Elisabeth Dawson

After you get that first card, how can you build up your FICO score?

Good credit opens doors. It is vital to securing a loan, starting a business, and buying a home. When you establish and maintain good credit in college, you create a positive financial profile for yourself that can win over lenders, landlords, and potential employers.

Unfortunately, some college students do not have good credit. In fact, Credit Karma says that the average 18- to-24-year-old has a credit score of 630, which verges on bad. A FICO score of 730 or higher is considered good.1

What are the steps toward a good credit score? To start, you need to utilize credit. About 15% of your credit score is built on the length of your credit history, so the sooner you purchase goods and services with a credit card and pay off that debt, the sooner you create a trustworthy record of credit use.1

However, the process of building your credit doesn’t need to mean blindly accepting the excessive fees which accompany many credit cards today. The 2019 U.S. News Consumer Credit Card Fee Study can be a helpful resource in educating yourself in order to make an informed decision of your own. You can view the report here: Credit Card Fee Study

Aim to reduce the balance to $0 every month. Does this sound like a challenge? It may not be if you just use a credit card to purchase everyday things. When you start splurging and buying items worth hundreds of dollars with a credit card, paying off the balance in full can become a problem.1

Pay your credit card bill on time. Roughly 35% of your credit history develops from your pattern of payments: how on time they are, how late they are. Procrastination is never your friend in college, and here is another example of that truth. So, schedule automated payments from your bank account, schedule reminders, or just try to pay the bill as soon as it arrives.1

Refrain from applying for 2-3 credit cards at once. You may have multiple cards already, such as gas cards or store cards that offer you points or cash back for purchases. Those kinds of cards and one core credit card with a low interest rate and no annual fee are enough for most collegians. About 10% of your credit score reflects your history of credit inquiries, so if you suddenly apply for another 2-3 cards, you could hurt your score.1

Another bad move is jumping from card issuer to card issuer – that is, getting a card, then closing that credit card account and opening a new one after a few months because you find another credit card with better perks. In doing this, you end up giving yourself a shorter credit history per credit card account.1

What if you have problems getting a traditional card? If you have no income, you might run into this – or, there might be other reasons that make it hard for you to qualify for one. If this is the case, consider going to the bank or credit union where you have a savings account and applying for a secured credit card. With these types of cards, you transfer some money into an account linked to the use of the card, and that amount represents your credit card limit. Or, if you do not have a gas card or a retail credit card, consider applying for one of those as the bar is often set a bit lower. You can also ask to become an authorized user on a credit card held by one or both of your parents.1

You can potentially help your credit score in other ways. Consistent bill paying is a plus for your credit history. If you do become an authorized user on a parent’s credit card and they use credit responsibly, just being linked to that account history could help your credit rating. If you are living off-campus, you might end up co-signing a lease; choose your roommates wisely. Financially negligent ones could hurt your credit rating if, for example, you are sharing utilities costs. With financially trustworthy roommates, you may avoid that kind of credit score damage. Lastly, if you move while in college, be vigilant about having your bills forwarded to you, to avoid missing payments.1

Citations.

1 – thesimpledollar.com/how-to-build-good-credit-in-college/ [8/29/18]

Sometimes more money can mean more problems.

“Lifestyle creep” is an unusual phrase describing an all-too-common problem: the more money people earn, the more money they tend to spend.

Frequently, the newly affluent are the most susceptible. As people establish themselves as doctors and lawyers, executives, and successful entrepreneurs, they see living well as a reward. Outstanding education, home, and business loans may not alter this viewpoint. Lifestyle creep can happen to successful individuals of any age. How do you guard against it?

Keep one financial principle in mind: spend less than you make. If you get a promotion, if your business takes off, if you make partner, the additional income you receive can go toward your retirement savings, your investment accounts, or your debts.

See a promotion, a bonus, or a raise as an opportunity to save more. Do you have a household budget? Then the amount of saving that the extra income comfortably permits will be clear. Even if you do not closely track your expenses, you can probably still save (and invest) to a greater degree without imperiling your current lifestyle.

Avoid taking on new fixed expenses that may not lead to positive outcomes. Shouldering a fixed mortgage payment as a condition of home ownership? Good potential outcome. Assuming an auto loan so you can drive a luxury SUV? Maybe not such a good idea. While the home may appreciate, the SUV will almost certainly not.

Resist the temptation to rent a fancier apartment or home. Few things scream “lifestyle creep” like higher rent does. A pricier apartment may convey an impressive image to your friends and associates, but it will not make you wealthier.

Keep the big goals in mind and fight off distractions. When you earn more, it is easy to act on your wants and buy things impulsively. Your typical day starts costing you more money.

To prevent this subtle, daily lifestyle creep, live your days the same way you always have – with the same kind of financial mindfulness. Watch out for new daily costs inspired by wants rather than needs.

Live well, but not extravagantly. After years of law school or time toiling at start-ups, getting hired by the right firm and making that career leap can be exhilarating – but it should not be a gateway to runaway debt. According to the Federal Reserve’s latest Survey of Consumer Finances, the average American head of household aged 35-44 carries slightly more than $100,000 of non-housing debt. This is one area of life where you want to be below average.1

Citations.

1 – time.com/money/5233033/average-debt-every-age/ [4/13/18]

Whether you’re going out on your third date and unsure of who should pay, or you’ve been married for 25 years and still can’t agree on a monthly budget, handling finances with your partner can take its toll on your relationship.

According to the Institute for Divorce Financial Analysis, money issues are responsible for 22% of all divorces, making it the third leading cause after incompatibility and infidelity. This doesn’t have to be your reality. You don’t have to let it get that far.

As a financial coach, I’ve had couples come to me time and time again, seeking advice on how to stop fighting over money and better manage their funds together. Take Joe and Paula, for example. This otherwise happy couple was a few short months away from getting married, but found themselves fighting over the wedding expenses each time a decision had to be made. Who should pay for the rehearsal dinner? What is a reasonable amount to spend on flowers, cake, or a photographer?

The fact that this couple came to me before they said their “I do’s” says a lot about their relationship. They had the willingness to come together and work on their money issues as partners, something that many couples find difficult to do.

Building this relationship can take time, especially if you come from different money mindset backgrounds. Everyone has a money story. Oftentimes, problems boil down to a lack of communication as to what someone’s story is. This was the case with Joe and Paula. They were fighting because they did not understand fundamentally where the other person was coming from — a common cause of many financial disagreements.

Here are seven mistakes to avoid when managing finances with your partner, and what you can do to keep the peace instead.

1. Hiding debt or spending.

No one is proud of entering a relationship with debt. Credit card bills, student loans, even outstanding parking tickets, may all cause you to feel shame, leading you to keep the debt a secret. Conversely, you may have little to no debt but love spending $500 on designer clothing each week. This is fine in theory, but if you never let your significant other know where a big portion of your paycheck is going, you’re opening yourself up to a world of problems.

A key component of any stable relationship is open communication. Agree that there won’t be any secrets, and bring everything to the table, including your finances. It’s time for full disclosure. You may feel embarrassed and have a tough time talking about certain areas of your past or spending habits, but it’s important to understand that your partner is in this with you, and you’ve agreed to manage your finances together.

2. Not understanding your partner’s mindset.

Chances are, you and your partner entered this relationship with some differences. You probably weren’t raised the same way, and you definitely didn’t come from the same household. This means, your money mindset may be quite different than your partner’s…and that’s OK. Once you recognize your differences, you’ll understand how to bring out the best in each other.

Consider the following questions.

· Did you grow up on a strict budget, or spend freely on whatever you wanted?

· Did you talk openly about money in your household, or was it hush-hush?

· Did your parents fight over money?

Sit down and ask your partner what money was like for them growing up, and allow the conversation to guide you to a place of respect for each other’s differences. The next time a financial disagreement arises, remember to bring it back to where it all began and communicate from a place of understanding.

3. Not having a common goal.

You may assume that you and your partner have common financial goals, but have you ever discussed it? While it’s perfectly normal to have different financial goals, you should strive for common goals as well.

A great way to line up your goals is to make a list of money goals that are important to you, and have your partner do the same. Is it important to you that you start saving for a big vacation, or your child’s college education? Do you want to be able to eat out once a week? How soon do you plan on retiring? Prioritize these goals and make time to discuss them together. See where there might be some commonality and overlap in your goals. Identify common financial goals, and outline steps on how you can achieve them together.

In areas where your goals are different, come up with ways to work on achieving these goals together. The idea is to be open about your financial desires so you can avoid fights about spending and saving.

4. Keeping secrets.

Communication is the foundation of a strong partnership. If you’re keeping anything from your partner, now is the time to come clean. 41% of Americans admit to committing financial deceptions against their loved one. Hiding finances from your partner is not healthy for your relationship and will catch up to you eventually. Keeping credit card bills or purchases hidden from your partner, for example, will only do damage to your relationship in the long run.

If you’re ashamed of a particular debt or spending habit, trust that your partner will be open to listening and working on it with you. If you’d like some support in facilitating the dialogue, consider working with a financial coach.

5. Trying to “keep up with the Joneses.”

Comparing your finances isn’t healthy. If you’re constantly looking at what your best friend and her husband are doing (taking vacations to Bali, buying new cars), you’re not giving your relationship enough credit. You and your partner have different salaries, expenses, and life plans than anyone else. Who you and your partner are is completely different to any other couple.

Instead of focusing on other relationships, bring your focus closer to home. Develop a budget and stick to a plan that is completely unique to your relationship. It may not feel as fun at the onset, but you will end up in far less debt and with fewer money arguments over time. If you both agree that you’d like to take a trip to Bali one day, add that into your travel savings goal.

6. Not allowing for money autonomy.

From what I’ve seen, the healthiest relationships allow for money autonomy.

You may be wondering how to handle that tactfully, especially if you have a joint checking account where every transaction can be analyzed down to the very moment of purchase. Agree on a monthly stipend for you and your partner, and stick to it. Each person should be allowed to spend on whatever it is their heart desires, without judgment.

In addition to a joint checking account, it may be a good idea to also keep separate checking accounts or individual credit cards. This way, you can buy yourself a treat, or grab your partner a gift without worrying about seeking permission.

Once you’ve agreed upon a monthly spending limit for each of you, the money is yours to spend as you please. You’ve worked hard for this money, so don’t feel shame in how you choose to spend or save it.

7. Only discussing finances when there’s a problem.

It may not sound sexy, but scheduling regular ‘money dates’ is the #1 way to keep your financial disagreements to a minimum. If you resort to only discussing your finances when there’s a problem, you will undoubtedly dread talking about money. To keep anxiety levels to a minimum, have monthly check-ins to discuss what’s working and what you’d like to improve upon.

Make time to discuss everything from your checking account to your 401k, with each date dedicated to discussing a different money topic. Conversations about money will be easier to handle if you start before there any problems. If you’re already feeling stressed about your finances, this is the perfect time to bring it up!

Managing finances with your partner doesn’t have to be a chore. Keep an eye out for these seven common mistakes that couples make when dealing with their finances, and instead, come to the table with open communication, and an understanding of your partner’s money mindset.

Put simply, grab a glass of wine and enjoy your money dates.

Ready to Upgrade Your Relationship with Money?

I’ve created a free cheat sheet to help you discover the 7 hidden costs that are sabotaging your financial success—and what to do about them.

Get your FREE cheat sheet here!

Managing your finances while living abroad can be challenging. Overseas workers often find their personal wealth suspended across borders, with bank accounts in different countries and income in different currencies. Taxes, transaction fees, currency conversions, and restrictions around opening a bank account are common headaches an overseas worker will likely encounter. As a result, expats working overseas need slightly different money management strategies than the average employee.

Living and working abroad can lead to better opportunities, more income, and the chance to experience new culture. Navigating wealth management comes with a whole new set of considerations. Here are some ways workers living overseas can manage and protect their money for better long-term financial health.

Open a local bank account

A local bank account can help you save money on extensive ATM fees. It’s also a good thing to have for making deposits each time you get paid. When you use a foreign card at an ATM, you’ll not only be charged by your bank but also by the local bank. That can add up quickly: some ATMs charge up to $10 each time you make a withdrawal. A local bank account is a good way to take some of the stress out of managing your cash flow while also saving on fees.

Pay attention to exchange rates

Exchange rates can impact an overseas worker’s take home salary over time. It can also play a role in how an overseas worker budgets for living expenses.

There are two key ways in which a currency exchange rate impacts an overseas worker’s salary. The first way applies more to the employer: it’s how the exchange rate affects the final cost to the employer for an overseas assignment. The second way is the amount of money an overseas worker receives relative to their home currency and the location where they’re spending on living expenses.

When an employee is earning an income in one currency, especially over a long-term assignment, the currency conversion can actually mean they’re earning significantly less (or more!) than they would back home. For example, an American working in South Africa earning rand will face currency fluctuations when the rand value decreases or the dollar gets stronger. This means they will not have the same financial security than if they were making USD. To mitigate this risk, negotiate your salary such that the employer takes on the financial burden of changes in exchange rate (up or down), or set your salary based on your home currency.

Find a way to transfer money with low international fees

Whether you’re transferring money to family, trying to allocate funds to multiple bank accounts, paying overseas bills, or simply sending money occasionally, international fees can take a good chunk out of your income. Get the mid-market exchange rate – the midpoint between the buy and sell prices of two currencies – when you send money abroad. Avoid hidden fees, such as the exchange rate fee, that many banks add into an international transaction. And, most importantly, protect your money and accounts by only working with compliant, safe transaction providers. There are international regulations and standards against money laundering that your bank or transfer agent should adhere to each time you need to make a transaction.

Keep your credit score high

Often, moving to a foreign country means losing your credit history. Credit histories are not portable across countries: each time a worker relocates, they will have to re-establish a credit track record. This can have a long term impact on your ability to get a mortgage, a car loan, and even get a cell phone plan.

Establishing a credit score requires historical debt repayment information. As a result, make sure to keep open a credit card from your home country and use it a few times each year. By simply ordering a few things from Amazon or another online retailer, and then paying your bills on time, you can manage to keep your credit strong while working overseas.

Budget for taxes

Taxes get even more complicated as soon as you begin working abroad. Depending on the country and the type of visa you have, you may be responsible for taxes at home and in your working country. The US is one such country where citizens are responsible for filing and paying income tax, even when they live outside the borders. For UK residents, if your business or property is situated in the UK, you will still be responsible for some UK taxes. It’s also important to know what local tax regulations require: in Argentina, for example, joint filing income tax is not an option.

You may be eligible to apply for a foreign tax credit, which can reduce your double-taxation requirements. Check if you qualify for a tax credit before you leave your home country. It also might be worthwhile to work with a local CPA or accountant to make sure you’re filing your overseas tax return accurately and taking full advantage of possible credits and deductions to save money.

Don’t forget to plan for retirement

Between managing living expenses, sending money home, and paying your taxes, the last thing many overseas workers think about is managing their retirement fund. This can be a big mistake down the road.

Before you leave to work abroad, make sure you’re aware of how your time overseas will impact your eligibility for retirement plans both in your host country and home country. “If employment status doesn’t allow for either, it’s sometimes possible to take advantage of tax-deferred retirement opportunities without the employer,” advises one expert. If you’re unsure where you will eventually retire, at the very least, start building an emergency or rainy day fund. This fund can grow over time and eventually become your retirement nest egg. Ask a financial advisor in your home country if there are alternate retirement funds available to overseas workers. For example, British expats could consider a QROPS scheme.

Make your money reflect your life.

On a sunny Friday in June of 2015, the Supreme Court of the United States (SCOTUS) made a monumental decision in Obergefell v. Hodges, which drastically changed the country’s social and financial landscape. Same-sex couples celebrated, the nation’s monuments were lit in joyous rainbow hues, and Americans who identify as LGBTQ+ were married in record numbers. In the years since, companies and investment vehicles have done their best to attract same-sex investors in all sorts of ways.1,2 But how do you know which companies are true LGBTQ+ allies? For some investors, the answer may be Socially Responsible Investing. Read on to learn more.

Investing in Your Convictions. Socially Responsible Investing (SRI), sometimes known as sustainable, responsible, or impact investing, is an investment discipline that considers environmental, social, and corporate governance (ESG) criteria. In other words, SRI strategies attempt to allow you to maintain your personal values and goals by investing in companies that have those same beliefs.3

Finding LGBTQ+ Allies. How do you decide which companies deserve your investment? An excellent place to start is with your financial advisor. Many advisors can help you narrow down your investment ideas until they meet certain criteria, allowing you to completely avoid particular industries that may not align with your values.

Indices That Care. Another helpful resource is the Corporate Equality Index (CEI), which rates businesses’ LGBT-inclusivity from 1 to 100. The CEI is constantly updated, allowing investors to see if a company is an inclusive as they claim. Another resource that may be useful is the Credit Suisse LGBT Equality Index, which only includes companies that score an 80 or better on the CEI.4,5

No Sacrifice Necessary. Some LGBTQ+ investors may worry that investing with their values could limit the return potential of their portfolio. Although, this notion has been floating around for a while, and a great deal of research tells a different story. In fact, studies show that companies with higher environmental, social, and governance scores and ratings can outperform comparable firms in both accounting and stock market terms. But remember, past performance does not guarantee future results.6

Don’t forget, having a chat with your financial advisor is a good idea if this type of investment approach appeals to you. Who knows? Perhaps this type of strategy is a good fit.

Citations.

1 – supremecourt.gov/opinions/14pdf/14-556_3204.pdf [6/26/15]

2 – pewresearch.org/fact-tank/2017/06/26/same-sex-marriage/ [6/26/17]

3 – ussif.org/education [2019]

4 – hrc.org/campaigns/corporate-equality-index/ [6/12/19]

5 – credit-suisse.com/corporate/en/responsibility/banking/sustainable-products-services.html [6/13/19]

6 – video.morningstar.com/ca/170717_SustainableInvesting.pdf [11/2016]

The case for aligning your portfolio with your outlook & worldview.

Do your investment choices reflect your outlook? Are they in agreement with your values? These questions may seem rather deep when it comes to deciding what to buy or sell, but some great investors have built fortunes by investing according to the ethical, moral, and spiritual tenets that guide their lives.

Sir John Templeton stands out as an example. Born and raised in a small Tennessee town, he became one of the world’s richest men and most respected philanthropists. Templeton maintained a lifelong curiosity about science, religion, economics, and world cultures – and it led him to notice opportunities in emerging industries and emerging markets (like Japan) that other investors missed. Believing that “every successful entrepreneur is a servant,” he invested in companies that did no harm and which reflected his conviction that “success is a process of continually seeking answers to new questions.”1

Among Templeton’s more famous maxims was the comment, “Invest, don’t trade or speculate.” Having endured the Great Depression as a youth, he had a knack for spotting irrational exuberance.2,3

As the 1990s drew to a close, he correctly forecast 90% of internet companies would have financial difficulties within five years. In 2003, he warned investors of a housing bubble that would soon burst; in 2005, he predicted a huge stock market downturn. To Templeton, a rally or an investment opportunity had to have sound fundamentals; if it lacked them, it was dangerous.3,4

Warren Buffett leaps to mind as another example. The “Oracle of Omaha” is worth $82.8 billion – yet he still lives in the same house he bought for $31,500 in 1958, and prefers cheeseburgers and Cherry Coke to champagne or caviar. He was born to an influential family (his father served in Congress), but he has maintained humility through the decades.5,6

Money manager Guy Spier dined with Buffett in 2008 at one of the billionaire’s annual charity lunches, and in his book The Education of a Value Investor (co-written with TIME correspondent William Green), he shares a key piece of advice Buffett gave him that day: “It’s very important always to live your life by an inner scorecard, not an outer scorecard.” In other words, act and invest in such a way that you can hold your head high, so that you are staying true to your values and not engaging in behavior that conflicts with your morals and beliefs.6

Buffett has also cited the need to be truthful with yourself about your strengths, weaknesses, and capabilities – as you invest, you should not be swayed from your core beliefs to embrace something that you find mysterious. “You have to stick within what I call your circle of competence. You have to know what you understand and what you don’t understand. It’s not terribly important how big the circle is. But it’s terribly important that you know where the perimeter is.”6

Speaking to a college class in Georgia, he cited the real reward for a life well lived: “When you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually do love you. I know people who have a lot of money, and they get testimonial dinners and they get hospital wings named after them. But the truth is that nobody in the world loves them. If you get to my age in life and nobody thinks well of you, I don’t care how big your bank account is, your life is a disaster.”6

Not every deal Buffett has made has been perfect, but he’s happy to acknowledge missteps and treat them as learning experiences. That unpretentiousness may be part of his mystique.7

Values and beliefs helped guide Templeton and Buffett to success in the markets, in business, and in life. For all the opportunities they seized, and ups and downs they faced, their legacy will be that of humble and value-centered individuals who knew what mattered most.

Today, socially responsible investing is more widespread than ever. Investors who want their portfolios to better reflect their beliefs and values often turn to “socially responsible” investments – or alternately, “impact” investments, which respond to environmental issues, women’s rights issues, and other pressing societal concerns. The Global Impact Investors Network investigated impact investing in their annual survey. Respondents reported they held $228 billion in impact investment assets, nearly twice that reported in the previous year. This speaks to the growing popularity of impact investing. Working with a financial professional can be a big help in balancing your values with a deeper understanding of the market.8

Have you read my book Wealth by Design yet? If you have not, what are you waiting for? Do you want more education on how to Design your Wealth? Then call our office now at 619.640.2622 for your complimentary copy.

Citations.

1 – forbes.com/sites/alejandrochafuen/2013/05/07/how-to-invest-think-and-live-like-sir-john-templeton/ [5/7/13]

2 – record-eagle.com/news/local_news/jason-tank-finding-the-right-mindset-is-good-start/article_42c81b99-c7c9-5fa1-83b3-4fa2f9c1c641.html [5/5/15]

3 – crossingwallstreet.com/archives/2014/02/sir-john-templeton-the-last-yankee.html [2/10/14]

4 – csmonitor.com/Commentary/Opinion/2008/0711/p09s01-coop.html [7/11/08]

5 – forbes.com/profile/warren-buffett [3/6/19]
6 – observer.com/2015/05/ive-followed-warren-buffett-for-decades-and-keep-coming-back-to-these-10-quotes/ [5/4/15]
7 – fortune.com/2019/02/25/buffett-kraft-heinz/ [2/25/19]
8 – forbes.com/sites/jpdallmann/2018/12/31/impact-investing-just-a-trend-or-the-best-strategy-to-help-save-our-world [12/31/18]