It never dawned on me how fortunate I am to be financially literate. My family instilled values that gave me the potential to make millions. I knew my community suffered from a lack of financial literacy, but I didn’t know the magnitude until I graduated from college. I started to realize there are literally millions of people that don’t own a bank account, know what a retirement plan is, and splurge money like there’s no tomorrow. What’s saddest is knowing a majority of people don’t care enough to invest resources in helping others in this area. But I do. That’s why I’m writing this piece, specifically for those looking for a way to become financially free, and it all starts with becoming financially literate.

Becoming Financially Literate

There are only two ways to become financially literate. 1) Learning from someone or 2) learning on your own. I’m lucky to grow up in a family that instilled financial values, but that was only the starting point. I have two degrees in accounting, my CPA license, and read several books on personal finance, investing, debt management, and still don’t know everything! Before I get started explaining how to become financially literate, here are several things to keep in mind.

1. It’s a marathon not a sprint! You can’t possibly learn everything in a short period of time.
2. You get out what you put in. The more you learn (and apply!), the more literate you become.
3. Learning financial literacy is like wine, you get better with time.

Now that you have those pointers in mind let’s break down the definition of financial literacy. Understanding what being financially literate means is the first step.

What is Financial Literacy?

Financial literacy is basically understanding how money works. Whether it’s how people invest, earn, spend, finance, or donate money, all of that falls within financial literacy. To take it a step further, it’s understanding that money is a tool that can be used in several ways by gaining knowledge and utilizing it to make better informed decisions. If used correctly, money can protect you (insurance), make you more money (investing), help others (donating), or prepare you for the near future (savings). Now let’s look at how you become financially literate.

Becoming Financially Literate

Remember how I said before there are only two ways to learn financial literacy? If you learned some financial tips from a relative or close friend, great! I hope you’re applying what you’ve learned to get ahead. If not, don’t worry, I’ll put you in the right mindset to get you on your way. My first recommendation is reading a book and it’s called Rich Dad Poor Dad by Robert Kiyosaki. Within the book, the author discusses the lessons he learned from his rich dad versus his poor dad and takes you on a personal journey that has inspired millions. I recommend this book because it inspires you to make money work for you. Having read the book, it’s a great primer as a you dive in the financial world.

My next recommendation will be where I spend most of my time and that is helping you develop an inquisitive mindset. The financial world is quite vast and you can get overwhelmed pretty quickly if you don’t have your thinking hat on straight. Here’s your starting point: from now on, when you hear the words ‘financially literate’ replace it with ‘understand how _____ works’. For instance, if you want to become financially literate in auto insurance, change the phrase to ‘ I need to understand how auto insurance works’. Your end point is to understand that subject as much as possible. The more you understand, the better you will able to utilize it as a tool to better your life financially. Now here comes the hard part.

The Hard Part…

 The hard part is the middle point, and the reason it’s hard is because this is where work comes in. In the grand scheme of things, what I’m about to tell you is quite simple and you will get better with time if you stick to it, but I guarantee you not everyone will do it for one of two reasons. 1) You’re a ‘know it all’ or 2) you’re not willing to put in the work. If you fall within one of these categories, the middle point will be the hardest thing you ever done. You ready? Here it is: Ask questions and seek out the answers! Here’s an example, (putting my thinking hat on).

“I want to understand how investing works”

“What is investing? Why do people invest? Why should I invest? Do I use money to invest or can I borrow money from others? How much should I invest? Where can I put my money? What is the difference between a stock and a bond? What is a commodity? Are their any other investments I can make outside of the stock market? How do I research a stock? How do I know if ‘NKE’ is a good stock or not? etc. etc. etc.

If you truly want to understand HOW investing works, you will google search the answers for every question above. The funny thing is, the more digging you do, the more questions you will come up with and the more answers you will need to find. Eventually you will reach a point where you begin to understand a particular subject within personal finance enough to make informed decisions. I just spent some time this past month understanding how I can obtain a personal loan secured by a certificate of deposit. Now I understand all the intricacies of how it works enough to leverage the tool to my advantage.

To conclude,

If you want to became financially literate you must develop an inquisitive mindset. You must have the drive to ask questions and seek out answers. It takes time and dedication to learn this stuff. You reap the rewards by being able to understand the costs and benefits of using each financial tool in your arsenal. What makes financial literacy unique is it’s all relative to an individual’s situation. For instance, if you don’t plan on owning a car it’s not wise to spend your time learning about auto insurance, or the in’s and out’s of negotiating at car dealerships. You may find it more of a benefit to invest time in learning and understanding the financing options in purchasing your first home.

If you want to build wealth you need to know what financial tools are available and how to use them. If you found what I’ve wrote to be interesting,  or have read Rich Dad Poor Dad, please comment below. I’m really passionate about this stuff and happy to discuss!

The post How to Become Financially Literate appeared first on Bradley Financial Services, LLC.

How many people really know HOW to get a good credit score? I mean really. Do you even know what makes up a good score? 500? 620? 875? Many people struggle with increasing their score for 2 reasons. 1) They don’t know what makes up their credit score and 2) they don’t know how to manage their credit card properly.

What if I told you there is a way to automatically increase your credit score?What if I told you there is a way to automatically increase your credit score? No lie! I use this method all the time! As a matter of fact, with this system I increased my score from 660 to 750+ in 6 months.  Before I show you the system, let’s go through a quick score breakdown to show what is considered “good”.

Here are the ranges:

Anything below 600 – Letter Grade: F

600-649 – Letter Grade: D

650-699 – Letter Grade: C

700-749 – Letter Grade: B

750+ – Letter Grade: A

So why is it important to know this? Answer: Once you know what makes up your credit score the easier it is to build it up. Once you know what makes up your credit score the easier it is to build it up. Easier said than done, right? True, but with enough patience and determination you can hit 750 in no time! Without further adieu let’s get to automating!

We’re going to use the lovely pie chart from FICO above. If you don’t know what FICO is it’s basically the company that crunches the numbers to produce your credit score. There are a number of other consumer credit risk reporters, such as VantageScore, PLUS Score, TransRisk and Equifax. We’ll just stick to FICO to make things easier. Let’s start with the biggest component and work our way from there.

35% – Payment History

One of the most important factors that makes up your credit score is making payments on time. One of the most important factors that makes up your credit score is making payments on time. To ensure you ALWAYS pay on time automate your payments. So how do you automate your payments? When you receive a credit card, there are two options to make a payment which includes making payments manually or through direct debit (the automation!). With direct debit, the minimum payment listed on your credit card is taken out of your account when the payment is due. When you automate, you no longer have to worry about paying on time. With manual payments, you constantly have to remind yourself to pay on time each month. So automate your payments and your worries are gone! Just make sure you have enough money in your bank account to cover the minimum payment. You wouldn’t want to get hit with an overdraft fee!

30% – Amount Owed

The second most important factor is the amount owed. With this category, it’s all about your utilization rate (Credit Card Balance/Credit Limit). A good utilization rate is below 30%. I personally like my balance to be 0% so no interest is added onto the balance. Here’s a good rule of thumb; if your balance is over 30%, pay a little extra to get that balance within the 0-30% range, if your balance is under 30%, pay the minimum payment. Here’s an example, you just made a $350 purchase and your minimum payment is $35 and you have a $1,000 credit limit, pay an extra $15. If you made a purchase that’s under the 30% threshold I would advise monitoring your credit balance and pay a little extra on your next payment to sustain a manageable balance.

Now some credit lenders give you the option to change the amount you can automatically pay each month while others only give you the minimum payment option. At the end of the day it’s up to you how much you want to pay each month. Just know, paying a little extra goes a long way to building your score.

15% – Length of Credit History

With this category your biggest enemy is time. The longer you hold an open credit card account the more this category plays a factor into your credit score.  The best way to automate this piece of the credit score is to continue having an open credit account. One of the worst things you can do is CLOSE OUT a credit card. Closing an account lowers your credit score. I’ve only had my credit card for 3 years now, which I think is good in my opinion, but imagine having a credit card for more than 5 years, now that’s some good credit history!

10% – New Credit

The new credit category is all about increasing your credit limit. I’ve probably asked about 3-4 times for a credit limit increase. Getting new credit increases your credit score. To automate this, schedule a time in your calendar to request a credit increase at least twice a year with your credit lender. Getting new credit added to your credit limit boosts your credit score and lowers your utilization rate which gives you a 2 for 1! One time, I asked for a request twice within 2 months and I got a $2,500 increase! I don’t anticipate using that much credit right now but it’s great to see that score rise.

10% – Credit Mix

Last but not least is the credit mix. This category is basically the different sources of debt you manage (auto loans, credit cards, student loans, mortgage loans, etc.). The more debt you have in different categories the more diverse your credit mix. In my opinion, I would focus less on this category as it encourages you to take on more debt. Even though the credit mix doesn’t contribute as much compared to the other categories it will still be on auto pilot if you have a mix.

Tips

1. Limit yourself to at most 2 credit cards. I tend to stick to one because it’s easier to manage. Having two credit cards shows lenders you can manage credit card debt well and can increase your score.
2. Check your credit balance at least twice a month. That way you constantly know what your balance is and if any charges seem unusual you can dispute it readily. A good rule of thumb would be 3 or 4 days before your payment is due and two weeks from that time.
3. Pick a credit lender that shows you your credit score each month. It’s great to see that credit score feature pop up after each month. You know exactly what your credit score is and you can see the progress you’ve made. In a way, it makes paying off your credit card a game!
4. Before making a big purchase such as a house or car, talk with a credit analyst at your bank on what their definition of a good credit score is. That way you gain more insight into knowing the interest rate and loan amount you will qualify for.

Edited by: Nigia Cusic

The post Put Your Credit Score on AutoPilot appeared first on Bradley Financial Services, LLC.

It’s hard to save! You have to manage budgeting,  recording what you spend and oh don’t forget those concert tickets you just bought that blew your budget!  Then you start all over again! What if I told you there is a simple way to save? I learned this trick in high school and it has worked wonders in helping me pile money away.([tweetthis]I learned this trick in high school and it has worked wonders in helping me pile money away.[/tweetthis])

The trick is to set up direct deposit for two bank accounts at two DIFFERENT banks. The primary goal of the first bank will be accessibility. Opening a checking account provides you the best access, I would pick a bank (if you haven’t done so) that has the most ATM’s in the area you live in. Think of using the first account as funds for your day-to-day operations.

The next step is to open a savings account at the second bank. You may be asking yourself, why don’t you just open a savings and checking account at the same bank? That’s a great question and the the answer is quite simple, you’re creating barriers for yourself. For the second bank you want to limit the accessibility you have to avoid the temptation of impulse spending.  The second account is solely for saving. To take it a step further, find a bank with the highest interest rate in your area (or online) to build your savings through compound interest! Sure, interest rates are low now, but it will be helpful when you’re adding more “0’s”!

After the bank accounts are set up. The next step is setting up direct deposit through your employer. You should be able to set this up on your own. If not, you should ask Human Resources if they can set it up for you. The amount you decide to save is up to you. Since my expenses are low, I am able to save half of my income.

When determining the portion you want to save, ask yourself, “how much do I want to save? Do I want to save for that Vegas trip in the summer? Do I want to set up an emergency fund? Or maybe I just want to get out of my parents house some day, but when? The best way to determine the amount to save is by making savings goals ([tweetthis]The best way to determine the amount to save is by making savings goals[/tweetthis]). You might set a goal  of  saving  $500 each month to get an apartment by 2018. Setting concrete, yet tangible, saving goals give you a purpose for saving and makes the whole process easier. With that being said, you now know the trick!

This is one of the best techniques for saving!([tweetthis]This is one of the best techniques for saving![/tweetthis]) Determining your budget and deciding how much money to save is the most difficult part. Once you know how much to save, it’s easy! Your savings will be stowed away in a separate account and you won’t even have to think about it.

So how will this trick help me gain wealth?

At the end of the day, you worked very hard to earn your paycheck. No one deserves to get paid before you do! Paying others before you pay yourself is not a wealth builder’s mindset. Wealth builders pay themselves first then manage their expenses. The trick I described above not only develops the habit of paying yourself first but it allows you to easily save money. Before you know it you’ll have thousands of dollars at your disposal that you can use for a rainy day. No one has gotten through life without having rainy days. This automatically provides you with an emergency fund that you can use to cushion the blow when hard times arrive.

I’d love to hear your thoughts on saving. Do you have a trick you use that works best? Comment Below!

Edited by: Nigia Cusic

The post Tricking Yourself into Saving Money appeared first on Bradley Financial Services, LLC.