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Wednesday November 20th 2019

The Basics of Building Good Credit

People have been trying to build their credit since before the recession hit. A number of people ran their credit into the ground in the years before the economy took a tumble and a good many did so afterwards out of necessity. During these years thousands of teenagers graduated into adulthood to find they had no credit at all. Luckily, the credit building basics are the same whether you are starting with bad credit or no credit.

In order to start building your credit you need to limit the number of credit cards you possess. Until you have good credit you should only have one credit card. Having a bunch of credit cards at once is a bad mark on your credit report. This includes all kinds of credit cards such as gas cards and store cards. The discounts are not worth the hit to your credit. Stick to one credit card to cut down on your temptation to spend and repair your credit one purchase at a time.

You also need to set the credit limit on your card to no more than a thousand dollars. It would be best to set your limit to five hundred dollars but not everyone can handle such a small limit. You can usually call your credit card issuer, which is typically your bank, and request that your limit not be automatically increased as your credit rises. Setting your credit limit low will allow you to handle your payments easier and help you control your spending.

The most important part of building your credit is paying your balance in full each month. If you can do that then you are better off than most people that are already drowning in credit card debt. Paying your balance in full each month will show creditors that you are responsible in paying your monthly balance regularly. This is what ultimately leads to an increase in your credit score and makes your life a lot easier. You may find this easier to accomplish by only using your card to purchase things you can’t use cash to pay for or by only putting something you pay regularly on your card each month such as a phone bill.

As a final note, stay away from free offers that come with credit card applications. You may find the free stuff enticing and think you can simply cancel your credit card afterward, however; doing so will result in a hit to your credit that isn’t worth the free pizza or t-shirt. Unless it is a free car don’t fill out the application unless you plan to keep the card. Follow the aforementioned pointers and you are sure to build up good credit in no time.

Financial Education and the American Student

Finances are a sore subject for a good majority of Americans. Full grown adults have little clue how to handle their finances on a daily. This is a contributing factor to the slugging economy we are faced with today. The problem can be relieved through simple education. In fact, public and private school systems across the country have begun mandatory financial education in high school in the hopes that more of the next generation will become financially conscious as they grow into adults.

Financial Education Programs

This is not a new concept. Some states have been implementing mandatory financial education for a number of years and more are joining the list each year. In 2007 a survey indicated that seventeen states required their high school students to take a mandatory economics class in order to graduate. A recent survey has found that now twenty-one states require an economics course in high school. The number of states requiring a personal finance courses has increased from seven to thirteen. Thirty-four states now have personal finance content standards. This is up from twenty-eight. Five states now require an entrepreneurship course in order to graduate as well.

Why Aren’t Kids Learning?

All this extra education doesn’t seem to be working though. Financial literary test scores have not increased in the last decade. The reason why kids are having a hard time learning the content is unclear. Many people believe that the children are fully capable of understanding the material; educators are simply unable to teach it well. Only thirty-seven percent of teachers can even say they understand the material. This is the ratio of teachers who have taken even one personal finance course in college. Only twelve percent of teachers have even bothered to take a course on how to teach personal finance to kids.

The general consensus is that teachers are more concerned with their own financial conditions rather than teaching their students. Most teachers did not get into teaching for the purpose of teaching kids how to balance their checkbooks. They have little desire to teach finance to their students.

Take Responsibility for Your Child’s Education

Our education system has been falling behind for years. It is no secret that we are far from the best country in education. Fifteen year old students were out performed and scored lower than twenty-three other countries and education systems in mathematics. The same students ranked nineteenth out of sixty-five in science. Studies have shown that the average American kid is at the bottom of the barrel in terms of received education not just in finance but across the board. The education system is failing our children. As parents, it is up to us to teach our kids about personal finance. Otherwise, they may fall victim to the same poor financial practices that plague our generation.

Zero Percent Credit Cards are Back

Consumers with credit scores of 720 or higher may have an extra reason to celebrate this Christmas season. Zero percent credit cards are back and better than ever with many of them lasting for up to twenty-one months. That is a drastic increase from the fifteen month zero percent periods of last year. Initially these zero percent credit cards look like a blessing from above but this blessing is not for everyone.

Zero Chance Getting Zero Percent on Poor Credit

If your credit score is below 720 then the chances of you receiving a zero percent credit card is about the same as the card’s initial APR; zero. Credit card delinquency is down twenty-six percent from last year alone. Credit issuers are beginning to target prime burrowers in an attempt to increase profits as delinquency rates continue to fall. Unfortunately, this leaves out those whose credit scores were hit hard during the recent recession.

If your credit is better than 720, take a serious look at zero percent credit cards. Just because your credit score is so high doesn’t mean you are completely free of credit card debt. However, right now is a great time to transfer your debt to a zero percent credit card in order to save hundreds of dollars due you would normally pay due to interest. Twenty-one months without interest is a lot of money saved and a nice security net should you run into tough times and miss a payment during the promotional period. Zero percent credit cards don’t stay at zero forever but two years is a nice time to help get your finances in order.

The Catch

However, there is a catch. Transfer fees have increased to three to five percent no matter what company you transfer with. Which means you would have to pay up to two hundred and fifty dollars to transfer five thousand dollars. Transfer fee limits are, for the most part, a thing of the past.

A few card issuers offer a limit of only paying fifty dollars no matter what the transfer balance is but there is usually an annual fee or other catch that makes them not worth the trouble. Also, after the promotional period ends you will end up being charged the normal amount of interest for the entire balance that is left over. Meaning whatever you have left will be charged the same amount of interest it would have normally acquired during the twenty-one month period as soon as the promotional period is over.

Whether this is truly a good financial decision for you depends on your finances and deals you are offered. Zero percent credit cards are definitely worth another look.

Find Hidden Fees Before You Fly

Hidden airline fees have become a fact of life. Simply buying a ticket and boarding a plane is, for most people, no longer enough to fly from one place to another. Now when you go to the airport a metaphorical line of airline employees have their hands out from the moment you walk in to the second you finally walk out and into the town or city of your destination. If you’re not careful you could end up out a couple hundred dollars before you even land in your vacation destination. The following are just a few hidden airline fees to avoid.

Better to Book Online

Most airlines now charge extra if you don’t book your flight online. US Airways will charge you an extra twenty-five dollars to book a flight over the phone and an extra thirty-five dollars should you have the gall to book your flight in person. However, this isn’t a gigantic inconvenience for most of us that order and book everything online now. Yet should you choose to book online you may be charged an extra fee for paying with a credit card. A nice catch 22 created by airlines to catch you unaware with your wallet out.

Sending Unattended Kids

Unaccompanied minor fees have become outrageously expensive. Having been an unaccompanied minor on a variety of airplane flights during my youth I can assure you that the flight attendant does little more than show you where to sit before takeoff and where to exit afterwards. However, round trips for two unaccompanied minors can cost an extra three hundred dollars depending on the airline.

When you book your flight, make sure you are certain that you will be able to travel on the date you book. Should you decide to change flights you could be charged anywhere from fifty to three hundred dollars extra. The only airline that doesn’t charge extra is Southwest.

“No Hidden Fees” No More!

Southwest had a “no hidden fees” commercial campaign about two years ago. It was so successful, that many consumers still remember it. The problem is that two years ago things were different.

Now, even Southwest charges extra fees. For example, Southwest charges $75 to bring small animals onto the plane. Southwest has begun charging $25 for unaccompanied minors and $50. Southwest has even begun taking $10 for people who want priority seating. Because Southwest does not assign seats, you would normally have the luck of the draw, or need to arrive early. This fee lets you get to the front of the boarding line so long as you arrive before boarding begins. So much for no hidden fees.

If the Fees are Hidden, How do You Find Them?

Save yourself some money and take a deep look at the possible extra fees you may encounter before you show up at the airline terminal. Not all of them are obvious and some can’t even be found on the airlines’ websites. The best place to uncover them is at online forums for travelers.

Preparing Your Loved Ones for the Worst

In most households, one spouse takes care of the finances and the extent of their discussion about their personal finances with their spouse are limited to occasional “can we afford this” questions and answers. Many couples prefer to conduct finances this way in order to stave off potential arguments about their finances and because some spouses just do not care to be concerned with the ins and outs of their family’s finances. However, should the financial guru of the family pass unexpectedly, the other spouse can be left in financial chaos.

It’s a Tough Topic

Thinking of unexpectedly passing can be a hard thought to swallow, but you should not let fear stop you from preparing your spouse in the event of your death. Being on the financial side of the relationship, you need to make sure your spouse at least understands personal finance basics in the case of your unexpected demise and what your family’s financial standing entails.

This can be accomplished a variety of different ways, but there are two popular choices that can get the job done. The first would be to sit down and get your spouse involved in your family’s finances. Share every financial decision and all pertinent information in order to ensure they know everything that is going on. Should he or she not wish to do this, you can decide to write a letter with all the financial he or she would need in order to continue without you.

Gather All Financial Information in One Place

Whether you decide to talk things out or write a letter, you need to make sure your spouse understands and has all the knowledge he or she needs. This includes account numbers and any information he or she could possibly need in order to access all your family’s investments and assets.

Your spouse will need a list of all accounts, and who is assisting in your estate planning, insurance agents, mortgage officers, and any other important people that are a part of your family’s financial security; any safe deposit boxes and how to access them; and finally, a list of all expenses including mortgages, phone bills, car payments, etc. Your spouse will need to know every possible detail. Include anything you think they could possibly ever need to know.

Keep it Up to Date

After you have everything in order, you need to make sure you keep it all up to date. This is especially important if you choose to leave everything in a letter instead of telling your spouse about everything you decide to do. Finances change over time, accounts get opened and closed every day, agents get fired and new agents get hired, a list of old account numbers and contacts helps no one. In such a difficult time, you do not want to leave you family any worse than they already will be. The death of a spouse is hard enough. Don’t leave your family open to financial insecurity as well.

Is it Time for a Flat Tax?

Various politicians and political groups have attempted to implement a flat tax numerous times in the past. Ideas on the implementation of a flat tax system that would simplify and equalize the taxes we have to pay each year have been produced recently and will continue to be brought up in future generations to pass. The simple idea of a flat tax sounds like a great idea to a large number of people and is actually a great way of taxation in practice. However, when it comes to actually implementing a flat tax in America, things become much more complicated than they originally seemed.

Getting a Simple Tax System Would be Complicated

Getting rid of the local taxation system and implementing a flat tax each year sounds like a great idea but what would this flat tax include? We pay multiple forms of tax each year. We pay income tax, social security, Medicare, payroll tax, businesses pay their own set of taxes, and the list goes on and on. If we were to implement a flat tax would it include everything or just certain categories?

If you think you have the answer, it would behoove you to realize this is putting it simplistically. There are a large number of factors included in the tax system we have now for each different tax that has to be paid. How much we are actually being taxed now has to be taken into account when trying to implement a flat tax. The government does not want to start bringing in less than it does now and people do not want to start being taxed more. To say finding equal taxation ground is hard is an understatement.

Special Interests

Then there are tax breaks. There are too many special interest groups lobbying to keep their tax breaks. Politicians are not going to just take these away to lose votes. You need to realize that everyone is out for him or herself when it comes to taxes and their finances in general. No one wants to pay more and everyone wants to pay less. Which means, starting a flat tax at all is going to ruffle feathers on someone somewhere? It cannot be avoided.

Despite all the political semantics involved, there is a single nail that currently puts to rest any possibility of a flat tax being implemented in the near future. That nail is called the economy. In all the talk about implementing a flat tax, how many people have thought about the repercussions it would have on the taxation industry?

Economic Damage from a Simpler Tax Code?

The Internal Revenue Service would either be greatly reduced in size or no longer necessary at all. Tax preparers and organizations would no longer be necessary without laws and guidelines to interpret. With a flat tax, figuring your taxes would come down to simple multiplication that a grade school child could do. Thousands of people would lose their jobs. The hit to the economy would be disastrous, especially during the economic times we are currently facing. Implementing a flat tax now would be like shooting ourselves in the foot. Neither the country nor the economy is prepared in the slightest for the implementation of a flat tax at all.

Still No Unemployment Extension

Some depressing news came for those on unemployment. The extension that would have pushed unemployment benefits has been shot down. The extension would have lasted until February, which would have increased an already record-breaking term of unemployment extensions for the United States. At the moment state funded unemployment lasts for 26 weeks at which time federal unemployment takes over for another 73 weeks bringing the total length of unemployment benefits to 99 weeks. The previous record of 65 weeks, which took place during the recession in the middle 1970’s, was shattered months ago. Congress was looking to increase unemployment due to the economic times but could not come to a compromise.

Unemployment Extensions During the Recession

Over the past three years around $319 billon has been spent to cover unemployment benefits. The Republicans shot down a bill asking where the money was going to come from. The bill came close; getting 258 of the 275 votes needed to pass. Roughly four million people are expected to be cut off from unemployment before the end of the year, which could make the holidays a very trying times for families across the country.

Emergency Spending May Still Come Through

This is bad news considering unemployment continues to rise. So many people losing unemployment at once is cause for concern for the overall economy’s health as well. The economy is expected to lose close to eighty billion dollars because of lawmakers’ failure to extend unemployment before the November 30 deadline. Many of the people receiving unemployment spend the money as soon as they get it in order to covers bills and much needed supplies, such as food. This is an immediate injection made each month into the U.S. economy. This could cause a crippling blow unless Democrats can win current arguments that an unemployment benefits extension would fall under emergency spending. This would mean that they do not need to offset the spending with savings elsewhere.

A Question of Motivation

The current unemployment rate is 9.6%. About 8.5 million people that belong to that 9.6% are currently receiving unemployment benefits. Many of those opposed to the extension believe extending unemployment only assists in nurturing a lazy attitude in people that are receiving unemployment benefits. The theory is that giving them more time to find a job will only make said beneficiaries less prone to actually search for one. However there is much skepticism facing this viewpoint due to the record breaking unemployment rates and extreme competition in the job market.

Democratic lawmakers are scrambling to pass a bill before Republicans take over the House in January. They fear the chances of passing an extension with the majority of the House Republican will be impossible. The original bill was meant to increase unemployment benefits for another year, but was shortened to three months in order to make the bill easier to pass. Unfortunately shortening the bill did not have the desired effect. The struggling economy is nothing new. The federal government has been arguing over how to fix the economy for a few years now and it is obvious that the economy is not going to be fixed for a while.