Improving Your Finances for 2021

Improving Your Finances for 2021

Reading Time: 6 minutes

2020 has been nothing short of an unpredictable year, where anything that’s considered normal is from the “good old days”. The COVID-19 pandemic resulted in an economic slowdown, job losses, and financial stress for many families and individuals. Unemployment numbers for November were down to 6.7 percent, which tells us that the recovery will be a slow and unknown journey.


Regardless if the pandemic had a negative impact on your financial health, it’s clear that your finances should be prioritized. Improving your finances in 2021 will help prepare you for any financial challenges that may arise. Seeking advice from financial professionals is a great idea, especially if you have questions about your specific situation.



Here are a few key factors you should consider to help improve your finances for this year:


Setting Financial Goals

Before diving into specifics, think about what goals you want to accomplish from a financial standpoint. Goal-setting is one of the proven ways to help individuals make positive changes in their lives. It can be applied to help achieve any goal including weight-loss, passing a test, getting hired by the company of your dreams, and more. So, applying goal-setting to your finances just makes sense.



Think about what you want to accomplish this year with your finances. Do you want to change your money mindset? Start saving money to put towards retirement? Whatever your financial goals are for 2021 make sure they are specific and lofty.


For example, let’s say you want to build an emergency fund. You decide to set the goal at the end of the year to have saved $5,000 towards this fund. This is going to require you to save a little over $400 a month, which can be doable as long as you have a clear and specific plan.


This makes the goal realistic and attainable, but you’re going to have to make some effort to reach it. Lofty goals increase your motivation, and your brain will naturally think of ways to accomplish them.


Set Milestones along the Way

Having a lofty goal to accomplish is great but may feel almost impossible to achieve. That is why setting up milestones will help keep you motivated by celebrating the progress you are making. Think of milestones as smaller goals that get you closer to your big goal.


If you set debt payoff goals, milestones could be things like:

  • Creating a budget and determining how much money can be used towards paying off debt
  • Recognizing progress you’re making at regular intervals such as every time you’ve paid off 25 percent of your debt or when a credit card is paid off


Think about what things need to be done to ultimately reach your financial goal. Milestones are basically like reverse engineering that should make achieving your goal easier.


Create a Budget that Actually Works

This may sound like a broken record, but creating a budget is one of the best things you can do to improve your finances. Budgeting is meant to be used as a blueprint to get to your financial goals. It helps identify areas where you are spending too much and can help find extra money which can be used towards your financial goals.


Give yourself a month to keep track of your normal spending habits. Put them into categories so it’s more straightforward. Examples of categories include groceries, clothing, eating out, subscription services, and entertainment.


Now jot down your monthly income. If your income varies each month because of the nature of the job, side hustles, etc. then take an average of the last few months. The last set of numbers you will need is all your necessary monthly expenses, which include things like rent/mortgage, car payments, student loan payments, utilities, etc.


Now, look at some ways you could cut down on your spending habits. Do you really need a subscription to Disney Plus, Hulu, Netflix, and Apple TV? Is there a gym membership that you haven’t used in over six months that could be canceled? Groceries and dining out are two common areas that people tend to overspend. Packing your lunches and meal planning your food each week could help cut down on these expenses.


The money that you’ve “found” and have leftover can then be used towards achieving your financial goal. Make sure when you’re cutting down on expenses, you’re being realistic. If you are trying to go from spending $400 a month on eating out to $100, that’s going to be hard to stick with. And do not get frustrated if you end up overspending a few months. A budget should be flexible enough to weather these storms.


If you want to use a specific budgeting method, there are plenty of them out there. Here are a few that others have found success with:

  • Zero-Sum Budgeting – Every dollar earned is assigned a specific purpose; You start with all your non-negotiable bills like mortgage, insurance, etc. Then the money leftover can be used for spending or saving (including debt repayment)
  • Paying yourself first – 25 percent of your take-home income goes towards whatever goals you have. I.e. 15 percent towards retirement, 10 percent towards a down payment. The rest can be spent however you wish.
  • Envelope method – This budget takes all of your available cash and sets them into certain budget categories. First, your money goes towards necessities like rent, utilities, etc. Then money is allocated towards discretionary spending like “entertainment”.


Having trouble with budgeting or deciding if you should use a certain budgeting method? Financial professionals are experts in helping people manage their money better. Don’t be afraid to reach out to one and get some guidance.

Find ways to Increase your Income

More money can give you a better financial outlook when it is used to reach financial goals faster. There are a couple of ways to do this including getting promoted, a raise, finding a new job, or starting a side hustle.

Getting Promoted

Talk to your boss about what skills or abilities you may need to move to the step. See if you can work on specific projects that will get you the right experience. It might be necessary to get specific education or training that your employer might even pay for. You might even ask your boss to help with creating a development plan to help you get promoted.

Receive a Raise

Make sure you’re a valuable top performer at your job. Remember, it’s not about what your employer can do for you, it’s about what you’re doing for them. Keep track of everything you’re contributing so that you can reference it later. Use this track record when you’re ready to meet with your boss and have a discussion about receiving a raise. You might even be surprised to learn that they have already been working on increasing your salary based on your contributions.

Find a New Job

Unfortunately, if you like your job and co-workers, the best way to make more money is to get a new job. Hop on websites like LinkedIn or Indeed to find what positions are available. Update your resume and have a few trusted people review it. Before an interview, research the company, jot down questions to ask, and practice!

Start a Side Hustle

Any business or side hustle you start is going to be on top of your current job. So it requires some time management and might not be the long-term solution.  If you’re looking to go full-time someday or fulfill a passion, then this is a step that makes sense. Otherwise, you can work when you have time by taking advantage of the gig economy to take on jobs like ridesharing for Uber or meal delivery with DoorDash.


Improve your credit score in 2021

2020 has been a tough financial year for many people. Your credit score is critical to getting approved for home loans and getting a good interest rate. This year is a good time to improve your financial health by working on your credit. Here are some ways you can make that happen:

Make Timely Payments

Your payment history is the single most important factor in building and improving your credit score. A single missed payment can take a while to recover from. Virtually every credit card company allows you to sign up for auto-pay. Automate this to save yourself from a costly mistake.

Keep your Credit Usage low

Referred to as your credit utilization, this is the percentage of credit that you are using versus your credit limit. If you have a credit card that has a limit of $1000 that you’re using $200, then your usage is 20 percent. It is recommended that you keep your credit utilization under 30 percent; however, 10 percent is even better!


Carrying a balance on a credit card is expensive. You’re paying double-digit interest on what you don’t pay. Try to pay more than just the minimum balance to get it paid off faster. Minimize using credit cards for purchases that you are already have a balance.

Don’t Open Credit Accounts when you don’t need them

Sure it’s enticing to take advantage of that credit card offer and get all those travel points, but ask yourself if you really need it. If the card doesn’t offer anything aside from a one-time bonus, you’ll be better off not opening a new account.

Consider a Credit Rebuilder card

Having a poor credit history is a challenging situation. There are some financial tools that can help though. Get a credit rebuilder card that has a low and manageable limit. Make it a goal to pay it off in full each month to help improve your credit score.

Review your Credit Report

You’re entitled to a free copy of your credit report each year from each of the three credit bureau reporting agencies. Order a copy at least once every six months and go over it. Mistakes should be reported immediately to the agency that the report is from.


Don’t close your Credit Card Accounts

Closing credit cards as a strategy to help improve your credit score will actually backfire. Your credit history takes into heavy consideration how long you’ve had your oldest account and the average age of your accounts. Your first credit card from 15 years ago could be sitting in your desk drawer unused for years, but it is still important to your credit.

How Do Credit Cards Work?

How Do Credit Cards Work?

Reading Time: 5 minutes

You’ve probably had a friend tell you about the awesome rewards they get on their credit card which helped pay for their trip to Mexico. There are other stories that you’ve heard too. About how credit card debt is taking over people’s finances.


These negative repercussions have made you hesitate about getting a credit card. Understanding how credit cards work and how to use them responsibly will help avoid pitfalls like accumulating credit card debt. Then you can reap the benefits and rewards that come with having a credit card.


How do Credit Cards Work?

A credit card is basically a type of loan. The bank, called the “issuer” will set a credit limit, which is the maximum amount that you can spend.


Your billing cycle is about a month long and you must pay back the balance within the grace period to avoid paying interest. Your grace period is typically about three weeks long. The statement closing date is the last day of your billing cycle and you’ll receive a statement either by email or in the mail, based on your preference, that lists all the charges for that billing cycle.


For example, you charge $250 of purchases on your credit card on the tenth day of your billing cycle. Your total credit limit is $1000 so you have $750 of available credit that you can still borrow. You’ll have more available credit when you make a payment.


Since your billing cycle is 30 days long, you have 20 days remaining plus another 21 days from your grace period to repay the $250. That’s a total of 41 days to pay back those purchases without interest charges.


That flexibility is why credit cards are a popular choice among consumers. However, if you spend more than you can afford, then you will quickly get yourself in a very bad financial situation.


What Interest and Fees do Credit Cards Charge?

The interest charges on a credit card is called the annual percentage rate, APR. This is the annual cost of borrowing money on your credit card. You’ll pay this interest rate on the balance of what you didn’t pay during the grace period.


Let’s take the following scenario: You have a credit card with a 15% APR, which is about the average interest charged on a credit card. If you carry a balance of $1,000, you’re charged daily interest on that balance. This is computed by dividing the APR by 365 and multiplying the amount you owe. You’ll owe an additional $150 if you keep that balance for a year, hypothetically.


Credit cards will require that you make a minimum payment each month to avoid fees and to keep your account in good standing. This minimum amount is generally around 2 to 3 percent of the balance.


Other than interest, there are other fees that you might be charged, depending on the credit card you have. Your credit card agreement will list all the fees associated with your account.  Here’s a list of some of the fees that are common:


  • Annual Fees – This charge is common on travel credit cards that generally offer more perks and benefits. The fee is charged annually for owning the credit card. The most typical amount that is charged is $100.
  • Balance transfer fees – If you move credit card debt from one card to another, this is the amount the issuer will charge. Some credit cards will waive this fee as an introductory offer to incentive you for opening an account. Balance transfer fees are usually between 3 and 5 percent of the amount of the balance.
  • Cash advance fees – If you use your credit card to withdraw cash like you would a debit card, you’ll be charged this fee. The charge will usually be the greater amount between a percentage of the transaction or a flat amount.
  • Foreign transaction fees – Travel credit cards will usually waive this fee as a perk of having the card. This charge is what you’re assessed if you use your credit card to make purchases in foreign currency. The fee is typically a percentage of each purchase you make so it can add up quickly.
  • Late payment fee – If you don’t pay at least your minimum payment by the due date, you’ll be charged a late payment fee. The fee is normally around $39, which is a pricey mistake!


What types of Credit Cards are there?

There are many types of credit cards out there. They can serve different purposes; therefore, certain types of cards are a better fit for certain people. Here is a rundown of the most common types of credit cards that are available:


  • Rewards Credit Cards.This type of credit card offers some type of rewards to its cardholders. Cash back, statement credits, and points that can be used for airfare, hotel, etc. are examples. 79 percent of consumers named rewards as the most attractive feature on their credit card according to a TSYS study.


    Rewards credit cards are the most popular type of credit card. If you are getting your first credit card, you might not qualify for the cards with the best rewards program. Using your credit card responsibly will help you qualify for credit cards with better rewards in the future.

  • Secured Credit Cards.Secured credit cards require that you put down a deposit upfront to open an account. This deposit also typically serves as your credit limit. Other types of credit cards are “unsecured” and there’s no deposit requirement.


    Secured credit cards are ideal for people who are new to credit or trying to rebuild credit. Just like unsecured credit cards, payments on a secured credit card are reported to the credit bureaus. This helps you build credit and qualify for other types of credit cards with more benefits.


Why should I get a Credit Card?

Credit cards offer many great benefits as long as you use them the right way. These benefits include:


  • Help with building your credit
  • Earn rewards
  • May have additional shopping and travel perks
  • Are more secure than a debit card; Better protection with online shopping
  • Have access to interest-free short term loans


To get a credit card, you should look for one that fits your current situation. If you’re new to credit, a starter credit card, student card, or secured card would probably be the right fit. Many issuers will allow you to check if you’re pre-qualified for a credit card offer on their website. Use this feature to see what you might be able to get before completing an application.


How do I build Credit using a Credit Card?


Credit cards are arguably the best tool to build your credit score. A good score can get you approved for things like mortgage loan with lower interest rates. Landlords, employers, cell phone providers, utility companies, and insurance providers also use your credit score to help determine if they will enter into a relationship with you. Here are some things you can do to help you build credit with a credit card:


  • Pay your bill on time – 35 percent of your FICO credit score is based on whether you pay your credit card bill on time. It’s the most important and easiest thing you can do to build good credit. Use features like auto-pay on your account so that you never miss a payment.
  • Don’t’ use too much of your balance – Ideally, you want to keep your balance below 30 percent to build credit. Charging more than that is a red flag to creditors and may indicate that you’re borrowing more than you can afford.
  • Don’t close your accounts – Even if you stopped using your first credit card months ago, don’t close it. Otherwise you lose out on that credit history. It also reduces the average account age, so it’s actually better for your credit score to keep it open.
How Are Credit Scores Calculated?

How Are Credit Scores Calculated?

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What is a Credit Score?

Credit scores are numeral models that help lenders determine how likely it is that you will pay back a loan on time. You have many different credit scores including the FICO® and VantageScore. Each of these credit scores use a unique mathematical formula which is called a scoring model. Credit scores will typically range from 300 to 850. High scores mean you have good credit. Don’t have a credit score? Read this to know what you should do.


If you apply for a mortgage, auto loan, credit card, or other credit products, the lender will use your score to decide if they will offer it to you. Your credit score also impacts the interest rate you receive and how much money they’re willing to lend or your credit limit. Other companies use credit scores too. For example, an insurance company may use it as a factor that decides what your insurance rate is.

What is a Credit Report?

Credit reports are an important part of how credit scores are calculated. A credit report is history of debt repayment and management. It includes information like how much debt you have and all the credit accounts you’ve had over the years.   If you apply for a loan or credit card, your credit report also keep track of this. These requests are known as a “hard inquiry” because the lender has your permission to check your credit due to your application. “Soft inquires” occur for various other reasons like checking your credit, a lender pre-qualifying you for a credit product, or a company that you have a relationship with checking your information. These types of inquires don’t’ affect your credit score but they show up on your credit report.   Lenders and other entities supply the information that is contained within a credit report. For example, if you have mortgage loan then your lender is sending information about your monthly payment history and balance information.  You can get a free copy of your credit report from each of the three credit reporting agencies: Equifax, Experian, and TransUnion. It can be done by visiting and you’re entitled to one free report per year from each agency. It’s recommended that you check it at least one a month to make sure the information is accurate.


How are Credit Scores Calculated?

The actual calculation of a credit score is not known for any of the credit scoring models. However, it is known what factors are used to help calculate a credit score. These factors are the same for each type of credit score, though their weight is different. Here, we will talk more specifically about the weights given to the FICO(R) score.  

Payment History – 35%. Your payment history is your track record of paying your credit accounts on time. This factor carries the single biggest weight of 35% of your FICO score. Therefore if you miss one payment, this could have a big, negative impact on your credit score.  



Accounts Owed – 30%. Commonly this is called your credit utilization. This is the percentage of credit you’re using (the balance that you carryover each month) versus how much credit you have. Let’s say you have a credit card that has a $1000 credit limit. If you are carrying a balance of $300, then that means you’re credit utilization is 30%. Keep in mind that your accounts owed looks at credit utilization ratio on all your revolving accounts.  



Length of Credit History – 15%. Credit history looks at how long you’ve had credit accounts which includes the average age of your accounts, the age of your oldest account, and the age of your newest account. It also considers how long it’s been since certain accounts have been used and the length of time specific credit accounts have been opened.  

Credit Mix – 10%. Credit cards, installment loans, mortgage loans, and other credit products are also a factor in how your credit score is calculated. It accounts for only 10% the weighted calculation and you don’t have to have one of each these products.  

New Credit – 10%. How many credit accounts you open over a period of time is the final factor that is used to determine your credit score. It looks riskier to a lender or creditor if you open a several accounts over a short period. You should avoid opening up new accounts too fast if possible.


Where can I view my Credit Score?

Your credit score is actually not available on your credit report. Many credit card issuers provide access to your credit score to their cardholders. Please note that issuers may provide different credit scores from each other. Generally you can check your credit score by accessing your issuer’s website or app and finding the section for credit score.   There are also some free credit score resources that are available through some issuers that don’t require you to a cardholder. These free resources include CreditWise from CaptialOne, Discover Credit Scorecard, and Chase Credit Journey.



How can I build good Credit?

Now you know what a credit score is, how it’s calculated, and where to access it. But how do you establish good credit? Here are some tips and habits that will help maintain and build a good credit score.

  • Pay all your credit cards and loans on time. This is the heaviest influencer of all the factors and also the easiest to control. You can sign up for autopay with just about every creditor out there. Don’t risk missing a payment because you forgot and take advantage of this service.
  • Don’t lose your oldest account. Even if you don’t use that student credit card you’ve had for over ten years, keep it open.
  • Keep your credit utilization low. The general recommendation is to keep it under 30%. Besides that, it’s just a good idea to not carry a lot of debt. Credit cards in particular have higher interest rates that can really add up.
  • Learn from other experts in the industry. Aside from The Phenix Group credit repair blog, Feedspot also shares a list of informative credit repair blogs that you can read.
Lenders That Work with Bad Credit

Lenders That Work with Bad Credit

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Buying a home when you have bad credit makes it harder to realize your dream of ownership. While it’s challenging, it’s not impossible to get a mortgage with less than stellar credit. There are also steps you can take that can improve your credit that will make you more attractive to a lender.


What Is Considered Bad Credit?

When people use the term, “bad credit”, it’s typically referring to their credit score. This is a calculation that measures how risky you are as a borrower. Your financial history includes your track record of making on-time payments on credit cards, loans, and other financial obligations. Credit scores are used by lenders to help them decide whether to take you on as a borrower.


There are different credit scores that lenders may use, but one of the most popular is the FICO® credit score. It uses a scale between 300 and 850, with the higher the number the better. Typically if you a 680+ credit score, you will be able to secure a mortgage loan. Here’s a look at the FICO® credit score ranges:


801+ and more  = Exceptional credit

741-800 = Very good credit

671-740 = Good credit

580-670 = Fair credit

Below 580 = Poor credit


Don’t be too discouraged though, you can still get a mortgage if your credits scores are lower, you will more than likely be subjected to a less than prime interest rate.  There are other factors that a lender will look at besides your credit score. Your income and down payment are two examples; requirement vary by lender. 


How to Check your Credit Score

To monitor and check your credit score, you have a lot of resources available to you. Many credit card companies will provide you with access to your credit score by logging into their website or mobile app. The three credit bureau reporting agencies, Experian, TransUnion, and Equifax all offer credit score access.

Home Loan Options for Buyers with low Credit Scores

There are a few types of loans that you can potentially get approved for with a low credit score. Here are some of the options for low credit borrowers below:


FHA Loan

The Federal Housing Administration (FHA) loan is backed by this government entity. This loan program was intended to help low and moderate-income borrowers who aren’t able to buy homes because of having a bad credit score. As long as you have at least a credit score of 580, you can qualify for an FHA loan. You must also be able to make a down payment of at least 3.5%.


Now there is a tradeoff for the lower credit score and down payment requirements. All FHA borrowers are required to pay an upfront mortgage insurance premium (UPMIP). The current UPMIP is 1.75%. On a $300,000 mortgage loan, that’s an additional $5,250. Also, there’s annual mortgage insurance that’s usually around 0.85% per year.


If you are an active-duty military member, veteran, or another qualifying group, you could be eligible for a VA loan. Backed by the U.S. Department of Veterans Affairs, you can get approved with a credit score below 620. There’s also no down payment or mortgage insurance premium. You must meet the VA’s eligibility requirements to qualify for a VA loan and get a Certificate of Eligibility.


The U.S. Department of Agriculture is the government entity that backs USDA loans. To get this loan, you must be buying a house in a qualifying rural area. Your credit score must be at least 640 in most cases to qualify. These loans are geared towards families who demonstrate economic need,. Your gross adjusted income must not be more than 115% of the median income in the area.

What can I do to Improve my Credit?

The best option for borrowers with bad credit is often to work on improving their credit score. You will have more loan options, lower-income, and down payment requirements. A better credit score can help you get a lower interest rate which can save thousands of dollars over the life of the loan.


First let’s understand the factors that affect your credit score, using FICO®:

  • Payment history (35%) – This is the biggest factor that determines your credit score. It’s your track record of paying your bills on time.
  • Credit utilization (30%) – This is the comparison between the amount of credit you’re using to the amount of credit you have available. It’s best to keep your credit usage under 30% to maintain or improve your credit score.
  • Age of credit history (15%) – Also called the Average Age of Accounts, this is based on the age of the oldest credit account, new credit accounts, and average ages of all accounts found on your credit report.
  • Credit mix (10%) – If you have seen your credit report, you have probably noticed different types of credit are being reported. Credit cards are reported as revolving credit, while personal loans and car loans are called installment loans. Having a mix of these types of credit is good.
  • New credit (10%) – Typically, a new credit account is considered one that’s been opened for less than 6 months. Opening new accounts lower your credit score and affect your age of credit history. It’s best to open new accounts sparingly.

Review your Credit Report

Lenders use your credit report to look at your financial history including bankruptcies and collections. It’s also used to calculate your credit score. You can get a free copy year of your credit report from each of the credit bureau agencies.  Use your copy to review your history and check for errors. If you find a mistake, immediately report it to the credit bureau.

Pay all your Bills on Time

The impact of even one missed payment is too great. Sign up for auto-pay on all your bills so even if you forget, you’re covered. Budget your money so that you can pay your bills when they’re due.

Pay down your Credit Card

Make a plan to pay off your credit cards faster. This will lower your credit utilization and improve your credit score.

Don’t open new or close old Accounts

Try not to open too many credit accounts in a short timeframe. It makes lenders nervous because it looks to them like you have a financial issue. Even if your first credit card from over a decade ago has been sitting in a drawer, keep the account open. Closing it will lower your credit score.  We recommend using the card to purchase a small purchase, like a tank of gas, and immediately paying the card in full.