Personal Finance Advice

Personal finance is about so much more than how much money you bring in every month or how much interest you pay on a credit card. Personal finance is also about psychology. How your mind is wired has a lot to do with how you spend your money. Do you impulsively buy things you don’t need when you’re feeling upset? Do you find that you’re less apt to keep your checkbook balanced when you’re in the middle of a personal crisis? Do you sometimes get the urge to buy something merely because someone you admire has the very same item? Obviously, personal finance is about a lot more than mere numbers.

Because money can be a complicated issue, it isn’t difficult to make the assumption that how people spend money says a lot about their state of mind. A man who is innately insecure might spend a great deal of money in an attempt to impress the people around him. A woman who is fearful of not having control may hoard cash away as a tool of comfort. Addiction ties directly into personal finance topics quite easily when you begin to consider this question:

What is the thing you think you need every day, regardless of the state of your finances?

In other words, what is your vice? Do you have to have a mocha latte every morning? Do you smoke cigarettes? Do you need a glass of wine every night before heading off to bed? Or, more importantly, do you consistently do these things whether or not you actually have room in your budget for it?

Vices don’t have to be things you consume. Some people pay for an expensive gym membership that truly stretches their budget thin, while others perpetually remodel their home at the expense of a home equity line of credit that is quickly getting maxed out.

How do you shed your vice? First, recognize your vice for what it is. Yes, a mocha latte is a pick-me-up, but you can make a similar drink at home for a fraction of the price. Yes, it’s nice to have a membership at a fancy gym, but you could do the same exercises at a less expensive gym or even at home.

Once you figure out that you’re spending too much for something, figure out how to stop. Treat this like an addiction recovery, even if it’s something as simple as buying shoes. Unless you convince your brain that it’s important for you to stop spending your money on whatever it is you’re into, your brain isn’t going to send up the warning signals the next time you reach for a pack of cigarettes.

Once you can convince yourself on a psychological level that it’s time to scale back on your spending, you have a better chance of keeping your budget in order.

For every financial expert out there who swears by using cash for everything and shunning debt like the plague there is another financial expert touting the brilliance of utilizing loans for investments and urging people to use credit for nearly every purchase.  The only solidarity among the wide variety of financial experts out there is the fact that they all claim to be financial experts and they advise people on how to spend (or save) their money. 

So who do you turn to when you need solid financial advice beyond a short article? There are plenty of experts to choose from - Suze Orman, Dave Ramsey, Robert Kiyosaki - but if you take to heart every single thing that every single financial expert says, you’re going to be one confused person.  One expert will have you working off a cash envelope system while another will urge you to get an equity line of credit to consolidate your debt.  There are a ton of contradictions within the confines of the personal finance world, and if you aren’t careful you’ll wind up a little flabbergasted.

The trick is to find the financial expert who seems to make the most sense to you.  Keep sensationalism out of it; just because a financial expert has a syndicated television show and has a fantastic rapport does not mean that he or she has the kind of advice you need.  If you take the time to listen to what the various experts have to say then you’ll soon find one that seems to have the same type of ideas you have, or at least has some ideas that you would be happy to adopt if it meant you would get a better hold on your finances.

If it sounds too good to be true, it probably is.  This old saying certainly applies to choosing a personal finance expert to trust.  If you’re reading a personal finance advice book and you find yourself thinking any of these things, then it’s time to put the book down and pick a different expert to trust:

“That certainly can’t be legal.”

“That sure sounds sensationalistic.”

“Why does this guy/girl sound so much like a commercial?”

It doesn’t matter if you need advice on debt, stocks, retirement, or some other financial matter.  You have plenty of experts to choose from.  Find one that makes sense, and who proposes ideas you think are feasible and effective.

If you have a low credit score, it may feel to you as though you’re stuck with this blemish forever. Even if you have made the effort to bring all your accounts to current status and have done every single thing you can think of to improve your score it can still take quite a bit of time for your credit score to reflect your hard work.

It can be a tedious task to build your credit rating back up after financial problems, and many people find themselves discouraged and ready to give up.

Here is what you need to know: It can be done.

A person with horrible credit is not doomed to have horrible credit forever unless he or she refuses to make an effort to correct past mistakes. Even the worst items on credit reports eventually fall off due to the number of years something can be reported to the credit bureaus, so in essence this makes the entire process boil down to a waiting game.

Suppose you get your first credit card when you are in your early twenties, and because you don’t have much experience with credit you allow payments to go late and you exceed your spending limit quite a few times. Then you get a couple more credit cards, and before you know if you’re a couple thousand dollars in debt and you have collectors calling you constantly. You change your phone number, chop up the credit cards, and pretend as though it all never happened.

Because they can’t contact you, the creditors charge off the debt and your credit report paints the picture of a person who is generally not trustworthy with debt. You have a low credit score, and there is no way any lender will extend credit to you.

A few years down the road you get to thinking that maybe this is something you should take care of. You contact the lenders and offer a settlement on the debt. Another year or so go by and you get your hands on a credit card with a high interest rate and low available balance. You pay this bill meticulously, and then eventually get a car loan at an embarrassingly high interest rate. You pay this bill meticulously too.

Years go by and you continue to pay your bills as scheduled, and you start getting offers for better credit cards and loans. Though it took some time and effort, by the time you hit your early thirties your credit score is great and you’re ready to get a mortgage loan at a premium rate.

Yes, it takes time to build your credit back up, but always keep this in mind: You are not stuck with your current credit score forever. If the thought of spending years correcting your past mistakes seems like too much effort, just ask a parent how quickly a few years go by. The parent will probably respond with this: “A few years can go by in the blink of an eye.”

If your credit is wrecked, start taking the small steps now to fix it. Years down the road when you can march into a bank and expect the best interest rate on a loan they have, you’ll thank yourself for putting forth the effort.