Farnoosh Torabi's Blog, page 61

#AskFarnoosh: All Things Credit!

This week’s #AskFarnoosh addressed a round up of credit-related questions. From closing accounts to establishing credit to qualifying for a mortgage.

As always, please keep your questions coming. You can leave questions below, Tweet, Facebook or email me.

Question from Leanne:

I am 31 and have never had a credit card….ive applied but the 3 credit places say i have a “0′ score what does that mean? and how do i change it?

Hi Leanne,

A “zero” score basically means that you have no history of establishing credit – whether through credit cards, car loans, mortgages or student loans.

The tricky thing here is that you often need credit – or a credit score – to earn the right to borrow. That, or you may need to work with a cosigner.

A better alternative? Consider opening up a secured card to establish credit, which can overtime help you open up a real credit card. A secured card is like a credit card on training wheels and perfect for those who need to establish credit or recover from bad credit. How it works: You load the card with your money – say $500 – and then proceed to use it as if it were a credit card, paying the balance every month. After six months to a year of good performance, you may get upgraded to a real credit card. You can shop around for them at local credit unions and banks. Choose ones with low fees. The folks at WiseBread.com and NerdWallet.com offer nice breakdowns on some of the best secured cards on the market.

Question from Hector:

My wife and I have credit card debt about $25,000. We are now looking to buy our first home. Should we pay off our debt first before looking for a new home? We are in our 30’s and have about $15,000 in savings. What should we do?

Hi Hector,

Yes, definitely do what you can to lower your debt prior to getting qualified. Keep in mind that the average household credit card debt in this country is about $16,000, according to the Federal Reserve, so try to – at least – get below that. In order to qualify for the best mortgage with the best rates, banks want to see that you have a clean balance sheet, which includes little to no credit card debt and savings, as well as a great credit score (740 or better is typically worthy of the lowest rates) and steady income. Just take some time to work on chipping away that debt – it will pay off! Good news is, interest rates are expected to stay low at least for another two to three years!

Question from Michael:

Hey Farnoosh! I recently paid of 2 credit cards (yay me!), but don’t know if I should keep them open or close them. Which is better for my credit score?

Hey Michael,

It’s better for your credit score to keep them open and use them sparingly (e.g. charging a utility bill and paying it off each month). Keep the cards active enough so that the issuer doesn’t shut them off for lack of activity. Your credit score takes what’s known as your “credit utilization ratio,” which is equal to the amount of debt you’re carrying on all your cards divided by your total available credit. The higher the ratio, the worse for your score. By closing an account, you effectively reduce your amount of available credit, which has the potential to raising this ratio and lower your score.  (By the way – a credit utilization of 10% of less is ideal).

Outsmart Your Fellow Traveler

Traveling is hard enough with all the logistics, headaches and lately rising fees. You can, however, outsmart your fellow traveler to save on planes, trains, automobiles – even hotels – with our top 10 insider travel tips.

Read the article.

There are lots of ways to travel smarter and save. Got any more?  Connect with me on Twitter @Farnoosh, and use the #FinFit.

Reasons to Reconsider Your Commute

[image error]Increasingly, folks are spending an hour or more a day on their work commute – either in their cars, on a train or bus. It begs the questions: what transportation offers the best use of your time and money?

According to the American Public Transportation Association, the average household spends 18 cents of every dollar on transportation costs — for most of us, 94% of those funds are going towards the purchasing, maintenance, and operation of our vehicles.  However, the APTA says, for households that favor public transportation, there’s the potential to save over $8,400 every year!

With a number that impressive, I decided to do a little digging into my own commuting conundrum.  From Queens, New York, to Upton Long Island, my partner’s trip into work is roughly 65 miles, a mega-journey no matter how you slice it. After factoring in his car’s miles per gallon, or MPG, I found that the APTA is right: public transportation does cost less than driving.  However, it nearly doubles his commuting time – not to mention he’s bound by the train schedule and can’t come and go from the city as he pleases.  The decision to take public transportation is not exactly a “no-brainer”.

But: when you factor in one of the most important elements of all, his time, I discovered it definitely pays to consider the productivity of the time spent commuting.  I found an online calculator that helps break it all down (I just swapped “bus” for “train” in the tool) and here’s what the math looks like for us:

Converting Miles Per Gallon to Gallons Per Hour

A typical car’s MPG is about 28 on the highway, but you can calculate this number yourself the next time you take a roadtrip by filling up your tank, then taking your mileage and dividing by the amount of gas it takes to refill the tank – that’s your MPG.  Or, look up your car’s fuel economy here.  We’ve calculated our 1992 Honda Civic’s mpg to be an average of 26; I divide by 55mph to find the gallons per hour.  55mph divided by 26MPG = 2.11 G/h.  That is, at the optimal driving speed, my partner burns through 2.11 gallons per hour, or g/h.  Note if our car got 38 MPG, it would only burn 1.45 g/h.

Next, I multiply that by the cost of gas, or dollars per gallon. In Queens, New York right now, it’s around $4.19.  (The current national average is $3.86 at time of publishing.)

So, 2.11/gph x $4.19 / gallon = $6.06 /hr, which means every hour he drive costs us $8.86.

Driving

Driving takes one hour, fifteen minutes one-way by car without traffic, or a total of 150 minutes per day.  It would be a good guess to say the commute costs around $22.16 per day for 2.5 hours on the road – but, that’s with ZERO productivity (or at least, extremely limited productivity, save for phone calls via a hands-free device, or catching up on audio books, etc).

Public Transportation

This commute, on the other hand, costs $334 for a monthly rail pass. (Note you should always factor in the cost of a monthly pass, not individual fare.  In New York, for example, buying a monthly pass saves 50%, based on 42 one-way rides per month).  That’s roughly $8 per ride. 

The train commute is typically 2 hours one-way, door-to-door, or a whopping 240 minutes per day.  That’s about $16 per day for 4 hours… WITH added productivity (working, emailing, reading, knitting, watching media, sleeping, etc).

The Verdict

When broken down like this, it means that it still makes sense for my partner to take the train instead of the car; in fact it saves us around $100 dollars a month for him to do so. But it also makes sense from a productivity stand-point.

3 Keys to Crowdfunding

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The Internet has forever blurred the line between consumers and creators. And now with people more connected than ever, it’s gone one step further by allowing consumers to act as investors, helping to support the work of others with just the click of the mouse.

It’s called crowdfunding: the collection of small donations pooled to fund otherwise expensive efforts. It’s a fundraising strategy made effective with the help of social media networks and sites dedicated to connecting the ideas of artists, writers, start-ups and nonprofits with individuals willing to support them.

Last year, crowdfunding platforms were responsible for raising nearly $1.5 billion and funded more than 1 million campaigns, according to a May report from Crowdsourcing.org.

 

If you’re a budding entrepreneur or artist, here’s some advice on how to ride the crowdfunding wave and raise some cash:

1. Be Realistic

Perhaps the best thing you can do for a successful fundraising campaign is to set a feasible goal and deadline. Sites like Kickstarter have all-or-nothing provisions that will return pledges if you don’t meet your goal, so plan for success by taking inventory of your needs. Make cuts where you can while still covering the basic needs of your project.

2. Match Your Project With the Right Site

There are tons of options if you’re looking to get a bright idea off the ground, but many of the 150 platforms analyzed by Crowdfunding.org specialize by type of project. Petridish for example exists for research scientists,  Razoo is exclusively for registered nonprofits and charities and for entrepreneurs there’s Rock The Post. Most of the sites operate the similarly. You post information about your project along with fundraising goal then share it through social media and wait for support to start rolling in. For their help, the sites collect a small commission (usually less than 5%) but offer easy-to-use tools to give and receive donations. Inc.com, Forbes and Mashable all have handy lists of crowdfunding sites with brief comparisons to begin your search.

3. Engage Donors 

In crowdfunding your project, the sky’s the limit if you have a solid game plan. Donations could come from your best friend or a perfect stranger in any amount. For maximum exposure, share as much as you can about your project. On Petrdish, researcher Erica Hermson needed $2,500 to study the best method to lure wild cheetahs. Hermson exceed her goal by more than $700 by outlining her project, detailing why it matters, potential discoveries, how the money would be used and a little about herself. This engaging strategy allowed donors to be a part of the work. Consider these questions in your fundraising. For a bonus, create updates throughout the process with creative videos or messages to energize your backers.

Photo Courtesy, Tax Credits.

5 Places to Retire on Social Security Alone

It’s sometimes hard to imagine life in retirement, but picture living on Social Security alone. We narrowed down five American destinations where it is possible to live on a simple Social Security paycheck. Read the article here.

Strange – But Easy – Ways to Make Extra Money

Visit NBCNews.com for breaking news, world news, and news about the economy

It goes without saying that we could all use some additional income these days. The trick is finding the time and figuring out where to start. Check out my latest segment for the Today show then read my post for Today’s Life Inc. blog for a few options to earn extra income.

Strange – but easy – ways to make extra money

Visit NBCNews.com for breaking news, world news, and news about the economy

It goes without saying that we could all use some additional income these days. The trick is finding the time and figuring out where to start. Check out my latest segment for the Today show then read my post for Today’s Life Inc. blog for a few options to earn extra income.

#AskFarnoosh: How to Trace Lost Money?

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In our inaugural #ASKFarnoosh column (which, very sorry, was supposed to go up Friday, but I got terribly busy!), I tackle a viewer’s question about how to trace back money he’s owed by an old employer.

Hadi asks:

I need assistance to claim funds that I believe are owed to me by a previous employer. After almost three years of searching I have been unable to locate. Can you recommend an individual or company that may be able to assist me in this matter.

 

 

Dear Hadi,

Three years is a long time! While employers are not required by federal law to give former employees their final paycheck right away, the general statute of limitations is about two years. So you are way overdue! Your first resource – if you haven’t checked with them already – should be The Department of Labor.  It’s a great user-friendly resource for detailed information on the rules around when and how you should be paid. The DOL is also where you can file a complaint.

According to the Fair Labor Standards Act (FLSA), you have a few methods for recovering unpaid wages.

(1) The Wage and Hour Division may supervise payment of back wages.

(2) The Secretary of Labor may bring suit for back wages and an equal amount as liquidated damages.

(3) An employee may file a private suit for back pay and an equal amount as liquidated damages, plus attorney’s fees and court costs.

With all of this, patience is key. “The process can be slow. If you have a serious problem, however, you might need to seek the help of an attorney, specifically someone who specializes in benefits and labor law,” says attorney Roy F. Harmon with Harmon & Major, P.A. located in Greenville, South Carolina.  And before you hire legal rep, give your previous employer one last chance. “Armed with the facts, you can always call up your old employer and make a request that they send your money. It could persuade them to move more quickly before ever having to seek legal action,” says Harmon.

Get the Job: Clean Your Online Profile

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Anyone who’s typed their name into a search engine knows that personal information can pretty much pop up anywhere, in more than a dozen search categories. But did you know that if this info is inaccurate, or simply unflattering, it could compromise your ability to land a job? Here are ways to protect your online footprint.

The Hidden Cost of Everything

 

[image error]We all know what we pay for things — the price tag says so!  But what we spend at check-out is not really the true cost of ownership.

From groceries to appliances to clothing — not to mention cars, electronics and even second homes — the amount you’ll spend fueling, installing, protecting, cleaning, repairing, storing or even adding accessories to your new purchase will only be compounded over the lifespan of your new item.

Here’s a breakdown of a few common household purchases, big and small, that add up over time:

Pets  

According to Mint.com, the cost of owning a dog is roughly $580 to $875 a year, a cat is about $670, and even fish cost at least $35 a year. This doesn’t include one-time expenditures such as your pet’s shelter (kennel, aquarium, etc), collars/leashes, or get this — destruction costs, like when your pet rabbit chews through her 12th extension cord or when Fido failed to get the memo that your favorite recliner is a “off-limits.”.  Many cats and dogs can live 20 years or more so, factor this into your finances before you take on pet ownership.

Cars

Just because you have enough in the bank to buy a new or used car doesn’t mean you can afford the expense of insurance, license plates, registration fees, and, of course, all the gas and maintenance your car will require. In addition, the type of car you purchase can directly influence costs of ownership. In other words, the used, gas-guzzling SUV you got at a bargain may end up costing you more in the long run than a new car getting better gas mileage.

Clothes

You may not think your wardrobe has hidden costs but when you consider that, according to Proctor & Gamble, women spend on average $1500 on dry cleaning alone – you may want to check care labels before check out.  That said, being frugal with your fashion has its financial consequences since poor quality clothes will need to get replaced more often than higher-quality threads.

Credit

When you use your credit card at the register, on top of the considerations listed above, you’re also incurring interest fees ranging on average from 10-23%. Carrying balances each month most certainly increases the total cost of ownership of whatever it is you just bought, so before reaching for your credit card, consider the long-term impact to your finances.

Finally, a parting thought for those of us knick-knack lovers, pack rats and collectors: when you accumulate a lot of stuff, you have no choice but to house and store it all.  Could that mean that you one day need an additional storage unit, or even a bigger home, to contain it all?  (The U.S. self storage industry raked in more than $22 billion in sales last year, FYI)  There’s even costs associated with disposing of that stuff so no matter what, make each new purchase with a plan in mind for paying for it – today and in the future.

Photo courtesy of Fotolog, Inc.