee-only financial planning firm. According to Luis F. Rosa, a certified financial planner and co-founder of the BLX Internship Program, they placed 38 applicants into internships last year, and of those, 20 got job offers.

Fund unpaid work with paid work

“I would combine an internship with other side gigs or part-time jobs,” says Mark Reyes, a certified financial planner at Albert, a financial wellness app. “Depending on the internship time commitment, you may be able to balance more than one job at once.” However, he cautions that this can quickly lead to burnout.

Vera felt the pressure as a student working part-time while interning 20 to 30 hours per week. “Sometimes I was fighting not to fall asleep while doing the internship,” he says.

School plus two jobs is a lot to handle. To ease the burden, you can work for pay during the school year and save that money to cover the cost of a summer internship. Or limit unpaid work to a part-time schedule so you can also have time for paid work.

Gain internship experience within paid jobs

If you need the earnings from your paid job to fund tuition, living expenses and other costs, it can be difficult to earmark some of that money toward supporting yourself during an unpaid internship. But your paid job might already provide the chance to learn beyond your actual role.

Rosa couldn’t afford unpaid internships as a student because he contributed financially to his family. He found he was able to create internships within some of his paid jobs, like when he did office work at a law firm and asked to also spend some time learning about the industry.

Embrace remote opportunities

The pandemic transformed many office jobs into fully remote positions, and that’s a benefit for interns who can’t afford to spend a summer in an expensive major city. With a remote internship, you’ll avoid paying for relocation, commuting costs and work clothes. Plus, having remote work experience on your resume will strengthen your candidacy for a virtual position in the future.

Use student loans instead of credit cards

You can use funds from your student loan for living expenses if you’re doing an unpaid internship for college credit. It’s still debt, but student loans charge lower interest rates than credit cards.

“People have misconceptions that all debt is bad, but student loans are there to add value to your life,” Reyes says. “It takes discipline and it’s not for everyone. It’s not free money, but it’s cheaper debt than credit cards.”

This article was written by NerdWallet and was originally published by The Associated Press.

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article Get Skills — Not Bills — at an Unpaid Internship originally appeared on NerdWallet.

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Cash Back, Miles or … Wine? Credit Card Rewards Are Evolving

Posted on by Sara Rathner

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

Rewards credit cards typically come in two basic flavors: cash back and travel — useful if you want to save money without couponing or spend less on that annual visit to the in-laws.

But a number of new credit cards are reimagining the role a rewards program could play in your life. These cards can help incentivize certain behaviors, or allow you to fund a hobby or investment account. They may offer rewards on spending that isn’t covered in the typical grocery-restaurant-travel triad, like rent payments or home fitness equipment. And while they might not be as rewarding as a premium card with a massive sign-up bonus, they offer a greater degree of personalization.

‘New ways of thinking’

The startups that create these cards are competing against major credit card issuers, which is no easy feat. While they lack the brand recognition and deep pockets of big banks, they have one thing in their favor: speed. Some financial startups rely on the services of other tech companies that provide the infrastructure (including selecting the bank partner and payment network, and establishing underwriting guidelines) for launching a new credit card. That makes it easier to turn an idea into reality.

“You’ll see that more of these interest-based cards come out because issuing a card is no longer as big of a lift,” says Ben Reid of M1 Finance, a personal finance startup with its own new credit card that targets investors.

How well this flood of new cards performs is another story. They all face a crowded credit card marketplace with lots of competition.

“The challenge that, frankly, we’ve experienced is it’s really hard to break through, and it depends on your demographic,” says Matthew Goldman, chief product officer at Apto Payments, a payments infrastructure company. Goldman’s startup created the Grand Reserve World Mastercard, a card designed for wine lovers. He found that people who are willing to spend hundreds on rare wines tend to have high incomes and credit scores, which would make them eligible for a wide array of premium cards.

No matter what, however, these kinds of cards will shake things up. “The thing that’s exciting about startups is most products won’t succeed,” Goldman says. “But they’re creating new ways of thinking about things.”

Credit cards that go beyond typical rewards

Here are some examples of credit cards with unconventional rewards programs:

Investing

Allocating rewards toward an investment account a few times per year can be a way to dollar-cost average without having to make room in your budget for your brokerage account. The Owner’s Rewards Card by M1, which launched in July 2021, earns extra cash back when you use the card to make purchases at select companies that you own shares of. Those shares must be held in an eligible M1 invest account, but your cash back can be automatically reinvested into your portfolio.

Cryptocurrency

Credit cards with crypto rewards are a hot trend, allowing you to obtain cryptocurrencies in small amounts through your normal spending. These cards can be appealing if you don’t have other uses in mind for your points and have been curious to learn what the fuss is all about.

Hobbies

The Paceline Credit Card earns extra cash back when you meet weekly fitness goals, and you can earn statement credits toward a new Apple Watch. With the Grand Reserve World Mastercard, currently closed to new applicants, you can earn more rewards on wine purchases and redeem them for wine, wine accessories and winery experiences.

Everyday expenses beyond the usual categories

We all eat and go places, so earning extra points on groceries, dining out and gas is helpful. However, a sizable portion of your monthly budget goes toward housing, especially if you live in a high-cost area, and previously, that expense would usually go unrewarded. But the Bilt Rewards Card earns points on rent payments, among other things, and you can redeem those points toward rent or even a future home purchase.

Are these kinds of cards for you?

If you want to use your credit card rewards to fund a highly specific purpose, you may enjoy using a card that feels like it’s custom-made for you. But, of course, you could also find value in a normal ol’ cash-back card with a generous sign-up bonus because you can allocate those cash-back rewards toward whatever you want.

It’s also worth noting that more established credit card issuers are beginning to offer cards with rewards programs that feel more customized. Some of these cards allow you to earn a higher rewards rate on your top spending category each month, and your earnings automatically shift with your expenses so you don’t have to track spending or activate anything.

They may not offer crypto as a rewards option, or credits toward fancy gadgets as a bonus, but you still get a bit of a personalized touch.

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article Cash Back, Miles or … Wine? Credit Card Rewards Are Evolving originally appeared on NerdWallet.

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Make Your Money More Exciting — By Keeping It Boring

Posted on by Sara Rathner

The idea of gaining wealth in flashy ways isn’t new. After all, Charles Ponzi, for whom Ponzi schemes were named, defrauded investors more than 100 years ago with a get-rich-quick scheme built on a foundation of lies. Today, speculative investments, multilevel marketing companies and other risky efforts to turn a profit still lay seductive traps.

You can always leave your money alone in an interest-bearing account and let time do its thing, but that doesn’t exactly make for exciting party conversations, does it? So we open and close accounts. We invest in hot stocks and sell them at the first sign of bad news. We mess with our money because, in our minds, growing wealth is supposed to take effort.

“In almost everything else we do, there’s a payoff to activity: If I want to be a good runner, I should run every day. If I want to be a good painter, I should constantly practice,” Morgan Housel, partner at The Collaborative Fund and author of “The Psychology of Money,” said in an email. “But if you want to be a good investor, the best thing by far for people to do is not trade, not tinker, just leave it alone — and I think that’s just so counterintuitive because it’s so unique to investing.”

In a world full of financial influencers peddling products and friends bragging about buying NFTs, it’s perfectly fine to manage your money in a mostly yawn-inducing way. Here’s why.

Being boring gives you more time to live your life

Dealing with your money is a necessary chore, and it’s not exactly fun. Thankfully, we live in efficient times. In a few minutes, you can set up automatic money transfers that quietly send your cash into separate accounts serving different purposes. Why keep money management on your to-do list when it can happen on its own quite literally while you sleep?

“Money is a means by which you live your life, not life itself,” Meg Bartelt, financial planner and founder of Flow Financial Planning, said in an email. “The more complicated, changeable or scary your investments are, the more time you spend working on them or thinking about them, and therefore the less time you have to live life.”

Being boring keeps you from making rash decisions

It’s important to take a peek at your investment accounts periodically, but obsessing over every market move is exhausting and counterproductive. It can lead to making reactive decisions that hurt your wealth in the long run.

Choosing to be boring with your money is an exercise in letting go of the illusion of total control. Yes, there will always be round-the-clock financial news, but not everything happening in the larger economy affects you as an individual. Turn off news and stock market alerts on your phone so you no longer feel that itch to react. Instead, mindfully decide when to watch the news and check on your accounts so you can stay informed with less stress.

What boring money management looks like

  • Create a plan you (mostly) stick to: Bartelt finds that, whether her clients avoid their money or obsessively track it, it’s because they all feel the same emotion: fear. The antidote is a financial plan based on specific goals and values. “Having a plan is reassuring,” she said. “Once they have the plan, or hell, once they know they’re going to have one, people relax.” Base your savings and investing goals on what you intend to spend money on in the short-, medium- and long-term. Leave wiggle room for life changes and other uncertainties, because those are guaranteed to happen.
  • Prepare for emergencies: There’s nothing particularly sexy about emergency funds, life insurance and up-to-date wills, but should the unexpected happen, these things can help you stay financially steady.
  • Automate your money: Transfer funds automatically from checking to savings or from checking to a brokerage account. Contributing to a 401(k) through your job is automation, too, since that money comes out of your paycheck directly. Making regular contributions to different accounts, and increasing them as your budget allows and goals shift, will grow your nest egg.

Once you have your boring financial foundation in place, you can sprinkle on some riskier investments if you want. But remain faithful to your plan. “You have to actively and continuously ignore the ubiquitous distractions, charlatans, and blowhards in order to stay true to your own values and goals,” Bartelt said.

This article was written by NerdWallet and was originally published by The Associated Press. The content is for educational and informational purposes and does not constitute investment advice. 

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article Make Your Money More Exciting — By Keeping It Boring originally appeared on NerdWallet.

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How to Bounce Back From a Credit Card Mistake

Posted on by Sara Rathner

Whether you’re using a credit card for the first time or you’ve carried one for years, mistakes happen. And while a credit card mistake can affect your credit scores, there’s no need to be hard on yourself. With some habit changes and a bit of time, you can begin to see your credit scores heal.

Here are some common credit card errors and tips for getting back on track.

Missing a payment

You’re in the middle of a hectic week and lose track of time. That’s when you notice the late fee on your credit card. If this happens to you, it’s always worth calling your credit card issuer. You might be able to get the fee waived if you ask, especially if you’ve never missed a payment before. Plus, the late fee serves as a warning since your credit scores won’t be affected until you’re more than 30 days late, which is when the missed payment would get reported to credit bureaus.

How missing a payment can be harmful: Not only is that late fee an added expense, but a missed payment that’s more than 30 days late can drop your credit scores substantially — sometimes by as much as 100 points.

How to avoid this in the future: Create an ironclad reminder system, like email or text alerts from your credit card issuer. You can also set up automatic credit card payments each month, but be sure you have the money in your bank account to cover your bills so you don’t get charged overdraft fees. Some cards allow you to choose your due date, so you can time payments with a memorable day, such as the first of the month or the day after your paycheck is deposited into your account.

Maxing out your credit limit

It can be difficult to avoid charging more than the recommended 30% of your total credit card limit, especially if you have a low limit to begin with or you’re faced with an unexpected major expense. In an emergency situation, you may need to tap into your credit limit and that’s OK. But if you’re routinely maxing out your card, you’re potentially damaging your credit over time.

How maxing out your credit limit can be harmful: Your credit utilization, or the amount of your total available credit you charge, is a factor in the calculation of your credit scores. Generally speaking, the lower your utilization, the better.

How to avoid this in the future: Cut back on using your credit card for every single purchase. You can use your credit card for some expenses each month and then turn to cash or your debit card for everything else. If you have a low credit limit, call your issuer to see whether you’d be eligible for a credit limit increase. Update your card issuer on your income if it increases, as this can help you qualify for such a hike.

Spending more than you can afford to pay back

Compared to handing over all the cash you have in your wallet, paying with a credit card just doesn’t feel like you’re spending real money, which can make it easier to spend more. That can lead to a rude awakening when your credit card bill arrives, especially if you don’t have enough in your bank account to cover it.

How going over budget can be harmful: By their very design, credit cards can lock you in a cycle of expensive debt because you can charge up to your credit limit, pay just a small portion of your bill, and then charge up to the limit again next month. After a short time, your debt can grow to thousands of dollars.

How to avoid this in the future: Don’t just hand over the plastic without a second thought. Check your balance several times throughout the month, and if you have a big expense coming up, plan for it by setting money aside to pay for it. If you’ve already overspent, switch to cash or a debit card while you pay down the debt. Setting up a budget can help you feel more in control of your money.

Closing a card account without a strategy

Deep cleaning your wallet might feel satisfying, but you don’t have to break out the scissors just because you don’t use a card that often anymore. Closing a credit card is sometimes the right move, but it can affect your credit scores. Because of this, you may want to consider ways to keep the account open.

How closing a credit card can be harmful: Closing a credit card you’ve had for a long time can lower the average age of your credit card accounts. When it comes to your credit scores, older is better. Plus, closing a card means a lower total credit limit. If your spending remains the same, that increases your credit utilization.

How to avoid this in the future: There are good reasons to close a card, like not wanting to pay an annual fee on a card you no longer use. But you may have other options, such as downgrading the card to one without an annual fee, which lets you keep the account open at a lower cost. Be sure to use that card a few times a year to keep the account active. If it sits in a drawer for too long, the issuer may close the account because of inactivity, and you’ll face the same result as if you had canceled the card yourself.

Paying your credit card statements without looking

While you can put your credit card payments on autopilot, take an active role in monitoring your account because errors can happen. You may have no idea unless your credit card company contacts you about possible fraud.

How ignoring credit card statements can be harmful: Suspicious charges, even in small amounts, can be the first sign that your credit card information was stolen. By law, you’re not liable for more than $50 of fraudulent charges, though most cards waive your liability entirely. However, you do need to report the fraud. If you consistently pay your credit card bill without reviewing the charges listed on it, you may be paying for expenses someone else racked up in your name.

How to avoid this in the future: Check every credit card statement before you pay it. If you have autopay set up, create a reminder to review your account every month. Any time you see an unfamiliar charge, call the number on the back of your card to report it. The credit card company will issue you a card with a new number.

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article How to Bounce Back From a Credit Card Mistake originally appeared on NerdWallet.

3 Things to Do Before You Buy Crypto

Posted on by Sara Rathner

Investing in cryptocurrency can be as easy as a few taps on your phone, and with crypto all over the news and coming up in conversations with friends, it’s tempting to dive right in. However, depending on your financial situation and appetite for investing risk, crypto might not be an appropriate investment for you right now — or ever.

“I am the biggest crypto hippie you’ll talk to in a very long time,” says Tyrone Ross, CEO of Onramp Invest, a cryptoasset platform for registered investment advisors. And yet, he cautions against it. “I don’t think the general public should be investing in crypto.”

Picture your finances as an ice cream sundae, with crypto as the cherry on top. It makes up a small proportion of the overall sundae, and not everyone wants one. And before you fish that cherry out of the jar, you need to assemble the rest of your dessert. In non-ice-cream terms, that means creating a strong financial foundation and learning everything you can about crypto before you put any real money in.

1. Put financial safeguards in place

First and foremost, you need to prepare for those times when things don’t go as planned.

Over the past year, workers who lost income because of the pandemic had to tap into savings, take on debt or enter into hardship programs to afford their bills. This time has been a stark reminder of the importance of having an emergency fund.

“When you’re young, you can feel like Superman or Superwoman, but when the bubble happens, you could easily be out of a job for nine to 12 months,” says Theresa Morrison, a financial planner in Tucson, Arizona. “Don’t underestimate systemic shocks to the market.”

Morrison recommends saving up six months of living expenses if you’re single, or around three months if you share expenses with a working spouse or partner. But stashing away even a few hundred dollars can be helpful when you’re faced with an unexpected expense. And if you have any high-interest debt, like credit card debt, paying this down can further strengthen your financial position.

Review your insurance coverage, too, because these policies can provide much-needed money during difficult times. Life insurance can be especially important if you have dependents.

2. Save and invest for future plans

Once you have money set aside for emergencies, begin thinking about your short-, medium- and long-term financial goals. Retirement is, of course, a big thing to save for, so contribute to retirement accounts (especially if you have access to a plan with an employer match). But set specific savings goals for other major life steps.

“Most people want to travel every year, buy a house in 10 years, get married in 10 years. These things cost money,” Morrison says. “Put down how much it’ll cost in today’s terms and figure out how much to save out of your paycheck every month. From my experience, that alone can be $1,000 a month.”

3. Get educated about cryptocurrency

You’ve got the money and you’re ready to jump on the crypto bandwagon, only you have no idea how someone even buys crypto. Or how it will fit into your overall financial plan. Or if it’s too risky for you.

Time out. Don’t do anything with your money that you don’t understand. Dedicate some time to learning everything you can about crypto. Understanding the mechanics is important, but so is learning what kind of investor you are, because that also affects the kinds of investments that would be a good fit for you.

“There’s a process you have to go through to determine if this new asset class is right for you. What’s your plan? How old are you? What are your goals? How tech-savvy are you? Do you understand what it means to hold these assets and have them not be insured? If something happens to you, who in your family knows about this stuff to retrieve it?” Ross says. “People don’t do the right due diligence before dumping money into something. I know that’s not the sexy answer, but it’s the truth.”

If you still want to dabble in crypto, start small

Once you have a grasp on how it all works, you can begin to think about allocating some of your excess cash (after you pay your bills and meet your monthly savings goals) toward crypto. But keep your investment totals small and manageable. Ross recommends investing up to $500 or so. This way, even if you lose it all, it’s an amount you specifically budgeted.

“If you invest in crypto, think of it as dead money. Money you’ll never get back,” says Danny Lee, a financial planner in Denver. “At the end of the day, it’s going to be a speculative investment.”

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

This article was written by NerdWallet and was originally published by The Associated Press.

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article 3 Things to Do Before You Buy Crypto originally appeared on NerdWallet.

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In Your Debt: Back to Pre-Pandemic Spending? Don’t Overdo It

Posted on by Sara Rathner

With COVID-19 restrictions mostly lifted in the U.S. (though that’s changing), you may be enjoying a more social summer than you were last year. But dinners out and movie tickets can seem pricey compared with a year and a half of home-cooked meals and whatever’s on TV — especially if you experienced pandemic-related financial hardships.

It could be time to recalibrate your money habits for the way life is now. Doing so just takes some planning and a healthy dose of honest communication.

Reconsider your values

Your values may have changed over the past year. Ask yourself a few questions: What did I start or stop spending money on? What do or don’t I miss doing? What specific money goals do I have now? Your answers can help you create a list of your current values, in order of importance, which can lead to an updated spending plan. If you have a spouse or partner, involve them in this process, too.

“Many people think this process is for those who can’t save,” Julie Quick, a financial planner in White Lake, Michigan, said in an email. “I would argue it’s for people who want to live intentionally.”

Match spending and saving with updated needs and wants

After reconsidering your financial priorities, you can begin to give your money specific jobs. You’ll likely have a combination of short- and long-term goals, like budgeting for weekly outings while replenishing your emergency fund or saving for an upcoming major purchase.

It’s in the name: A spending plan requires planning. Though it’s tempting to meet up with friends and see where the night takes you, for instance, picking where you’ll go in advance allows you to design social outings around your budget.

Be thoughtful about diving back into travel, too. According to U.S. Bureau of Labor Statistics data compiled by the Federal Reserve Bank of St. Louis, airfares have been increasing in the U.S. since March 2021, though they haven’t yet returned to levels seen in February 2020 and earlier.

“Spontaneous travel is exciting, but it can also run away with your wallet,” Vadim Verdyan, head of advice at the financial wellness mobile app Albert, said in an email. “Keep in mind that people usually get the best deals when they plan far in advance and the worst deals when they plan last minute.”

Open up about money with friends and family

The outside pressure to spend is nothing new, though now you may be feeling an extra-strong urge to make up for lost time with people you haven’t seen in more than a year. But all those far-flung weddings and in-person visits may be beyond what you can afford. This is where honest communication comes in, even though discussing money can be difficult. In these situations, it can help to let the other person know what’s going on in your life.

“To tell a friend that something they want to do isn’t in your budget, it feels like a rejection of them,” says Joshua Escalante Troesh, a financial planner in Rancho Cucamonga, California. He recommends telling your loved one about the thing you’re saving up for that makes it difficult to afford the activity. “Most people who care about you will say, ‘Yeah, I understand that.’”

If you overspend, get back on track

There’s nothing quite like an enormous credit card bill to ruin the fun you’ve been having, especially if you can’t pay it in full and end up in debt. If this happens to you, it’s time to regroup and reallocate some funds.

If you were saving for something, like a vacation, by automatically transferring money to a savings account, you’ve already learned to live without that cash each month. This situation presents an opportunity: Apply that monthly sum toward your debt instead. You may have to postpone or scale back your trip, but you’ll get out of debt quicker without having to make too many changes to your day-to-day life.

Escalante Troesh recommends putting away your credit cards and using only cash or a debit card for purchases while you pay down your debt. “We’ve dug ourselves in a bit of a hole — not a big deal, people make mistakes,” he says. “But let’s get the shovel out of our hands.”

This article was written by NerdWallet and was originally published by The Associated Press.

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article In Your Debt: Back to Pre-Pandemic Spending? Don’t Overdo It originally appeared on NerdWallet.

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How to Be a Frugal Traveler and Still Have Fun

Posted on by Sara Rathner

That first post-vaccine vacation is finally a possibility for many, but after more than a year without travel, the sticker shock is no joke. In general, travel prices are increasing to reflect higher demand. According to the U.S. Travel Association Travel Price Index for May 2021, airfare is up 24.1% and lodging prices are up 10% year over year.

Nothing will stamp out that after-travel sense of bliss like getting a credit card bill full of vacation splurges. With some creativity and advanced planning, your trip can be budget-friendly without feeling cheap.

Use credit card perks

Airline and hotel credit cards can provide valuable VIP treatments for those with good credit. Some offer free checked bags on flights, which can be worth around $60 each round trip you fly with the airline. Other cards offer discounts on in-flight food and beverage purchases, complimentary airport lounge access and hotel room upgrades that can enhance your trip at no extra cost. These cards usually come with an annual fee, but the value they offer can be worth the cost for many travelers.

Think outside the big brands

If you’re not loyal to a well-known hotel chain, co-branded credit cards aren’t as helpful. Instead, look for deals on rates at independent hotels. Becky Pokora, founder of the travel blog SightDoing, finds that independent hotels can be 20%-30% cheaper than equivalent chain brands.

“In past years, everybody kind of had to play on the same level to attract travelers, but this year there’s so much demand,” she says. “The obvious answers get booked up fast, leaving these independent places having to compete more.”

Save money on getting around

Ground transportation is increasingly expensive. According to the U.S. Bureau of Labor Statistics, the consumer price index for car and truck rentals increased 109.8% from May 2020 to May 2021. Because of COVID-19, the number of drivers working for ride-sharing services is down, affecting availability and pricing. To save time and money, consider other ways to navigate your destination:

  • Walk and take public transit: If you’re able to walk longer distances and use public transit, you can save a lot on transportation costs. Unique transit options like ferries, cable cars and gondola lifts double as fun tourist experiences. In cities like New York and San Francisco, you can walk on world-famous bridges for free.
  • Stay close to the action: It can cost more to stay in the heart of a city, but a hotel in a far-flung location means you have to spend time and money getting into town every day. You may also need to rent a car to get into the city, which adds to the expense. It can be worth it to spend a bit more (or tap into travel credit card rewards that you’ve earned) to book a stay at a well-located hotel, or at least a hotel near public transit that can whisk you into the city quickly.
  • Be strategic when renting a car: There’s no need to book a rental car from the moment you arrive until the day you leave if it’s just going to sit in the hotel parking lot and rack up parking fees for half the trip. Arrange your travel itinerary so you can manage a few days without a car, then rent one for the part of the trip where you need to drive. A car rental location within the city may also be more cost-effective than renting a car at the airport. For example, at Ronald Reagan Washington National Airport near Washington, D.C., fees, including a concession recovery fee and customer facility charge, drive up rental prices. At a rental car location in downtown D.C., the base price for a similar car is higher, but with fewer fees, you may end up spending less overall.

Save money on souvenirs

Bringing home souvenirs and gifts can get expensive, and your minimalist friends may not want another trinket that will just collect dust. This is where grocery stores come in handy. They’re great places to find local foods and snacks for a reasonable price (and consumable gifts don’t take up space for long).

Pokora offers a creative way to spend less: Instead of buying food and drink items for all your friends, buy a few things, then host a tasting when you get home. You’ll bring people together for a cost-effective shared experience.

This article was written by NerdWallet and was originally published by The Associated Press. 

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article How to Be a Frugal Traveler and Still Have Fun originally appeared on NerdWallet.

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