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Hello and welcome to DrFrugal.com. If you've ever had the unfortunate experience of trying to find information online that has anything to do with money, you know most sites are worthless because they're trying to pawn something. Not here--there's nothing to buy. I've tried my best to only include pragmatic, realistic informtion to help you lead a simpler life by taking care of your personal finances.
Credit cards, just those words, are, well, bad.
No one wants to associate with credit cards or have anyone know they have one, much less a trail of them, which means you're paying and not making headway on those higher interest rates and seem as though you'll never get out of debt.
But can credit cards actually be a good thing?
Naturally, you can spin credit cards into something that aren't so bad, namely the ones that are fighting for your business, will offer you bonuses and perks, as well as lower interest rates and those other elements you look for in a credit card.
The bare bones of credit cards indicate you should only use them in an emergency or if you're buying something online (and security might be an issue), but the bottom line is you should use the credit card and try to pay it off as soon as possible.
Being able to pay off that card as soon as possible means you should find a creditor or lender that can work with you as far as when you pay your bill. Keeping your credit and score in line means paying on time, so make sure that payment date works for you. The payment date, despite what some card companies will tell you, can be worked out and chosen or moved to help you, for instance, pay off your balances in full when that pay date comes around your pay day.
As much as everyone who has a piece of plastic knows this, that rule isn't followed. Credit cards should never be used for things that aren't tangible, like using them to pay bills or charging your way to a vacation for two.
Finding the right credit card really makes a huge difference, so as you begin to think about credit cards or finding one, think about choosing one that, for instance, offers you a bonus for signing up, such as frequent flyer miles you can use or some sort of points system that is paid out immediately upon getting the card.
You'll want to steer clear of annual fees, which are truthfully a thing of the past. Credit cards are begging for business, and most will let you have a card without charging you just for that sole purpose (of having one).
Having a credit card today is a necessity for the majority of people, but that doesn't mean you have to succumb to the bad habits or even the bad cards, especially when you're adept at shopping around for the cream of the crop of credit cards.
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Patience is always a virtue but that sentiment couldn't be more apparent and relevant then when you're talking about money, more specifically credit card or any sort of debt that is mounting and you feel as though you'll never get ahead or even close to being out of debt any time soon.
How do you know if you debt has taken hold of you to the point that you're in need of a major overhaul?
If your debt is being handled on a very minimum basis, you aren't going to do anything but pay an extraordinary amount of interest and never get out of debt. And by "never," you're talking decades of paying.
The minimum payment works if you're just trying to pay on time, but paying on time might help your credit score to some degree, but if you're maxing out lines of credit and are nearly at your ceiling on credit cards, you're going to be viewed as a credit liability.
You can't just pay the minimum payment if you expect to get out of debt.
The best advice is to start with the smaller amounts of debt you have and pay them off so you can continue to pay down total debt and set mile markers of sorts of yourself so you can see progress.
Naturally as you move on to lines of credit with higher balances, you have to begin picking based on not only amounts owed but also the amount of interest that you're paying. Higher interest cards should be the first of your priorities if the balances are roughly the same between two or three cards or lines of credit. The higher rate as your main focus means if you have $500 to pay on credit cards, make sure the majority of your credit budget goes toward that higher card in the attempt to pay it down and stop paying extra in the form of the high interest.
Often what tends to be overlooked as far as paying off debt is your income. You can cut expenses out of your budget, such as cable, cell phone extras, clothing and restaurant dining and that extra income that you created from saving can be used to pay off more of your debt, so while that money won't be put aside you can climb out of debt faster.
If you're in debt and it is sizable, you have to remember that this is going to take time, but that doesn't mean you have to pay only the minimum but rather make a few adjustments to maximize just how quickly your debt goes away.
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You can observe your budget, look up and down at how you're spending your money and come to a conclusion the masses typically draw: you're not doing anything wrong.
Let's say you have a budget, you spend money on your bills and hardly spend money, and if you do, it's something that you need and is rarely if ever frivolous in nature.
And, to make matters better, you have a budget and you stick to it, and even when you buy things like clothes, shoes or even your car, you justify quite easily that not only do you have the money but you've allotted your income toward those things.
But did you ever think that those purchases, even though they're justified and accounted for, could be better served to help you save money in the process of spending it?
That question simply centers on buying new or buying brand names versus the actual art of loving and spending money on used items or not necessarily needing to have name value behind every purchase you make, namely in the vein of clothing.
Think about a new car and that how quickly a car or truck can depreciate the moment you take it off the lot. When you finance a new vehicle you do, in fact, get a better interest rate then you would a used one, but think about two other elements: your monthly payment and the overall price of the car, most importantly the latter.
We tend to focus on who much a monthly payment is going to be, granted, but what about the total sticker price of the vehicle and the length of the term. A good salesperson can give you the car of your dreams and make that monthly payment look good, but you justify the newness of the vehicle and the duration, a six or seven year term versus that same comparable payment on a used vehicle with a four or five year one.
The car, as far as buying new, is the obvious spot where you can buy used a save, but what about clothing and subsequent brand names or other items that lend themselves to used versus new?
Things like furniture, technology and clothing are perfect spots to save money buy buying used, rather than new. Whether it's CraigsList, eBay or other online auctions for those items, you can save hundreds on any of those classifications of items, and that money can be better served sitting in a savings account.
While used isn't the preferred method of buying, it can be effective in allowing you to save money and still have what you need, minus the proverbial bells and whistles of buying new.
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It's the old "he said, she said" when it comes to fixing your credit.
Someone tells you that this particular move makes the most sense, and will instantly (or over time) inflate your credit score, while some argue that some other action is your better bet for adjusting that score for the better.
The truth is some actions to get your credit score back on track are better than others, while some are just plain ill advised.
The easiest and best way to keep that three digit score in a good place is to make timely payments and not to miss payments on a regular basis, which is why the majority of people take the automatic billing route when it comes to paying.
The ultimate goal is to decrease the amount of debt you have totally, but also keeping in mind that the debt to credit limit score is paramount. For instance, if you have a credit card with a high balance that is nearly the entire amount of total credit on the card, focus on that one first. Creditors frown upon that and also the total amount of debt you carry. That's why during the time when you're trying to decrease your debt, you have to stop applying for new and focus on paying down what you have. Focus on the loans or debt that have the highest interest rate first and foremost, while others that have lower rates or even zero (such as agreed upon medical debt repayment or low rate school loans) should be saved for last.
Where a lot of misconception comes into play is when you're talking about credit cards specifically that you have and aren't using. The thought process is you should be closing cards left and right, but be careful because that does lower your score but if you're in the process of applying for a loan, closing accounts could actually hurt you long term.
You also can open new lines of credit; that isn't going to hurt your credit score unless those lines of credits, credit cards specifically, are opened and maxed out. Transferring balances isn't the best option but is one that can save you money and interest over the long haul.
In addition to transferring, you might want to increase your credit limit. As much as that is perceived as a bad thing, credit utilization will increase and so will your score.
That score is going to define your ability to borrow and how you're perceived from creditors. That involves assigned interest rates and how much you'll have to spend, or overspend, when you borrow and thus leading to the ability to save money.
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When was the last time you heard someone refer to their budget as "tight?"
While that word often creates negative connotative meanings when you talk about money in the form of spending it and saving it, those who live within their means but aren't doing anything crazy in that regard love the idea that they play their money close to the vest.
They enjoy the challenge that is having an exact science in the form of a budget that is going to win every time, and by "win," you mean that you'll be able to save money even though that budget isn't filled with an overly expensive income (or multiple ones), yet still is responsible for expenses just like any one else.
So how exactly can you take a budget that has little room for error and actually save more?
Really, what it boils down to is a mindset, a means and a thought process that makes your budget one that isn't focused on the basics only or deals directly in generalities but rather specific to where your money goes, whether it's something as simple as a daily cup of coffee that is a weekly routine or not forgetting about budgeting for your gym membership or that weekly movie date with yourself or that special someone.
Even though your budget is tight, you still are able to save because you have taught yourself how to get by and be a little more thrifty with every purchase you make on that very same budget you hold so close.
You shop smarter, and that starts with clothing and food, primarily. You tend to plan meals ahead and eat dinner at home, and decide to opt out of buying food out at restaurants despite the convenience element involved.
Furthermore, you tend to shop for clothes in the off seasons or look at coupons, namely online ones, to save money and only shop when the prices are right. You don't buy at full price, but still manage to save money because you know exactly what the right time to buy truly is.
And finally, you don't just try to save money in the most obvious places, like cutting expenses that you don't need, but instead look at other ways to generate or take advantage of income, whether that's a change jar that you started that is responsible for you buying a flat screen TV or taking a part time job that allows you to work from home.
Being on a budget is one thing, but a tight one is just as rewarding when you're so precise and perfectly balance spending and saving even when there isn't apparently much of the latter to go around.
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