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Archive for June 13th, 2009
Personal Credit and your business credit Step 1
posted by Happy Business Guy @ 9:57 PM
Saturday, June 13, 2009
If you have a business and need a personal guarantor, you will need to make sure you have good credit. Along with using your business checks, need to make sure your personal credit is good. I have some helpful information here to help to improve your personal credit, that will in turn, help your business.
Improving your Personal Credit Score takes money – so you’ll need a game plan to identify sources of cash. This means that you may have to cut your spending, withdraw from your savings and maybe even sell off assets.
Evaluate savings account vs. credit card interest rate
Compare the interest rates on your credit cards with the interest rates you earn on your savings accounts. It is likely that interest rates on your credit cards are higher than those on your savings accounts. If that is the case then the interest you are paying is more than the interest you are earning. This could mean that you consider withdrawing from your savings and paying off your cards.
Consider money in your current account, money market accounts or certificate of deposits which could be used to pay off your higher cost debt.
Reduce your spending
Experts say that most people spend 20% more than they think they do. The only sure way to understand your spending and manage it is to track it over a period of time. You could try writing in a notebook or use a money management software package such as Quicken or Microsoft Money. Analyze your budget and expenses to identify categories where you can cut expenses.
Here are a few examples of small steps that can start you off:
Reduce small luxuries – drink morning coffee at home, carry lunch to work, skip a manicure
Reduce spending on entertainment – eat out less frequently, rent movies and watch at home
Downgrade your cable subscription to a basic service
Take a list when you go grocery shopping. Using coupons saves money too
Carpool or take public transport. Driving less will cut your gasoline costs
Move to an apartment or home with lower rent
Enroll in auto-pay with your bank to pay your bills. This will eliminate the possibility of late fees
Use the Home Budgeting Calculator to understand where your money is going. By entering your income and monthly expenditures, you will get a break-down of where your money is being spent.
Make structural changes to your life
Sometimes you have to take severe actions to get out of debt. When you earn less than you owe and when your debt spirals to a level that you do not have resources to pay for it, you need to make structural changes to your life and elements that drive those expenses.
If you find it difficult to pay $450 monthly for your recently purchased new truck then trade down to a used car that may cost you only $250 monthly. You may lose money on the sale of the truck, but you’ll save approximately $200 per month in payments. And insurance, gas, and maintenance expenses will likely be less as well.
Consider selling other assets such as boats, ATVs, etc. Even if you don’t owe money on these items, selling them may still make sense if you can use that money to pay off your other debt and gain control of your credit.
Consider trading down your home to one with a lower monthly payment. If your debt situation is dire, trading down your house may make a big enough reduction in your expense. Remember, this is a decision you should make only after careful consideration and evaluation of the economics, including the cost of selling your current home, closing costs on a new home, and any change in interest rates. Contacting a trusted real estate professional is a good first step if you need to explore this option.
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