How Your Debt-to-Credit Ratio Impacts Your Credit Score

Did you know that how close you come to hitting your credit limit can impact your credit score? Even if you pay your bill on time? Banks look at what’s called your debt-to-credit ratio. This is basically how much debt you acquire in relation to your credit score. For example, if your credit limit is $1,000 and you have a balance of $900, then your debt-to-credit ratio is 90%. But if you only have a balance of $500, then your ratio is only 50%. A higher ratio can negatively impact your credit score as it looks “irresponsible” to creditors. Maintaining a lower ratio can increase your credit score. Although opinions differ as to what the ideal ratio is, it’s generally agreed upon that lower is better.

Having a higher credit limit can decrease your debt-to-credit ratio, which can also increase your credit score. Like the example above, if your credit limit is $1,000 and you have a balance of $900 then your debt-to-credit ratio is 90%. But if your credit limit is raised to $1,800 and you still spend the same $900 then your debt-to-credit ratio is only 50%. Much better. Having a lower debt-to-credit ratio can improve your credit score, but increasing your credit limit can be risky and tempt you to spend more. I only recommend it if you are able to pay the balance in full every month. Here’s a good article about debt-to-credit ratios.

Your debt-to-credit is just one of several factors used to determine your credit score, but it is one that is less obvious and more easily forgotten about.


Caribou: $2 Med Drink 4/17

Caribou: Get a $2 medium drink after 11 tomorrow 4/17!

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Is “Free” Always A Good Thing?

I’m a big fan of free stuff…if you’re a regular reader, I know you frequently see posts about freebies. I do enjoy free samples. I enjoy finding free substitutes for things I used to pay for, such as reading the news online versus paying for subscriptions. We’re all familiar with the little thrill of getting something for free, but is free always a good thing? Do you get things simply because they are free? What do you do with all that free stuff?

I personally think there is a line somewhere, where “free” goes from being a good deal to unnecessary, and I think that line is different for all of us. I don’t actually sign myself up for every free item that I post on the blog, just things I will actually use or give to someone who will get some use out of it. My personal line is somewhere between having a small backup stash of an item and hoarding things I’ll never use just because they were free. I remember last year I participated in a Garnier Facebook rewards program, takings polls and stuff. At the end of the program I cashed in my points for a “year’s worth” of BB Cream. They sent me 6 full size tubes! More than I could ever use any time soon. So I gave away 4 tubes to friends. They were super excited to try the product and I wasn’t drowning in unnecessary stashes of BB Cream!

Another line for me is how much work it takes to get the free item. If I have to drive out of my way to get a free 65¢ can of cat food, then it’s not worth it to me. The amount I’ll spend on gas and time voids the free savings. But if I’m driving by the pet store anyway, sure why not?

So what do you do with all that free stuff? I take free samples with me when I travel. The samples are usually travel-sized so it’s perfect. I’ve sent tons of samples to my military friends serving overseas. Now that I don’t have any friends overseas (for once in my adult life!) I have a stash to take to a women’s shelter. I add a lot of freebies to my gift stash, such as the free collage prints that Walgreens always has, free magnets from Shutterfly, or freebies from Bath & Body Works.

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Freebies can be a great way to save money, cut costs, and try new products, but I think it can easily cross over into greed if you really won’t get any use out of the item. What do you think? Where is your personal line when it comes to free stuff?


I’d Rather Not Be Average

I’ve noticed a few things since I’ve gotten into this whole lifestyle of living frugally and working towards my goal of financial independence: I may not exactly be normal. My frugal friends and fellow personal finance bloggers understand why I’m not comfortable with debt in my life, but many people are comfortable with the debt that most consider to be normal. My choices are strange to a lot of people. They go against the “norm.”

I don’t want to be average.

A recent article from Mint claims that the average American has just over $7,000 in credit card debt. But wait, what about all those people who don’t have credit card debt? Take them out of the equation and the average American credit debt for indebted households is over $15,000.

At the end of 2013, the average student had $29,000 in student loan debt, a very slight decline from $29,400 in 2012, and up from $26,600 in 2011. Seven in ten college seniors graduate with student loan debt. Here’s a list of the top ten colleges where graduates have the highest student loan debt.

This slightly more recent article places the average student loan debt at closer to $33,000. It also includes average mortgage debt at just over $154,000.

And what about the other debt we accrue? Auto loans, miscellaneous loans for things we just have to have now?

That’s around $198,000 of debt per person! Even with a modest salary, it would take years to pay that off! Sure, mortgage and auto loan debt may be considered “normal” but those are bills you’re stuck with practically forever!

Nope, I don’t want to be average.


FREE Snapfish App: 100 FREE 4×6 Prints/Month

Download the FREE Snapfish app on iTunes or Google Play and receive 100 FREE 4×6 prints every month for one year! Hurry and sign up before April 30th!

Use promo code APPSHIP at checkout to get free shipping for your 100 prints. Your first credit for 100 prints will be applied when you download, set up, and log into the app. The monthly 100 credits will be applied automatically at checkout-no promo code necessary!

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SYSK: 10 Easy Ways To Save Money

I feel like I’m getting old because I listen to a lot of podcasts these days, which I liken to talk radio. One of my favorites is Stuff You Should Know (free on iTunes!). I was listening to an episode recently called 10 Easy Ways To Save Money and I really liked it! There were a lot of great tips and ideas and I agree with most of them, but one part of the podcast in particular really caught my attention. (Listen to it here)

Like I mentioned in yesterday’s post, it’s not my goal in life to make a lot of money. I don’t plan to follow the subconscious “norm” where my success is defined by my status of employment. That’s not the purpose behind all these money-saving goals and strategies. In the podcast they talked about how many people live frugal lifestyles in order to increase efficiency and reduce waste. They call it a “conscientious lifestyle.” I love the way they define it and think it fits my mindset pretty well!

I have the goal of reaching financial freedom and I won’t get there if I’m swept up in the tide of our typical consumerism culture. I love life, but sometimes it feels like it’s pressing down on me from all angles…there’s so much to manage and keep track of…bills, insurance, appointments, memberships and subscriptions, events etc. There are weeks where I feel like I’m constantly on the phone sorting something or another out. It ends up being mounds of paperwork and it exhausts me. Living a frugal lifestyle eliminates some of that madness. Fewer bills and memberships to manage, less pressure to keep up with everyone, less stress. Along with all that brain clutter, there is also the physical clutter that comes with a consumerism lifestyle with constant upgrades to keep up with the Joneses.

In some ways though, being frugal can add more things to keep track of…coupons, freebies, sales, cost per unit, etc. It’s definitely a conscientious lifestyle. You have to stop and really think about your money and where it’s going. You have to stop and consider what is really important to you. You have to develop some new habits, such as unplugging things when they’re not being used and bringing your own bags to the grocery store. (Once developed, they are pretty easy to maintain, in my opinion.) It’s about analysis, instead of just going with something out of habit. For example, researching car insurance quotes every year or so instead of sticking with the same company for 20 years. It is definitely conscientious.

The podcast also says quite simply that wasting is the opposite of saving. When you’re being wasteful you’re not saving money. They talk about just looking for some ways to trim the fat. What things are you paying for that you don’t use or could get for free? Conscientious and eliminating waste.

I definitely recommend this podcast if you’re just starting to try to figure out this frugal lifestyle. There are some great ideas and suggestions. And I particularly like their definition of a “conscientious lifestyle” that’s about waste and efficiency!


If Money Weren’t A Factor…

Long drives make me think and I had two long drives to and from the airport when I was on vacation last week. It’s no secret that I spend a bit of time thinking about money and how it’s involved in my life. Well on this particular drive I was thinking about how my goal in life is not to see how much money I can make. I don’t think many people start out with that goal or even consciously set that as a goal, but it seems to be what happens as time goes on. We strive to make enough, but then as we make more, our standards of living increase and the cycle repeats.

As I’ve gone on this blogging adventure, I’ve realized that I don’t desire to make as much money as possible. The point behind all these financial goals and money-saving strategies is to get myself to the point where I have the freedom to truly go after what I want in life. Finances and time seem to hold us back from doing what we really want, and my goal is to get to a point where they don’t hold me back. Where I am in a position to support myself without requiring a traditional Monday through Friday 40 hour per week job. That is what financial freedom means to me.

So what would I do with this financial freedom? What are time and money holding me back from? I don’t know yet. I know I want to do something big with my life. As corny as it sounds, I want to change the world. I want to make a difference, have an impact. I have so many inspirational people in my life that inspire me to do something big. I just don’t know what. It may be helping veterans with their resumes as they transition to a civilian career, or something with animals. I would blog more for sure and explore more avenues with Simply Save. I do have a feeling I will end up working in a police department some day…maybe as an officer, but more likely in a clerical or Community Service Officer role. Honestly, I think if money weren’t a factor, I’d be working at dispatch taking 911 calls.

Even though I don’t know the answer to this question quite yet, a lot of Simply Savers do. Here’s what they’d do if time and money weren’t a factor:

Mine’s easy. Making a safe haven for those in need. Not a homeless shelter with stigmas attached, but a place people could really come & have counseling, showers, food, snacks, laundry, games, etc. -Mariette

I’d be doing what I’m doing now…only YEARS earlier! ….I take it back…I’m where I’m supposed to be at the time in supposed to be here. If $$ and time weren’t an issue though…I’d be in one class or the other all the time. -Randy (Randy is the Director of Operations/Development of a nonprofit that trains assistance dogs. He and his wife are huge inspirations to me.)

Wander around the world, exploring different places, learning new cultures, and volunteering in a few of my favorite places. –Scott

I’d have a ranch with a small herd of cattle that don’t require too much attention/time and a garden large enough to support a year round supply of tasty fresh veggies. -Ben

Operating a pick-your-own produce farm. -Jessica

Have a nice place on a lake back in MN, and travel the world to meet new people. -Michael

I would love to own a doggie day care/spa. I would call it Maggie’s Pet Hotel and Spa. I would also start a program that grants financial assistance for pets who need emergency or life threatening medical care from veterinarians. -Ashley

Running an animal rescue. -Katy

What Katy said! -Julia

Going to school and staying at home with Abel. –Andreina (Abel is her son)

Traveling the country drag racing. -Brian

Travel the world. -Anonymous

A steady combination of dog training, sporting clay and IPSC shooting with constant motorcycle trips in summer. International travel in the winter. Get a membership at a myriad of gyms and train when not traveling. Eat all the high quality foods I can’t afford right now. Smoke good cigars. -Christian

Take my family on trip to most of the places I have been plus some. -Rich

Wow, these Simply Savers inspire me! What would YOU do if time and money weren’t a factor? Comment below!

 

 


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