Saturday, February 9, 2008

Debt to Income Ratio - A Calculation Important in Debt Reduction

Ever wonder how much debt is considered by banks and financial institutions to be too much debt? If you don't know where you stand, its time to take a moment and figure out your debt to income ratio.

First, take a moment to figure out your bad debts. This includes credit card balances, store charge cards, car loans, and any debt that is depreciating in value. Don't worry about including good debt like student loans, mortgages, investements, etc. Now you need to figure out your after-tax annual income. Finally, divide your after tax income by the total bad debt (after tax income / total bad debt = debt to income ratio.)

Obviously, the personal finance and frugal communities don't believe in carrying any bad debt, but if you do carry debt you shouldn't carry more than 15%. If you meet a company who is trying to convince you otherwise, RUN! They obviously are only concerned about their bottom line.

Wednesday, February 6, 2008

Today Was A Very Good Day

I was lucky enough to have two opportunities to earn a bit of extra money. The first was a taste test. The subject was apples and I have to admit it made me think. As most tests are set up, I was asked a number of questions about taste, texture, color, etc., but I found myself falling into the consumerism mindset that makes marketing companies the big bucks. It was the search for the perfect green apple.

I like to think of myself as a bit of a foodie preferring organic, fresh food. I believe I can taste the difference and that the organic will be obvious because it will have flavor. Today I was humbled. I realized I was drawn to the crisp green apple that didn't brown after it was cut. It wasn't until the very end of the test that I realized no natural apple does that. This apple was manipulated through genetic breeding, radiation treatment, injected with toxins or some other torture device designed to make a super apple.

I had ask what is my tolerance for flaws? The apple that browned was just as good as the bright green one. In fact, I think the green one was slightly more tart. How many other things do I look over because it doesn't fit the picture of perfect freshness? How much food goes to waste because others share my ingrained preference for appearance? Don't get me wrong, I'm not typically worried about trends. I try not to judge a person by its cover. I usually value the unique and different. So why is this green apple different?

The second opportunity was much easier. It was a market research panel for a local restaurant. It was really fun. I may have to add these types of panels to my entertainment list. Wow, how sad is that!?!

At the end of the day, I have $67 for debt reduction, $25 for groceries, $3 lunch splurge, and a $50 gift certificate to a fantastic restaurant. Yeah! Now if I could just work more days like this.

Monday, February 4, 2008

Fair Isaac Is At It Again! Are you Ready?

Liz Pulliam Weston at Money Central has written a new post and its a must read! Fair Isaac has revamped their FICO score for 2008. Check out "Build A Killer Credit Score In 2008." There are changes and if you aren't privy to those changes you could be hurting your score without even knowing it. According to the article, some changes include:
  • "Applying for new credit accounts may hurt your score less.
  • Having high balances on your credit cards could hurt more.
  • Actively using the credit accounts you have may be more important.
  • Having both revolving and installment accounts on your report could help you more, as the new formula is more sensitive to your ability to handle different types of credit."

Throughout the article, Liz Pulliam Weston stresses the importance of keeping credit balances well below the limit suggesting not to exceed 30%. This is because FICO uses this percentage as the largest factor in your score. Unsure of your FICO? While you can get a free annual report yearly at, it's not as easy to find out your FICO score without applying for a loan. Having said that, they will for a price, include your FICO score with your credit report. Each of the three reporting companies will have a different score. To play it safe, use the lowest score.

Sunday, February 3, 2008

Weekly Review

The Simple Dollar - Should You Cancel Your Credit Cards Or Not
This has always been a question on my mind. Once you pay off a credit card, do you close it? Some say yes, but others say it will hurt your FICO score. The Simple Dollar weighs in.

Being Frugal - 75 Frugal Hacks For Your Home
This is a great post with 75 frugal ideas from cleaning, to DIY, to planning.

Zen Habits ~ Simple Productivity - The Minimalists Guide To Simple Housework
Anyone that can mediate while cleaning has peaked my curiousity.

Working For Financial Freedom - The Scoop On The Tax Rebate Checks
Are tax rebate checks really going to prevent a recession? Working For Financial Freedom answers all sorts of questions you may have about them.