Personal Finance Advice

Whenever you enter into a financial agreement - whether you’re opening a checking account or getting a car loan - you will inevitably encounter some paperwork to sign.  In some cases, such as when you close on a mortgage loan, you will be faced with an intimidating pile of documents that you’re expected to sign relatively quickly.

The scenario usually goes like this:

1.  You are presented with some paperwork to sign that outlines the terms of the financial agreement.

2.  The representative summarizes the documents, points to where you should sign, and then hands you a pen.

3.  The representative and everyone else present sit back and stare at you while you sign the documents.  If you hesitate, ask questions, or stop to read the documents in their entirety, the representative might sigh or keep asking if you have other questions.

As humans, we want to be cordial and appear to trust people.  We may actually feel awkward asking questions about documents because we may feel as though this implies that we don’t trust the people presenting the documents to us.  We may also feel as though we look inept when we take the time to read the documents because everything has already been explained to us, hasn’t it?

The truth of the matter is that signing documents make them legally binding.  By signing documents, you are stating that you not only agree to the terms, but you understand the terms as they are presented to you. 

Taking the time to read financial documents before signing them is smart.  It really doesn’t matter if you wind up annoying the representative because it’s your job to make sure you aren’t getting into something that you never intended on getting into.  Ask questions, demand clarification, and walk away if something seems wrong and the representative is vague or flippant in response to your concerns.

Remember: If you feel pressured to sign something that you don’t understand it may be because you are indeed being pressured because something was placed within the documents that the representative hopes you don’t ask for clarification on.  This is not the time to fear insulting the representative.  Take your time signing documents and don’t be apologetic for requesting clarification.

A man sits on the couch with his spouse, lamenting about how they can’t possibly make more than the minimum payments on their credit cards this month.  They are both incredibly frustrated because they can’t seem to get ahead financially.  They both agree that this entire situation is unfair, and soon they’ll both sit down and figure out a way to tackle this debt problem once and for all.

Then they turn on the television to browse all the premium channels they pay for while eating the pizza they ordered in.

What is wrong with this picture? The most glaringly obvious thing is that people who do not have the money to pay more than their minimum credit card payments probably shouldn’t be enjoying expensive cable and delivered pizza.  The less obvious thing - and the thing that needs the most attention - is the absence of a comprehensive budget.  These folks don’t have any idea where their money is going, but if they sat down and made the effort to figure it out they would probably take a hard look at their finances and cancel the cable and stop ordering in when they could cook at home for a fraction of the cost.

Getting your personal finances straight involves much more than just not spending money on frivolous things.  You have to be committed to budgeting your money and figuring out where you funds should be going every month.  Sometimes folks don’t really make the connection - like figuring out that the cable bill would probably cover much more than the minimum payment on a credit card - until they write everything down and have a look at it on paper.  It can be an unsettling discovery, but an important one nonetheless.

 If you feel as though you aren’t making the financial progress you should be, start writing down how much money you spend on things you don’t really need.  The picture will become clearer when you start to realize that the money you pay for a mocha latte every morning might cover the cost of a couple of bills you thought you were having trouble paying.

It’s time to get your financial priorities in order.

You might be surprised to discover that plenty of people have never laid eyes on their credit report. For these folks, a credit report is a mysterious document that they just hope is accurate. They assume that if their credit applications are getting approved, that must be a sign that all is well in the world of credit.

Then again, this may not surprise you if you are indeed one of these people.

Getting a copy of your credit report isn’t hard, especially since you’re entitled to a free copy annually. Chances are you already know that you’re entitled to your credit report, but have you actually taken a look at it? The truth of the matter is that even if you consistently get approved for credit it does not mean that your report is free of blemishes. There may be errors on your report - or small accounts you simply forgot about - which may not be substantial enough to get you denied for credit but which drag your credit score down nonetheless.

Even if you don’t have a single negative item on your credit report, taking a look at your report can help you realize where you stand with your personal finances. Although it’s true that you can open your monthly statements and figure out how much money you owe to what lenders, there is something about seeing it all laid out in a couple of pages of well-documented facts. Look at the information through the eyes of a potential lender. Do you look like the type of person who may be getting in over your head? In other words, would you lend money to you?

Get a copy of your credit report. Make sure there are no errors on it, and then take a look at the bigger picture. Whether or not you’re current on all your payments, do you owe a bunch of lenders an awful lot of money?

Check your credit report every year to make sure everything is accurate, and also use this time as an annual reflection of the state of your finances.