Q & A Wednesday - Stimulus Money, Phone Plans, Credit and Credit cards...
If you want to know where my expertise lies. I am familiar with anything that has to do with stock, savings accounts, savings overall, insurance, budgeting, I’m not a tax accountant, but I understand taxes fairly well, I understand mortgage, and I’m familiar with pretty much all things finance. And anything I don’t know I have good connects in these industries that can help me come up with the right answers. I don’t know why, but I always found finance interesting. I don’t love money, but I find it very interesting what money can do. So now I have so much stuff in my head about these topics and I don’t want to keep it to myself. I want to just put it all out there for you. Please take it and be successful. No catch. I know people that have charged for this information. I have charged people for this information. And here it is at your fingertips for free. When have you ever said no to free?
Q: // Anna, New Mexico: I opened an account and they said they did a soft credit check on me. What’s the difference between a soft credit check and a hard credit check?
A: This is a good question, so for anyone listening that has never heard of the two. There are two ways to pull your credit. A soft credit check and a hard credit check. Places that do soft credit checks are banks to open accounts, phone companies, and banks when you see your credit score online. Now hard credit checks are done when you apply for a loan and there are some places that do it when you open an account so you should always ask if they tell you their pulling your credit.
Now the difference between the two is that when you do a hard credit check, you get access to your full credit report and it makes your credit go down. So to be clear, every time you pull your credit as a hard credit pull it goes down. So to everyone listening, please don’t do that thing where they offer you a credit card at a store to give you a discount. I know someone that did that all the time to get discounts and their credit score went to 500 real quick. Now there is a law that’s states that you have a month to credit shop, so whenever you are applying for something like a credit card. Shop around and pull it as much as you can that month and it will only report to your credit as one credit pull.
Now a soft credit check does not give you your full credit report and does not make your credit go down, so you can look at your account every month on your online bank account and it won’t negatively affect your credit score. So in your case Anna, the credit hit they did will not affect you negatively.
Q: // Dee Nice, New York: I messed up my credit and I’m trying to fix it so I can move out and rent a new place, my rent keeps going up. Is there someone I can pay to make some stuff come off my credit. I know I owe the money, but I heard that there are people out there that get collections out of credit reports for a fee, is that true? And where can I find them?
A: OK, this is an interesting question, how do I start to answer... OK. So yes, there are people our there that will take your money to make things quote unquote disappear from your credit report. But to be honest, there is nothing that you can’t do yourself. And some of it is pure luck on their end. So let me explain, you can dispute anything in your credit report, and the creditor you are disputing has a month to prove that you owe them. Now if they don’t make the time line or if they ignore it. Then it has to be dropped from your credit report. So there are things like that that would be done by this person that you can do. But it’s a game because depending on your situation, the lender will tell them that you owe them because that’s the only way they’ll get their money. And I am definitely oversimplifying this, but to answer your question, yes there are people out there that can do it, but my advice is to save your money and either learn how to dispute it yourself or talk to the creditors to create an arrangement to pay them off. See what they can do. Dispute it or settle it. This is the right way to do it, because another thing is that those people that say they can remove it, can sometimes get it temporarily removed and it comes right back, and they still take your money which in this case. It just makes more sense to pay it. That’s just my opinion. Good Luck
Q: // Crystal, Chicago : This may be a weird question, but what’s the best advice you’ve ever received when it comes to finance?
A: LOL. This is awesome. I like freestyle question like this where I can just openly state my opinion. Hmmmm what’s the best advice given to me? This is hard because when I worked in the branches, I would ask a lot of people about money advice and they told me a lot. Well, I can tell you the one I heard the most from wealthy people is to never spend money you don’t have... But for me... OK, there are two pieces of advice that has tremendously changed my life and put me in a great financial position and that simply to save in case of any emergency, because there’s always an emergency, and the other is to always ask yourself, is it a need or a want before you purchase anything. Those are words of advice that I live by and they have helped me so much. So that’s Save in case of an emergency, because there’s always and emergency, and ask yourself before you purchase anything if this is a need or a want. Hope that helps you. Thanks for this fun question
Q: // Bobby, Baltimore: I’m looking into consolidating some of my high interest credit cards. Would it be better to apply for a new credit card to do a balance transfer at 0% for 18 MO or should I take out a personal loan to consolidate it?
A: I think they’re both not bad ideas. Well, if I were to choose from those two I would consider a balance transfer, but I would ask you first, can you actually pay off the credit card in 18 months? Also, can you get approved for the total of the other credit cards? And the last question is, do you have the self-control to not use any of the credit cards once their paid off? I know someone that had the intention to do the same thing you’re asking and then they used the other credit card for some other reason and double their debt instead of paying it down. So to clarify, if you have the self-control, you can get approved for a large enough credit card to consolidate, and you can actually pay it off in 18 months. Then I would recommend the route of apply for a credit card to do the credit card balance. Now remember, there’s typically a 4% balance transfer fee. Now the personal loan would work if the interest rate is lower than the average of your total credit card debt and if you don’t have that much self-control, because then all you have to do is make sure you do your payments. And you also have to qualify for a personal loan large enough to consolidate your credit cards... But all this to say, that they are both a good idea...
OK, now, I'm hoping this doesn't confuse you, but, this is more for people that can’t get approved for a new credit card or a personal loan. So what I did was get the total of all my credit cards and then I got the average of all my interest rates. So for example, if I have a credit card that has 18% and another that has 23% and I have another that hat 25%. The average of your interest rates would be 22% and the total for your debt for example would be $10,000. Not that you have that information, take out a loan calculator and calculate how much you have to pay to pay all your debt at a certain time. So for example, I have a simple app called Loan Calculator and I put in the calculated what my payments would be if I paid off $10,000 at 22% for 3 years and the payment would be 381.90. Now if it’s something you could afford, then make sure you are putting that much to your credit card payments... So now pay the minimum of all you credit cards and the credit card with the lowest balance throw all the money to it and continue that until you have everything paid off. So for example, you agree to pay $380 to your credit cards monthly, pay the $25 minimum to two of them and the one with the smallest balance, make payments of $330 until it’s paid off then pay the second lowest one and then pay off the last one with the full $380 after the other two are paid off. According to your calculations it should take 3 years to pay off, but it’s usually less because you will see the light at the end of the tunnel and then just pay off the last $1000 all at once... OK. I know that was a lot. Hope it didn’t confuse you more than help. It’s what I did and it worked for me. If you need me to take more time in explaining this process slower please let me know and I’ll spend more time to explain it better in more details in another episode.
OK, so I want to give a shout out to this person I’m helping with their finance. For confidentiality sake I will not mention this person’s name, but I want to briefly tell you their journey. Mainly to motivate and to show you, you can do it too. So a few months ago I chatted with this person and they just paid off their credit card with their income tax so I told them. “Hey don’t waste time” Cut your credit card up right now”. That’s usually my indicator when I know someone is serious about getting out of debt. So this person did. And then like a month in a half ago I called them to check in to see how they’re doing, and they were fine but just needed a little help so I’ve been working with this person for just a month and a half and in that little time they went from having no money saved, having credit card debt, and 550 credit score to now having no credit card debt, 620 credit score which would qualify this person for a mortgage now, and $4000 in savings which they never had before. And let me add, this was during the pandemic. I am so proud of this person. You know who you because I know you’re listening. The even more impressive part is that this person is now telling other people around them that they should be savings and helping them open online savings accounts with higher interest earnings. Successful finance is a state of mind. And I want to let you know that there is nothing this person can do that you can’t. And that’s not to say that there have been hiccups and temptations along the way but if this person can do it. So can you. You know you want to be financially healthy, just do it... There’s this quote I like that I repeat over and over again. If you can do better. Do better!
Q: // Eduardo, Texas : I was sold life insurance for my kid just in case something ever happens to them. I’m reevaluating where my money is going. Do you think I need life insurance for my kid?
A: OK, so insurance is a tough one to answer, because you are technically putting money aside to prepare for the unknown and I can’t speak for the unknown, so I can’t truly answer if it’s a need or not, but I can tell you how I feel and what I would do if I were you and please do further investigation to make your own decision. So life insurance is made to supplement your income in case you pass a way. That means to make up for the money loss. So for example, my wife and I have a home and we need both our income to pay for this mortgage, so my life insurance should technically cover my end in case I die so she won’t lose the house if I pass away. So with that in mind, your kid does not provide any income and as morbid as this may sound. God forbid if your kid passes away, aside for the funnel cost, it will not burden the family financially. Now I’m only just talking financially because I know there are other burdens it would bring. I know thinking about death is a hard topic... So for those reason I would not have life insurance on my kid and I would cancel it if I were you. Instead I would put that money in a College savings account and prepare more for their life and future instead of their death. Now I don’t want to knock insurance agents, but they are selling fear, which are valid fears, but they get a hefty penny for it so you have to decide what you need because they can tell you the worst case scenario of anything.
Great job evaluating where your money is going. This should be done at least once or twice a year for anyone else listening.
Q: // Dominic, Arizona: Should I lease or finance a car? What are the differences?
A: I get asked this question a lot. Thank you Dominic for this great question. So the difference with the two is the difference between renting a home and buying a home and as you know, buying a home is way better. So in your situation, always finance or buy, do not lease a vehicle. You would be renting the car and you have to pay it back with nothing to show for it. At least if you finance a car, which finance means to take out a loan to buy the car. You could always sell the car and get your money back. Always always Always finance, do not lease. There is no reason to lease a car.
Q: // T: My iPhone is acting up and I’m thinking about buying a new one. Is it best to finance a phone at 0% interest or should I use my credit card at 0% interest to buy the phone so the amount doesn’t have to be on my phone bill?
A: OK, So I wouldn’t do either. I would go online and find a refurbished phone that is just like new and purchase it free and clear so you don’t owe anyone. Both options you presented puts you in a position of owing someone else. You can find a good phone for $200 to $300. That’s what I did. I don’t know if you know, but most people don’t use any of the latest features on a phone. You don’t need an iPhone 11 when you can buy an iPhone 7S that can do the exact same thing. Why do you need the latest one? Now if you don’t have two hundred to drop on a phone. I would finance through the company the cheapest good phone you could find which there are a lot and should cost no more than like $5 a month added to your plan and I would work on paying that off as soon as you can, but it shouldn’t be a high priority because the phone companies don’t charge interest. The cell phone company’s bank on you wanting the latest phone and quote unquote needing the more expensive one. They are so overpriced. Go the cheaper refurbished route. You won’t regret it.
Q: // Anonymous, Toronto: I keep hearing that there is a new wave of stimulus money coming to us, is that true?
A: For now that is not true. Well let me clarify, there is not more stimulus money coming to our accounts. Now there has been approval of a second wave of SBA PPP loans to go out to all small businesses for the sake of employee retention, but not to us as individuals. What you may be hearing chatter about is a stimulus package where they want to give about $2000 monthly to you and your child until the country’s economy levels out, but if your mouth is drooling right now, you can stop. Don’t hold your bank on this one. It would cost way too much for this country and it has yet to be proven as a need to help this country’s economy. So to repeat. No money for us again, but I’ll keep you updated if something comes up.
OK pain to progression family, hope you enjoyed this post. We talked about stimulus money, phone plans, credit and credit cards. Remember you can send me your questions at firstname.lastname@example.org
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