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Another 30-day challenge to boost your finances

3 min read

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This week, we are going to look at another 30-day challenge to improve your financial life.

Interest rates currently are at historic lows. If you still have a mortgage, it may be an ideal time to try to get a lower interest rate. Over an extended period, this can add up to a lot of savings.

It may be possible to use secured credit, such as a mortgage, to consolidate higher-interest loans. You should consider this only if you have the discipline to do this as part of a repayment plan to reduce overall debt. If you will run up the balance on credit cards and other high-interest loans, you should not consider this.

Credit cards probably are the items you have with the highest interest rates. Some charge 12% to 18%. Miss a payment and your rate could jump to 29%! This means you want to pay them in full each month, so you will not be charged any interest.

If you are carrying a balance, you are not alone. About 61% of Americans have credit cards and carry an average balance of $6,194, according to Experian. You never want to pay only the minimum, or it could take years to pay off your balance. One strategy might be to pay enough to cover all current charges, plus a fixed amount each month. Say you had a balance of $2,000. If you paid $200 per month more than your purchases, your balance would be eliminated in a year.

Thirty-three percent of people surveyed said they want to improve their credit score. There are several things you can do to accomplish this. The number one thing is to pay bills on time. One way to do that is set up AutoPay. Not opening a lot of new credit cards also will help to improve your credit score.

Be sure to check your credit report every year. It has been estimated that 25% of Americans have a mistake on their credit report. The government website is www.annualcreditreport.com, which is free every 12 months.

Some people borrow against their income tax refunds. This is usually a poor idea. When a return is e-filed, as most are, you could receive your refund in two weeks or less if there are no issues with the return.

Rent-to-own stores cater to people with poor credit. If you figure out the interest rate on these purchases, they might make credit cards look cheap. If you follow the steps we talked about two weeks ago, and review your purchases, you can realize a big interest savings.

To do the 30-day challenge, inventory your outstanding credit obligations. Determine the ones with highest interest rates and search your budget to find ways to pay them off faster. Buy what you need and not everything you want.

If you take these steps, you will feel less stress and put yourself in a much better position.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.

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