What Are NSF Fees? (and How to Avoid Them)

You’re running around doing errands and you stop to log onto your bank account. You discover that in the midst of your busy day, you’ve somehow overdrawn your account. Now you’re being charged an NSF fee, and you’re so confused.

What’s this fee dragging down your balance even more? And how can you get rid of it?

What is an NSF Fee?

A non-sufficient funds fee is a fee your bank charges when you overdraw the account and you have a negative balance. Banks charge this fee because they have to cover the difference while your account is in the red.

You may also be charged if you wrote a check to someone else and they tried to cash it, but there weren’t enough funds in the account. The bank will charge an NSF cheque fee. The fees depend on your bank, but are often around $45.

These fees are designed to discourage people from overdrafting their accounts and not having enough money.

How to Avoid NSF Fees

The easiest way to avoid NSF fees is to always have enough money in your bank account. If you keep a buffer in your checking account, you never have to worry about overdrawing your account.

If you keep incurring NSF fees because you keep too much money in your savings and not enough in your checking, move a small amount from your savings to your checking account. It’s not worth trying to earn a higher interest rate in your savings account if you end up paying a $45 NSF fee every few months.

You can also find a bank that notifies you when your balance is low. Some banks do this by text or email. When you get this notification, you can transfer more money from your savings account to your checking. Some fintech apps also send reminders when you have a low balance.

If you still use checks, make sure to note how much money you have when you write the check. It’s easy to forget about checks you’ve written because there’s no way to be reminded of them. If possible, try to switch to online payment. Most checks expire only after six months, so you could wind up having an account overdrawn because someone deposited your check five months after you wrote it.

Some people experience NSF fees because they set their bills to be automatically paid the same day. If possible, stagger your dates so they don’t all fall on the same day. You can base them on different pay cycles.

If you accidentally spent more than you earned one month, you may have to keep a balance on your credit card to avoid overdrawing your bank account. You’ll pay interest on the credit card, but that’s preferable to owing an NSF fee.

It’s better to make minimum payments on your debt than try to pay the max and overdraft your account. Make the minimum payment automatic and then pay extra manually, once you know how much you can afford to pay.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

Ways to Boost Your Credit Score

Your credit score is like a grown-up version of a report card. It shows how liable you are to pay off debt on time and in full and how likely you are to default.

But everyone makes mistakes and it’s common for your credit score to drop while you’re still learning about how to be responsible with your money. Like a low GPA, you can raise your credit score fairly easily.

Read below to find out how to boost your credit score and how to keep it high.

Pay Your Bills on Time

The biggest element in your credit score is if you pay your bills on time every month. That makes up a huge portion of your credit score. When you make a late payment, the company notifies the credit bureaus that produce your credit scores.

Figure out why you struggle with late payments. Is it because you often don’t have enough money to pay your bills? Or do you simply forget to pay your credit card bill?

Set up automatic payments from your bank account for all your bills. You can pay just the minimum if you can’t afford to pay the entire statement at once.

You can also create recurring calendar reminders in your phone, calendar or planner. If you prefer getting physical reminders of your bills, sign up for paper statements to be sent to your home.

As soon as you notice a late payment, call the company and make a payment right then. Usually, a payment needs to be more than 30 days late for it to show up on your credit report.

Lower Your Credit Use

A credit score tells prospective and current lenders how responsible you are. One of the factors that determine your creditworthiness is how much credit you’re currently using or your credit utilization. This makes up 30% of your credit score, so it’s an important component. This mostly affects credit cards and lines of credit.

You can find your credit utilization ratio or percentage by dividing your current credit balance by the available credit limit. Look up your credit card bill and view the most recent balance and then find the total credit limit.

If your balance was $3,000 and your credit limit is $10,000, then your utilization percentage is 30%. That means you should pay off more of your balance or call the credit card provider to increase the limit.

Fix Mistakes

It’s not uncommon for your score to be low because of a mistake or error on your credit report. That might be because your identity was stolen, and someone opened a credit card in your name. It might also be because you didn’t get a bill in the mail and the lender sent the bill to collections.

Look at your credit report to see if there are any mistakes and call the lender to ask about any collections or defaults. If you find an error, try to fix it as quickly as possible.

Avoid Opening New Accounts

Too many new accounts will affect the average age of your credit accounts. If possible, don’t open any new accounts unless you absolutely need it. If you have a lot of new accounts, a lender might think you don’t have enough cash on hand.

If you’re still having trouble increasing your score, check out Climb’s Personalized Credit Prescription that will give you custom, specific advice on how to increase your credit score.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

Should I Give My Kid an Allowance?

You can’t really teach your child about money until they actually have some. Unless you wait until they’re old enough to get a job, that probably means giving them some form of an allowance.

But if you give a child money with no restrictions, conditions or caveats, chances are you’ll just teach them how to buy $5 worth of candy every week. An allowance should be part of a broader approach to financial education, with the aim of instilling responsibility and patience.

If you’re considering whether or not to give your child an allowance, here are some things to keep in mind.

It Can Teach Them Financial Responsibility

Children who receive an allowance get hands-on experience in money management. They’ll learn the consequences of impulse spending and how to save for what matters. Nothing teaches the value of a dollar more than… well, having a dollar.

When I was six, my parents took me to Disney World for the first time. I was enamored with the souvenirs and merch, and I kept begging them to buy me toys and stuffed animals. They got me something small, but not the oversized Minnie Mouse plushie I was hoping for.

When I turned seven, I started getting a small allowance every week and immediately started saving for our next trip to Disney. I was so excited to buy whatever I wanted without my parents saying no.

As soon as we arrived, I realized how expensive everything was and why my parents only bought me a trinket the year before. I walked away without getting anything, proving my parents right once again.

Don’t Tie It to Chores

In his book, “The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money,” New York Times columnist Ron Lieber says parents shouldn’t connect a kid’s allowance to their household chores.

Just like an adult doesn’t get paid for taking out the trash, your child shouldn’t get paid for contributing to the household. Tying an allowance to chores can backfire when you ask your child to do something extra and they expect to be paid more. Everyone has to do thankless chores once in a while, and children should be no exception.

Explain the Rules

If you’re just starting to give your kids an allowance, make it clear what they should use it for. Will you still pay for their baseball gear or will they need to buy that with their allowance? Will you buy them books and video games or should they save up for those purchases?

Your child should clearly understand their new financial responsibilities. If you expect them to pay for a prom dress with their own money, don’t tell them a week before prom. Give them adequate time to save up. You should also explain if birthday or Christmas gifts will change because of their allowance.

How Much to Give

Finding the right allowance sum for your child depends on their age, your budget and what they’ll use the allowance for. Most children between the ages of 4 and 14 receive somewhere between $3 and $12 a week.

You can also ask friends who have kids the same age to see how much they give.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

The Best Way to Sell Your Things

With the growing popularity of minimalism and the KonMari method, spring cleaning has never been more in fashion. It’s invigorating to clear out the stuff you don’t need and make space for the stuff you actually care about.

So if you’re already getting rid of unused items, why not make a little money in the process? Here are some of the best ways to sell your things, from mint condition collector’s items to the junk you have laying around in your garage.

eBay

Still one of the most popular sites for online sellers, eBay is great if you have a lot of small, valuable items to sell such as electronics or video games. These will have low shipping fees and be easy to pack up.

You can sell items through the traditional auction format or through eBay’s “Buy It Now” feature. The latter lets you create a minimum price, but potential buyers can still haggle with you.

eBay takes a small portion of all proceeds, usually around 10%. Make sure to factor this in when deciding how to price an item.

Kijiji 

Sites like Kijiji are perfect for selling furniture, musical equipment and other heavy items that are too large to ship. Look for similar posts on Kijiji to decide how to price something. Posting on Kijiji is free for a certain number of ads

Yard Sale

Yard sales are perfect for selling things that aren’t valuable, like books, craft supplies or knick knacks. You won’t be able to make much on individual items, but it’s a great opportunity to clear out unused junk and make a few bucks in the process.

Advertise your yard sale ahead of time, particularly with signs pointing to your house. Post about it in your local online communities and be clear on what you’re selling, whether it’s baby clothes or home furnishings.

Pick a warm day, set up shop early and display your items so customers can pick through them easily. Keep your prices low and be prepared for customers to bargain.

Specialty Sites

If you’re getting rid of collectibles or unique items, you might be better off selling them on a specialty site aimed at specific buyers. These sites will have serious collectors and connoisseurs who will appreciate what you’re selling.

For example, if you have a large collection of Wedgwood plates, find a site for people interested in fine china. You can also contact local antique or vintage retailers to see if they’d be willing to buy or consign your items.

General Tips

Make sure to take lots of photos before posting an item. If you sell online, buyers can leave negative reviews if you don’t describe a product accurately or forget to note any damages. They can also request a refund, which usually means you’ll have to pay for them to ship the item back to you.

If you’re taking care of shipping costs yourself, find an accurate estimate before listing your item for sale. If you undercharge for shipping, you could end up wiping out your entire profit margin. Sites like eBay can calculate shipping costs automatically based on the dimensions of the box and weight of the object.

Decluttering your home? Let Climb declutter your finances! Click below for a customized plan to help get your finances in order.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

How to KonMari Your Finances

Marie Kondo has been marginally well-known in America since her book “The Magical Art of Tidying Up” came out in 2014, but her star has risen significantly with the release of her Netflix show “Tidying Up with Marie Kondo”. She’s helped people all over the globe learn to declutter their lives with the “KonMari” method, an organizational philosophy inspired by the Shinto religion.

The method revolves around choosing the items you want to keep by deciding whether or not they spark joy. The idea is to pare down and organize your lifestyle, while also developing a deeper appreciation for what you have.

That approach can also be used to take a closer look at your finances. Here’s how to do it.

Why You Should KonMari Your Finances

The financial decisions we make reflect our deeper habits. Our weekly manicure or daily take-out isn’t just an activity, it’s a subconscious reinforcement of the patterns we develop over time. Sometimes, those patterns are in direct conflict with our goals and priorities.

That’s the purpose of applying the KonMari method to your finances – it forces you to look at your budget with a curious mind. Instead of making financial decisions based on affordability or ingrained habit, you’ll learn to make them based on personal fulfillment.

Make a List of Your Expenses

You need to visualize your expenses before you can decide what to cut and what to keep. Print out your bank and credit card statements from the past three months and lay them out before you.

Then, go through each transaction one by one with a pen or highlighter and ask yourself if they spark joy. A $10 Spotify membership might seem unnecessary at first, but not if listening to music keeps you sane on your hour-long commute.

Let your gut reaction be the primary guiding factor here. Don’t think about the feelings you should have or how someone else might feel. Just allow yourself to react genuinely.

Pay careful attention to expenses that don’t get used often, like gym memberships or items that spark guilt or shame when you examine them. Chances are, you’ll be better off without them.

One expense I removed from my life was a subscription to The New Yorker and The New York Times. My journalism mentor recommended I read them to see examples of good writing and reporting, but I didn’t enjoy them as much as my other publications. I felt guilty seeing stacks of unread magazines sitting on my floor, so I finally canceled my subscriptions.

Create a Routine

People think the KonMari routine is something to do once a year, like spring cleaning. In reality, you can apply the KonMari method every time you buy something.

When you go to check out, take a minute to examine if the item will really bring you joy. Are you buying those cinnamon rolls because they spark old memories of Sunday brunch with Grandpa or because you’re feeling stressed about work? Are you buying a new notebook because you love to journal or because you think it will finally make you the organized person you want to be?

It’s hard to be mindful in the moment, especially if you feel pressure from a salesperson or you’re distracted from a hard day at work. That’s why it can be helpful to wait 24 hours before making any significant purchases, which will give you time to consider how important the expense really is. Coming to a deeper understanding of your spending habits will make you happier with your purchases and keep you from buying things for the wrong reason.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

How to Budget as a Couple

When it comes to important relationship milestones, moving in with a significant other gets all the attention. It’s true that sharing the same space with someone is a big deal – and a reliable indicator of a relationship’s future – but there’s an even more important step that usually comes shortly after: combining your finances.

Learning to share your money is one of the most intimate things you can do. By pooling and managing your resources as a team, you’re committing to each other in a deep and lasting way. You might be able to just move out if a relationship falls apart, but disentangling bank and investment accounts is another story entirely.

That’s why it’s so important for couples to learn how to budget together. Here are some of the ways you can make the process easier.

Craft Your Why

Budgeting is like working out. Some people genuinely enjoy the burn and sense of accomplishment they get after leaving the gym. Others may know it’s the right thing to do, but struggle to find any kind of satisfaction from doing it. The difference lies in finding the right motivation.

When it comes to budgeting as a couple, both parties should understand why it’s important. The reason can be something common like, “Have more money to travel,” but it can also be something emotional like, “Pay for our child’s college education.” The more specific and personal your reason, the more likely it is to stick. My husband and I budget so we can save for retirement and other goals, like remodeling our house and traveling abroad. Try to be honest with yourself and don’t judge your reasons too harshly, even if they seem petty or embarrassing. It doesn’t really matter what your reasons are, as long as you have them.

Choose a System

There are many ways to budget, and each couple should find a routine that works for them. These days, lots of people use apps and software like Mint, Tiller or You Need a Budget. Other people prefer a spreadsheet or cash envelope system.

There’s no perfect budgeting solution, especially for a couple with different personalities. The important thing is that the approach works for both parties. If one person has been managing the money by themselves for a while, they should consider switching to a new arrangement if their partner has a strong preference. Take some time to test drive various methods until you find one both of you like.

One thing that seems to work for most couples is to allocate a certain amount of discretionary money for each person. This is money that both people can spend on whatever they want, without judgment from their partner. My husband and I even use separate bank accounts for that money, so our purchases are completely private.

You should also designate a certain time each week or month to sit down and budget together. Some couples even incorporate this into a date night so it’s a fun activity instead of a chore.

Compromise and Communicate

Budgeting as a couple is like a lot of relationship activities – it can bring you closer together or expose your problems. Money reveals our priorities, so it’s important to keep an open mind and avoid getting emotional. When you disparage your partner’s spending, you’re saying his or her needs don’t matter to you.

Use budgeting as an opportunity to talk about your feelings and your dreams for the future. Compromise when you can and acknowledge what your partner does to save money, like batch cooking meals or taking public transportation.

Budgeting should be a team sport, but that only happens when both people realize they’re not competing against each other. It’s OK if it takes some time to find an approach that feels comfortable, as long as you get there eventually.

Find out how Climb can help you and your partner’s financial situation. Click Get Started below and receive a free Personalized Credit Prescription with recommendations to help you build a better financial future.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

How to Ask for a Raise… and Get It!

These days, being content with your employer is a double-edged sword. On one hand, working for a company you trust and respect can help you feel happier and more fulfilled. At the same time, staying with the same company longer than two years is a great way to earn less than your peers.

That’s why asking for regular raises is key if you plan to stick with your employer long term. In an economy that values growth over loyalty, your boss might need regular reminders of just how valuable you are to the operation. Here’s how to do it.

1. Make Your Case

No company hands out a raise just because you ask for one. Like a lawyer presenting a case, you need to provide solid proof that you’re worth more to the organization than your current salary would suggest.

First, make a list of your recent accomplishments and include specific outcomes. Instead of saying, “I increased our revenue,” say, “I increased our profit by 12% this past quarter, exceeding estimates by 5%.” Bring physical evidence like revenue reports, compliments from clients or feedback from other supervisors.

When I successfully negotiated a bonus at my last job, it was because I showed my boss how much money I had saved them over the course of the year. The implication was clear – if the management wanted me to continue saving them large sums of money, I needed to be compensated in return.

2. Practice Ahead of Time

Like a job interview, asking for a raise is a conversation that requires preparation. Unless you’re an incredibly gifted negotiator, you probably won’t have much success improvising.

Sit down in front of a mirror or with a friend, and outline your reasons. By repeating them ahead of time, you’ll be less likely to misspeak and more confident in your message. Your boss needs to see that you really believe in what you’re asking, so it helps to reinforce that belief ahead of time.

Have a friend give feedback or constructive criticism if possible. Record yourself on your phone or laptop if you can’t find anyone to critique you. Try not to fidget, speak in a timid voice or pitch your voice up at the end of sentences like you’re asking a question. The goal is to sound clear, relaxed and in control.

3. Have a Number in Mind

Asking for a raise isn’t a straightforward exercise. In most cases, you have to be sneaky to get what you want.

When your boss asks how much more money you want, give a number that’s bigger than your actual goal. They will often try to negotiate your number down, so starting with your actual target will just leave you disappointed. If you start high and then negotiate down, you can still end up with the raise you really want.

To find your dream number, compare your role to those at similar companies or estimate how much your company would have to pay a new hire to replace you. Those are the metrics they’ll consider when making a decision.

4. Ask for Other Options

If your company has a tight budget or doesn’t typically offer individual raises, think of something else you can ask for. Some people would settle for a few more paid vacation days or more work-from-home flexibility.

If your boss rejects the idea of a raise outright, having a consolation prize in mind could allow you to leave with something.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

How to Prepare for your Next Mortgage

With the spring home buying season fast approaching, anyone committed to buying a home in 2020 needs to start preparing. That can be a pretty daunting task, especially if you’ve never taken out a mortgage before. With all the rules, steps and considerations, buying your first home is like taking a crash course in the real estate industry.

But when you break it down, applying for a mortgage isn’t as complicated as it might first appear. Follow these four steps to prepare your finances and the rest will fall into line.

Evaluate your Credit

Having a good credit score is one of the best ways to qualify for a mortgage with favorable terms. Without solid credit, a bank may charge higher interest rates or deny your application outright.

Check your credit report or your credit score through a free service to see where you stand.

Make sure there are no errors on your report that could disqualify you for a mortgage.

See if there are any red flags from your past that may be disputable. Negative marks generally stay on your credit report between six and seven years, so call the credit bureau if you see any older than that.

Save for a Down Payment

If you haven’t started, now is the time to create a savings plan for your down payment. A down payment acts as proof of trustworthiness to the lender, so it’s a great way to establish yourself as a qualified borrower. You need to put down at least 5% for a mortgage, but a 20% down payment will save you from paying private default insurance.

How much you want to contribute depends on your budget and how soon you want to buy. If you want to purchase a home next year, you might not have time to save the full 20%.

Remember to also save money for closing costs, moving expenses and new furniture. Buying a home for the first time can come with a lot of surprise expenses, so it never hurts to save more than you’ll probably need.

Pay Down Debt

Lenders determine how big of a mortgage to offer based on your income and current debt load. The more you owe, the less you’ll qualify for.

Before buying a home, see if you can pay off high-interest debt or refinance to a lower monthly payment. Reducing your total debt burden will free up your finances and make it easier to qualify for the mortgage you want.

Look at your Budget

Borrowers often use their current rent payment to determine the size of the mortgage they want, but owning a home is far more expensive than renting. On top of the mortgage payment, you have to pay for repairs, maintenance and property taxes. When the water heater breaks, there’s no landlord to step in and handle the repairs.

Assess your budget and see how much wiggle room you have for the unexpected costs. If your monthly spending is already tight, consider getting a house with a monthly payment less than your rent. You can use the remainder to save for future repairs and other home costs.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.

Take Control of your Finances in 2020

Everyone wants to make big change in the new year. We want to quit smoking, start reading more novels and stop spending so much time on our phones.

But many of us also want to use the new time as an excuse to fix our finances. If you spend most of your days avoiding your bank account balance or refusing to open your credit card bills, then make 2020 the year you change.

Here are the best ways to take control of your finances in 2020:

Start Tracking Your Expenses

The most basic way to control your finances is to track how you spend money, whether it’s a $3 croissant or a $300 TV. Tracking your money will notify you of any trends in your life and help you find your financial weak spots. There are many apps available you can use to track or simply track on a spreadsheet or journal.

After you’ve tracked expenses for a while, you can start a budget or plan to minimize your spending and maximize your savings.

Create a Debt Payoff Plan

If you have any non-mortgage debt, make 2020 the year you finally tackle it. Make a list of what you owe including credit cards, student loans, car loans and personal loans. If you have extra discretionary income, decide how you want to conquer your debt.

There are two debt payoff methods: the snowball and the avalanche. The avalanche means paying off debt in order from highest interest rate to smallest. This strategy will decrease how much you pay in total interest.

The debt snowball method encourages people to make extra payments on the smallest balance first. When you do this, you’ll pay off individual debts faster and gain more momentum.

Shore Up Your Retirement Accounts

Most of us have no idea how much we have in our retirement accounts or how much we need to save. The best action you can take in 2020 is to determine how much is in your retirement accounts and if you need to do more.

List all your retirement accounts including your RRSP and TFSA and their current balances. Note any pensions that you might receive in the future and what you need to qualify for those.

Start Estate Planning

One personal finance topic that people usually ignore is estate planning. No one wants to think about their death or their spouse’s, so they ignore it. Unfortunately, avoiding the problem doesn’t make the process easier.

If you’re married or have a family, now’s the time to create a will. A will can speed up the probate process and prevent any snags when distributing assets.

If you don’t want to hire an estate lawyer, you can use a service like LegalZoom to create a will for a fraction of the price. Make sure to be thorough as possible when creating a will and list all of the assets you have. If possible, go through all your accounts and designate a beneficiary. That will also accelerate probate.

About the Author

Zina Kumok is a trained journalist and has covered everything from professional sports to murder trials. Now, she specializes in personal finance and has written for brands and publications such as Mint, Investopedia and Discover. She paid off $28,000 worth of student loans in three years.