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2023 was definitely a big year of learning, in all aspects. Not just personal finances. But when I sat down to come up with a new personal finance blog post this week I began to reflect on all that I learned an experienced these past 11 months. And figured I had more than enough to talk about.
Learn to Play the Game
The “game” will look little different for each person, depending on your personal finance status and where you have your money going and coming from. For me, the game is to move my money around when the time is right.
For a while I was battling my credit card debt that resulted from my time in college. No student loans, THANK GOODNESS. Just little over $20,000 in credit card debt that I just couldn’t get a handle on. The interest charges would be more than I was able to pay toward the card each month. Leaving me buried under more and more debt with no way out.
Or so I thought…
Despite my suffocatingly large pile of debt, my credit score was intact and somewhere in the 700s. Due to my on time payments and credit history for the most part. My debt to credit ratio wasn’t looking so hot however. I definitely could have managed my personal finances a lot better during nursing school, but nine sight twenty twenty I suppose.
My credit score was my ticket into the personal finance game. With my decent credit score, I was able to apply for another credit card (Sounds counterintuitive to the end goal here huh? Stay with me). I did little research and found a card that had 0% interest on a balance transfer for 18 months, which is a pretty good amount of time if you ask me. Thankfully I was approved for this card. Only for $6,000, but it’s a start.
This means, I was able to transfer over $5,000 and change (due to a transfer fee of about 6%) and utilize 18 months of no interest on that balance to pay it down. That also meant that my original high balance was $5,000 lower, decreasing the monthly interest charges. I did this between 3 different cards: 1 original card, a card I already had that gave me a balance transfer offer, and the newly acquired card.
Between this method, the snowball method, and my new job as a registered nurse, I was able to get my personal finances in check and pay my credit card debt down to $0 in 2023. Now on to the car loan.
I played a game with my car loan this year as well. In 2022 I discovered that my dream car is a RAV 4 Hybrid, so I bought it and traded it in a year and a half later. For the same exact car, just a 2023 model.
Long story short here, is that I drive ALOT. In the 18 months that I had my first RAV 4 I put 40k miles on it. Devaluing it by nearly $18,000. That’s expected, I get that. I also got rear ended and had a little scuffed area on the back bumper. I was also due for new tires and my warranty was expiring. No more free oil changes for this girl.
No, I didn’t trade in my car for more free oil changes, but that was definitely a perk. But I traded in my car because I had about $13,000 in equity on the car. Meaning I had some credit or cash on my side after trade in and paying off the remainder of the old loan. My new car loan balance is now about $6,000 higher with lower monthly payments than I had before. But now I have a brand new car, new tires, about 10 free oil changes, and 0 miles on the odometer. I’d say I played the game well this time around.
Don’t Be Afraid to Put Up a Fight
This one is connected to my story about buying my newest car, but can be applied to a number of other financial situations. When we sat down to run the numbers before I signed on anything. they told me my interest rate was going to be somewhere in the range of 7%, and I wasn’t about to commit to that. Yuck.
I went to my personal bank and asked them what they would quote me for an auto loan interest rate. They told me it could possibly be as low as %6. That’s all I needed to hear. I went back to the dealership and told them I was going to take my money else where if they couldn’t go lower than the rate quoted to me by my bank. But of course they didn’t want to lose business with me since dealerships get a nice kick back when you finance through them, verses independently with a bank.
Needless to say, they were quick to re quote me with a 5.6% interest rate and I drove off into the sunset in my beautiful new RAV 4 Hybrid just a couple hours later. Sure that interest rate still isn’t the best. But at the end of the day, I had lower monthly payment that previously and can refinance if I really want to in a year or two if the rates improve. I also always make extra principle payments to my car loan each month to get it paid down faster.
Protect and Grow Your Personal Finances, and Pay Attention to Interest Rates
Not just the interest rates on buying a new home or financing a car, but on your credit cards, checking accounts, and savings accounts. These fluctuate just as much as mortgage rates and auto finance rates. You should weigh interest rates heavily when considering money moves to make with your personal finances.
Checking accounts that earned a decent amount of interest were a new concept to me this year in the realm of personal finance hacks. I was definitely little late to that game unfortunately. But I’ve seen a few decent ones out there that earn you interest for keeping money in your checking account as well as for spending it. I personally haven’y opened one of these accounts, only because I have a good system going with my PayPal accounts and don’t wish to spread my money that moves often out any thinner.
If you don’t already have a savings account that earns you interest each month, you are missing out on some free money. I’m not taking about the 0.1% interest earning accounts. I’m talking 4.45% monthly interest with no minimum initial deposit amount. Well, $5 at least in most cases, but still.
Citi Bank and PayPal Savings are the two high yield savings accounts that I utilize for my personal finances and have been with them for years now. At the time that I am writing this article their interest rates are 4.45% and 4.3%, which is much higher than most other savings accounts that don’t require you to deposit $10,000 or more just to open the account. Having a savings account of any sort should be high priority when managing your personal finances.
Make Your Money Work for You
I will never stop endorsing the use of PayPal to manage personal finances. Even more so now that they’ve created a savings account feature with a competitively high interest rate. I now have two high yield savings accounts that make me $47-50 a month each.
With PayPal, I have set up a method of setting aside all of my monthly bill payments into “goals” that are a part of the high interest savings account. That and some cash my husband and I have set aside for our late honeymoon we plan to take to Scotland soon. All that said, I have a decent amount of money in this savings account within my goals. Even though it’s bill money that has to be paid out each month it is constantly being refilled as I continue to put money aside each month.
Why wouldn’t you want your money to make you little extra money each month before it flies away to pay more and more bills? As of this point in the year (November) I’ve earned about $500 in interest between my two high yield savings accounts. My second account is my personal savings that I try not to touch. I add to it each pay check, and try and just sit back and watch it grow and hope that I will never need to tap into that account.
Don’t Be Afraid of a Little Risk
By this, I mean don’t be afraid of doing something that could temporarily drop your credit score, or do something that could result in some loss. Within reason. If you’re in your twenties/thirties with a steady job and decent income, don’t be afraid to take little risk if the return could be well worth it.
This year I spent a lot of time working with the guys who manage my IRAs (I have both a Roth and traditional IRA. A conversation for another day). We talked about how much I contribute each months and where they are putting my investments to make me more money long term. They may only focus on the one aspect of my personal finances, but the part that they manage has a huge impact on everything else for sure.
They also advised me that I can be little more high risk with my money in the market, since I am young and have time to financially recover from the inevitable dips of the market. The dips may seem more extreme if I am investing higher risk, but that means that the returns could also be more extreme.
It’s Hard to Maintain a Good Credit Score
I worked my butt off this part year to meet my personal finance goal of hitting a 800+ credit score. Currently I am teetering between 795 and 803 every other week or so. Depending on my spending habits, debt repayment habits, and of course throw my new car purchase in there. The higher your score goes and the more often you leverage that score for your benefit, the more it’s going to fluctuate.
This discouraged me at first, but then I noticed how quickly it would pop back up to 800+. It’s like having a high average in a college class. It only takes one teensy little B- or C+ to drop your over all average dramatically for some time. This year I learned to ignore these frequent changes, knowing that I wasn’t doing anything different with my personal finances. So I could expect for it to go back up just as fast as it went down.
As 2023 comes to a close, I’m looking forward to all the money moves I plan to make in 2024 with all this new experience under my belt. What money move do you plan to make in 2024?
Trying to spend less than you earn is a great strategy!
It’s so true about the fluctuating credit score so always good to look at the overall average! If you know what you’re doing with credit cards they can absolutely be a strategic move to helping!