Done To Zen

J.D. at Get Rich Slowly explains how to open multiple ING accounts. This functionality is quite useful, and something I use all the time. (Especially because ING does not allow you to create notes for transactions — I wish it did, so I know what that $10 I send it is for.)

Trent at The Simple Dollar talks about The Net Worth Mentality:

I used to be deeply ensconced in the paycheck mentality. My personal finance was based around the amount of that next paycheck, and my spending would reflect it. I’d blow most of it pretty quickly upon receiving it, paying bills and buying frivolous stuff, and before long I’d be right back where I was, waiting for the next check to come in. Even worse, I’d often continue the high living on credit.

That mentality is extremely dangerous. If your job goes poof, you’re in deep trouble. You can’t possibly spread your wings and try something new - you have to keep at that same job, even if you hate it. Sure, your weekends are fun, but Monday mornings become a nightmare.

The last two years have revolved around switching from the paycheck mentality to the net worth mentality. The net worth mentality is all about spending less than you earn - and making that gap as wide as possible. Do this for a while and you’ll find your checking account is fat - and suddenly it doesn’t matter too much when your paycheck comes in. Instead of building up, your debts start going away, meaning that before too long your monthly expenses get even lower.

I too only recently made the switch from paycheck mentality to net worth mentality, and I couldn’t agree more with Trent. Analyzing your finances against the paycheck is dangerous because it gives you a false sense of how your finances are doing. For example, suppose you’re making $250,000 a year. It’s a lot of money, and you will be able to buy most things you want with it, but what happens if, god forbid, you get fired? Will you even be able to make the mortgage payments on time?

However, analyzing your finances by net worth is also not enough. Let’s go back to the question of whether you will be able to make your mortgage payments and be able to pay your fixed expenses. For that, you need liquidity. Just because you have $1 million net worth doesn’t mean much of anything. But $1 million of liquidity — why, you might be able to live on it forever (if you keep re-investing the required amount, that is). :-)

Free Money Finance asks whether now is the time to buy a gas-hog vehicle because manufacturers and owners are offering thousands of dollars of discount on them. Only if the discount is enough to make the used SUV vehicles less costly than other vehicles. With rising gas costs, I don’t have high hopes for reselling SUVs when the market gets better, so the only reason I would buy one is because it costs less than other vehicles.

PT Money talks about the importance of doing a mid-year financial review.

Ron at The Wisdom Journal interviewed an expert in the field of credit scoring and posted some 24+ questions.

14. How badly does a bankruptcy affect my credit score?

You can expect a bankruptcy to significantly lower your score. The amount the score drops mainly depends on what your score was before the drop. For example, after filing for bankruptcy someone with a previously high FICO score can expect to lose more than 100 points, while someone who already has a low score might not see that much of a drop. Also keep in mind that while Chapter 7 bankruptcies will remain on your credit report for up to ten years from the date filed and a completed Chapter 13 for up to seven years, your low score can begin to show improvement soon after filing. Substantial improvement can be achieved within a couple of years by demonstrating consistently responsible credit behavior.

19. I’ve never skipped out on anything, but I have been a week or two late on some payments in the past. Why do lenders look at my score and decide that I’m a risk for non-payment?
Even minor late payments can hurt your credit score. This is because, more than anything, lenders want to be assured of being paid on time. Research on predicting credit risk has shown that borrowers with recently late payments – even only minor ones — are more likely to be late in the future than borrowers who consistently pay on time.

23. Does the number of open accounts make a difference on my score?
The number of accounts (both open and closed) you have on your credit report can make a slight difference in your FICO score; however, the scoring formula doesn’t distinguish between open and closed accounts when evaluating the number of accounts you have.