Let's Talk Money

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...