General Financial Planning

Roughly half of millennials have bad credit. Consumer credit reporting agency TransUnion says that 43% of borrowers in the 18-36 age bracket have credit scores under 600. For a generation crushed by student debt, that isn’t surprising.[1] A credit rating is a snapshot of your borrowing history. Just like a digital image, you can edit and enhance it to make it look better. Here are a few ideas to improve your credit score:

1. Make payments in full and on time. Financially, this can be a challenge—but a mobile app or reminder system can at least help you meet deadlines. Each rent, loan, credit card, or utilities payment you miss is recorded by credit bureaus.
2. Keep monthly account balances as low as you can manage. The further your account balances are from account limits, the better your credit picture looks. See if you can keep your balances at 30% of limits or less.
3. Crop your credit picture. Pay off and close out accounts or loans with small balances or spotty payment histories. As NerdWallet notes, reducing a few maxed-out balances to zero may raise a credit score by nearly 100 points in less than a month.[2]
4. Ask for a limit increase. Can’t reduce a card balance? Call the card issuer and ask to lift the limit. This will cut your credit utilization rate for that card. In a recent Experian survey, a third of millennials didn’t know the limits on their credit cards, and just half knew the interest rates on them. Look at the big picture and the details of your borrowing with an eye toward constant improvement.[3]

Sources/Disclaimers:

This material was prepared for [Name] and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

[1] nerdwallet.com/blog/finance/millennials-have-bad-credit-transunion [5/9/16]

[2] nerdwallet.com/blog/finance/raise-credit-score-fast/ [10/28/16]

[3] forbes.com/sites/mayakachroolevine/2017/04/24/the-6-biggest-credit-mistakes-millennialsare-making [4/24/17]

Diet books. Fitness apps. Live-streamed exercise classes. They all tell you the same thing: Maintaining good physical health requires discipline and adherence to a few simple habits, such as eating wisely, getting enough sleep, and exercising regularly. But did you know that the same basic formula can also apply to achieving and managing financial fitness? If you’re looking to shed some unwanted financial fat and build a potentially healthy financial future, all you need is a good attitude, a little bit of dedication, and a solid plan to get you on track.

Priority One: Be Smart About It!

Just as maintaining a food diary may help you determine if you are eating healthy meals and snacks, the same strategy can help you become a more self-aware — and better — spender. That’s why it’s so important to keep track of your actual spending and to see how it matches up against your ideal household budget.

Next on the Agenda: Cut the Fat!

Accumulating debt — particularly high-interest credit card debt — is like gaining a few extra pounds: It’s often easier (and more enjoyable) to do than to undo. But on a positive note, achieving success in your attempts to lose a bit of weight or reduce the amount of money you owe can be an incredibly satisfying and rewarding experience.

So how can you begin tightening your financial belt? Start by making a pledge to use credit cards only in emergencies or to make big-ticket purchases you intend to pay off immediately.

If you find it difficult to make more than the minimum monthly payments on your credit cards, then you should probably consider consolidating your debt by transferring the balances to a single account that offers a low interest rate.

Keep in mind, however, that there is such a thing as “good debt.” For example, taking out a home equity loan or line of credit to pay for household improvements or to consolidate high interest credit card debt or to pay for large purchases can be a possible option and is still one type of loan that allows you to deduct the interest on your income taxes.

A Constant Goal: Peace of Mind

Once you get in the habit of making better spending decisions and minimizing your debt, your work is not done. In fact, budgeting and getting a handle on your debt are just the beginning of being financially fit.

Just keep in mind that while identifying a plan of action is easy to do, you shouldn’t be too hard on yourself if you don’t see the desired results overnight. After all, a couple of quick trips to the gym won’t give you the body of an Olympic athlete. And it may take more than a few weeks of smarter spending before your financial well-being shows signs of long-lasting improvement.

So be patient, stay focused, and let yourself feel good about doing the right thing one day at a time. In the end, the tremendous satisfaction and accomplishment of being financially fit might stretch even beyond your checkbook or savings account.

Required Attribution Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2017 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

If you don’t have a financial plan, that question may be hard to answer. To achieve financial wellness, you need to define your goals and set a time frame for reaching them. The following steps can help you take control of your finances.

Build a Budget

A good place to start would be with a budget. Tracking your expenses can help you determine how much money you have coming in each month and how much you’re paying out toward bills and other expenses. It will also help you to see where you can cut back on spending.

Create an Emergency Fund

Would you be able to pay for an unexpected expense, such as a car repair, broken appliance, or medical emergency? If you don’t have an emergency fund, you might be forced to pay the bill with expensive credit card debt. You should try to keep three to six months’ worth of living expenses in your emergency fund.

Protect Your Credit

Each year, you’re entitled to a copy of your credit report at no cost from each of the three major credit reporting companies — Experian, Equifax, and TransUnion. It’s a good idea not only to periodically check your reports for errors but also to get your credit score. Paying bills on time and staying within your credit limits can help you boost your credit score.

Plan for the Long Term

Saving enough for a comfortable retirement is probably one of your long-term goals. But if you have kids, you may put that goal on the back burner to save for college expenses. Remember, funding your retirement is up to you. Your child can use student loans or work part-time to help pay for college. Participating in your retirement plan helps you put saving for retirement first. Any “extra” money you have left can go toward college savings.

Remember To Review

Establishing a financial plan is only the first step toward achieving financial wellness. Make sure you review your plan on a regular basis to make sure you’re still on track to reaching your goals.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Required Attribution

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2018 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

Have you made a federal student loan payment in the last three months? About 11% of federal student loan borrowers have not and are therefore in default. That default rate only represents the borrowers entering repayment.[1] More than 8.1 million Americans are behind on federal student loan payments. If you risk facing this dilemma, consider these possibilities.

You could rehabilitate your loan. Rehabilitation of a Direct Loan or Federal Family Education Loan (FFEL) Program involves making nine monthly payments within a ten-month period; for a Perkins loan, the period is nine months. Once rehabilitation is complete, the loan is out of default and you are again eligible for different repayment options, forbearance, deferment, loan forgiveness, and additional federal student aid.[2]

You could consolidate your loan(s). This move transfers your debt into a new fixed-interest-rate Direct Consolidation Loan, which you can repay through an income-based plan. Alternately, you can make three straight full monthly payments on time on a defaulted loan and then consolidate it, which allows you to repay the resulting Direct Consolidation Loan under any repayment plan for which you qualify.2

Sources/Disclaimers:

This material was prepared for [Name] and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.

[1] freep.com/story/news/local/michigan/2016/10/02/rate-student-loan-defaults-slowsmichigan/91330184/ [10/2/16]

[2] studentaid.ed.gov/sa/repay-loans/default/get-out [1/15/17]