Category Archives: saving money

Your Credit Score

trivial pursuitWhen she read that I was talking about buying or building a house, Foundry reader Ethel mailed me and asked if she could write a guest post about an important elephant in the room when making a large purchase: your credit score. Ramit Sethi from I Will Teach You To Be Rich points out that a bad credit score will cost you tens of thousands of dollars over the course of even a modest mortgage.

Take it away, Ethel…

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Why it’s Frugal to Build a Better Credit Score

A good credit score can make it easier to secure loans and get better interest rates, but what many don’t realize is that a bad credit score can hit your wallet in ways you are not aware of. Besides having to pay higher interest rates on loans and mortgages, a poor credit rating can cause denial of employment, higher insurance premiums, or paying a higher security deposit when renting a house or apartment. Cell phone companies may even require those with a low credit score to pay a security deposit of as much as four or five hundred dollars before they can open an account.

What is a Good Credit Score?

Most credit reporting agencies use what is known as the FICO (Fair Isaac Corporation) model or a version of it to calculate your credit score. Various factors such as your bill payment history, the types of credit you have, the length of your credit history, and recent borrowings are considered in its calculation. A “good” credit score, according to Experian, one of the major credit reporting bureaus in America, depends on the system used by your lender. Most credit scores fall in the range of 600 – 750, and the average score for the United States is around 720. Generally they say, a score of 700 or above suggests that you manage credit well.

How to Improve Your Credit Score

There are several steps you can take to improve your credit score if it’s on the low side. One of the most effective methods is to pay off any outstanding bills and continue to pay them on time in the future. Your history of paying bills makes up 35% of your credit score, so making timely payments can raise it quite quickly.

Another effective way to raise your credit score is through the responsible use of a credit card. If you charge only small amounts which you can pay off in full every month, your credit score will gradually rise. If you aren’t able to pay the full balance, maintaining one of less than 30% of your card’s limit is also effective. For instance, if you have a $1,000 limit on your credit card, make sure you keep the balance at around $300 or below. [ed: NEVER use a credit card if you can’t pay the balance in full each and every month.]

If you don’t qualify for a standard credit card, you can get a secured credit card. You simply deposit an amount of money with your bank, and they will issue you a card with a limit equal to the amount you deposit. You must follow the same practices as with a normal credit card, keeping your balance at below 30% of your limit, or paying it off in full every month when you can in order to increase your credit score.

Raising your credit score is really not that hard. It does require a focused plan and a bit of discipline, but it is well worth the effort it takes. Paying your bills and making loan payments on time can save you from costly penalties or late fees. For those seeking a mortgage, a healthy credit score can save you tens of thousands of dollars over the course of the loan. Why pay more of a security deposit than you need to? A little effort can go a long way, not only towards raising your credit score, but to raising the balance of your bank account as well.

Ethel Wilson is a financial and credit specialist with 12 years experience in the banking, credit scores, and financial industry.  She has advised countless clients on how to improve their credit score rating.  She now shares the best of her credit score rating information as a contributor and editor of creditscoreresource.com

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Thanks, Ethel! One thing I’d add is to check all 3 credit scores yearly. The official website for checking your scores is annualcreditreport.com. Do NOT use the websites that you see advertised, even if they say “free” they are for-pay services. You can also get your credit score checked for free by 3rd party sites like creditkarma.com. They “guess” your score so it isn’t 100% accurate, but it’s close enough to monitor if you’ve been the victim of identity theft, between your yearly official credit check-ups.

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Last-Minute Frugal Date Night Ideas

Items from a frugal date night As if she was reading my mind, Foundry follower Sally Ashley asked if she could do a guest post on Frugal Date Nights. Just in time for Valentine’s Day! When she’s not reading this blog, Sally writes about romance and personal finance. Her most recent work focuses on how to pick the best finance schools.

So if you don’t have anything planned for your sweetie tonight, and you want to keep it frugal, read on…

How to Plan a Frugal Date Night
Planning a date doesn’t always have to be expensive, and you can have just as much fun on a frugal date as you can on an expensive date. Below are some great ways you can plan a frugal date night and still have a great time!

Hangout at Home
You can plan a fun but cheap date night in your very own home. You probably have food there, so look up some recipes online and cook a great meal for you and your date. More than likely, you have some good entertainment in your home as well. A stereo, television, computer, video game system or just some good old-fashioned board games can be fun on a date. Simply invite your date over to hangout and listen to music, watch a movie and share a meal, or play some fun games.

Attending Local Events
Most every city has local newspapers that list local events and happenings that will be going on in the next few weeks. Some cities have their own websites that list these events. Look in those papers or Internet sites, and search for some local events that you and your date can attend. When you see something that looks fun, and go out and have some fun. Most of the time, these events are relatively cheap or even free.

Visit the Park
A romantic AND cheap date that can be a lot of fun is going to the park. If you or your date has a dog, take your pet along. You can pack a nice picnic lunch and a blanket and sit under the trees and enjoy good conversation while eating lunch. Some parks host events and activities as well. They might have a swimming pool, walking/jogging trails or some secluded areas to get some privacy. If it’s winter, there might be somewhere to go ice skating.

Cheap Movie 
Going out to the movies on a date is ridiculously expensive, and more often than not, boring. Staring at a screen and being silent for over two hours can make it tough to get back into the vibe after the movie is over. However, if there is a movie you both want to see and it is available by rental, check it out and watch it at home. You can pop your own popcorn, have your own drinks and sit down and share a movie together. Every now and again, you can stop the movie to enjoy some conversation or refresh your beverages. If you know your date pretty well, take advantage of the cheaper movie specials during the daytime, or visit the dollar movie to catch a really cheap one. [ed: Even cheaper, borrow a movie from the library for free!]

Cheap Coffee Dates

Meeting up for coffee can be a good idea if you know your date pretty well. If so, you can engage in good conversation the entire time you are there. If you do not know your date well, a coffee shop can be intimidating – trying to find something to say for a couple of hours. If you have a nice coffee maker or cappuccino machine at home, ask your date over for some homebrew, and make your own coffee at home while enjoying conversation, a meal or just watching television together. First dates at a coffee shop are easier if you go on a double-date to help break the ice. Afterwards, you can go to a cozier place alone if things go as planned.

Hopefully, you can use some of these frugal date ideas for yourself. They are easy on the wallet, and they will allow you the opportunity to get to know your date better. You can learn a lot about a person by using one of these cheap date ideas over the more expensive options.
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Thanks, Sally! Readers, how are you spending your Valentine’s Day (frugally or otherwise)? In our family, we exchange hand-made cards for each other, and Mrs Foundry usually bakes a treat for the family. This year I splurged and got her a bouquet of her favorite flowers (even though we agreed on no gifts). Oops!

Save Bling with Ting

tingEven a well-oiled machine like the Foundry’s finances need some tuning every once in a while.

One big offender in our budget was the mobile phone plan. We were paying $150 a month for 2 phones with data plans. I knew we could do better. Pre-paid plans look cheaper on paper, but I didn’t want the hassle of recharging minutes (or worse, forgetting to recharge and finding my phone out of service).

Ting to the rescue! They run on the Sprint network (so you can bring your Sprint phone over), and use a tiered plan. At the end of every month you only pay for what you used, in terms of minutes, text messages, and megabytes of data. For instance: less than 100 minutes is $3, 100 – 500 minutes is $6, and so on.

You can see the dashboard in the image above (that was my usage for last month), but they also have alerts you can set up. “You’re about to go into the next level of text messages,” for instance.

Here’s the best part: without changing my phone habits much, my phone plan went from $75 (my half of the family plan) to $25! I use Google Voice for long calls (or when I know I’m going to be on hold) and for outgoing text messages. And I’m almost always near a wi-fi signal.

I highly recommend taking a look at Ting to see how much money they’ll save you. Especially if you already have a Sprint phone, since your existing phone will work.

Here’s a promotion code for $25 off: https://z2qhtq7rd1.ting.com/

NB: The links on this post are referral links, that get each of us $25 off. Please click on them! It’s a nice and fully optional way to help out this blog if you choose to do so.

What do you think of this new tagline?

oxygenNot that it makes a huge difference in the whole scheme of things, but I put a new tagline up at the top of my blog. Here’s why…

I figured that there are a thousand frugal blogs out there (even though this was the only “frugalism” blog), so I needed something more unique and inspiring. The new tagline is:

Work to earn. Earn to save. Save to invest. Stop working.

It was inspired by this awesome article on what “retirement” means in this day and age. The full context is:

I demonstrated a very typical Generation X attitude to finance. Rather than thinking of it as having a pension plan, getting vested, putting in my time, and making monthly installments on my defined contribution plan, I looked at the “rules” of the game. How does the money system work? Should I work to earn and earn to consume? Or should I work to earn and earn to save and save to invest so I can stop working?

I broke it into four sections that are really the four main topics of Foundry in the Forest

  1. Work to earn means Maximizing Income. Reading your average frugal blog has a diminishing return on your time, since there’s a limit to how little you can spend (Jacob, the guy who wrote the above article, seems to have found that limit, $7k a year per person). On the other hand, there’s no limit to how much you can earn. That’s why I recommend most people focus their efforts on maximizing income. Once you’re past 6 figures, you’re probably good in this department.
  2. Earn to save means Minimizing Spending. Figure out how much is enough and don’t spend a penny more. If you increased the frequency of your breathing, you could gulp up so much more oxygen. But you don’t because you have all the oxygen you need.
  3. Save to invest means Educating yourself about Investing. I wrote a series of posts on this topic that will help start your investing education. But never stop learning!
  4. Stop working means Becoming Financially Independent, and no longer requiring paid employment. That part should be self-explanatory. But maybe not, since smart people are still re-working the definition of “retirement” these days.

So that’s the new tagline. What do you think?

Borax + Baking Soda win again: how to make homemade scouring powder

japanese bathIs there anything that Borax and baking soda, once combined, can’t clean up? Actually, don’t answer that.

You all know the childhood song: Comet, it makes your teeth turn green. Comet, it tastes like gasoline. That song was written because Comet is nasty and it doesn’t belong touching the stuff you touch with your naked body, like your bathtub*.

It was time to clean the Foundry bathtub and I had to think fast. Truthfully, I had plenty of time. I’m just trying to build up suspense for this blog post.

I found this recipe for “scouring powder” (the generic name for Comet) and noticed it contained my two favorite household cleaning ingredients: borax and baking soda. So I gave it a try, and it works great!

The recipe is: equal parts borax, baking soda, and salt.

So here’s the updated, ever-expanding list of commercial household products I’ve replaced with diy recipes:

Anyone else have any other household products that they make themselves? Even if it doesn’t use borax or baking soda.

* There’s a product called Bon Ami that’s a lot less caustic. So if you must buy a commercial scouring powder, buy that one. But if you’re into that kind of stuff, why did you read this post?

How to Become Free From Debt [guest post]

highline trailAlmost any form of debt is antithetical to the Foundry lifestyle: credit card debt and car loans are out of the question; college and home loans are a maybe, but should be avoided if possible. If becoming financially independent is akin to climbing a mountain, taking on debt is like leaving the trail to take a crap in some poison ivy.

Not having any personal experience with debt puts me at a disadvantage when it comes to writing about the topic. Luckily, Foundry reader Randolph Warner offered to write up some tips on getting oneself out of debt. Randolph writes about personal finance and business. His most recent work is focused on helping people earn Master of Finance Degrees.

Take it away Randolph…

Freedom from debt is something that many people are seeking. Nothing about pulling yourself up out of a financial hole is easy, but there are many steps that you can take to make the process a little simpler. To give yourself a little bit of assistance, here are a few tips to help you along your path to regaining financial freedom:

Assess The Situation 
Many people know that they are in great financial distress, but really do not have a lot of specific knowledge regarding their situation. The best thing that you can do is to gather up all the information you have, including the current bills you are receiving and the information that can be obtained from your credit report to get a complete list of what you owe and to whom you owe it to. Then, you can see where you’ll be 6 months, even a year from now, assuming things stay the same.

Start Small 
Take your newly acquired budget and order all your expenses so that the smaller amounts are at the top of the list, and put the rest in ascending order from there. The game plan is to start making payments on these smaller amounts to begin paying off items that you have to check them off of your list. With each of these paid off things, your credit score then has room to improve.

Get Some Help 
Many services are available to give people an opportunity to lower their overall debts to specific collectors. Consider how much easier it might be for you to pay off a bill if it had hundreds of dollars shaved off of the total amount. These services specialize in bartering with companies to get them to settle at a lower amount, which could theoretically save you thousands of dollars, depending on the current debt situation you are in.

Pace Yourself 

This is not a problem that you are going to be able to solve today. You have to take some time to figure things out and make changes. Professional assistance can help save you a lot of money, but it still might not be something that you can take care of all at once. Pace yourself and ensure that you are not putting significant financial strain on yourself to take care of this, which could result in a cyclic return to debt in the future.

Avoid Traps
All kinds of things play a role in reducing debt. Some people think debt consolidation loans are the way to go, but these carry problems of their own. Never leap at an opportunity like this, no matter how promising it may sound, as it could have severe consequences for even the slightest mistake or setback.

Seek advice from a professional who can give you a sound approach and a plan to get out of debt that can work with your current budget limitations and a time span that you can live with. It is not an easy road, but one that you can easily travel if you take the right steps.

Thank you, Randolph! Great article. The only thing I would add is that even if you’re in debt, you should still have a small emergency fund. Having said that, I can’t stress how huge of a financial emergency it is to be in debt. Do whatever you can to get out of that situation, as it will set you back decades on your path to financial independence.

Food Stamp Challenge: Thankful Wrap-up

The Food Stamp Challenge ended Sunday afternoon. We broke the bank by just $2, as you can see by the image to the right, which is close enough to the goal that I consider it a success. If you’re interested, you can also look at the full spreadsheet with lists of what we bought and (much of) what we ate.

The week went by pretty much like a normal week. Venessa might tell you otherwise, since the work of planning and purchasing just the right amount of food fell mostly on her shoulders. I’m very thankful that she’s so willing to go along with my crazy challenges! The biggest change was not going out to lunch with my co-workers, which I usually do a couple times a week.

From looking at the shopping list, the secret to keeping food costs down is obvious: buy individual ingredients, instead of ready-to-eat meals and convenience foods. With the exception of “hamburger buns,” almost everything else on the list is either a food item in its most basic form, or a food home-made prior to the start of the challenge*. Given enough time (and my awesome bread machine) I could have made the buns too. Time is really what is needed to turn ingredients into food. I’m thankful that Venessa and I each work sane schedules so we have time for cooking nutritious meals, and being with the rest of the family.

I was talking about the challenge with a friend, mentioning how I aimed to show that living on a very limited food budget doesn’t mean that one needs to make compromises. She mentioned that simply having the money and mentality to make healthy food choices isn’t sufficient for everyone, since some folks live in a food desert. I’m lucky to live walking-distance from an adequate supermarket and work walking-distance from two very good ones, so it didn’t occur to me that not everyone has that luxury. This is yet another thing to be thankful for.

If you haven’t figured it out yet, I’m dropping a lot of thankful bombs, which can only mean one thing: Happy Thanksgiving to everyone! Eat yummy food but don’t overdo it. Remember those who are overworked, not able to get to grocery stores, and getting by on Food Stamps.

* If I really wanted to be tough on myself, I’d also add “wine” and the various dairy products to the list of ready-made food items, since they can both be made at home from basic ingredients.