Whether you are working your way to be debt free or are already debt free, these four tools can help you maintain or achieve a debt free lifestyle.
They also position you to qualify for the best mortgage rates, the only type of debt I believe is acceptable although paying off the mortgage is a goal I hope everyone achieves.
PerkStreet Debit Card
The best way to buy things without going into debt is by using cash. The second best? A debit card.
I have a free PerkStreet checking account with debit card. It is an online bank with thousands of ATMs around the nation and has the exact same fraud protection that a credit card does.
UPDATE: PerkStreet no longer offers this service as of 8/12/13
Use a debit card like a credit card and the only thing you will miss is paying a credit card bill 30 days later.
You Need A Budget software
The beginnings of a financial plan is within reach of the everyday American. It all begins by controlling spending with a spending plan. It helps you
- Sets realistic spending levels
- Show how much you can put in savings
- See what is possible with your money
Excel spreadsheets are all over the internet and largely free. The MoneyPlanSOS Budget 2013 is the one the Stewart household operated on for almost a decade. It is a Zero Based Budget that allows you to set limits by category and has a “checkbook register” component. It automatically subtracts expenses from the remaining amount every time you enter a transaction. But it isn’t the prettiest.
We have graduated to a more powerful program called You Need A Budget (YNAB). YNAB is a flexible budgeting program that costs $60. They do offer a 34 day free trial and you can install it on multiple computers.
Emigrant Direct Savings Account
Having an emergency fund is Step #1 in any sound financial plan. The question is: Where is the best place to put it?
I agree with having $1,000 in a simple savings account at your local bank. But that shouldn’t be your only liquid savings.
Online services offer better interest rates than local banks. They can do that because they have less overhead (physical locations).
We use EmigrantDirect. It is tied to our local bank so we can easily transfer funds back and forth while the money they hold for us gains interest. It isn’t a lot but it’s six times better than what our bank can offer.
eCredable: A non-traditional credit report
Worried that your credit score isn’t good enough to qualify for the best mortgage interest rates? Then you are playing the game wrong.
We have been taught for decades that the way to a better interest rate is by playing the FICO game. Your traditional credit score is based on how much debt you have compared to
- How much credit you have been granted
- How you have been paying those debts
- How long the debts have been there
What if you don’t have debt for FICO to measure? You most likely don’t have a credit score – but that’s a GOOD thing. It means you have controlled your spending, pay all your bills early or on time, and are a great “credit risk” for any lender that wants to make money off of you.
Banks don’t want to turn you down for a mortgage, it’s a wonderful profit vehicle for them, but they can’t fit a zero FICO score into their little widget.
Fear not. There is still a process called “Manual Underwriting”. It isn’t prevalent and it is more time-consuming for banks, that is why they prefer the faster “Credit Score Lending” policy. However, if you want the loan and they want to get you into the loan then there is a better way. It’s called a “Non-traditional credit score”.
There are a couple companies out there that offer services to speed up the verification process but my favorite is eCredable. eCredable verifies all your payments, not just debt products like FICO does. This way your payment history with your cell phone provider, your cable company, even your landlord will count towards proving your credit-worthiness to a lender.
Visit MoneyPlanSOS.com/eCredable and enter “SOS” in the Promo Code box for your free eCredable account. You only pay for the service when you are ready to apply for a mortgage or need to get a better rate on a bad loan. The estimated cost for that verification is around $100, much less than most people pay in interest charges and late fees on debt products they keep around to help build a traditional credit score!
Are you ready to improve your net worth in 2013?
Using these products and services this year is guaranteed to improve your finances. They have helped me and my family for the past year and there is no downside other than spending the time to pay attention, not interest.
I’m Steve Stewart and I approve these products.