Dear Mary: I am a retiree and maintain a good credit rating but it could be better. That being said, I discussed that with my insurance people who said having charge cards open with no balance is a strike against you in achieving that. That took me by surprise. I currently have one active credit card and pay the balance each month. However, I do have three charge cards from clothing stores, which are seldom used. Balances are always paid off each month.
Are inactive charge cards keeping my credit score low even though they never carrying revolving balances? Joann
Dear Joann: I must take exception to what your insurance people told you. That information is not correct. Whoever told you that closing any credit card account will improve your credit score is misinformed. On the contrary, closing any credit card accounts will effectively lower your credit score.
It is important for you to understand that Insurance companies use a different credit score when determining premiums than the score a bank will use to issue a credit card account or mortgage.
Your “insurance credit bureau score” originates using the same information (from Equifax, Experian and TransUnion) used by financial services, but also considers information on previous insurance claims. If you filed an auto claim or a claim against your homeowners insurance, for example, that is considered and can lower your insurance credit bureau score.
This will explain why your insurance credit score may be lower than say the score you received from MyFico.com or one of the credit bureaus.
There is one thing I’m sure we can all agree on: credit scoring is complicated!
Could you use an extra $50 or $100 next week? If you get motivated there’s a big chance you can slash your family’s food bill by $50 a week without sacrificing health and nutrition. And that will be tax-free cash you have in your hand … not money that requires more overtime or a garage sale before you can get your hands on it.
Notice I said “food” bill, not grocery tab. Unless you’re keeping careful track of your spending, you might not know just how much is being sucked out for restaurants, fast food, school and business lunches, coffee shops and on and on.
There’s not one single way to reduce food costs significantly and consistently. It has to be a combination of strategies: buy right, eat out less and cook at home more.
Coupons. These days shopping with coupons requires more than clipping them from the Sunday paper. You can still do that but you need to know how to grab digital coupons, too. Even with the explosion of ways to add coupons to your grocery dollars, lots of people don’t do it because it’s just not their thing. Or they don’t have the right information or know-how. Two great resources to get you up to speed: 5DollarDinners.com and TheGroceryGame.com.
There was a time that I didn’t have much of an opinion on paying for college with student loans. That was before the advent of e-mail and thousands of messages all with a similar subject line: Help! I’m drowning in student loan debt!
That was before I learned that 85 percent of all college graduates do not end up working in their major.
That was before I heard from Jim P., who took all the student loans he could get to pay for college and law school. He assumed he’d land a big-bucks cushy job and pay back $200,000 really fast. The fifth time he failed the bar exam he gave up on being a lawyer. But the debt goes on.
That was before I met Peter K., who became a chiropractor on borrowed funds. Guess what? He couldn’t stand the profession. Now he’s teaching high school math. Too bad teachers don’t make enough money to service $160,000 in student debt. But the debt goes on.
Try this: Add up your monthly expenses and deduct the total from your monthly income. Hey, not bad! You should have plenty of money with some left over. So why is there never enough? The answer is your selective amnesia. Most of us suffer from it.
We conveniently don’t remember expenses that don’t recur every month. It’s easy in March to forget about summer vacation, back-to-school clothes, wedding and shower gifts, new refrigerators or myriad other inevitable expenses. The solution is to make all of your expenses as predictable as the rent, phone and cable TV bill.
I call my solution a “Freedom Account.” It forces us to anticipate irregular expenses so we can finance our own emergencies.
If you remember Christmas Club Accounts, you’ll understand my Freedom Account. Basically you determined how much you would need for Christmas shopping. You authorized the bank to transfer 1/52 each week (or 1/12 if you did it monthly) from your checking account to your Christmas Club Account. It was painless because you didn’t miss money you didn’t see and the results were huge. You got a big fat check in the mail for holiday shopping.
I haven’t thought much about “back to school” for quite a few years. But this year will be different.
For the past five years, I have taken care of our sweet grandson, Eli, every Friday since he was 6 weeks old. That was a gift I gave to myself and my kids when he was born. To say that Eli and I have grown on one another would be a huge understatement. We live for Fridays and have a secret between us that Friday is our favorite day of the week!
In just a few weeks, Eli will start Kindergarten, and my Fridays will change forever. Back-to-school will be bittersweet. Of course, I wouldn’t have it any other way than for him to be going to school and moving into that season of his life. What’s difficult is that I cannot believe five years have gone by so quickly.
I’ve decided to embrace the whole idea of back-to-school by getting together a collection of kid-friendly breakfasts. What fun! Here’s a small sampling, from our friends at eMeals. They’re celebrating back-to-school at eMeals.com and you really should check that out, too (hint: use coupon code SCHOOL for 20% off an eMeals membership and their Back to School Survival Guide free with purchase).
Faithful readers may recall a series of columns, Mary’s Big Remodel, where I kept you up to date on my husband’s long and agonizing remodel of our home. What you may not know is that no sooner had the paint dried, we put the house on the market for sale. To our utter amazement it sold in about 3 hours. Yikes! We were only testing the water. But the offer was something we could not refuse.
And now for the rest of the story …
We had 30 days to pack up 27 years of our lives, which we put into storage pending a decision on where we would eventually relocate.
We kept out a few bare necessities and moved into a tiny apartment, where we will live for about 18 months. Did you get that … a “few”? Clearly, I was not in my right mind when I decided what I would need in this microscopic kitchen.
We’re talking a spatula, a wooden spoon, and a rubber scraper. That’s about it in my tiny utensil drawer. And that spatula? It’s 44 years old. I know because it was a wedding gift. It works better than ever and makes me laugh every single day.
But that’s not all. I had to put my slow cooker, pressure cooker, rice cooker and 99% of my kitchen into storage. That’s how small this place is.
Debit cards are by far my least favorite type of plastic. The fraud protection is, at best, shaky. But beyond that, there is the temptation to use a debit card with a certain level of abandon–to purchase everything under the sun by swiping instead of writing a check or paying with cash.
It becomes far too easy to empty your bank account using a debit card than if you actually had to write out the checks and think about what you’re doing.
I would rather see you use a credit card.
What if I told you there is a way you can have a fully functional debit card without any of the problems and hassles that come with running up a credit card balance you cannot pay off in a single month. You’d say, “Mary, this is brilliant!” Well, get ready because that’s exactly what I have for you.
If you’re holding out for the life you love to magically appear once a boatload of money gets dumped into your lap, don’t count on it.
You may believe in your heart that winning the lottery or getting an unexpected inheritance will make your life perfect. Perhaps you’re convinced that getting in on the ground floor of the latest and greatest multilevel marketing opportunity or stock offering will make you rich overnight. That won’t happen.
If you can figure a way to get that kind of money, good for you. But if you think money alone–and plenty of it–will give you the life you love, forget it. Money alone, no matter how much of it flows through your life, will not automatically materialize into the life you love.
More money will only magnify your current situation because you will continue to manage it the way you’re handling it now. If you’re in debt now, more money will put you deeper into debt. If there’s never any money left at the end of the month, more money is not going to change that because your spending habits will simply escalate to accommodate the greater income. How can that be? Because you will use it as a down payment on something bigger and better and even more opulent. Or you’ll spend your brains out even faster than you do now. Money will not change your behavior. Only you can do that.