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About Gina Boykin
Expertise
Financial planning, debt management & credit cards, and money-saving tips for adults and teens. Saving vehicles such as CDs, treasuries, bonds, and money-market funds. I provide honest, objective and relevant information to help you made the best decision for your money.
Experience
Over 10 years of combined experience in accounting, audit, investing, entrepreneurship, real estate.
I am the CEO of Atlanta Y.E.S., a nonprofit organization dedicated to financial literacy for youth.
Education/Credentials
B.S. Accounting, 10 years of experience in accounting, audit, and investing
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You are here: Experts > Shopping > Frugal Living > Living on a Budget, Saving Money > Credit and Loans
Expert: Gina Boykin
Date: 8/25/2008
Subject: Credit and Loans
Question
I'm in a tight spot, I just recently got a car thats 840.00 a month for 72 months (i've already paid 12 months). I also have a credit card that has 3,750.00 on it. I'm trying to get my finances in order. Do you know of anything that might help. Like a credit card that has low interests rate, mines at 24.00%. Or a way to get a better rate on my car payment. I got it at 11%.
Answer
The rate you can get will be based on your FICO score. Do you know what yours is? If not, you should find out what it is (and look at your credit report). It sounds like it's not very high based on the rates you just gave me. You can get your report for free (annualcreditreport.com), but you will have to pay for the score (myfico.com).
Now, how can you increase your score? By paying on time and decreasing your debt. If your credit card balance on any one card is at least 50 percent of the available balance for that card, this is also bringing down your score.
The best thing you can do, though, is to focus on total financial discipline. A lower credit score and an expensive car (looks like about $40,000?) is a sign that you don't have discipline with your money and that you may be trying to impress someone (even if that someone is yourself).
First step - do a budget. I know, it's painful, but it's necessary. You need a reality check of what you make and what you're spending. If you can't add up what you spent over the past month by looking at bank account transactions and/or credit card statements, then get a little notebook and start tracking everything you spend money on for the next month. You'll be surprised!
By doing a budget and monitoring your spending, you will be planning the use of your money before you get it. Money with no plans will find places to go on its own....very easily.
Second step - Get rid of the car. Find out what the car is worth, and if it's anywhere near what you owe, sell it. You will either have to take a personal loan out for the difference, or you can save money for the next few months to be able to pay the difference in cash.
Third step - Buy a really cheap car - the cheapest reliable car you can find.
Fourth step - Pay off the credit card. This shouldn't be hard once your car payment goes away.
Fifth step - Make sure that your budget has a line item for SAVINGS. Set up an automatic plan to move money into a savings or money market account each time you are paid. The first purpose of this money will be to build an emergency fund.
Fifth step - Save for the things you want. If you want a nicer car, this time you can save up for it and pay for it in cash (or at least mostly in cash). You shouldn't have a car loan over 3 years, and should not purchase a brand new car - it depreciates too quickly in the first 5 minutes after you drive off the lot. Save up for vacations, a new house, and anything else you desire. You may realize that some of the things you thought you wanted don't really matter, and for the things you really desire - it will mean so much more because you will have worked hard to reach a goal. This feeling will last much longer than the fleeting joy you experience after an impulse buy.
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