Personal Finance Advice

The best personal financial budget allows for some charitable giving.  If you manage your finances well then chances are you have enough money to give some back to a worthy cause, and as a bonus you might be eligible for additional deductions when tax time rolls around.

Just like with any other aspect of your personal finances, you want to make sure that the charity you give money to is using the money in the most effective way.  After all, you work hard for your money so why would you give it to a charity that squanders it away on exorbitant administrative costs and other expenses instead of putting the majority of it toward the cause you’re trying to contribute to?

Follow this guide when trying to decide which charity to contribute money to:

1.  Choose a charity you are actually passionate about.  Be selective about the charities you choose to give to.  There are so many charities available - all of which are looking for money - so sometimes it can seem like a daunting task to choose which ones you want to give money to.  Narrow down the prospective charities by choosing ones that do work in a field you are interested in.  If you feel compelled to give to the poor, give money to a homeless shelter.  If you are passionate about animals, contribute to the local Humane Society.  If liberal arts are your passion then send contributions to a community theater.  There is no end to the potential charities that will gladly accept your donations.

2.  Make sure the charity is non-profit.  Some for-profit organizations do a pretty good job of masking themselves as non-profit, whether intentionally or not.  If you give money to a for-profit organization then your dollars may not be used in a charitable way and the donation may not be tax deductible.

3.  Choose charities where your money will go to the cause.  Some charities work more efficiently than others.  Choose a charity where the greatest percentage of your donation will go directly to the cause as opposed to administrative costs and advertising dollars.  Although it’s not easy to find many charities to choose from where 100% of the donation goes directly to the cause - charities have operating costs just like any other business, after all - you shouldn’t give money to charities who are going waste the majority of your donation on other expenses.  Most charities list the percentage of donations that go toward administrative costs on their websites or within literature they distribute.

4.  Choose a highly rated charity.  Not all charities are created equal, and unfortunately there are some charities that aren’t very charitable at all.  The vast majority of charities are actually working toward helping a cause, but there are some so-called charities that don’t do much more than line their own pockets.  Before contributing to a charity - especially if it is one you have never heard of before - check it out through the Better Business Bureau.  If someone has filed a complaint about a certain charity you’ll find out about it using that website.

5.  Get involved.  If you really want to get a glimpse at how charities use the contribution dollars they receive then consider spending some time volunteering with the charity.  You’ll see first hand how the money is used to help whoever the charity is supposed to help.

Be sure to give something.  Even when money is tight you probably have the ability to give at least a few dollars to a worthy cause.  Do it to help make the world a better place or do it for the potential tax deduction, but just be sure that you do it.

You’ll find many different opinions from a wide variety of financial experts when it comes to paying off your debt.  If you have several different accounts to pay off then you will probably encounter dozens of ideas for how to pay it all off.  Should you consolidate the debt? Should you settle the debt? What is the best way to pay off your debt when you decide once and for all that you have had enough?

There are two main schools of thought when it comes to paying off several accounts: The Debt Ladder and The Debt Snowball.  Both methods involve prioritizing your debt and aggressively paying it down one account at a time, but they differ when the decision needs to be made as to which accounts to start with.

Debt Laddering:  This involves making minimum payments on all your accounts with the exception of the one account that has the highest interest rate.  No matter what the balance of this account, it becomes your main priority and you are supposed to aggressively pay this account down until it has a zero balance.  You then move on to the remaining accounts and aggressively pay down whichever one of these has the highest interest rate.  You keep going on until every one of your accounts is paid in full.

This method makes a lot of sense mathematically.  Since many people pay a lot more in interest charges than they realize, by attacking the account with the highest interest rate you’ll save money in the long run.

Debt Snowball:  With this method you aggressively pay down the account with the smallest balance with no regard to interest charges.  All other accounts receive the minimum payment each month while the smallest account is paid off quickly.  Once this account is paid in full, you move on to the next account with the lowest balance of the remaining debt.  You methodically eliminate accounts until you reach the account with the highest balance, and then you throw all your extra money toward this account until it’s paid off.

This method makes a lot of sense psychologically.  By first paying off accounts with small balances you get a taste of victory quicker than if you pay off debt using another method.  This is a great method for people who need to witness progress in order to stay motivated.

Which method will work best for you? Choose the method that makes the most sense in your own mind.  If you can’t shake the thought of the mathematical benefit of debt laddering then use this method, but if you know in your heart that you won’t stay motivated unless you use a debt snowball then go with that one.  Really, there is no one correct way to pay off your debt as long as you eventually reach the preferred end result: zero balances.

Many people argue that there is nothing constant in this world (except, of course, for death and taxes), so why should your credit limit on your credit cards stay the same all the time? The fact is that your credit limit will probably fluctuate greatly depending on how you use your card and how efficiently you pay your card on time.

If you pay well and use the card a lot, you can expect an increase eventually.  Once you prove to your credit card company that you’re a good customer they’re going to consider increasing your limit.  What is a good customer? It’s someone who not only pays monthly bills on time every time, but also who uses the card on a regular basis.  If you don’t carry a balance from month to month you may not get the same attention from your credit card company.

It may surprise you to find out that credit card companies also take your other accounts into consideration when deciding to increase your credit limit.  They may periodically run a credit report on you to see if you’re handling the rest of your finances as well as you handle your credit card, and if everything looks good then they increase your limit.

The funny thing is they don’t call you and ask if you want an increase in your credit limit; they just do it.  Sometimes they’ll send a letter in the mail to you congratulating you on your timely payments and announcing that you have earned a higher credit limit, but other times you’ll take a look at your statement and notice the increased limit and think to yourself, “Have I always had such a high credit limit?” Don’t be surprised if you experience more than one credit limit increase during the life of your card if you always manage your payments well.

If you don’t pay on time then you may find your limit decreased.  When you send payments in late, or miss them altogether, your credit card company starts to doubt your ability to pay.  Not only will you see your credit limit decreased, but you might wind up with a higher interest rate in addition to the inevitable fees associated with late payments.  You might pay your credit card on time like a champ, but if you get behind on other payments your credit card company might review your credit report and decide to decrease your limit to avoid the potential for you getting behind on payments to them.

In other words, it’s better to keep up on your payments to avoid all sorts of trouble.

Do you want an increased limit? As long as you have the ability to stay away from maxing out your credit card then an increased limit certainly can’t hurt.  After all, available balances reflect well when it comes to your credit score, and it’s always nice to have the funds available if an emergency were to arise.  Then again, if you are the type of person who enjoys impulse shopping and usually winds up maxing out credit card balances then a suddenly increased limit might be a dangerous situation.

If your credit limit gets so high to where you’re uncomfortable with having so much money available to you, contact your credit card company and ask them to decrease the limit.  Although credit card companies don’t get this request often - and they certainly don’t like to do it - they usually would rather decrease the limit instead of losing you as a customer.