October challenge: Review your insurance coverage

Insurance is one of those rare things we buy that we hope we will never use. As a result, it is easy to kind of set it and forget it.

There are three reasons you need to review your insurance at least one a year.

1. Your coverage needs may have changed. We buy the insurance but then fail to follow up periodically to make sure that the coverage we have is still appropriate.  The sad result is when the day comes we need to make a claim, we may be surprised to find that we are not covered nearly as well as we thought.

2. There may be cheaper options. It never hurts to shop your insurance around a bit. If you haven’t reviewed your insurance recently, you might find a few simple adjustments could save you big bucks over the course of a year.

3. Major life changes affect your insurance. Have you gotten married or divorced? Had a child? Experienced a significant change in income?  Made major renovations to your home? These kinds of life events can affect your insurance needs.

My October challenge for you, if you have not reviewed your coverage within the last year, is to schedule an appointment this month with your agent.

Life insurance

You should have at least 10-12 times your income in life insurance. The real purpose of life insurance is to replace your income in the event something were to happen to you. Would those who depend on your income be in financial trouble if you were no longer here? Then you need to have life insurance. If your income has changed significantly since the last time you reviewed your life insurance, you might need to adjust the amount of insurance you have.

A second very important thing you need to review is your beneficiaries. If you have changed marital status, had children, or had other significant life events, it is possible you may need to change your beneficiaries.

A third consideration is health changes. Have you lost a considerable amount of weight since you first qualified for your life insurance? Stopped smoking? Made other positive improvements to your health? It is possible you might qualify for a lower rate.

Homeowners or renters insurance

Have property values in your area changed significantly since the last time you reviewed your policy? Most insurance companies no longer offer full replacement coverage policies. Generally, they insure what they calculate to be the current replacement value with some increases for inflation over time. But if your home has significantly changed in value, you might not have the coverage you think. The last thing you want to happen is for your home to burn down and find out that the policy you bought 10 years ago only provides $100,000 in coverage but it is now going to cost $200,000 to rebuild your home.

Have you made significant upgrades to your home that would affect the value of the property? If so your covered amount may no longer be accurate.

If you are a renter, you must have renters insurance to cover your personal property. Your landlord’s policy does not cover your personal belongings. If you do not have renters insurance, you need to buy it today! If you do, you should review your policy and make sure your belongings are properly covered, especially if you have made any significant purchases.

Auto insurance

It is not a bad idea to periodically shop your auto insurance to make sure you are getting the best rates. Even if you choose to stay with your current company, there may be many ways you could save money. Good student discounts, changes in your credit score, changes in your driving patterns, multiple vehicle or multiple policy discounts, or safe driver discounts are just some of the ways you might be able to save.

If you have a good emergency fund, consider raising your deductible. This can be a great way of saving on insurance costs, but only if you have the money saved to cover the cost of the deductible.

If you drive an older car, check to see what it would save to drop collision. I do not necessarily recommend doing this. Often collision coverage is very affordable on older cars, but it is something to at least look at. Never, ever, ever try to save by reducing your liability coverage. That can be a quick ticket to bankruptcy court in the event you are in a serious accident.

Health insurance

October is often the month for benefit re-enrollment for those who have employer sponsored healthcare plans. Or for those who get their insurance through the Affordable Care Act it is likely coming up on the time when you will need to enroll for another year. Many programs will automatically re-enroll you for your current coverage. This might be your best approach, but take a few moments to look at your options. Make sure that your healthcare coverage is most appropriate for your situation.

If you are fairly healthy, a high deductible plan combined with a health savings account might save you a considerable amount of money. Like auto insurance though it is ok to look at ways to save by increasing your deductible, but you should never lower your maximum out of pocket expenses.

Umbrella policy

Finally, if you are doing well and are starting to acquire significant assets, you might consider adding an umbrella policy to your accounts. An umbrella policy works in conjunction with your homeowners and auto insurance to provide you with additional liability protection in the event you were to be sued. If you do not have many assets, then the standard liability protections your basic policy provide is sufficient, but once you start to accumulate more assets an umbrella policy can be fairly inexpensive and provide you with a great deal more protection. The last thing you want is to have a serious car accident or have a visitor fall at your home and suddenly you are at risk of losing a lifetime’s work of saving.

Take the time to schedule a meeting with your insurance agent

Insurance is an important part of a healthy financial plan because it protects you from disasters that could sink you financially. It is always sad to hear of someone who lost everything they had because they weren’t insured. Even sadder are the stories of those who thought they were covered, but found out too late they did not have the coverage they thought they had. Take the time this month to schedule an appointment with your insurance agent just to make sure you have the coverage you need.

Best of the week – September 27, 2014

Here are some articles that caught my eye this week…

7 money mistakes you shouldn’t make in your 40s

Are you making any of these mistakes?

How Recovering Spenders Can Become Frugal

Knowing your weaknesses and having someone to hold you accountable is key.

4 Cheap Healthy Meal Plans for Families

Food is one area where we potentially have the most ability to affect our budget either positively or negatively. Nothing wrong with enjoying a mean out once in a while but continually eating out can really put a dent in our ability to succeed. Meal plans are one way of getting those food costs under control.

A Closer Look at Healthcare-Sharing Ministries

It is absolutely critical that everyone have some form of health care insurance. Few things can land you in bankruptcy court quicker than a major medical issue with no insurance. Unfortunately, health insurance can be very expensive. The Affordable Care Act has helped some, but many still struggle to afford coverage. Healthcare-sharing ministries can be an option for some that find themselves in this boat. Technically, these programs are not actually insurance, but more like co-ops where members pitch in to help pay other members’ bills. This can sometimes be a lower cost alternative that can at least protect you from catastrophic medical bills.

7 Lies About Money That Can Kill Your Financial Future

Whether we actually believe these or just live as if they are true, many of these principles are at the heart of why so many people never can manage to get ahead.

10 things retirees won’t tell you

If you are young, the lesson is start now. Retirement may seem like something a lifetime away, but if you start at a young age building up a comfortable nest egg is so much easier. If you are not so young, it is still not too late. Get your debts paid off and start saving. There is an old proverb that says the best time to plant an oak tree is 20 years ago. The second best time is today. Consider the alternative. If you feel you are too old and you do nothing, you will have nothing. But if you start saving, even albeit a little late, you’ll still be better off than if you had not saved at all.

Why your budget is like building a house

Let’s say I were to give you a half a million dollars to build a house. You can build any style house you want but you must use the money to build the house. What would you do?

Would you head down to Home Depot and buy some lumber, pipes, wiring, etc. and head out to the site and start  haphazardly putting something together?budget

Perhaps you’d be a little more organized. Hire a builder and tell him “Well, I want a kitchen over here, and I suppose 3 or 4 bedrooms. Maybe a family room over here. Well you get the idea. Just kind of do whatever seems right. I’m sure it’ll turn out ok.”

Would anyone really build a house that way?

No, of course not. If you had $500,000 to build the house of your dreams, you would carefully plan. You’d probably talk with several architects to make sure you found one that you had confidence in. You’d lay out very careful plans for exactly how you wanted your house laid out.

Then you’d search carefully to find a trusted general contractor to execute those plans. You’d over see the construction carefully to make sure everything was done exactly how you wanted it. After all, this is your dream home we are talking about.

Finding that $500,000

So am I planning to offer some lucky reader a half a million dollars? Sadly no. But where could you get $500,000?

According to recent US Census Bureau data the median income for families in the United States was $51,017. That means that over a 10 year period the average family has a little over $500,000 pass through their fingers. Many of us though reach the end of that 10 years and have no idea where that money went.

The problem is we approach our income like that foolish home builder. We don’t really have a plan so we spend a little here and a little there and wonder why our financial house ends up looking like a pretzel.

“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.’ – Luke 14:28-30

While in context Jesus was talking about understanding the cost of being His disciple, I believe there is a principle here that is just as applicable to our finances.

Just as you would never consider building a $500,000 home without first creating a plan, you need to have a plan when it comes to your spending. That plan is called a budget. John Maxwell says a budget is simply telling your money where to go instead of wondering where it went.

Managing what we have been entrusted with

If the median annual salary is around $50,000 that means over the course of a normal 40 year plus working lifetime most people will earn more than 2 million dollars.

Now I understand not all of that 2 million dollars is free to spend. Naturally there are things like taxes and insurance. You need to spend money on basic necessities of life like food, shelter, transportation and clothing.

My point is when we are making the little day to day purchases it is easy to not consider the big picture. But when you take a step back and consider just how much money you will earn over the course of a lifetime, it should make you stop and more carefully consider how you will spend your money.

As a Christian I believe that everything I have belongs to God anyway and I am just a manager of those resources. I want to manage those resources well and when I consider how much I have been given over the course of a lifetime, I realize just how important it is to have a plan.

I know many see a budget as something that will keep me from ever doing anything fun, and this is just one more attempt to shame me into not buying what I want. In reality, it is the opposite. The budget is a plan that we use to make sure that in the midst of spending the millions of dollars we earn over the course of a lifetime, we are spending it on what really matters most.

Take a few moments to add up approximately how much money you have earned and are likely to earn over the course of your lifetime. Are you happy with what you have to show for it?

Photo credit: Oregon Husky (creative commons)

Best of the week – September 20, 2014

Here are some articles that caught my eye this week…

10 Silly Sales Tactics You Fall for Every Day

OK. Time to confess. How many of these have you fallen for? It’s ok. Actually, my hand is up too. In reality a lot of these tactics aren’t necessarily bad. In fact, they might be good if used right. But they are bad when they tempt you to buy things you don’t need or can’t use or when you get 10% off that item whose price was jacked up by 20% before the “sale”. The bottom line is you need to be a smart shopper so you get the deals and the deals don’t get you.

5 warnings for a credit card co-signer

There are a lot of things that can happen when you co-sign and sadly almost all of them are bad. The worst case is you end up with damaged credit, a huge bill and a relationship with a friend or family member that is damaged forever. It is simply not worth it. Do not enter into a co-sign arrangement.

Behind the Scenes of a Happy Frugal Marriage

Getting on the same page financially is one of the factors that can make or break your marriage. The #1 cause of divorce is money fights, and even if it doesn’t lead to divorce, you will find it almost impossible to succeed financially when you and your spouse are not working together.

5 Things I’m Giving Up To Get Out of Debt

It’s all about priorities and choices. So often we choose something that we want a little bit right now at the expense of something we really want down the road. Don’t trade what you want most for what you want now.

10 Things Interviewers Really Want to Know When They Ask These Questions

One of the most important keys to interviewing well is being prepared. There will always be a few questions that are a surprise, but there are many common questions that interviewers ask. Spend time ahead of time thinking about how you will answer them. Think about projects or things you have accomplished in previous jobs. Have them fresh in your mind so that as you are asked questions you don’t have to rack your brain trying to think of relevant experiences. Spend some time finding out information about the company you are interviewing for. If you know someone who works there, give them a call. If you enter the interview confident and organized and you appear to have done your homework, you stand a great chance of getting that job.

8 ways to protect your identity while online shopping

It seems that every other week we hear about another data breach at a major company. Identity theft is a real risk. While there may be no good way to perfectly protect yourself from being a victim, there are things you can do to limit your risk.

How to put a HALT to your spending when willpower starts to fade

Have you ever bought something and then the next day wondered what in the world you were thinking? While we may be able to exercise willpower in most circumstances, will power has limits. There are definitely times when our willpower is not nearly as strong. Learn to recognize the circumstances that drain your willpower, and HALT your spending

Hungry

Have you ever gone grocery shopping when you were hungry? You intended to buy two or three things that were on sale and some how you came home with two or three bag of groceries instead? When you are hungry, everything looks good. It’s pretty hard to say no to that bag of Oreos when you are hungry.

Angry

I had a friend many years ago who was upset and frustrated by some potential impending layoffs at his workplace, so he went out and bought a new truck to make himself feel better. OK. Let me get this straight. You might lose your job, so you just took on a bunch more debt to make yourself feel better??

When we are upset, scared, or angry we can often do things that are pretty irrational if we really stopped to think about it.

Lonely

Another time when you are vulnerable to making poor decisions is when you are feeling lonely. I fell victim to this myself a few times. I was 34 when I married my wife, and I don’t regret for a minute waiting until I found her. But there were many times in the years leading up to when I finally met my future wife that I found myself feeling very bummed out about being alone. More than once I medicated my loneliness with a trip to Best Buy to purchase some electronic item I thought would make me happy. The happiness was short-lived but the credit card scars lasted for many years.

Tired

Lastly, our willpower suffers when we are simply tired. It is Friday night and it’s been a long hard week at work. You don’t feel like cooking, so it’s easier to just go out to eat.

There is nothing wrong with doing that once in a while, but if you make a habit of it you can easily sink your budget. This might be the most dangerous of all of the threats to our will power. When you are tired, it is just very hard to say no.

Understanding when to HALT your spending

So what is the point? Never get hungry, angry, lonely, or tired? Of course, that’s not realistic.

What you can do is recognize when you are vulnerable. When you know you are really upset and you are tempted to go shopping to make yourself feel better, stop and think about your motives. The first step in keeping these emotions from wrecking your budget is understanding what impact they have.

While making that purchase may make you feel better for a little while, ultimately you are just trying to medicate a bigger issue. And if you have to rely on credit for your purchase, you may feel even worse when the bills start to come due.

What steps do you take to keep from letting negative emotions lead you to spending decisions you’ll later regret?

How to find proper balance in our finances

In a very general sense, there are really only three things that you can do with money:

  • Spend It
  • Save It
  • Give It

If you are handling money in a healthy way, you should be doing at least a little bit of each of these. The problem occurs when we lack balance in our finances and any of these three areas get out of whack.balance in our finances

Spending

Spending is the most common place where we lose our balance. Some people struggle financially because of income issues or because of setbacks like a job loss or a significant medical situation, but if we are really honest with ourselves, most of us struggle simply because we spend money we don’t have.

As long as you are spending more money than you earn, you will never get ahead. The problem we face is the advent of credit cards makes spending more than you earn a little too easy. They can mask our overspending until we wake up one day in a hole that we find very difficult to climb out of.

Most financial sites focus on the problems caused by having your spending out of whack and much has been written. But while spending is where we often focus, we can also be just as unhealthy in the areas of Saving and Giving.

Saving

Almost no one would suggest that we shouldn’t save. We all know the benefits of saving for a rainy day or preparing for future large purchases or life events like college or retirement.

Saving is good and you should be doing it. But is there ever a time when saving is bad?

We should be savers but there is a line where saving and frugality can cross into miserliness.

Frugality to the extreme

If you have worked hard, you are living on a budget, you have a fully funded emergency fund and are saving for other future needs, there comes a time when it is ok to reward yourself with a little spending.

Sometimes when people have struggled to pay off their debts and build up their savings, they find it difficult to loosen up and make purchase. They have been working so hard to get ahead that it becomes difficult for them to spend.

The bottom line is if you are healthy financially and are making progress toward your savings goals there is nothing wrong with buying something you want. Just make sure it is in reason. If you want to trade in that old beater and move up in car a little and all your other finances are in order there is nothing wrong with that. But if trading up means buying a new Lamborghini, then, unless you are a millionaire, that would probably be a mistake. I exaggerate, but it really is about ratios.

Saving is good, but it’s ok to enjoy your hard work a little along the way.

Misplaced trust

There is another danger to saving.

If you are not careful, that savings nest egg can easily become where you place your trust.

“Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where neither moth nor rust destroys, and where thieves do not break in or steal; for where your treasure is, there your heart will be also. Matthew 6:19-21 NASB

Jesus spoke more about money than he did about heaven and hell combined. I believe the main reason for this is because money more than anything else in our lives has the ability to take the place of God.

Savings are good and in many places the Bible tells us it is wise to save. But, if we are not careful those savings can become our source of protection and provision.

You may begin to believe “I don’t need to trust God to care for me, because I have it covered with my bank account and my 401K.”  That is a dangerous place to be.

Giving

The third thing we can do with money is to give it away. There are few things that you can do with money that provide more joy than giving. As a Christian, I believe in tithing 10% to my local church and then giving after that as you feel led, but even something that is very good like giving can get out of balance.

Being too generous

I believe in giving. I believe it is part of managing well the things that God has given us. But that said, there can be times where it is possible to be too generous.

If you have a friend or family member who is constantly asking for money, you have to consider whether the gift is really helping or if you are simply continuing to enable behavior that is harming them. Giving a helping hand to a friend in need is loving; being an enabler of harmful behaviors is not.

Holding a closed fist

The opposite of this are those who have difficulty giving anything. They hold onto their money tightly as with a closed fist.

Whether it be motivated by greed or by fear, the root cause is often the same as those who are addicted to saving. It is a simple lack of trust that God will provide for our needs. “If I give money away, I might need it later, so I better keep it all just in case.”

It shows we have an unhealthy trust in money and also that we don’t really understand that we are simply managers of the resources that God has generously given us.

Keep all things in balance

The bottom line is all three of these items need to be a part of your financial world in moderation. How much largely depends on your income. If you are a single mom making $20,000 a year, simply giving a tithe to your local church may be a sacrifice. If on the other hand you are a millionaire, you might be able to easily give 25%, 50%, or more of your income and still be very healthy. The same ideas apply to spending and saving.

September challenge: Budgeting one category at a time

A recent Gallup poll found that only 32% of those surveyed follow a detailed written budget. I would suspect that of those other two-thirds who don’t budget, many know they should be. But budgeting can be a little overwhelming when you first start.

Part of the problem is if we have not been tracking spending, we really have no idea of how much to allocate for some items. Some categories are easy. It isn’t too hard to figure out how much to budget for our mortgage or rent, but there are many other categories that aren’t nearly so obvious.

  • How much did you spend on groceries last month?
  • How much did it cost to keep gasoline in your vehicles?
  • What did you spend on eating out?

Categories like these can be a lot more difficult to evaluate.

You can’t improve what you don’t track

One solution to this is to track your spending. A good place to start is is to simply write down every penny you spend for a month or two.

But that can be a little daunting too. Do I really have to record everything I spend? Sounds like a lot of work. (Actually, it really isn’t compared to the freedom and benefit of knowing where your money is going.)

September challenge: pick a category

If you are one of those 68% that doesn’t currently budget and you don’t really know where to start, here is my September challenge to you.

Pick one category of spending. It can be any category. It could be food, a hobby, entertainment, etc.

You can define it as narrowly as you want. Preferably though, it should be a category where you have some control over what you spend.

Maybe it is groceries, maybe it’s eating out, maybe eating lunch out with the work friends, maybe it’s money spent on the vending machines at work. You can decide to be as specific as you want, but it should still be broad enough to be meaningful.

Now for the month of September track everything you spend in that category. Just make sure you are honest. No cheating. And since we are only doing one category you need to make sure you track every penny spent.

Making the effort worth it

At the end of the month total up how much you have spent. Multiply that by 12 to get an idea of how much you are spending a year.

Suppose you spent $150 on lunches with co-workers. That’s $1,800 a year! If you could cut that in half, that’s $900 a year that you could be using to pay down debt or add to your savings.

Now that you have that information, brainstorm 3 ideas you could try next month to reduce that expense.

They say the best way to eat an elephant is one bite at a time. If you really want to make a change in your finances, you must have a plan. If the thought of budgeting is too overwhelming, try budgeting one category at a time.

What expense will you track this month?

The two letter word that can change your finances forever

Definition of discipline: Making yourself do something you really don’t want to do, in order to get a result you really want to get. – Andy Andrews

A recent study  by the National Foundation for Credit Counseling found that 61% of people don’t have a budget. While there are many reasons why people don’t budget – too busy, think they don’t make enough, don’t know where to start – I think at the heart of many people’s failure to budget is the simple fear that if they had a budget, then they could not have what they want.

Let’s face it; our society isn’t exactly very good at telling ourselves no. The credit industry has made it so easy that there is very little need to think about denying yourself. Whether it is credit cards or 90 days same as cash deals, the message is buy what you want now and worry about paying for it later.vision

The power of “No”

That little word “no” though is one of the keys to financial success. But, (and this is very important!) saying no does not mean you can’t have what you want. In fact, by saying no to less important things, you make sure you will be able to say yes to what really matters. It is really about prioritizing your money. And that’s all a budget really is.

The key to being able to say no is understanding what you want to say yes to.

What helps give us the ability to say no is knowing what is at stake and having a vision of what could be. If you aren’t connected to the larger vision, then in a moment, you cave and say yes to something you really ought to say no to. Remember that when you say no you are saying yes to something bigger and more significant.

So what do you really want? What are your goals? What matters most to you?

Maybe it’s travel. Maybe you wish you had a bigger house or a house in a better neighborhood. Maybe it’s a hobby that you really love to pursue. Maybe you dream of being able to quit your job and stay home with the kids.

Maybe if things are really tight, you just really want to make sure you can continue to provide food and shelter for your family or perhaps you dream of what it would be like to be debt free.

Spend some time thinking about those dreams. What is really most important to you?

Write them down

Once you have decided on what your goals are, write them down. There is power in written goals. Goals that are not written down are just wishes.

Put them where you will see them

Once you have written them down, keep them somewhere that you will see them. Post them on the refrigerator or the bathroom mirror. Tack them on the wall at work. Attach then to the visor in the car. Maybe put them in your wallet next to that plastic.

By having it somewhere you will see it, when you are tempted to spend money, you have a reminder of what you really want most.

Create your budget with your goals in mind

Now create that budge,t but think about those goals as you decide how you will spend your money.

I can have the super-sized cable package with 546 channels, but if I do that I can’t save for that vacation I really want to enjoy with my family. Maybe I could downsize, as I never watch 90% of those channels anyway, or maybe I could do away with cable all together.

I can plan to eat out with my buddies at the office each day. But if on the other hand I saved that $100 a month I am spending on lunches, I could retire someday with more than a half a millon dollars in savings.

I could buy a new car like my neighbor just did, but if I have a $450 car payment then I won’t be able to pay any extra on my credit cards and I’ll be in debt for years. Or I could squeeze a couple more years out of my current car, buckle down, and knock out that debt.

Keeping the greater vision in mind

Andy Andrews defines discipline as making yourself do something you really don’t want to do, in order to get a result you really want to get. That’s really at the heart of successful budgeting. It would be nice if we all made so much money that we could have anything we wanted, but for almost all of us that isn’t the case. And so we must make choices.

Understand that every time you say yes to a purchase, you are also saying no to something else you could be doing with that money. That doesn’t mean you should feel guilty any time you buy something. But by having that bigger picture vision of what you really desire, you have a framework for making sure you say yes to what matters most.

Using Checkout 51 to save money on your groceries

Probably one of the biggest variable categories and one of the areas with the most potential to save is food. Food can range from those who eat out almost every night to those with large gardens who may spend very little, with pretty much every data point between the extremes.

While we don’t do the extreme couponing that you see on TV, we do cut coupons for items we commonly buy. We shop a handful of stores for various items depending on where we typically get the best deal, and we try to stock up on items when we see a really good sale.

Recently, I came across one more way that you can save a few more bucks on your weekly grocery bill.

Checkout 51

Checkout 51 is an app that is available for both Android and iPhone. Here is how it works.checkout 51

Each week Checkout 51 posts a list of special deals. Usually there are 30-35 items with specific cash back offers. Most items offer cash back between $0.25 to 3 or 4 dollars, depending on the price of the item.

Simply do your normal shopping at your local grocery store but if you purchase one of the items on the list, save your receipt.

The app then works in conjunction with the phone on your smart phone. You simply tell it you want to upload the receipt. It launches your camera and allows you to easily take a picture of the receipt and preview the result. If your receipt is long it is very easy to piece together multiple pictures. Once you have a good picture of the receipt, you check off which cash back offers you are claiming and then upload the information.

When Checkout 51 receives the receipt, they send an e-mail promising to process your upload within 48 hours. In practice, I have found it rarely takes more than 3 or 4 hours. Once they have reviewed your receipt to verify the date and that it contains the items you claimed, they send another e-mail letting you know your claim has been processed and how much your account was credited.

Each Wednesday night at midnight they refresh the list of items with cash back available.

Once you have $20 accumulated in your account, Checkout 51 sends you a check with your savings.

That’s really all there is to it.

What I like about Checkout 51

It is easy. It probably takes me less than a minute to upload a new receipt. And I have never yet had an issue with the receipt being processed.

They usually have at least a couple generic produce cash back offers. I have seen offers for bananas, apples, tomatoes, and carrots in the time I have been using the service. Usually, coupons for fresh produce are rare, so it’s nice to find a way to save a little on these purchases.

There are no limitations on where you can shop. According to their website you can even use online purchases, though I haven’t tried that personally yet.

It is combined with other offers. On our most recent shopping trip, we had a 50 cents off coupon for a popular household cleaning product. Our store doubles coupons under a $1.00. Plus Checkout 51 had a $1.00 cash back offer. So the all in all we saved $2.00 on the purchase.

What I don’t like about Checkout 51

Really about the only negative I would site is that I wish they had a bigger selection of items. I am not sure how long they have been in business, but hopefully maybe their list of products will grow over time.

The other caution is one I would add with any kind of coupon. Make sure you are not tempted to buy items you wouldn’t have normally bought. If you buy a $5.00 item to get a $1.00 cash back, remember you didn’t “save” $1.00, you spend $4.00! It is great to save on things you would be buying anyway, just don’t fall into the trap of buying to get the extra “savings”.

Also Checkout 51 currently is only available for stores in the US and Canada. If you are elsewhere, you are out of luck.

A handy app

You aren’t going to get rich with Checkout 51. It isn’t likely to move the needle on your budget. But it really takes very little effort to upload the receipt and if I can save a few bucks here and there on things I would be buying anyway, then count me as a fan!

What savings apps do you find useful?

Understanding the difference between your credit report vs. your credit score

I have written previously about how you can go to http://www.annualcreditreport.com and get a free copy of your credit report from each of 3 major credit reporting agencies once per year. This is valuable and something you should be doing to make sure there are no errors or unexpected items.

This service only provides free access to your credit report. If you want to actually see your credit score, you must pay extra for that.

So what is the difference between your credit report and your credit score?

Your credit report vs. your credit score.

Be aware that your credit score and your credit report are two different things. Your credit report is a list of all of your reported creditors. This would include credit cards, mortgages, auto and personal loans, etc. Note it only includes items that are reported to the credit reporting agencies. So, if you have a line of credit at the local mom and pop hardware, it won’t appear there unless they report it. You credit report will include a list of accounts, your payment history, your current balances and credit limits, whether the account is in good standing or is delinquent, and personal information about you and your employment status.

Your credit score on the other hand is a number that is calculated based on the information on your credit report. It is an attempt to look at how you have used credit in the past along with your track record for repaying that credit and distilling that down to a numeric score.

Not a single score

What many people don’t realize though is you don’t really have a credit score. You have many credit scores. First, there are three credit reporting agencies: Equifax, Experian, and TransUnion. You might expect to see the same score generated from each, but in reality each will be a little different. If your credit reports are accurate across the three sites then those scores should be close but they won’t be identical. If one of them is significantly different from the others, then that probably means you have errors on your credit report.

But wait, it doesn’t stop there. The Fair Isaac Corporation (FICO) creates the formula that is used to distill that credit report down into a specific number. They update that formula from time to time. That formula is also available to mortgage and credit providers. Many banks do their own calculation based off the FICO formula. So if you apply for a mortgage or other credit, your lender may not go back to one of those three credit reporting agencies, they may be calculating their own score and that score could vary depending on which version of the FICO algorithm they use.

In addition to that, credit scores are often used by insurance companies to evaluate what rate you will be charged for things like auto insurance. Guess what? They have their own algorithms for evaluating your score, so that number will be slightly different too.

The bottom line is you don’t have a credit score. You have credit scores. However, if the information in your credit report is accurate, all of those scores should be similar. If most of your scores are in the good range, but you have one that is way out of whack and indicating poor credit, then there is probably an error somewhere that you should try to get corrected.

My disdain for the Great FICO

While I think it is important to understand credit reports and credit scores and how they can affect your financial picture, in truth I really hate the credit score and what it has become in our society.

Everything about your credit score is related to how successful you have been at borrowing money and paying it back. All of the factors considered relate to debt.

If I were evaluating whether or not to loan you money, looking at your current debts and your past track record of making payments would be relevant information. But a history of getting into and out of debt isn’t really a sign that you are financially healthy. In fact, it is probably more of an indication of financial instability.

And yet our society has come to accept that a high FICO score indicates you are doing great. I think that is just plain wrong. But because of the way debt has been normalized and thus the importance that has been placed on a credit score,  it is a factor that you must contend with as you navigate your financial world. As a result, knowing roughly your current credit score, and even more important, regularly reviewing your credit report are important parts of maintaining healthy finances. Just don’t make the mistake of borrowing money just so you can raise your credit score so you can later borrow more money.