Should You Apply for A Card with an Annual Fee?

Credit CardWhen it comes time to get your first credit card, or perhaps get a new credit card, take time to sit down and make a list of everything about the cards that you’re interested in.  The PROS and the CONS.  Depending on your credit level, the cards you’re interested in, the rewards available (if any), and the fees attached to the credit cards, you can either save a bundle or end up paying an annual fee that simply doesn’t make it worthwhile to get the credit card at all.  But, are there actually times when paying the annual fees on certain credit cards makes sense?

Let’s look at some of the reasons you might consider paying those annual fees:

You have a Limited Credit History:  If you’re just starting out, it’s not always easy to get a credit card in the first place.  Most of the top credit card companies reject your application right off the bat, others promise a certain amount of credit, but hit you with a hefty fee (up to half of the credit limit), and still others charge a higher than normal interest rate.

Unfortunately, many of the credit cards that are marketed to customers with limited or no credit history also charge an annual fee. However, for these types of cards, you’ll typically see an annual fee that’s less than a $100, but when it costs you the $100 just to get a credit limit of $200-$300, it’s very frustrating to say the least.  But, if your credit score is very low and you’re serious about building it up, then this may be the best way to start, so don’t discount these credit cards without considering whether it will work for your circumstances.  Sometimes, the end justifies the means.

Your Credit Isn’t Good Enough: What if your credit is less than perfect or damaged?  As a result, you may not qualify for credit cards with no annual fee. If so, you’ll most likely have to start with a credit card with an annual fee, and then work your way up to other credit card options.

The Rewards Outweigh the Fee:  There are upper tier credit cards that offer substantial rewards, but do charge a fee.  If, after you’ve reviewed the rewards, and you’re certain that you’ll exceed the amount of the annual fee in cash back or points rewards, then the card with the annual fee may be a good option for you.  Just make sure that you can easily downgrade to a no fee option should you choose to do so.  Closing a card can actually hurt your credit score, so the downgrade option is definitely one to look for when selecting a credit card of this type. 

In closing, it’s safe to assume that there are times when a credit card with an annual fee can be beneficial to you.  You just have to make sure that you review all of the terms, know exactly what you want, and what you’re getting.



It’s Tax Time Again!

Here it is, tax time again!

Figure Income TaxWere you able to save much on your taxes this year?  Or, did you fall into one of the many tax brackets where it seems you just can’t get a break?  Regardless of where your income falls on the scale, there are some things that you can do right now that will potentially reduce your tax bill.  While many of these things fall into the tax return you’ll eventually file next spring, there are a couple of things you can do to make sure this year’s return is at least as accurate as it should be.

  • If you’ve not already done so, consider having a tax professional do your taxes.  Granted, there are lots of free or nearly free options online, but the laws change so much during any given year that you should definitely consider having a reputable firm do your taxes for you.  Especially if you make a lot of money, have lots of deductions, or have made a major life change in the past year, the difference between doing them yourself and having another do them could mean a substantial amount of money.
  • Make sure you’re filing under the correct status.  Even though you might think this is pretty straightforward, there are actually three options for singles and two for married couples.  Single, but have a child?  Single is probably not the right status for you.   Perhaps your spouse passed away, but you have a child?  There’s a couple of different status options for you, too.  Even Married is not necessarily as simple as it sounds.  Did you know that you might be able to save money if you and your spouse file separately instead of jointly?  Depending on your situation, choosing your status can significantly alter your refund (or tax bill).

Now, what about next year?  What can you do differently this year that will save you money?

  • One of the biggest ways to save money on your taxes is to BUY a home.  Not only will you save money because you can deduct mortgage interest and property taxes, but you will also be building equity in something that you own.  No more paying rent (buying a house for your landlord).
  • Go back to school!  Finish your degree, take classes for work, or learn something totally new.  Many educational expenses qualify for tax breaks, just be sure to do your research in advance so you’ll know if what you sign up for qualifies.
  • Keep paying on your student loans.  You can deduct up to $2,500 in interest on your student loan interest every year, even if you don’t itemize.  So, keep paying on time!
  • Donate to charity.  While it’s always nice to make a few dollars when we sell old clothes, furniture, and such online or at garage sales, it may be more beneficial to you if you donate it to charity.  Just keep the receipts and itemize your deductions (if you qualify).
  • Make pretax contributions to a 401(k), 403(b), or 457 retirement plan.  The more you can contribute pre-tax, the more you’ll save on your income taxes.  For 2020, the maximum 401(k) contribution is $19,500. If you’re age 50 or older, you can make an additional “catch-up” contribution of $6,500, bringing your total 401(k) contribution limit to $26,000. The limits for 403(b) and 457 plans are the same.

Still think you can’t save money on your tax bill?  Remember, the more attention you pay to your finances throughout the year, the easier it becomes to save money on taxes (and everything else) when the time comes.  So, get busy!  Pay attention!  And have a great year!


Why Budget Your Money?

Do you try to stick to a weekly, monthly, or even an annual budget?  Maybe you figure since you can barely make ends meet that it’s a waste of time to even try to budget your money?   Maybe you’ve never even thought about budgeting?

Even though it may not seem worthwhile, or even important to you, budgeting your money is actually very important to your financial future.  Not only will it help you to see places where you can (and should) save money, but setting financial goals and objectives and then achieving those goals is a great way to boost your monetary self confidence.  I can almost promise you that, achieving even the smallest objective will be just the encouragement that you need to strive for the next, bigger financial goal.

Budgeting is a powerful financial tool even for those of us with little money – but it’s not foolproof.  Emergencies arise.  Unexpected expenses.  Income decreases or increases.  So many factors can have an effect on your budget, but if you don’t HAVE a budget, there’s absolutely no way to prepare, endure, or recover from some missteps. And you certainly won’t make near as much headway toward reaching your longterm financial goals as you would if you simply sit down, analyze your spending, and create a workable plan to stay on track.

Here are some of the best reasons for you to create and stick to a budget this year:

  • Keep Your Eyes on Your Financial Goals:  Having a plan for your future involves sticking to a plan for today, but if that plan seems too far out there, it’s really easy to lose sight of where you want to be.  Being able to see where you are, where you’ve been, and where you want to be (and WHEN you can expect to get there) is crucial to your success. If you can’t see it, it will be that much harder to work toward it.
  • Curb Your Spending:  It seems like there’s always something that we think that we want or need out there, and even though it’s really easy to do so, we shouldn’t just pull out that credit card and slide it through the machine every time we’re tempted.  If for no other reason, having an analysis of your current (and past) spending habits (and needs) can keep you from adding yet another bill to an already tight budget.  Once you know what your bottom line is each month, I can almost guarantee you won’t want to see that number decrease!
  • Emergencies:  One of the most important things you can do when you create your budget is to allocate a certain amount of money each week (or month) toward setting up an emergency fund so that you can get through the next financial crisis, whether that crisis is illness, job loss, an accident, or something else entirely.  With the right amount of time and planning, you will be better suited to survive the next financial emergency that you face.
  • Cut Unnecessary Expenses:  As you analyze your finances, you will gradually accumulate enough information (and knowledge) that you’ll just naturally see areas where you can cut back or eliminate certain expenses… for example, cutting your cable subscription and streaming instead can save lots of money, maybe theres a gym membership that’s still coming out of your checking account on a regular basis that you’re not using, or maybe it’s something else entirely.  The point is, if you don’t pay attention to it, you may not realize that you can eliminate it.

Truthfully, these are just a few of the reasons for you to seriously consider making a budget and sticking to it this year –  some may make sense for you, some may not.  You may even have a totally different reason for wanting to set up your own financial plan, but the important thing to remember is that you have to have a plan.  Granted, your plan should be flexible, and you should review it regularly to see where you need to make adjustments, but you still need to have a plan if you ever want to achieve your financial goals.