I'm Debt-Free, So Why Did My Credit Score Drop?

Getting out of debt is a good thing, so why do some consumers see their credit scores decline after paying it off? There’s a common misconception that you must be in debt to have good credit, but that’s not the case. You do, however, have to use credit to earn a good credit score, and it’s sometimes difficult to see the difference.

Credit cards are probably the best example of this: If you pay your credit card bill every month, you are not in debt, and you’re building credit by using the card.

Swear Off Debt, Not Credit

If you’ve just paid off your credit cards, you may be said to yourself, “I’m never falling into debt again.” That’s a great goal, but if your plan involves cutting up the cards and never using them again (and you have no other debt, such as a mortgage or student loan), you may find yourself without a credit score.

It’s different among credit scoring models, but you have to have some recent credit activity on your credit report in order to have a credit score. If you don’t use your credit cards after paying the outstanding balances, the issuer will likely close the card due to inactivity, meaning they won’t report to the credit bureaus anymore. If that was your only form of recent, active credit, you’ll lose your credit score.

You can avoid this by using your credit card sparingly and paying the bill immediately. If you didn’t have a credit card before emerging from debt, you can get a secured card and apply the same strategy. Consider asking a trustworthy friend or relative to add you as an authorized user on one of their credit cards. That’s not a choice to be taken lightly by either party, so do your homework before trying it.

Prepare for Some Changes

Continuing with the credit card example: Paying off credit card debt can lead to a variety of shifts in your credit score. If you were using a high percentage of your credit limit, your credit score may improve, because you will have reduced the ratio of your debt to your available credit (here’s why that credit score factor is important). On the other hand, if you stop using the card, the issuer may close it, which would reduce your available credit and hurt your credit utilization rate.

Your mix of accounts also contributes to your credit score. Say you had student loans and credit cards, and you’ve just paid off your last student loan. If you don’t have an active installment loan on your credit report, your credit score may go down, but this isn’t nearly as important to your credit score as making payments on time or keeping your credit utilization rate low.

It’s easy to see how your various credit accounts impact your credit standing if you know how scores work. You can get a free, monthly snapshot of your credit and credit scores with a Credit.com account. Having a good understanding of your credit should allow you to reach your goals of getting out of debt without hurting your credit in the process.

What Happens If I Never Pay an Old Debt?

Maybe you can’t pay. Or maybe you won’t pay. Either way, you have an old debt

hanging out there. What if you just decide to let it go, and do nothing about it? That’s what Credit.com reader Dave, who says he can’t afford to pay off the old debts he owes, asks:

My credit card debt is roughly $12,000. I consulted a bankruptcy attorney. He said filing bankruptcy should not be my first option since the amount is quite low. And the collectors have stopped calling.  In California, is there 3 or 4 years of the limit by which the collection agency can file a lawsuit? After that time, they can’t sue? Then what happens? Can they still collect but not sue? Debt still stays on credit files.  If they can’t sue me since it’s about 4 years since [it] went into the collection and the attorney said filing may not be a good idea for such a small amount, then what?

Dave’s question is hardly unusual. Plenty of people wonder what will happen if they simply do nothing about an old debt.

“There is no law saying that they cannot try to collect after the statute of limitations has expired,” says Southern California consumer law attorney Robert Brennan. At least not in California, where he practices, and in most states, it’s the same – though if you’re considering this move, you’ll want to consult an attorney who knows your state’s rules. “In California, on written contracts, the statute is four years from the date of a breach which, in most cases, will probably be the same as the date of first delinquency.”

He goes on to explain that “under the Fair Debt Collection Practices Act, debt collectors may not make false representations in connection with collecting debts, and may not take or threaten to take legal action that cannot be taken.  So, if a debt collector threatens to sue the consumer past the statute of limitations, this may well be an FDCPA violation, and I would argue that it is. If a debt collector tells a consumer that it can sue the consumer five years past the date of first delinquency, this is a false representation made in connection with debt collecting, and is also actionable under FDCPA.”

In other words, if a debt collector threatens to take you to court after the statute of limitations has expired, you can actually sue them, in which case, they may end up owing you money.

Does any of this mean Dave won’t hear anything more about these debts? Probably not. “If a collector makes routine debt collection phone calls and does not otherwise violate the  FDCPA or mislead the consumer, the debt collector may continue to attempt to collect the debt,” says Brennan. Nevertheless, consumers always have the right to tell a debt collector not to contact them, and if the debt collector continues to call, they again may be in violation of the FDCPA.

The statute of limitations varies from state to state and may be different for various types of consumer debts. In many states, they often range from four to six years, calculated from the last payment on the debt.

Collections & Your Credit

As far as Dave’s credit reports are concerned, these debts can’t be reported forever. Collection accounts may be reported for seven years plus 180 days from the original date of delinquency – the date he first fell behind with the original creditor. So if he missed a payment to his credit card company on Jan. 1, 2000, and it was later sent to collections, Jan. 1, 2000, is the original date of delinquency.

After that 7 1/2-year time period elapses all collection accounts related to that particular debt can no longer be reported, regardless of whether they are paid or not. There is the risk, however, that one of the current collectors sells the account to another collection agency and that creates a new collection account.

Starting Over

In addition to wondering about his old debt, Dave wonders what to do about his credit going forward:

Would you suggest I apply for a secure card (can I?) even though I’ve debts in a collection? And would a NEW secure card improve my FICO even though my old debts are showing up in my files?

A secured card, which requires the cardholder to place a security deposit with the issuer, is often an excellent option for rebuilding credit, and the applicant generally need not have good credit to get one of these cards since the line of credit is fully backed up by the deposit, at least initially.

When it comes to rebuilding credit, it’s usually best to start as soon as possible. It takes time to build positive credit references. One of the factors used to calculate credit scores is the age of accounts.

At the same time, however, Dave should also be thinking about ways to shore up his finances so he’ll have adequate emergency savings in case he runs into difficult times in the future. He can review his credit reports for free once a year and monitor his credit score monthly for free at sites like Credit.com, where he will also get an action plan for improving his credit over time. As these unpaid accounts become older and his new account is paid on time, he should see his credit scores continue to get stronger.

Source: What Happens If I Never Pay an Old Debt?

The 10 Most Common Student Loan Mistakes

Student loans are complicated. And, unfortunately, most freshly-minted freshmen sign those promissory notes without having a clue about student loans (let alone know what a promissory note is).

Before you sign on the dotted line, take time to understand your student loan options. And be sure you’re making the best choices. While you’re at it, avoid these 10 common student loan mistakes.

1. Assuming you need them

Yes, about 60 percent of students borrow annually to cover their college costs, according to the Chronicle of Higher Education. But that means that 40 percent don’t.

Contrary to popular belief, you do not have to have student loans to get through college. There are plenty of ways to get around them:

• Choose a cheaper school, and pay in cash.
• Opt for a school with a great scholarship for you.
• Go to a work-based school for free.
• Work while attending school part-time.
• Put off school for a year to save up.

As you’re making your college choice, don’t just assume student loans — especially tens of thousands of dollars worth — are a necessary evil. In some cases, you might be OK taking out some loans. But you don’t have to use them to get a decent degree.

2. Not exhausting other options first

Before you even apply for student loans, you should be shooting for every single grant or scholarship you can possibly get. This means spending time trolling the Web, talking to your local librarian (they usually have access to scholarship databases), and looking for schools that offer great scholarship programs. Remember, the more free money you get, the less student loan money you’ll need.

And while you’re at it, be sure you understand education-related tax credits, which could put money back in the bank for you (or your parents), making school more affordable.

3. Taking everything you’re offered

When you get your federal student loan offer (after filing your FAFSA), you’ll see how much the government is offering you in loans. If you’ve (unwisely) chosen a very expensive school that you really can’t afford, you may actually need the full amount to cover tuition.

But if you’re like most college students — especially those at state schools — you don’t really need that whole amount to cover tuition, or even room and board. Unfortunately, many of these same students take the full student loan amount — either because they want to use loans to fund their frat parties or because they don’t know they can accept less than they’re offered.

Carefully evaluate your actual needs, and take only the amount you must have to pay tuition for that year. If you need student loan money to cover books, car insurance, and other expenses, consider getting a part-time job.

4. Not figuring out monthly payments

One way to keep from taking out more than you need in student loans is to take a few minutes to figure out your monthly payments. Many college graduates are shocked to find out how big a chunk student loan payments will take out of their shiny new post-college paychecks.

This calculator can help you determine how much that federal student loan will cost you later on, based on today’s student loan interest rates and how much you borrow.

5. Not keeping track of your debt

We get it. You’re a student. You deal with a lot of paperwork, and you’re probably not all that organized. This makes keeping track of student loan paperwork difficult. But tossing those papers in the recycling bin can be devastating later on. If you can’t find your student loan providers, how do you know where to send payments?

(If you do lose your paperwork, the National Student Loan Data System can help you find out who services each of your federal student loans.)

Also, you need to keep track of the actual amount of your debt. It’s easy to lose tabs on how much you’re borrowing in total because you’re just taking out loans once a year for a four- to six-year education track. Make a spreadsheet of how much you borrow each year and probably monthly payments that you’ll shell out eventually. That alone should keep your borrowing in check.

6. Skipping out on interest payments

Unless you qualify for a subsidized student loan (which is based on income), your loans will start accruing interest immediately. The biggest problem here is that your interest will capitalize, which means the outstanding interest is added to the loan’s principal. This means you’re now paying interest on an even bigger principal amount. Let’s let the numbers illustrate:

Let’s say you take out a $5,000 loan for your first four years of college. The loan is in deferment for 54 months — four years of school plus the standard six-month grace period. On a loan with a 6.8 percent interest rate that capitalizes annually, your new loan balance when you enter repayment is a whopping $6,722.65.

Because you let that $1,722 in interest capitalize, you’ll now pay about $78 per month on that loan (in a 10-year repayment plan), as opposed to $57 per month otherwise. If you let the loan capitalize and then make minimum payments, you’ll pay a total of $9,283, as opposed to the $6,904 you would have paid otherwise.

What does all this mean? You can — and should — make interest payments while you’re still in school. Even on hefty student loans, monthly interest isn’t too much to tackle. And even if you can pay only part of the interest, you’ll save a fortune in the long run.

7. Turning to private loans

Private student loans have a place for some students, but most shouldn’t turn to them first. Federal student loans typically have lower interest rates and much more flexible payment terms. If you do need to take out private student loans, shop around for the best interest rate and terms, and take out the absolute least amount possible.

8. Asking your parents to co-sign

Some parents automatically assume they need to co-sign on student loans, and this may be the case on private loans. But most students can take out federal loans on their own. And your parents shouldn’t co-sign unless they’re really OK making your student loan payments if you run into financial problems later on.

Having a parent as a co-signer looks good on the surface, but it effectively makes your parents secondarily responsible for your student loans. This means if you fail to make payments, your credit suffers. It also means your parents would be responsible for paying your loans if something should happen to you.

9. Not updating your information with your loan servicer

Student loan servicers are used to their debtors changing address frequently, and they’re good at tracking people down. But if your student loan servicer doesn’t have your current address, you could miss important information about your loans — like when who, and how much to pay.

So what happens if you accidentally forget to update your address and miss payments because of it? Your student loan servicer will report those late payments to the credit bureaus, which will seriously ding your credit scores.

10. Choosing the wrong payment plan

Once you enter repayment on your student loans, you can choose a variety of repayment plans (assuming your loans are backed by the federal government). These plans give you some flexibility in your actual payment, which can be helpful if you can’t find a job or aren’t making much money.

The standard repayment plan has your loans repaid within 10 years, which is good. You want to choose this one if at all possible — even if you have to give up lattes and nights on the town to make your student loan payments. With the standard plan, you’ll pay much less interest over the life of your loan.

Other options – like extended repayment and income-based repayment – are tempting because of their lower monthly payments. But be sure to calculate how long it’ll take to pay off your loan under these plans, and how much interest you’ll pay over time.

And be extra careful with income-based plans. Sometimes with these plans, the minimum payment doesn’t even cover all your student loan interest. In that case, your interest will be capitalized, and you’ll run into the same problem with a growing balance that you saw in the above example.

Source: http://www.moneytalksnews.com/2014/05/20/the-10-most-common-student-loan-mistakes/#P0YWgc2rw85iDAWb.99

7 Steps to Get Ruthless About Paying Off Your Debt

Dave Ramsey calls it getting “gazelle intense.”

The popular get-out-of-debt guru uses the term to describe that singular state of mind in which you think of nothing other than getting out of debt and away from your creditors.

It’s an interesting concept, but Ramsey can sometimes be decidedly short on the details about how to hit that intensity.

If you’re wondering how to get gazelle intense, let us fill in the blanks. Here are seven steps to start ruthlessly attacking your debt:

Step 1: Rethink your budget from the ground up

If you already have a budget in place, this step will be easy. If you don’t, first go read this article for a simple way to create a budget.

Pull out your budget and scrutinize each and every line item. Eliminate everything that isn’t a need – and by need, we’re talking about things that help you stay alive, stay healthy, or stay in a job. Everything else can go. Cut the cable. Eliminate the Internet. Cancel the cellphone.

Then, take a second run through your budget and think long and hard about how to reduce what’s left. Could you install a programmable thermostat to save on your heating bill? Maybe cut coupons to reduce your grocery spending? Or think really big and consider whether it makes sense to downsize your house or trade-in your cars for cheaper vehicles.

Step 2: Stop spending

and start saying no. Now that your budget is stripped down to the essentials, you need to flex your self-discipline muscles.

It’s time to stop spending. That means no weekend trips to the mall, the thrift store, or the art show. Likewise, stop swinging into the farmers market or the street vendor fair just to see what’s there. Only go into stores or marketplaces if you have planned (and budgeted) purchases in mind.

Also, get in the practice of saying no. If your child wants candy in the checkout lane, the answer is no. If your spouse suggests seeing a pricey concert, the answer is no. If your friends want to go out to eat at the swanky new hot spot, the answer is no.

Of course, you need a little common sense too. Unless you want to be pegged as Mr. or Ms. Scrooge, the key is to have a free or cheaper alternative in mind that you can suggest right after your decline.

And special occasions may require a little flexibility on your part. If your friend wants to celebrate her birthday at a particular restaurant, it would be rude to demand a venue change. Assuming you can afford the meal, by all means, go and enjoy time with your friend. Don’t forget that people are more important than money – even when you’re gazelle intense.

Step 3: Limit your access to cash

To help with step No. 2, limit your ability to spend. A cash envelope system is often used for this purpose, but it’s not the only way to stop overspending.

With a cash system, you leave the debit and credit cards

at home and use cash only. However, if carrying cash makes you nervous, try a variation that involves plastic.

Open a prepaid card and load it with only your budgeted amount for the week. Make that the only card in your wallet and opt-out of any overdraft protection to force yourself to keep your spending in check.

Step 4: Sell at least half of what you own

Next, look around. What do you see? If you’re like the average American, you’re probably surrounded by items you don’t need and rarely use. It’s time to move those things out and bring some debt-paying cash in.

There are a couple of different ways to do this. You could try selling it all on a single weekend during a yard sale. Another option would be to piecemeal it out to get top dollar from various sources.

The best option will depend largely on your personality. Some people don’t mind intense work for short periods of time but get frustrated if a project seemingly never ends. In that case, a yard sale may be the best bet, particularly if you can combine it with a community sale day. Other folks like the slow and steady approach, perhaps posting 10 items a week to eBay or Craigslist for small but steady cash flow.

Step 5: Earn extra cash whenever you can

Many people living in debt find their budgets are exceedingly tight. The money comes in and goes right back out. There is very little wiggle room to make extra payments. That’s why you need to stop spending and start selling.

However, go one step further and start bringing in extra income whenever possible. Depending on your individual circumstances, that could mean picking up a second job or offering to take extra shifts or overtime.

If you aren’t able to commit to a regular job, you could try babysitting, house cleaning, or even using your smartphone to make extra money (assuming the phone is still in the budget). Plus there are a lot of other little ways to rack up a few dollars here or there.

Step 6: Consolidate your debts

This step may not apply to everyone, but if you’re carrying around multiple debts with high-interest rates, you may want to consolidate.

You could do this in several ways. First, if you have equity in your home, you could apply for a line of credit. These loans often have lower interest rates than credit cards, and you may be able to deduct the interest on your income taxes. However, lines of credit may require loan fees and an appraisal, which can make them cost-prohibitive.

Another option would be a personal loan you use to pay off your other debit and credit cards. With financial institutions still licking their wounds from the Great Recession, these loans may be hard to come by.

Finally, you could transfer existing balances to a low-interest or zero-interest credit card. Many of these cards come with an introductory period, after which the rates can zoom to the stratosphere. Be sure you’re able to pay off the debt before the promo period is over or at least transfer it to a different card. Plus, watch for balance transfer fees, which can tack on an additional 2 to 5 percent of the amount you owe.

Step 7: Set up an online bill pay system

The last step is to have a system in place to get all of the money you’re saving and earning to your creditors as quickly as possible. It defeats the purpose of selling the DVD collection if you use the money to buy your family dinner from McDonald’s.

You can find free online bill pay services at many banks and credit unions. Sign up, input payment information from all your creditors, and decide which bill to attack first. Then, every time you get some extra money in your account – whether it’s $10 from an eBay sale or $1,000 from an awesome yard sale – send it straight to your creditor. As in, make the payment that day.

Don’t let the money get cozy in your checking account. The longer it sits there, the more likely you are to use it for something else. When the money comes in, send it right out, and soon you’ll enjoy the peace of mind and financial freedom that comes with being debt-free.

Source: 7 Steps to Get Ruthless About Paying Off Your Debt

Student Loan Debt: How Much is Too Much?

Student Loan

Some call it the Student Loan Bubble — I call it crazy. And what better time to discuss student debt insanity than now, as countless soon-to-be graduates prepare to slip on their caps and gowns? An estimated 1.8 million students are graduating this year, many with degrees that perhaps aren’t worth a damn when it comes to actually get a job. Nevertheless, many of them will soon be paying back the tens or hundreds of thousands of dollars they borrowed to get those nice degrees, and I wonder how many will regret the decision to spend what they spent as they see their interest compound and principals skyrocket through cycles of deferment and forbearance. The college experience can be an amazing one, but is it really worth the cost? (And I’m not just talking about tuition.)

To get at the heart of this question, I recently commissioned a poll that asked adults of all ages about student loans. We asked how much student debt is okay, and how much is too much. One in five senior citizens and almost a quarter of adults between the ages of 35 to 49 agree that $20,000 to $50,000 in student loan debt is too much to borrow. Maybe that’s because they are in the age range of folks in a position to hire young people. Maybe it’s because the college didn’t use to cost so much. At any rate, people of college age, between 18 and 24, disagreed with the old folks; only 16 percent said graduating with that much debt is too much.

Many respondents believe there should be no limits at all. Among recent graduates, 22 percent agreed that students “should borrow as much as they need,” and “no amount is too much.” Baby boomers and seniors overwhelmingly disagree — only 7.9 percent of people aged 65 and up agreed that college students should borrow to the hilt. It seems the marketing of “Don’t Worry, Pay Later” has been a success — at least in younger demographics.

Clearly, many college students and recent grads take a more cavalier approach to student loans than their parents and grandparents. Research shows that many even consider high debt loads to be empowering and give them higher self-esteem. Conversely, young adults

—folks who have labored a few years into the real world — are less enthusiastic about borrowing so much; 73 percent say they owe more in student debt than they can manage.

“It’s not surprising that the generation that has to borrow a lot more for college believes it’s a necessity for others,” says Lauren Asher, president of the Institute for College Access and Success. “There’s been a big structural shift in how Americans pay for college, and the cost that students and families have to pay has increased.”

Young adults back their beliefs with more student debt. Just shy of half the respondents — 46.8 percent — between ages 18 and 24 said they have borrowed money to finance a college education. That’s the highest level of any age group. About 40 percent of adults aged 25 to 34 took on student loans, and under a quarter of all Baby Boomers did.

Loan totals are going up, too. Young adults reported a median debt of $38,100. That blew all other age groups out of the water. Middle-aged adults said they borrowed about $25,000 for college. The average college student has about $26,600 in debt, according to the Project on Student Debt, a 40-percent increase since 2002, and it’s time to find a way to start paying it down.

Today’s bad economic climate makes this pretty scary. The unemployment rate for Americans dipped to 7.1 percent in April. But joblessness among adults ages 20 to 24 remains mired at 12.5 percent, according to the Bureau of Labor Statistics. When you add in all the college grads working as baristas, waiters and other jobs that don’t require a degree, about 1.5 million bachelor’s degree holders — 53.6 percent — under age 25 are unemployed or underemployed, according to a study by the Associated Press.

High college debt mixed with low job opportunities equal economic fallout. And if you are wondering why young people are taking on the debt: high school graduates face a jobless rate twice that of college grads.

Signs of stress are already showing. More than half of all student loans are now delinquent or in deferral. According to the latest report from the U.S. Department of Education, over 13 percent of graduates default on their loans within three years of leaving college.

So, riddle me this: how do you buy a car, a home, or start a family (i.e. put the “consumer” into our “consumer economy”), if you can’t even afford a monthly student loan payment? You already know the answer. And so the economy will continue to stagnate, with demand flagging along with everything else.

As President Obama and Congress dither over federal Stafford loan rates possibly doubling to 6.8 percent, they have done nothing substantive about the real problem: The Great Recession and a competitive technology job market that colleges and college lenders aren’t catering to. This is the problem that has already killed millions of middle-class jobs that are never coming back.  And until our lawmakers get busy on a solution, it’s only going to get worse.

The new economic age of big, portable, sharable data is here, yet many American students today are still preparing for the economy of the past. Rather than slashing investment in higher education and scientific research, we should be adding to it. We should also be seeking innovative ways to keep a lid on tuition increases while simultaneously working to help millions of American graduates win the kinds of good-paying jobs they’ll need to pay their loans.

The New and Improved Way to Save Money

Picture this: You’re in line at Target, ready to check out—and somehow you have a cart full of stuff when all you came for was toothpaste and face wash.

You know you don’t really need all those other things, but the yoga pants, flower socks, hair wrap, and holiday table linens were just too cute to pass up.

So you check out and end up spending $150.

Then you feel guilty because you know you should be saving that money instead of spending

it.

Sound familiar?

Chances are, if you’re like most modern working women, you know you need to save money

for the future—yet somehow there’s never any money left at the end of the month.

So instead of constantly beating yourself up for not saving every month, learn this simple approach and then spend money guilt-free—a win-win solution.

The old way of managing money

every month was to pay your bills, spend your money on fun things like going out and shopping, and then save whatever was leftover.

Old Way: Save What’s Left Over

Net Income (after-tax income)

-Bills

-Spend money on fun things

=Save whatever’s leftover

This approach never works long-term.

It’s just too hard to save money at the end of the month when we live in a world of immediate gratification.

So stop making it so hard.

Simply shift your mindset and follow the new approach to managing money: The “Pay Yourself First” strategy.*

New Way: Pay Yourself First

Net Income (after-tax income)

-Bills

-PYF Savings (Cash cushion, retirement, travel goal)

=Spend money on fun things (guilt-free!)

Automate your savings so they’re just like another bill that you must pay every month.

After you pay your bills and  Pay Yourself First, you can spend the remaining amount of money on whatever you want, guilt-free.

If you want to go to Target and spend $150, go for it. Or maybe you want to buy that new designer bag that costs a lot of money.

Do it.

You may have to eat ramen noodles the rest of the month, but at least now you’re being a smart, financially wise woman who is saving first and spending last.

Of course, you can’t spend more than what’s left over every month, otherwise, you’ll be creating debt–and we know that’s not good.

How much should I be saving?

A good rule of thumb is to save 10-20% of your net income toward your top three financial goals for the year.

However, if that’s too much for you, start small.  Maybe start with 3% and work your way up by increasing the percentage by 1% every six months until you reach the desired level of 10-20%. 

Take Action

This approach sets the foundation for your financial success long-term.

It makes it super easy for you to save money and not feel guilty about spending what’s leftover.

So now it’s your turn.

Work on setting up your Pay Yourself First strategy and start saving the easy way.

Set up automatic savings toward at least one of your financial goals today.

This could be as simple as putting $50 per month into your savings account to build your cash cushion.  Or it could be contributing $100 per month into your Roth IRA.

Whatever it is, just make it automatic.

You’ll be surprised at how you won’t even miss that money once it’s automatically deducted.

10 Simple Strategies to Simplify Your Life

You probably know the feeling.

It’s one of the walls closing in on you because you have too much stuff. It’s the panicky thought you’re forgetting something important as you run out the door. It’s the desire to somehow find that happy place where you envision you’ll be the perfect parent with the perfect home.

With modern lifestyles pulling us in all directions and entire television networks devoted to creating home envy, it’s no wonder we are feeling overwhelmed and stressed out by our busy lives and cluttered homes.

UCLA researchers even wrote a book on the subject, finding many families had garages too full to accommodate cars, backyards that are never used, and mothers with elevated stress hormones.

If you’re ready to step off the hamster wheel, watch Money Talks News finance expert Stacy Johnson’s video, and then keep reading for more simple strategies to simplify your life.

1. Consolidate your accounts

It’s hard to say no to the $100 bonus for opening a checking account when the new bank comes to town or to pass up the great sign-up offer available from the latest rewards credit card.

Before you know it, you could have a half dozen accounts at various institutions. Your IRA is in one place; your checking account is in another. Then, you have your mortgage, emergency savings, and insurance products to juggle too.

Rather than have your accounts scattered to the wind, try to consolidate them in a couple of places. Pick one bank for your money and credit and one company for all your insurance needs. In the end, you not only have fewer accounts to manage, but you might also get better rates or terms for bringing more of your business to a particular institution.

2. Purge the paperwork

Consolidating accounts is only the first step. Next, you need to purge the paperwork.

That means signing up for paperless statements, which are now offered by nearly every financial institution. Then, with the exception of a few vital documents such as birth certificates and titles, you can scan and shred almost everything else in your filing cabinet.

For more pointers, check out this article with five tips for paperless finances.

3. Pay cash

Whenever possible. Don’t underestimate the power of cash to simplify your finances.

Not only can paying with cash prevent you from overspending, but it also eliminates much of the stress of daily money management. There’s no more remembering to save receipts and record transactions and no more worry about whether your card will be declined because the fuzzy math you did in your head isn’t quite right.

4. Automate your life

Remembering to pay the bills

on time can take up a lot of headspaces. Free yourself from the anxiety of getting the mortgage in on time by automating your finances.

First, if you’re not being paid via direct deposit, you need to sign up if it’s an option. Some employers will let you split your paycheck among two or more accounts. If that’s possible, send at least 10 percent of your earnings to your savings account.

Then, use a bill pay service to automate your monthly bills from your checking account. Depending on your bank and billers, you may be able to request bills be electronically delivered and the amount due paid automatically. Otherwise, you can set up recurring monthly payments.

For expense tracking, skip the spreadsheets and use an app or tracking software such as our partner PowerWallet.

5. Stop buying more stuff

One of the core principles of simple

living is minimalism.

The less stuff you have, the less time you need to spend maintaining, rearranging, and obsessing over what you’ve got. Plus, when you stop spending, you have more money for saving or for splurging on those things that are really important.

6. Declutter what you have

As the UCLA researchers discovered, clutter can make us stressed. Putting a stop to your spending sprees will curtail the flow of new items coming in, but now you’ve got to do something with all the stuff you already own.

Before you run out and invest in yet another organizational system or storage unit, consider boxing up all the excess and shipping it off to the thrift store or the landfill. Or you could sell what you don’t need. After all, simplifying can be good for your wallet as well as your state of mind.

7. Cut loose toxic and high-needs people

When we talk about simplifying, we need to discuss more than money and stuff. We also need to consider the people surrounding us.

Toxic personalities make our lives difficult. They steal our good days and put demands on our time and attention – time and attention that could probably be put to better use elsewhere. Consider how many times you’ve gotten off a phone call with a high-needs friend only to discover you’ve completely lost your mojo to get anything done for the rest of the day.

Do yourself a favor and cut off the emotional vampires who are feeding on your positive energy.

8. Reconsider your commitments

Juggling multiple activities is much more complex than focusing on one. Simplify your schedule by reconsidering everything on your calendar.

Ask yourself:

• Do I need to do this?
• Do I want to do this?
• Can I delegate this to someone else?
• What happens if this doesn’t get done?

In a world in which we wear our busyness like a badge of honor, saying no won’t come naturally at first. However, one of the keys to a simple life is an uncluttered calendar.

9. Unplug at least once a week

At least once a week, put away all the electronics. Power down the computer put away the phone and turn off the TV. Spend some time getting reacquainted with your paper books, an old hobby, or your backyard.

Unplugging has several benefits, but when it comes to simplifying your life, it helps by letting you slow down. Electronics tend to be very “in your face.” They can be loud, bright, and engaging, and when you’re constantly surrounded by them, it’s easy to lose track of time and start operating on autopilot.

Give yourself some quiet time to contemplate something a little more meaningful than whether Justin Bieber should be deported.

10. Create routines

Finally, a simple life thrives on routine. Without it, you may find you waste a lot of time and energy wondering what to do next.

Don’t confuse a routine with a schedule. A routine isn’t set in stone with time constraints. Rather, it’s a general idea of how your day will go.

A routine means knowing that you get up in the morning, have breakfast, load the dishwasher, and go for a walk. It could also be paying the bills on Monday, shopping on Tuesday, and doing your weekly dinner prep on Saturday.

Routines take the guesswork out of regular activities and, yes, make life simpler.