Earth Day 2014

by Sara Seeger 22. April 2014

Today we celebrate the 44th annual Earth Day. Founded in 1970, Earth Day was created to raise awareness of environmental concerns such as pollution and waste. Earth Day proved to be a success, with a number of important pieces of environmental legislation passed during the 1970s. Earth Day celebrations have grown over the years, and it is now celebrated across the globe. Check out the infographic below for more Earth Day facts and how you can contribute to a clean environment.

April is National Financial Literacy Month

by Spencer Tierney 16. April 2014

Financial Literacy

Every April for the past 10 years, we have celebrated National Financial Literacy Month – and for good reason. A person’s financial literacy level can always be improved. In a study conducted by the FINRA Investor Education Foundation, participants were asked five questions about personal finance, and 61% of them couldn’t answer more than three questions correctly.

1. Why is financial literacy important?

As the financial landscape changes, it is becoming increasingly important for individuals to know how to plan and manage their finances. More companies are moving away from pension plans and toward retirement plans that require employee participation, like 401(k) plans, leaving it up to the employees to determine how much to put into retirement. Additionally, college tuition is steadily increasing, making it even more important for families to save.

Add to that the constantly changing markets and interest rates – and the myriad options for credit cards, bank accounts, mortgages, IRAs, and investment options –and it might start to seem overwhelming.

But the more you know about financial matters, the easier it becomes to navigate through your options, and the better you are able to plan. A 2011 TIAA-CREF study also shows that higher financial literacy leads to higher pension contributions and higher household wealth.

2. How can you improve your financial literacy?

Don't be embarrassed if your financial literacy isn’t stellar. According to the 2013 Consumer Financial Literacy Survey, 41% of U.S. adults give themselves a grade of C, D or F on their knowledge of personal finance. That leaves plenty of room for improvement.

Start by getting to know your finances. Be aware of your household income and your household debt including credit card debt, mortgage, auto loans, student loans, etc. Once you know your finances, you can make yourself a budget. This will serve as the blueprint for your everyday finances to help get them on track.

That's the easy part. Once you have the basics in place, you’ll want to arm yourself with the knowledge to make the best financial decisions moving forward. Some things you’ll want to learn about are:

  • Interest rates. That means on both earned and owed interest. Learn how earned interest will affect the amount in your savings account over time and how the owed interest on your credit card will affect your monthly payments.
  • Investing. Learn what the difference is between a stock and a bond, and how to invest your money to make it work the hardest for you.
  • Retirement. If you don’t have a retirement plan in place, find out what your options are. If you do, make sure you’re contributing enough each month to make your retirement years financially stable.

3. How can your bank help you improve your financial literacy?

Many banks have programs in place to help their customers increase their financial literacy. Some offer seminars, literature in their branch lobbies and/or consumer education modules on their websites, including glossaries of banking terms. In addition, many banks offer online tools for financial planning, like budgeting tools or tools to help diminish debt. Banks may also offer financial education programs for kids and teenagers. Check with your bank to see what resources they can offer you.

There's no better time to start, so take advantage of Financial Literacy Month to get a jump-start on increasing your financial knowledge.

Spencer Tierney is a staff writer for NerdWallet, where he covers all aspects of personal finance.

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Establishing Credit for Beginners

5 Actions that Hurt Your Credit Score

by Sara Seeger 8. April 2014

Good Credit, Bad Credit

Establishing a healthy credit history is a responsible action of mature adult and very important to ensure a financially bright future. With the escalating costs of goods and services, it is critical you work towards this goal. In a previous blog, I wrote about five actions that help your credit score, but what about behaviors that hurt your credit score? Ask yourself if any of the following five situations pertain to you.

1. Missing a Creditor Payment

This may sound like a no brainer, but missing a credit card payment could be detrimental to both your current and future credit. Missing just one payment can make your credit score drop. If you make a habit of missing payments because you don’t see an immediate effect, think again. While you’re feeling comfortable, your credit score is plummeting, making it more challenging for you to obtain credit in the future. To add salt to the wound, delaying or missing payments will typically result in a late payment penalty, making it more challenging for you to obtain credit in the future.

2. Closing Old Credit Card Accounts

You have paid off your credit card; congratulations! Some people who are tired of debt immediately choose to close a credit card they have just paid off. You might want to think twice before you close out those old accounts as about 30% of your credit score is based on the amount of debt you have charged. The lower the amount of credit card debt you carry, the better it is for your credit rating due to your “credit utilization rate.” By closing old credit card accounts, you could throw off your credit utilization rate and unintentionally lower your credit score.

3. Accepting Too Many Retail Incentive Card Offers

I know it can be tempting to say yes to the smiling sales associate at your favorite retail store who offers you a 15% discount for opening a credit card, but just say no. Retail credit cards carry much higher interest rates than national brand cards, and applying for that new credit card triggers a hard inquiry on your credit report. Each inquiry of credit may cause a “ding” on your credit score. These inquiries add up fast, and may have a detrimental impact on your credit score.

4. Opening Too Many New Credit Card Accounts

If you open too many new accounts in a short period of time, you may be risking your credit score. Each time your credit is “run” by a creditor to determine your eligibility, your credit score takes a hit. Hard inquiries, as mentioned above, can deduct about 5 points from your score. A familiar example of this happening is someone who purchases a house and opens multiple credit cards at the same time to buy furnishings and other items for their new home. Restrain yourself and buy a little at a time.

5. Shopping Too Long for a Loan

When shopping for a large loan, like a home mortgage, it is important to shop around for a low interest rate. In fact, interest rates can change daily, and could be much lower a month from your first credit inquiry. However, shopping too long for a loan could actually hurt your credit score. Although mortgages and auto loan inquiries will appear on your credit report, they will only count once as long as they are done within a short period of time, typically within 45 days. So, when you make the decision to shop, make sure you’re ready.

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