Buy This, Not That: How to Spend Your Way to Wealth and Freedom

Title: Buy This, Not That: How to Spend Your Way to Wealth and Freedom 

Author: Sam Dogen

Hardcover: 336 pages

Publisher: Portfolio

Publishing date: July 19, 2022

Who is this book for? 

  • Financial Samurai fans looking to learn more.
  • Readers of average economic status who want to learn how to build wealth and achieve financial freedom.

What’s inside this book?

  • The Financial Samurai’s unique approach to money management, which has been absorbed by an audience of 90 million over the past 13 years.
  • The Financial Samurai’s innovative 70/30 framework for optimal financial decision-making.

4 lessons you’ll learn from this book:  

  1. How to tell the difference between good debt and bad debt.
  2. The best way to invest on your own terms.
  3. How to create your own rules for spending.
  4. How to take the guesswork out of financial planning.

4 questions this book will answer for you:  

  1. Can I invest in real estate if I can’t afford to buy property?
  2. How can I build passive income streams that work with my goals and risk tolerance?
  3. What’s the best way to pay down debt?
  4. How do I optimize every dollar I earn so I can maximize my wealth?

What people are saying about this book: 

“Financial Samurai and this book have prepared me for life after basketball! A straightforward guide to live a balanced, financially free life. – Shaun Livingston

“A no-nonsense guide to living your best life now while also ensuring a financially independent future.” – Emily Chang

“A one-of-a-kind book! Bold advice from someone who’s not just done the math, he’s lived it. A must read!” – Kumiko Love

“Step-by-step, chapter-by-chapter, Sam shows how to make optimal money choices that focus on wealth building—not just saving for saving’s sake, but for living life on your terms.” – David Mcknight

Your Turn: What did you think of Buy This Not That? Share your opinion in the comments. 

Cash, Credit or Debit–How Should I Pay?

Q: With inflation soaring, I want to spend my money in the best way possible. When paying for various everyday and occasional purchases, should I be using cash, credit or debit?

A: There’s a time and place for everything. Some purchases should be paid for with cash, some with a credit card, and others with a debit card. Your lifestyle and personality may influence this choice as well. Let’s take a closer look at each payment method and when they should be used.

When should I use cash?

Between P2P payment platforms, mobile payment wallets and the growth of cryptocurrency, the world of commerce is becoming increasingly cashless. In fact, some consumers barely touch cash at all. 

However, there can be times when you’d be better off using cash. First, some gas stations charge less per gallon when the driver pays in cash. The difference is usually modest, up to 10 cents a gallon, but with gas prices soaring, it can add up to substantial savings over the course of a month. Next, if you have trouble sticking to your budget when you shop, it can be helpful to take only the amount of cash you need and leave your cards at home. This way, you’ll be forced to stick to your budget. Finally, some small businesses, like food trucks or independently owned stores, only accept cash payments or offer discounts for paying cash.

On the flip side, there are many disadvantages to using cash. First, cash provides no purchase protection. Consequently, it’s best not to use cash for very large purchases. Next, cash leaves no paper trail and it can make tracking expenses difficult. It’s best not to use cash if you’re trying to get a clear picture of where your money is going. Finally, cash always carries the risk of being lost or stolen. 

When should I use my credit card?

Credit cards are the double-edged sword of personal finance. On the one hand, credit card debt is one of the leading causes of consumer debt in the country. On the other hand, owning credit cards and using them responsibly is a crucial part of one’s financial health. 

In addition to the impact to your credit score, responsibly used credit cards offer two primary advantages: rewards and purchase protection. Using a rewards card for purchases you’d need to make anyway, such as paying utility bills or subscription fees for a service, can help you earn cash back, airline miles or another reward. The second big advantage to using a credit card – the purchase protection it offers – makes it the ideal choice for paying for large purchases or when buying something from a newer retailer. Knowing you can always dispute the charge or even cancel it if the product turns out to be different than expected, can help you shop with confidence. In addition to these advantages, paying with a credit card and making on-time payments can help boost your credit score while making expense tracking easy. 

Ideally, credit cards should only be used to cover fixed or steady payments, such as monthly bills, and for purchases you know you can pay for in full when the bill becomes due. It’s never a good idea to swipe your card for a purchase you cannot pay for today or within the next few weeks. Use your cards responsibly to ensure a healthy credit score and to stay out of debt. 

When should I use my debit card?

In many ways, debit cards offer the best of both worlds. You can always track your spending by reviewing your checking account statement, and you generally can only spend what you have. This helps minimize the risk of falling into debt. In addition, if your card is lost or stolen, you can cancel it and/or close the associated account. 

Debit cards can be a great choice for everyday purchases of any kind. However, since they  typically don’t offer rewards or the same level of purchase protection as credit cards, they may not be the best choice for large purchases, or for paying for products from a new retailer. 

Life is expensive, and you want your money to go as far as possible. Use this guide to help you choose the right payment method in every situation. 

Your Turn: When do you use cash, credit and debit? Tell us about it in the comments. 

6 Ways to Pay Less at the Pump

Just when you think they can’t possibly jump any higher, gas prices start rising again. They’ve long passed the $5 mark in much of the country, and in some areas they’ve even gone beyond $6 a gallon. This means it’ll cost the average American close to $100 just to fill a 16-gallon tank. With prices peaking on so many other goods, the pain at the pump is real.

There isn’t much you can do about the cost of gas, but there are ways you can pay less at the pump. Here are six ways to save on the cost of gasoline.

  1. Use cash

Lots of gas stations offer a discount for cash payments, sometimes up to $0.20 per gallon. This can quickly add up when pumping a full tank. Just be careful to have the cash handy when you need it, as you don’t want to lose all those savings to ATM fees when using machines that are not connected to your credit union.

  1. Use a rewards program or credit card

If you don’t like the idea of carrying around a lot of cash, but you still want to save at the pump, consider signing up for a rewards program or credit card. Tread carefully, though; not all of these programs actually benefit the consumer. Ask these questions about any rewards program or credit card you’re considering before signing up:

  • Is there an annual fee? An annual fee can easily offset any savings you might incur from rewards.  
  • Is there a cap on rewards? Some programs limit the amount of rewards that can be accrued per quarter or year. If the cap is not sufficient for your needs, the program might not be for you.
  • What is the redemption value for each reward point? Actual rewards can vary tremendously by program. Be sure to find out exactly how much a rewards point is worth  to see if it’s actually a good deal.
  • Is this card only good for purchasing gas? Some rewards cards allow you to rack up points with any purchase at a gas station, while others are strictly for fuel only.
  • What are the membership requirements for this rewards card? Make sure the requirements aren’t so rigid or restrictive that you can’t earn enough points to make it worthwhile.

In addition, consider your personal track record with credit cards before signing up for a gas rewards credit card. If you already find it challenging to pay off your balance in full each month, it may not be the best idea to open another credit card. 

3. Check your tire pressure

According to the US Department of Energy, a  well-inflated tire can save you $0.15/gallon by boosting your gas mileage by 3%. Check your tires regularly to ensure they’re always inflated. To make this easier, consider springing for a tire pressure gauge that will automatically monitor the health of your tires.

  1. Use a gas-tracking app

In 2022, there’s no need to search for the gas station offering the best-priced gas. There’s an app for that! Popular gas-tracking apps include GasBuddy, Upside and Waze. Using the gas station conveniently located right near your home or workplace might be easier, but taking the extra time to find one that sells fuel for less can save you a bundle.

  1. Purchase a club membership

If you don’t already have one, this may be the time to buy a club membership. Costo, Sam’s Club and Walmart Plus all offer discounted gas exclusively to members. Of the three, Costco tends to feature gas for the lowest price, up to $0.34 less per gallon than a typical gas station. In today’s gas-crazy climate, that’s a huge difference. Of course, you’ll want to find out how much a club membership will cost you before signing up to join any of these or other club stores to ensure it’s worth the price. Also, be prepared for long lines at the club store’s gas station, especially with spiking gas prices. 

  1. Buy gas at the right time of day

Did you know there’s an ideal time of day to fill your tank? And no, we’re not talking about shorter lines, or even the time of day before prices will change yet again. You can get more bang for your buck if you buy your gas in the early morning or late evening hours, when it’s generally cooler out. If you pump gas during the midday hours, after the sun has been beating down on the gas reservoir all day, the gas has likely expanded. This means you’ll be paying the same price for a less-dense gasoline, which will not last as long. Pump when it’s cooler outside for the densest gas.

It’s sticker shock at the pump these days, but there are still some ways you can save on gas costs. Use these tips to get started.

Your Turn: How do you save at the gas pump? Share your best tips and hacks in the comments.

Step 8 of 12 Steps to Financial Wellness-Know When and How to Indulge

[Now that you know how to spend mindfully, pay it forward, and regularly set aside money for savings, you’re ready to learn how to indulge in the occasional expensive treat–responsibly.]

Many people equate financial health with a life of deprivation, but this is far from the truth. In fact, living a life of true financial wellness means being happy with a lifestyle that is within your means, but does not leave you feeling like you are lacking. Like an overly restrictive diet, an overly tight budget is more likely to become broken.

On the flip side, financial wellness means spending your money wisely and learning how to treat yourself for less – or for free. It means money choices are governed by discipline, and not by emotion. And sometimes, it means telling yourself no.

How, then, do you strike a balance between the two?

Here’s how to indulge responsibly. 

Live with a budget

The first step to financial wellness is knowing where your money is going and how much you actually have to spend. The best way to always have this information is to create and stick to a budget. 

[If you’ve been following all the steps to financial wellness until this point, you’ve already developed and live with a budget. So you know how to stick to it. Let’s take a quick review of this crucial money management tool.]

Create your budget by tracking your spending for three months. Make a list of all your expenses, including fixed, non-fixed and discretionary expenses, and list your income in a parallel column. Tally up your totals and assign a realistic dollar amount to each expense. Going forward, be sure to only spend within the allocated amount for each expense category each month. 

Leave room in your budget for “just for fun” purchases

As you work on building and sticking to a budget, be sure to leave room in your spending plan for the occasional treat. The exact amount will vary by income level, lifestyle and personal choice. However, choose an amount you can easily afford without feeling deprived. 

To ensure you don’t overspend in this area, you can borrow an idea from the money-envelope system and withdraw the designated amount from your checking account at the beginning of the month. Place this cash in an envelope, and use it as necessary. When the money is gone, so is your “allowance” for pricey treats this month.

It’s important to note that the indulgences referenced here are spontaneous buys, or small purchases that aren’t part of your normal budget. Large purchases you have planned for and saved toward for months, or even years, are in an entirely different category. 

Review your savings

Before giving yourself permission to indulge, make sure you are setting aside a percentage of your monthly income to savings. Savings should be an item line on your budget, with short-term savings like an emergency fund in a savings account, holding enough to keep you afloat for 3-6 months if you have no source of income. Long-term savings should be sufficient to support your retirement and any long-term savings goal you may have, like saving for a house or a luxury vacation. 

Choose your “treats”

Everyone’s got their personal vices and their guilty indulgences. Take a look at where your non-discretionary money went during the last month or two. Highlight the more expensive impulse buys and hold them up to these questions:

  • Did this purchase bring me happiness or positive energy the day I bought it? Did that feeling last until the next day? The next week?
  • Did this impulse buy blow my budget?
  • Does thinking about this purchase now fill me with joy, guilt or something else?
  • If I found myself in the same circumstances today, would I make that purchase again?

Here, too, the answers to these questions will depend on your personal set of circumstances and lifestyle. Use the insight you’ve learned about your indulgences to help you make better money choices in the future. 

Lose the guilt

Once you’ve decided how much you want to spend each month on indulgences you can afford, it’s time to let go of the guilt. If you’re spending responsibly and you’ve already fed your savings as well as your future, there’s no need to eat yourself up over an impulse buy you could have done without. As long as you’re keeping these just-for-fun purchases within your budget, and your choices fill you with happiness or positive energy, you can still maintain your financial wellness.

Your Turn: How do you indulge responsibly? Share your best tips in the comments.

Cashing Out: Win the Wealth Game by Walking Away

Title: Cashing Out: Win the Wealth Game by Walking Away

Author: Julien Saunders, Kiersten Saunders

Hardcover: 272 pages

Publisher: Portfolio

Publishing date: June 14, 2022

Who is this book for? 

  • African Americans who find it challenging to build their wealth despite following all the right rules.
  • Anyone struggling with money management and career growth.

What’s inside this book?

  • A roadmap to financial freedom that makes wealth possible despite a broken economic system. 
  • A financial and career path that breaks free from corporate America’s rules so you can build wealth on your terms. 

4 lessons you’ll learn from this book:  

  1. Which goals to prioritize at each stage of your career so you can plan for an early retirement.  
  2. How to talk about money with your partner without every conversation ending in an argument.
  3. Practical strategies to grow your wealth without a large investment of time and energy. 
  4. Why the mantra of “Black Excellence” is an unsustainable form of motivation for building wealth. 

4 questions this book will answer for you:  

  1. I’m following the same script as my white colleagues; why am I only seeing half the results?
  2. Is financial freedom really within my reach?
  3. Why am I always being passed up for career opportunities?
  4. Do I have to sacrifice my time and mental health to maximize my income?

What people are saying about this book: 

“Cashing Out feels like the talk you desperately needed from the big cousins you’ve always looked up to. It’s filled with gems about money, navigating your career and most importantly — relationships — from people who’ve done it successfully. You can literally feel the love and wisdom they’ve poured into every single chapter.” –Anthony O’Neal

“Read this book. Read it for the cool stories. Read it for the cool concepts. But mostly read it because it just might nudge you toward a far freer, richer and more rewarding life.” –J.L. Collins, author of The Simple Path to Wealth

“The ideas in this book have the power to change the wealth trajectories of Black folks everywhere.” –Jewel Burks Solomon

“An honest and encouraging approach, with a dash of tough love, to help you determine what it takes to be financially, emotionally and mentally wealthy.” –Erin Lowry

“Kiersten and Julien know their stuff, but they never put themselves on a pedestal. Instead, they nudge you along to your best financial life like your favorite older siblings, sharing their own vulnerabilities, acknowledging the many systemic barriers that exist, and never making you feel bad for your past choices.” –Tanja Hester

Your Turn: What did you think of Cashing Out? Share your opinion in the comments. 

Don’t Get Caught in a Shopping Scam!

Shopping in 2022 is worlds away from what it was at the turn of the century, or even just a few years ago. According to retail research firm, Digital Commerce 360, ecommerce sales surpassed $870 billion in 2021, a 50% jump over 2019. Online shopping is quick, easy and convenient. 

Unfortunately, though, when a lot of shopping moved online, it also ushered in a wave of scams that are often successful. Some of these scams can be difficult for the untrained eye to spot, and many offer no way for the victim to reclaim their lost funds. Here’s what you need to know to recognize an online shopping scam and avoid being the next victim. 

How these scams play out

There are several variations to the online shopping scam. 

In one version, a shopper will scour the internet for a specific item in their desired price range. They’ll find the item retailing on a site at an attractive price and then proceed to make the purchase. They’ll share payment information, input their delivery address and complete the transaction. Unfortunately, though, the item never arrives on their doorstep. Alternatively, a cheap knockoff of the product will arrive instead of the item they’ve purchased. When the buyer tries to demand a refund, they are unable to reach the seller. 

In another variation, a shopper finds an item online and tries to make a purchase. They’ll be asked to input sensitive information, such as a credit card or checking account number. At this point, the shopper will be unable to complete the transaction and will continuously run into errors on the site. However, the scammers now have their information and can proceed to empty the victim’s accounts, or worse.

In a third version of the online shopping scam, a seller clicks on an ad, or on a site that came up in a Google search for one of their favorite stores. They’ll proceed to make an order, not knowing they’ve actually clicked into a bogus look-a-like site run by scammers. The rest of the scam will follow one of the scenarios described above. 

Red flags

Watch for these warning signs that you may have stumbled upon a shopping scam:

  • Prices are too good to be true. If you find an online offer for a new iPhone retailing at just $450, you’re likely looking at a scam. 
  • The offer urges you to act now. If an offer warns that the bargain prices it’s offering won’t last until sundown, it’s likely a scam. 
  • The seller demands specific means of payment. If an e-tailer insists that you pay via prepaid gift card or wire transfer, opt out. 
  • The website is full of typos and grammar errors. If the site is badly in need of editing, it may be run by scammers. 

Stay safe

Follow these tips to keep yourself safe from online shopping scams:

  • Only shop on safe, secure sites. Check the URL for the lock icon and for the “s” after the “http”.
  • Check the URL for proper spelling of reputable sites. Make sure the URL of the site you’re on matches the authentic URL for that retailer and that you haven’t landed on a spoof site. You may want to save the genuine URLs on your computer for future use. 
  • Avoid clicking on high-pressure pop-ups and banner ads. These are often scams.
  • Pay with a credit card when shopping online. A credit card offers the most protection for your purchases. 
  • Never share personal information with an unverified contact. Don’t input your credit card number or account details unless you’re absolutely sure you’re dealing with a reputable website. 

If you’re targeted

If you’ve fallen victim to an online shopping scam, there are steps you can take to mitigate the damage. 

If you’ve paid via credit card, call the company to dispute the charge. At this point, you may want to consider closing the card and placing a credit alert and/or a credit freeze on your name. Next, alert the FTC about the scam. If the alleged retailer is on the BBB website, you can let them know, too. Finally, let your friends know about the scam so they know to be aware.

Stay safe!

Your Turn: Have you been targeted by a shopping scam? Tell us about it in the comments. 

Should I Buy Out My Lease?

Q: My lease agreement is nearing its end, and I’m getting many offers to buy out my lease due to the current state of the economy. Should I ignore the hype, or is it really a good idea to buy out my lease?

A: With cars in hot demand, and selling at all-time high prices, many lease customers are looking at trade-in values for their vehicles with the intention of buying out their lease. While this can be a smart choice for many consumers, it’s important to consider all relevant factors before making a decision. Here’s what you need to know about buying out your lease.

What is a lease buyout?

Many drivers are confused by the offers they’re getting and the promotions they’ve seen for buying out leases. How is it possible to buy a lease when a leased vehicle, by definition, is essentially a rented car?

First, buying out a lease involves paying the car’s “buyout price” as specified in the lease contract, which makes you the car’s new owner. Second, it’s important to establish that buying out a lease generally makes the most sense when you are nearing the end of your lease term.   Finally, this may necessitate taking out an auto loan to afford the buyout price, just like you might do when purchasing a new or used car at a dealership.  

How can I determine my car’s buyout price?

To estimate how much you’d need to pay to buy your leased car, look for the term “residual value” in your lease contract. This tells you what your leased vehicle is expected to be worth at the end of the term, which may be months or years away. To reach your vehicle’s buyout price, add the residual value to any remaining payments. For example, if your car’s residual value is $25,000 and you owe another 10 payments of $500, the car’s buyout price is $30,000. Of course, the more time left on your lease, the higher price you can expect to pay to buyout.

Will I need to pay any fees in addition to the buyout price?

Depending on your home state, your vehicle’s buyout price may be subject to an auto sales tax. Your lender may also charge additional fees, such as a ‘purchase option fee’. It’s important to know about any additional fees you may need to pay in addition to the buyout price and to 

estimate the total you’ll be paying before deciding to purchase a leased car.

The good news is that you won’t be accountable for the typical lease-end fees, which can include the costs of reconditioning the vehicle for resale, fixing any damage the car may have incurred during your term, and an over-mileage penalty for every mile you may have driven over the official limit.  

What are the advantages of buying out a lease?

Many drivers are opting to buy their leased vehicles now due to the current state of the auto industry. Supply is low and both new and used cars are in high demand. A driver nearing the end of their lease agreement may find it challenging to purchase or lease another car. Buying a car you already lease will give you first dibs at a hot commodity.  

Some drivers are choosing to capitalize on the high demand for used cars by buying out their leases and then flipping the car to a dealership or selling it privately to a new owner. They assume they will earn enough from the sale to help offset the price of a new car. While this may be true, it’s important to remember that it may be difficult to find a new car in a desired model and at an affordable price.

Before taking out a loan to buy out a lease, find out what your car is actually worth. Due to the state of the market, it’s likely worth more than you’ll pay. However, if it’s worth less than the buyout price, you’ll be upside-down on your loan, which is never a good idea. In addition, you may find it difficult to qualify for a loan in an amount that is higher than the value of the asset.  

How do I buy out my lease?

If you decide to go ahead and buy out your lease, you’ll first need to run the numbers as described above to be sure it’s a financially responsible decision. When you have the total buyout price, your next step is to work on financing. You can choose to take out an auto loan or a personal loan to help cover the costs. 

Next, you’ll contact the company behind your lease and complete the purchase. The sale process will be similar to the sale of any car. Finally, be sure to notify your insurance company about the change in ownership of your vehicle. Leases generally require plans with low deductibles and high premiums, so you may want to choose a new plan with higher deductibles and lower monthly premiums.

If you’re looking to finance an auto loan for a lease buyout car, look no further than Advantage One Credit Union! Our auto loans offer low interest rates [see for current rates], easy payback terms and a quick approval process. Call, click or stop by to get started or discuss available options!

Your Turn: Have you bought your leased car? Tell us about your experience in the comments. 

Step 5 of 12 to Financial Wellness: Practice Mindful Spending

Creating a budget and deciding to stick to it is easy; it’s actually carrying through on your plan that’s the hard part. For too many people, financial responsibility ends at having good intentions and real life gets in the way of all well-laid plans. A large part of the discrepancy between what they want to do and what they actually do is caused by their failure to spend mindfully. When every indulgence and impulse buy is just a swipe away, it can be super-challenging to rein in that spending instinct – but it is possible. Here’s how to learn the art of mindful spending. 

Find alternative ways to de-stress

Too often, people claim they need “retail therapy” and use it as an excuse to practice mindless spending. But choosing to turn to shopping for alleviating stress, dealing with a challenging situation or just to escape real life for a bit makes it very difficult to make smart, responsible choices. In addition, the bills, or debt that will likely accumulate as a result will increase stress levels considerably. Instead, it’s best to find another way to lift a heavy mood. Find someone to talk to, take a long, hot bath, go for a jog while listening to your favorite pick-me-up playlist or take up a forgotten hobby again. 

Consider disabling the one-click feature for online shopping

If you’re big into online shopping and often end up buying more than you’d planned, you may want to disable the one-click feature on sites like Amazon. You can also choose not to have your device “remember” your payment information so you have to input it whenever you shop. The more resistance or friction required to complete a purchase, the greater the chances of that purchase being a mindful choice and not a decision you’ll soon regret. 

Leave your cards and cash at home

When you don’t plan on spending any money, don’t take any with you. For safety reasons, you may choose to carry a card with you, but it’s a good idea to keep it as out-of-reach as possible. If you make all your payments with your phone, keep it tucked away, too. Similarly, if you’re hitting the shops to pick up a specific item, bring just the amount you’ll need for the purchase and nothing more. 

Put large purchases on hold

One of the best ways to avoid buyer’s remorse is to put all large purchases on hold. Set your own dollar amount for what you consider to be a large purchase and resolve to wait a while before completing any purchase in that amount or more. For example, you can decide to wait two weeks for every purchase of $50 or more. Delaying a large purchase will give you time to think it over and consider whether you really want to spend this money now. Of course, if you’ve been saving up for a large purchase for a while, you’ve already thought about the purchase and decided it’s worthwhile. 

Avoid temptation

It’s hard to keep telling yourself no when temptation is constantly flashing across your screen. Opt out of social media accounts that get you to spend more than you should, and unsubscribe from email lists. Avoid browsing on brand sites that often trigger overspending and only visit when you need to make a purchase. You can do this in real life as well, being careful to avoid shops that provoke mindless spending. Similarly, when shopping for groceries, keep away from aisles and checkout counters that cause you to overspend and purchase more than you have on your list. 

Mindless spending can be the undoing of the most carefully-crafted budget. Follow these tips to learn how to spend mindfully. 

Your Turn: How do you practice mindful spending? Share your best tips and tricks in the comments. 

Beware of Debt Relief Scams

High debt can be a beast, taking huge bites out of a household or personal budget and destroying any chance of financial wellness. To make matters worse, being in high debt can mean being stuck in a desperate cycle that never ends, as payback is often accompanied by high interest rates that make it nearly impossible to get ahead. Unfortunately, scammers know this well, so they target victims with debt relief scams to get at their money.

Here’s what you need to know about debt relief scams and how to avoid them. 

How the scams play out

Debt relief scams target consumers who may have significant levels of credit card debt using any, or a combination, of the following false premises: 

  • Debt repair service that greatly increases their credit score in a short time 
  • Service to remove negative credit report information
  • Student loan debt reduction
  • Promise to reduce credit card interest rates 

The target, who is desperate to get rid of their debt, will pay any price for these services. The scammer demands a non-refundable upfront fee before getting started and happily pockets this money. The scammer then fails to come through as promised, leaving the consumer even deeper in debt. 

In a variation of this scam, the bogus debt relief company will collect payments in small increments, promising to bring the target’s credit score up and their debt balance down over a short period of time. The target will continue making payments to the fictitious service until they finally smell a scam, which might ultimately cost them thousands of dollars in losses. 

Red flags

Debt relief scams can be difficult to spot because there are legitimate debt relief services available for debt-straddled consumers. However, there are several signs you can watch for to let you know when you’re being targeted by a scammer. Most importantly, it’s crucial to remember that overcoming a significant amount of debt takes lots of time. 

Look out for these red flags to help you identify a debt relief scam: 

  • The service guarantees to bring your credit score up by a specific amount of points in a short amount of time.
  • The service promises to get rid of factual credit report information that’s on your credit file.
  • The service demands an upfront payment.
  • The service claims to be affiliated with a credit card company, but the card company does not recognize the service. 
  • The service advises you to cut off all communication with creditors. 

The do’s and don’ts of credit repair

If you’re looking for a legitimate credit repair service, these tips can help. 

Do: 

  • Research the debt relief service you consider using very thoroughly. Look for a secure site, a phone number and street address on their website, as well as positive reviews from past clients. You can also do a quick Google search of the company’s name and the word “scam” (such as, “ABC Debt Saviors Scam”) to see what the internet has to say about them. 
  • If the service claims to be affiliated with a credit card company, give the card company a call to see if this claim checks out. 
  • Ask for a clear explanation of all fees and conditions of the service before signing up. This includes the timeframe for the service, the total you can expect to pay and any risks you should know about before using the service. 
  • Consider other options for paying down debt, such as credit counseling, negotiating for a lower interest rate from your creditors or taking out a [debt consolidation loan] [or personal loan] from Advantage One Credit Union.

Don’t:

  • Never pay an upfront for a debt relief service.
  • Don’t believe a service that guarantees to bring up your score by a certain amount in a specified timeframe. There are no guarantees when it comes to debt relief. 
  • Don’t agree to let a company enroll you in a debt relief program without fully knowing any details. 
  • Don’t believe a service can get rid of negative information on your credit file. There are laws dictating how long specific information must stay on your credit report, and a debt relief service can’t change that. 

  • Your Turn: Have you been targeted by a debt relief scam? Share your experience in the comments. 

Step 2 of 12 to Financial Wellness: Creating a Budget

Now that you’ve tracked your spending and kept a careful record of where your money goes over the course of a month, you’re ready to move onto the next step of financial wellness: creating a budget. Budgets play a crucial role in promoting financial awareness, which then helps to facilitate more responsible money choices. This discipline will benefit you individually, as well as all who are part of your household. 

Let’s get started by taking a look at how to create a budget and review some popular budgeting systems and how they work. . 

Create a budget in 5 easy steps

  • Track your spending and income. This includes all your financial documents, such as your account statements, bills and pay stubs. [If you’ve followed Step 1, you’ve already completed this step–nice work getting ahead of the game!]
  • Tally up your totals. Calculate the totals of your monthly expenses and all your streams of income. If your income exceeds your expenses, you’re in a good place. However, if your expenses exceed your income, or the numbers are too close for comfort, you’ll need to trim some discretionary expenses to make it through the month without falling into debt if an unforeseen big expense happens. 
  • List your needs. Your needs include anything that is essential for living and basic functions, such as rent or mortgage payments, savings, food and clothing. Needs always take priority in a budget. As you list each need, write down its corresponding cost. Sum up the total of your needs when you’ve finished. 
  • List your wants. This includes anything that is not essential for living, like entertainment costs, brand-name clothing and eating out. Here, too, note the monthly cost of each item on your list and add up the total when you’re done. 
  • Assign dollar amounts to your expenses. Open a new spreadsheet and copy your list of expenses, starting with fixed-cost needs, then non fixed-cost needs, and finally, your wants. Assign an appropriate dollar amount for each of these costs, making sure the total does not exceed your estimated total for monthly expenses. 
  • Review and tweak as necessary. You will likely need to adjust the amounts in each expense category at least once a year to keep your budget relevant. Likewise, you will hopefully be able to increase the amounts in the income column as you move upward in your career path or find additional income streams. 

Budgeting systems

While every kind of budget involves tracking expenses and committing to a maximum spending amount each month, there is a wide range of budgeting systems to fit every kind of personality and money management style. 

The traditional budget doesn’t involve much more work than the steps described above. After working out a number for every expense category, you’ll simply need to track your spending throughout the month to ensure you’re sticking to the plan. You can use a spreadsheet for this purpose, or utilize one of the popular budgeting apps, like Mint or YNAB, and do it digitally. 

The money-envelope system works similarly. However, instead of simply committing to sticking to your spending amounts for each expense category, you’ll withdraw the amount you plan to spend on all non-fixed expenses in cash at the start of the month. Divide the cash into separate envelopes, using one for each of these expenses. Then, withdraw cash from the appropriate envelope when making a purchase in that category. There’s no way to blow your budget with this system; when the money in the “Dining out” envelope runs dry, that’s all for this month!

The 50/30/20 budget is simpler, but requires more discipline. Set aside 50 percent of your budget for your needs, 30 percent for wants and the remaining 20 percent for savings. Of course, you’ll need to make sure your income and expenses will work with this kind of budget. Does 50 percent of your income cover your needs? If yes, this budget allows for more individual choices each month and less accounting and tracking of expenses. 

A well-designed budget can provide its creator with a sense of financial security and freedom. When you stick to a budget, you’ll always know you have enough to get through the month and save for the future. Start budgeting today!

Your Turn: Do you stick to a strict monthly budget? Share your best budgeting tips with us in the comments.