Let's Talk Money

I just came back from traveling Monday.  I hope you all did not miss me too much!  I decided to take a trip to DC.  Visiting the many museums has been on my bucket list since high school.  I am a true nerd!  So, for this birthday, I decided to go ahead and cross it off!  But, booking this trip and being able to reflect by myself, brought out some good financial prospectives.  Enough with the backstory, let's begin!

Travel to DC
I have a rule.  Any trip 600 miles or less, I will drive.  This has two purposes.  One, the trip is short enough that I can stomach being in the car for that amount of time.  Two, it saves me valuable money that I can put towards spending at my destination.  So, for this trip to DC, I mapped it from my home.  It was only going to be a 314 mile trip (equivalent to a 5 hour drive +/-) so it passed my "drivable rule".  I also figured I can use my vehicle to get around while in the city but...

I have been filing my own taxes since I got my first job at the age 16.  It blows my mind when friends and family members tell me how they pay an arm and a leg to get their taxes done.  Most people can file their taxes completely free thanks to the federal government!  Did you know that 70% of all tax payers are eligible for their free file program?  Click on the link below to learn more.

IRS Free File Program
To get started, go here. Based on your income, you have the option of filing electronically for free or filling out a form to send in by mail. There are a variety of software offers to choose from. I have personally used TurboTax every year with no issue. Always be sure to go through this page to get the free offer! If you go directly to the provider's website, they may try to charge you. No more splitting your refund with the tax professional!

First Time Tax Self-Filer
With TurboTax, the website walks you step-by-step through the process. It literally...

I have been diagnosed with asthma my entire life.  I never really had any issues with it flaring up.  I can count the times I've had issues on one hand (literally).  This past Friday caught me by surprise.  

I had a severe asthma attack and because I never have issues, I did not have an inhaler or anything on hand.  As I stood in the bathroom trying desperately to catch my breath, I thought about how I got to this point.  My body started to feel weak and I collapsed to the floor.  How did I allow this to happen to myself?  My body decided it was done trying to keep up with me and told me it had had enough.  In this moment, there was nothing left for me to do.  I had been so used to stretching myself so thin and for so long, that it had become part of my persona.  Those who know me, know that I am the "Jill of all trades" but is this what it gets me?  Is this what happens when you are the go-to person for so many people?...

During this time of year, Americans usually fall into one of two camps.  Either they are excited because they are expecting a big tax refund or sad because they know they will end up going.  No matter what camp you fall into, I want to explain why neither scenario is ideal and some tips to keep in mind before next tax season.

How Do Taxes Work?
First, it may help if I explain how income taxes work.  Every working adult is subject to federal and state income taxes.  If you live in certain states like Florida, Texas, or Washington, there is no state income tax and you are just liable for federal taxes.  It may help to think of the government as a corporation.  Income tax is its greatest source of revenue.  It uses those taxes to fund infrastructure projects, medicaid, medicare, food stamps, etc.

When you are hired at a company, one of the first forms you fill out is a W4.  This tells your employer how much federal income tax to take out of each...

The infamous emergency fund!  Most people know what it is but do you have anything saved for a rainy day?  Right now, I have a little over $1000 saved in case I need it.  Why not 3 - 6 months like you read and hear about from financial experts?

Well, the short answer is because I have debt.  Would you borrow money at, let's say, 6% interest to fund an emergency fund?  I wouldn't.  Especially not when it is only making 1.30% sitting in a savings account.  My small emergency fund won't be like that forever.  I will eventually have a 3 - 6 month emergency fund but I won't start working on that until I have tackled most if not all of my debt.  The way the job market is now, if I were to lose my job, it would not be difficult to find another one even if it was something I didn't love to do.  So, I feel comfortable having only a little over $1000 to fall back on.

When I first started out, I scraped up that $1000 starter emergency fund very...

Now that you know what is on your credit, checked your credit score, and called your creditors, let's talk about paying debt down.  There are a couple of different ways to accomplish this potentially monstrous task.  You can either use the snowball method or the avalanche method.  In this post, I will explain how they work so you can make the best decision based on your circumstances.

Lining Up Your Debt
If you have been following the steps in "The Importance of Credit" series, you should have a list of all your debt whether it is handwritten, in a spreadsheet, or in an app.  Everything except your mortgage should be listed.  Don't discriminate!  Car loans, student loans, personal loans, credit cards, all of this has to go!  Can you imagine not having any payments?  Just the thought is overwhelming!  Once you pay off debt, you can invest more, save more, have more money to spend on things you love!  There are a variety of tools you...

Ok, so now we know what's on our credit and our credit score.  Let's clean it up a little!  I want to start with collection accounts since they are the most detrimental to your score.  Never pay anyone to do this for you!  It is pretty simple and I am going to walk you step by step.

1.  Call the creditors - I must admit this is the most daunting task but you have to get it done.  On your credit report, it will tell you who is reporting the debt and their contact information.  This step is just for fact-finding.  You do not want to mention anything about paying the debt.  Remember when I told you collection accounts fall off after 7 years?  Well, if you mention that you will pay, that 7 years will start all the way over!  Keep the conversation short and simple.  The conversation should go something like this:

You: Hello, I was checking my credit report and noticed that (insert company here) was listed.  I wanted to see...

I had to take a quick break from our credit discussion to announce my first student loan debt has been paid in full!  I am super excited!  I am in the middle of my debt snowball (paying debt down in order from smallest balance to largest).  That particular loan started with a balance of $3,832.  It is now $0!  That was my smallest debt, now on to the next!  Woohooo!

Welcome to part two of the money talk about credit!  I highly recommend reading part one first as this post is meant to be a continuation.  So, now that you have pulled your credit report, let's pull our credit score.  There are a few different ways to do this.  When you go to pull your credit report from the three bureaus, they will ask if you want to purchase your credit score.  You do not have to go this route!  I will always recommend the free options first.  Remember in part one when I said you really have hundreds of reports creditors can use?  The same thing goes for credit scores.  The scores are calculated in multiple ways so there may be variances between the scores you or a creditor pulls.

Favorite Option
Credit Karma!  This is my favorite way to pull my credit score.  You can download the app or go to the website.  The site will ask you a few questions in order to pull your score but it is completely safe and...

According to Investopedia.com, credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest.  Now, it would be great if there was nothing on your credit report because you never had to borrow money, but for most Americans, that is definitely not the case.  The goal of this series is to get you acquainted with your credit, the terminology, the importance of paying attention, and how to fix it on your own (you don't need to pay anyone).  Let's get started!

My Story
Before I started this financial journey, I didn't know anything about a credit report or score.  I would get medical bills and never pay them thinking they just went into the abyss after a while.  I figured once they stopped sending me the bills in the mail, they didn't care about them anymore.  So, I went a long as if nothing was happening.  When I was 19, I applied for my...