Knowledge is power in the realm of credit, and a cornerstone of financial literacy is understanding the difference between a soft vs. hard credit check on your credit report. Credit checks, also known as pulls or inquiries, can significantly affect your financial well-being if you’re not careful—so with that in mind, let’s dive in.

Soft Pull vs Hard Pull: The Basics

The main difference between a soft pull and a hard pull of your credit is the potential impact on your credit score. Soft credit checks are gentle and leave no mark, while a hard inquiry could impact your score.

Soft Credit Check: A Peek into Your Credit Health

A soft credit check, or a soft pull, is only visible to you. They have no effect on your creditworthiness from a lender’s perspective.

Types of Soft Credit Checks

There are two main types of soft credit checks:

1. Marketing pre-screen credit checks: Often used by companies to pre-approve you for their products.
2. Consumer-initiated inquiries: Used when you check your credit score through bureaus like Equifax, Experian, and Transunion or when you opt-in to “check your rate” or “see if you pre-qualify.”

Typical triggers for soft credit checks include employment verification, background checks, insurance quotes, and promotional mail-in offers.

Pro tip: If you’re unfamiliar with any company names you see on your credit report, it could be due to the marketing pre-screen credit checks companies use to pre-approve you for an offer.

Hard Credit Inquiry: A Deeper Dive

A hard credit inquiry, or a hard pull, is typically triggered when you apply for a line of credit or loan. Lenders use hard inquiries to determine if you qualify for their offerings, which can impact your credit score.

Common Hard Inquiry Triggers

Common triggers for hard credit inquiries include applying for a mortgage, credit card, or personal loan (as well as student, business, and auto loans). Keep in mind multiple hard inquiries within a short period can significantly impact your credit score. Lenders may perceive this as a sign of financial difficulties and, as a result, may consider you a high-risk customer.

How Long Does Hard Inquiry Stay on Your Credit Report?

A hard inquiry can typically stay on your credit report for about 2 years. Fortunately, the impact it has on your credit score lessens over time.

Keeping Track of Your Credit Inquiries

It’s a good idea to check your credit report at least once a year. Equifax, Experian, and Transunion offer free consumer credit reports weekly, allowing you to dispute any inaccuracies in the inquiries listed.

The Bottom Line: Soft vs. Hard Credit Checks

Navigating the world of credit can be challenging. But with the right knowledge, maintaining a healthy credit score is achievable. Understanding the difference between a soft vs. hard credit checks is a critical step in that journey. Remember, soft pulls are harmless, while hard pulls could impact your credit score. Regularly monitor your credit report and be mindful of the inquiries made about your creditworthiness.

By doing so, you can take control of your financial health and make informed decisions that drive your financial success.

Before diving into home improvement tax deductions, it’s crucial to understand that most home enhancements and repairs are not tax-deductible. However, a well-thought-out strategy and a clear understanding of the tax-filing process can open doors to certain benefits. Read on to see what deductions you may be able to claim ahead of this year’s tax season.

Classification of tax deductions

In their official document titled Tax Information for Homeowners, the Internal Revenue Service (IRS) splits tax deductions into 2 broad categories: home improvements and home repairs.

A home improvement is any modification that enhances the value of your home, such as constructing a patio or installing an air conditioning system. On the other hand, home repair is maintenance that keeps your property in good working condition, like fixing a leak or replacing a damaged window.

Since an improvement could boost your home’s value, there’s a chance it could be tax deductible; however, home repair expenses are not. Though most home improvements aren’t tax-deductible, they can lead to tax benefits when you sell your house. If you plan wisely, you can get some of the benefits, such as:

Home office tax deductions

You may be eligible for a deduction on improvements if you use a room in your house as an office. Any repair that benefits your entire home could also be deducted based on the percentage of your home used as an office. IRS Form 8829 helps you figure out which expenses you might be able to deduct.

Tax deduction for home renters

If you rent out a part of your home, you may be able to fully deduct any improvements you make to that rented space.

Financing home improvements through your mortgage

You could save money on your taxes based on how you finance home improvements. If you plan on improving a home you bought this year, you can incorporate the expense into your mortgage.

Tax deductions for medical renovations

You could potentially claim a home renovation tax deduction if your doctor recommends modifications for medical purposes. However, if the renovation adds value to your home, it won’t be deductible.

Energy-efficient home improvements

You could claim the cost of installing energy-efficient technology on your property through a limited-time tax credit. If your improvements increase the value of your home, you could earn non-taxable capital gains when you sell your home.

Making a profit with untaxed capital gains

Home improvements that add value to your home may give you a tax break when you sell it. If your home sells for more than what you paid, the profit you make may be considered a non-taxable capital gain.

Home improvement and repair tax deduction FAQs

Here are some answers to frequently asked questions about home repairs, improvements, and tax deductions.

Q: Are foundation or roof repairs tax deductible?

A: Most repairs do not add value to your home; hence, they are not deductible. But, if the repair does add value to your property, it could be considered a home improvement.

Q: Are home improvement loans tax deductible?

A: You might be able to fully deduct interest paid on a loan used to improve your home if you meet certain IRS requirements.

Q: Can repairs on a second home be deducted?

A: Unless your second home is used as a rental property or business office, you likely cannot write off repairs to it.

Q: Are rental home repairs tax deductible?

A: Yes. If you receive rental income for a property you own, you can deduct the cost of repairs from your taxes.

Conclusion

When you’re planning your home improvements or filing taxes, it’s essential to keep track of every expense. Understanding the ins and outs of Home Improvement Tax Deduction can provide a significant advantage in maximizing your tax benefits.

Note: This article is not intended to provide tax advice. Always consult a tax professional for special home improvement tax deductions and all general tax questions. For more information on tax implications and homeownership, visit IRS.gov.

Understanding your credit score is essential to maintaining stable financial health. It may help guide you through major financial decisions like consolidating debt or buying a home. In this article, get to know how your score is determined, specific factors that can impact it, and how it plays into obtaining credit.

What is a Credit Score?

A credit score is a number between 300-850 that lenders use to determine how likely you are to repay your debt. It comes from credit reports generated by TransUnion, Experian, and Equifax credit bureaus and is calculated with FICO® and VantageScore® scoring models. If you don’t know your credit score, you can always check it for free at Best Egg Financial Health, set goals to improve it, and even see exactly what factors are impacting it.

How To Understand Your Credit Score

No matter which credit scoring model is used, the result will be part of the criteria lenders will use to gauge your creditworthiness. Credit scores below 650 indicate poor credit, while scores between 650-700 are deemed to be in the fair credit range. Scores between 700-750 are in the good credit range, and scores above 750 are considered excellent. The higher your score, the more likely you are to repay your debt and the less of a risk you may be to default.

How to Use Your Credit Score Responsibly

Your credit score may go up or down based on factors such as credit utilization, debt-to-income ratio, and your payment history. When possible, pay off the total monthly balance of your credit cards to keep it from ballooning as the result of compounding interest. Tracking your credit card purchases and statement balances is critical to good credit management. When your loan balances increase, your credit utilization and debt-to-income ratio may also increase, which has a negative impact on your credit score.

Benefits of having good credit

A higher credit score implies you’re a low-risk borrower and more likely to pay off your debt. Lenders often offer better financing terms to applicants with good credit scores. If you’re applying for a new credit card, you may be more likely to receive a favorable interest rate with good credit. This can also apply to interest rates on auto, mortgage, and personal loans.

Having good credit score impacts your negotiating power concerning interest rates and payment terms. This may also include approval for apartment rentals, reduced insurance rates, and waived security deposits for utilities.

How credit scoring models work

Before we review factors and their impacts on your credit, it’s crucial to review the existing credit scoring models and their differences.

FICO® and VantageScore® consider multiple factors when determining a credit score. The scoring models share some similar factors, including payment history, length of time you’ve had credit, the types of credit you have, how much debt you currently have, and how many hard inquiries have recently been made into your credit history.

VantageScore® models differ from FICO® in that they incorporate up to 24 months of previous credit activity and include rent and utility payments. Total credit usage and credit mix are highly influential in VantageScore®’s scoring criteria, while the age of credit and new accounts are considered less significant.

FICO® credit score	VantageScore® 3.0 credit score
•   35% payment history •   30% amounts owed •   15% age of credit •   10% credit mix • 10% credit inquiries	•   40% payment history •   21% age and type of credit •   20% percent of credit used •   11% total balances/debt •   5% recent credit inquiries • 3% available credit

Payment history

Before approving you for a loan or a line of credit, lenders want to know that you’re a responsible borrower who will pay them back on time. Your payment history is the most telling factor they can use to determine that.

Proof that you’ve repaid previous lenders in full and on time significantly impacts your score and is the key to getting approved for any credit you’re looking for.

Factors that can negatively affect your payment history:

• Late payments: Even 1 late payment can drop your credit score dramatically. The later you pay, the worse the impact may be. Do your best to pay your bills on time, even if you can only afford the minimum payment.
• Accounts in collections: Most lenders look for safe bets when it comes to borrowers. Collections on your credit report may be a major red flag that you may not repay them.
• Settlements, bankruptcies, and foreclosures: These negative marks on your credit report signal that you could have trouble paying lenders back and make them think twice about lending to you.

Time plays a significant role in how severely these factors affect your score. If you had accounts sent to collections a few years ago but have had an excellent payment history since lenders may be more likely to consider your more recent behavior. In other words, time and responsible use moving forward can heal even the deepest credit wounds.

Amounts owed

Another major factor that affects your credit is your credit utilization ratio. This ratio measures the level of debt you have compared to your available credit limits. It is calculated by adding the total balances on your credit cards and dividing them by your total credit limits.

Lenders see low credit utilization as a sign that you’re keeping your spending in check and avoiding overspending. The fact that you have access to more money but aren’t using it is a good indicator that you’re using your credit responsibly.

Lenders may believe borrowers with high credit utilization ratios already have more debt than they can effectively manage. If a borrower uses $9,500 of their $10,000 in available credit, it’s not a far leap to assume they may have difficulty repaying an additional financial obligation.

Most financial experts agree that using less than 30% of your available credit limit is ideal for your score and borrowing potential, but it’s not a hard-fast rule. Typically, the less you owe, the better. That said, having a $0 balance on your accounts won’t necessarily be helpful for your score. Lenders want to see that when you borrow money, you pay it back. If you never borrow, there won’t be any payment history to consider.

Length of credit history

Why is the length of your credit history important for your score? It’s simple – the longer your history of using credit, the more experience you have using it. If a lender is deciding between 2 borrowers, they will look at both borrowers’ credit histories. Someone who made on-time payments throughout their 6-year credit history has more evidence of responsible credit use than someone with no history at all. That’s why, generally, the longer your credit history, the better it is for your score.

Pro-tip: Rather than close your unused credit card accounts, consider keeping them open. An older account may increase the average age of your credit history and ensure you have access to a larger amount of available credit–both of which could improve your credit score.

Mix of credit

Credit scoring models consider whether you have a mix of different types of credit (credit cards, retail accounts, installment loans, and mortgages) when calculating your credit score. The more diverse your credit, the better your score.

Important note: Avoid opening new accounts just to improve your credit mix. As you’ll learn next, opening multiple new accounts in a short time could actually hurt your credit.

New credit

Generally, when you apply for a loan or line of credit, lenders will check your credit reports and information during the application process. This is known as a hard inquiry or hard pull.

Hard inquiries may drop your credit score slightly, though the impact is usually minor. Scoring models likely assume borrowers who open many new accounts within a short timeframe are having money difficulties and may be a greater credit risk.

If you’re seeking new credit, don’t let the potential negative impact of a hard inquiry stop you. Your score may drop a few points temporarily, but as long as you use your new credit responsibly, it’ll be back up in no time.

Conclusion

Whether you’re rebuilding your credit or simply hoping to better understand how credit works, knowing the factors that affect your credit score is a great place to start. Hopefully, you’ve learned ways to improve your credit score and continue your journey to financial confidence.

Personal loans are a significant component of financial planning and management. But you may still be wondering, “What is a personal loan?” This Personal Loan 101 is designed to help you understand the basics of personal loans, how they function, their benefits, and how you can qualify for one.

Definition of a personal loan

A personal loan is a form of credit provided by a lender that borrowers can use for multiple purposes. It’s a fixed sum of money you repay in equal installments over a predetermined period. Personal loans can be used to consolidate debt, cover medical costs, pay for home improvements, or practically anything else you need cash to cover.

The mechanics of personal loans

Unlike credit cards, personal loans have a set repayment schedule, providing you with a precise payoff term. Once you borrow the money, you can’t access additional funds by making payments, as you might with a credit card. The fixed payment schedule means you can accurately anticipate when your loan will be fully repaid and plan your finances accordingly

Secured vs. unsecured loans

Personal loans can be either secured or unsecured:

• Secured loans require collateral such as a house or car. If you default, you risk losing the asset. However, secured loans usually have lower interest rates because the lender has a form of security in the event of default.

• Unsecured loans do not require collateral. If you default, your credit score may take a hit, but no physical asset is at risk. However, unsecured loans typically come with higher interest rates due to the increased risk to the lender.

consolidate debt, pay down high-interest rate credit cards, take on a home improvement project, or do nearly anything else you can put your mind to.

Benefits of personal loans

When managed responsibly, a personal loan can offer several benefits:

• Simplification of finances: Consolidating various payments into a single recurring payment can simplify your financial management.

• Savings: Using a low-interest personal loan to consolidate high-interest credit card debt could save you money in the long run.
• Adding financial value: You can use a personal loan to make home improvements, potentially increasing your property’s value.

• Stress relief: In times of sudden financial need, a personal loan can help make a challenging situation more manageable.

• Credit score enhancement: A well-managed personal loan can improve your credit score by diversifying your credit mix and demonstrating a good payment history.

Potential costs of personal loans

The cost of a personal loan can vary. Your credit score and the lender’s terms play a significant role in determining your interest rate. A better credit score increases your chances of securing a loan at a lower interest rate. It’s always wise to compare loan rates before deciding on a lender.

Amount you can borrow

The amount you can borrow with a personal loan largely depends on your credit history, income, and the lender’s policies. Lenders may offer a range of loan amounts from small to quite large, but it’s crucial only to borrow what you genuinely need to avoid unnecessary debt.

Getting approved for a personal loan

The approval process for a personal loan is unique to each lender. The criteria generally includes having a good credit history, a record of on-time repayment, and a low debt-to-income ratio that indicates your income can sufficiently cover your debt. Some lenders may approve loans to borrowers who pose a higher risk, but those typically come with higher interest rates. Keep in mind, it may take some time to be approved. Take that into consideration if you need the funds in a hurry. However, when you’re approved, your funds typically don’t take long be available to you. Once the funds are in your account, you can use them to cover your financial needs.

Conclusion

Understanding personal loans can help you make informed financial decisions. Whether you’re consolidating debts, covering unexpected expenses, or investing in home improvements, a personal loan can be a helpful financial tool when used responsibly. Always consider your financial situation and consult with a professional before making significant financial decisions.

When it comes to credit, it’s more than just swiping a plastic card. There are many types of credit accounts you can leverage along your financial journey—each with their own purpose, features, and best uses.

To determine which type of credit account is right for your needs, let’s review the three main types of credit accounts: revolving credit, installment credit, and open credit.

Revolving Credit: An Overview

Revolving credit is a type of credit account that lets you borrow up to a certain limit on a recurring basis. As you pay off your borrowed amount, your available credit replenishes, allowing you to borrow again.

Key Characteristics of Revolving Credit

Credit limit: Revolving credit comes with a predetermined credit limit, which represents the maximum amount you can borrow.

Repayment: The repayment of revolving credit is flexible. You’re required to make minimum monthly payments, which is typically a percentage of your outstanding balance.

Interest and fees: Depending on the terms of the account, interest and other finance charges may apply—but you can often avoid these charges by paying your balance in full each month.

Examples of Revolving Credit

Credit cards: Credit cards are the most common form of revolving credit, allowing you to make purchases, transfer balances, and even borrow cash.

Personal lines of credit: Like credit cards, personal lines of credit let you borrow money as needed (up to a specified limit). However, they differ in that they don’t provide funds in a single lump sum.

Home equity lines of credit (HELOC): A HELOC lets you borrow against the equity you’ve earned in your home. It’s crucial to handle this type of credit with care, as your home serves as collateral.

Installment Credit: An Overview

With installment credit, borrowers receive a fixed amount of money that they repay through fixed payments over a certain period.

Key Characteristics of Installment Credit

Loan Amount: With installment credit, you borrow a lump sum of money upfront.

Repayment Schedule: Borrowers typically repay installment credit through fixed monthly payments spread over several months or years.

No Replenishing Credit: Unlike revolving credit, installment credit doesn’t replenish as you pay off your balance.

Examples of Installment Credit

Personal Loans: Borrowers obtain these loans for personal use, repaying them in fixed payments over a specified period.

Auto Loans: Auto loans are used to purchase vehicles and are repaid over an agreed-upon period.

Mortgage Loans: Homebuyers obtain mortgages to purchase a home, often repaying them over lengthy period spanning several years or decades.

Open Credit: An Overview

Open credit, also known as charge cards, is the least common type of credit. It allows you to make purchases like a credit card but requires you to pay your balance in full each month.

Key Characteristics of Open Credit

No Interest: Unlike credit cards, open credit doesn’t accrue interest.

Full Payment: With open credit, you’re required to pay your balance in full each month to avoid penalties.

Understanding the different types of credit accounts is crucial to managing your finances effectively. Whether you opt for revolving credit, installment credit, or open credit, ensure to make informed decisions based on your financial goals and circumstances.

Remember: knowledge is power. The more you understand about credit accounts, the better positioned you are to make sound financial decisions!

In the world of personal finance, the term cash-out refinance is used frequently. But what exactly does it mean, and how does it affect you? This article could help answer these questions and more.

What is cash-out refinance?

A traditional cash-out refinance is a financial strategy where you replace your existing mortgage with a larger loan. The difference between the amounts of the old and new loan is paid out to you in cash, which you can then use toward your financial needs, such as home improvements, debt consolidation, or other expenses.

How does cash-out refinance work?

The amount of cash you can get depends on factors like your credit score, the loan-to-value (LTV) ratio, and your existing mortgage. Typically, you can cash out up to 80% of your home’s value. But remember, to qualify for this kind of refinancing, you need to have built up equity in your home.

Advantages of cash-out refinance

1. Debt consolidation possibilities

You may lower the interest rate on an existing loan by 1-2% by refinancing. If you have multiple high-interest loans, consolidating them into a single, low-interest loan might be a good option.

2. Access to cash

As the name suggests, cash-out refinance provides cash you can use according to your needs. However, be smart about how you spend this money. Investments in education or home improvement can be more beneficial in the long run than splurging on luxury items.

3. Boost your credit score

You may increase your credit score by paying off existing debt. For instance, you can use the cash from a cash-out refinance to pay off your high-interest credit card debt, which can reduce your credit utilization score considerably.

4. Home improvements pay off

Reinvesting the cash in home renovations may increase your home’s value. Focusing on value-adding improvements can yield a high return on investment. Pro tip—these improvements might be tax-deductible, saving you money in the long run.

Potential drawbacks

1. Closing costs and other fees

Like all refinancing options, cash-out refinance comes with closing costs, legal protection fees, insurance, and application fees. Ensure the potential savings from refinancing outweigh these costs.

2. Impact on your credit score

A cash-out refinance requires a hard credit inquiry, which can temporarily impact your credit score. Generally, lenders do not do a hard pull unless you’re approved and accept the loan. Even a minor drop in your credit score can hurt your chances of getting a new loan.

Cash-out refinance in comparison

How does a traditional cash-out refinance measure up against other options like a Home Equity Loan (HELOAN) or Home Equity Line of Credit (HELOC)? Let’s have a look.

	Cash-Out Refinance	Home Equity Loan (HELOAN)	Home Equity Line of Credit (HELOC)
Credit Score	620 or higher	620 or higher	680 or higher
Loan Amount	80%-85% of the house value minus mortgage	80%-85% of the house value minus mortgage	80%-85% of the house value minus mortgage
Closing Costs	2%-5% of mortgage	2%-5% of total loan costs	2%-5% of total loan costs
Monthly Payments	Fixed-rate	Fixed-rate	Variable depending on the amount you draw
Loan Payment	Part of the refinancing will not be paid out and the cash-part in a lump sum	Lump-sum	Revolving credit
Annual Percentage Rate (APR)	Slightly lower than a home equity loan	Slightly higher than cash-out refinance and HELOC	Slightly lower than home equity loan and only on the amount you draw

Cash-out auto refinance

If you don’t have a lot of equity in your home, you can also consider a cash-out auto refinance. Similar to a mortgage refinance, with a cash-out auto refinance you get the equity out of your car and replace it with a loan of higher value. The loan amounts are generally smaller than a traditional cash-out refinance and the funds are paid to you in cash. With a vehicle equity loan, you can get up to 250% of the value of your car, but you must own it outright and it must have a clean title to do so.

This option is beneficial if you have built up significant equity in your vehicle and you need cash for immediate expenses. However, it’s essential to carefully consider the interest rates, terms of the new loan, and impact on your credit score before opting for this. Another potential drawback to this type of loan is that, if you are unable to repay your loan, it’s possible for your vehicle to be repossessed by the lender.

Conclusion

If you decide to move forward with a cash-out refinance or another option, you should carefully consider your financial situation. Remember, even if you don’t own a home, a cash out vehicle equity loan is a potential solution. Weigh the pros and cons and consult with a financial advisor before making a decision. The goal is to make sound financial decisions that enhance your financial stability and future prosperity.

Cracking the code of credit card definitions can be hard, especially when different credit card companies use different terms to describe the same thing. This helpful guide aims to simplify these terms so you can better manage your credit card and enhance your financial confidence.

Annual Percentage Rate (APR)

The Annual Percentage Rate (APR) is the yearly interest rate your credit card issuer charges you on your credit card balance. Most cards feature a variable APR, meaning it might change over time based on economic factors.

Authorized user

An authorized user is typically a family member or friend to whom the account holder has given permission to use their credit card account. The authorized user gets their own credit card, which is connected to the primary cardholder’s account.

Balance

Your credit card balance, or statement balance, is the amount of credit you’ve used on your credit line.

Balance transfer

A balance transfer is when you move a credit card balance from one card to another, usually at a lower APR.

Billing cycle

The billing cycle is the time between one credit card bill and the next.

Cash advance

A cash advance is when you withdraw money using your credit card, usually through an ATM.

Cash advance APR

The cash advance APR is a specific annual percentage rate for getting a cash advance with your credit card. This rate is generally higher than the regular APR, and interest begins accruing immediately after you withdraw the money.

Credit limit

The credit limit is the maximum amount your credit card allows you to charge.

CVV number

The Card Verification Value (CVV) is a security feature on your card that helps prevent fraud and identity theft.

Interest charge

An interest charge is the total interest you’ve accrued on your balance in a billing cycle.

Introductory APR

Credit card issuers may offer an introductory APR, which is a promotional annual percentage rate to attract new customers. It often starts at a low or even 0% rate but only applies for a specific timeframe.

Minimum monthly payment

The minimum monthly payment is the smallest amount you can pay on your credit card by your due date without going past due.

Penalty APR

If you violate certain usage restrictions, credit card companies may charge a penalty APR, which is usually higher than the regular APR.

Pre-screened offers

Pre-screened offers target consumers based on their borrowing history and other factors. They usually use phrases like “pre-approved” or “pre-selected.”

Pre-qualified, pre-selected, pre-approved

Terms like pre-qualified, pre-selected, or pre-approved signify that a financial institution considers you a likely candidate to meet their credit-offering eligibility criteria.

Prime rate

The prime rate is a base interest rate most major US banks use to calculate variable credit card rates. Changes in the prime rate can affect your variable APR.

Understanding various credit card fees

Annual fee

An annual fee is charged once a year. Not all cards carry this fee, but those that do often offer rewards and benefits that can help offset the cost.

Balance transfer fee

Balance transfers can be enticing, but they often come with balance transfer fees.

Foreign or international exchange fees

These are fees (usually between 1–3% of the purchase amount) on purchases you make outside the US.

Planning your wedding is exciting and something you should remember for the rest of your life. Developing a financial plan to cover the cost of your wedding will help make the day as special as possible.

This article explores tips for how to pay for your wedding without breaking the bank. Whether you’re just starting to plan or the bells are already ringing, we’re here to help you navigate the financial aspects of your wedding and set up a savings plan to make it a memorable and affordable celebration.

Understanding the cost of a wedding

Before diving into strategies to pay for your wedding, let’s review the expenses involved so we can help you determine your budget:

Venue and catering
The venue and catering typically make up a significant portion of the total wedding budget. This includes the rental fee for the venue, food, beverages, and service charges. Costs can vary depending on location, number of guests, and the type of meal service (buffet or plated).

Wedding attire
Wedding gowns, tuxedo rental, and the attire for the wedding party are all expenses that need to be factored into the budget. This includes the cost of the outfits, alterations, accessories, and shoes.

Photography and videography
You’ll want to capture this special moment in photos and video. Those professionals come at a price. It’s important to allocate a portion of your budget to ensure you have these memories recorded to cherish for years to come.

Flowers and decorations
Flowers and decorations add beauty and ambiance to your wedding venue. This includes bouquets, boutonnieres, centerpieces, and any other floral arrangements. It’s important to work closely with a florist to determine your vision and budget for these elements.

Entertainment

Whether you opt for a live band or a DJ, entertainment is an important aspect of any wedding. This includes the cost of hiring the entertainment and any additional fees for sound equipment or lighting.

Invitations and stationery
Sending out invitations and other stationery items, such as save-the-date cards and thank-you notes, is an expense that should be included in your budget. You may choose to also pay for professional design printing and mailing services or do some of this yourself.

Wedding cake
The wedding cake is a focal point of many receptions, and its cost should be factored into your budget. This includes the cake itself and any additional fees for delivery and setup.

Transportation
Transportation expenses may include renting a limousine or other special mode of transportation for the wedding party and coordinating transportation for out-of-town guests.

Miscellaneous expenses
Additional expenses often arise during the wedding planning process, such as marriage licenses, wedding favors, and guest accommodations. It’s important to allocate part of your budget for these miscellaneous expenses.

Creating a wedding budget

Now that you have a clear understanding of the various expenses involved in a wedding, it’s time to create your budget. A budget will help you stay on track financially and ensure that you spend your money wisely. Follow these steps to create a realistic wedding budget:

Determine your total budget

Start by determining the total amount of money you have available to spend on your wedding. This may include contributions from family members or personal savings. Be realistic about what you can afford and set a budget that aligns with your financial situation.

Prioritize your expenses
Once you have your total budget, prioritize your expenses based on what is most important to you. For example, if having a stunning venue is a top priority, allocate a larger portion of your budget toward the venue and catering expenses. This will help you make informed decisions when it comes to allocating funds.

Research and gather quotes
Research the average costs for each expense category and gather quotes from vendors to get a more accurate idea of the costs involved. This will help you refine your budget and make adjustments as needed.

Track your spending

As you start making payments and booking vendors, track your spending to ensure you stay within your budget. Keep a spreadsheet or use an online tool like the one available for free at Best Egg Financial Health to record all expenses and regularly review your progress.

Make adjustments if necessary
If you find that you’re exceeding your budget in certain areas, look for ways to make adjustments. This may involve cutting back on non-essential items or finding more cost-effective alternatives.

Saving for your wedding

Now that you have a budget in place, you may need to start saving to cover the costs of your wedding. Here are some strategies to help you save effectively:

Set a savings goal

Start by determining how much you need to save and set a savings goal. Break it down into manageable monthly or weekly amounts to make it more achievable.

Automate your savings

Make saving automatic by setting up a separate savings account and scheduling automatic deposits. This will help you stay disciplined and consistently save towards your goal.

Cut back on non-essential expenses

Look closely at your current spending habits and identify areas where you can cut back. This may involve reducing dining out, entertainment expenses, or unnecessary subscriptions.

Increase your income

Consider ways to increase your income, such as taking on a side gig or freelancing. This additional income can be dedicated solely to your wedding savings.

Explore cost-saving alternatives

Look for ways to save on wedding expenses without compromising on quality. For example, consider DIY projects, borrowing items from friends or family, or opting for off-peak wedding dates.

Paying for your wedding

In addition to saving, you may need to explore other options to cover the costs of your wedding. Here are some strategies to consider:

Personal savings

If you have personal savings earmarked for your wedding, this can be a great source of funds. However, be mindful of depleting your savings entirely and leaving yourself financially vulnerable.

Family contributions

Consider reaching out to family members who may be willing to contribute towards your wedding expenses. This can help alleviate some of the financial burden and make the day more memorable with their involvement.

Wedding loans
If you need additional funds to cover your wedding expenses, consider taking out a wedding loan. However, be cautious and only borrow what you can comfortably repay within a reasonable timeframe.

Crowdfunding

With the rise of crowdfunding platforms, some couples are turning to their network of friends and family to help fund their wedding. This can be a creative way to involve loved ones in your special day and receive financial support.

Wedding funds and registries

Consider setting up a wedding fund or registry where guests can contribute toward specific aspects of your wedding, such as the honeymoon, photography, or entertainment. This can be a great way to offset some of the costs.

Final thoughts

Planning and paying for a wedding can be a financial challenge. Still, with careful budgeting, saving strategies, and exploring alternative funding options, you can make your dream wedding a reality without breaking the bank. There are online resources like The Knot that can help you as you begin to plan your day. Remember to prioritize your expenses, track your spending, and be flexible when adjustments are needed. By taking a proactive approach to your wedding finances, you can enjoy your special day while setting the stage for a sound financial future together.

Having a healthy relationship with money leads to better financial well-being and peace of mind. Whether you’re struggling with debt, trying to build savings, or simply want to improve your financial habits, implementing a few simple changes can make a big difference. Start improving your relationship with money and get on the path to financial success with these 6 habits.

1. Create and stick to a budget

Creating a budget is the foundation of good financial management. It helps you understand your income, expenses, and where your money is going. Start by making a list of your monthly expenses, including fixed costs like rent or mortgage payments, utilities, and insurance. Then, evaluate your discretionary spending, such as entertainment, dining out, and shopping.

Next, compare your expenses to your monthly net income. Are you spending more than you earn? If so, identify what you can cut to save money. Tracking your daily expenses provides a clear understanding of your spending habits and where your money goes so you can make informed decisions about what expenses are necessary and which ones you can live without.

To stick to your budget, it’s essential to exercise financial discipline. Reward yourself for sticking to your budget by putting extra cash into an emergency fund or using it to pay off high-interest credit card debt. Find creative ways to stay motivated. Allow yourself to indulge in a favorite meal or beverage when you successfully stick to your daily budget.

Remember, a budget is a tool that puts you in control of your finances and allows you to prioritize your spending, save for the future, and achieve your financial goals.

2. Set smart money goals

Shape your relationship with money by setting specific financial goals. It’s easy to overspend and lose sight of your long-term financial well-being without clear objectives. Short-term, mid-term, and long-term goals provide a roadmap for your financial journey.

Short-term goals may include building an emergency fund, saving for a new computer, or paying off credit card debt. Mid-term goals could involve planning a dream vacation or purchasing a car. Long-term goals might include buying a home or growing your retirement fund.

Create a vision for your financial future to make your goals more tangible and achievable. Imagine where you want to be in 1, 5, or 10 years, and write down your goals. Create a vision board with pictures that represent your financial aspirations, such as your dream vacation, a renovated kitchen, or a comfortable life after retirement.

Make your goals measurable by breaking them down into actionable steps. For example, if your goal is to save for a down payment on a house, determine how much you need to save each month and identify strategies to increase your savings, such as cutting cable or consolidating high-interest debt.

Set benchmarks and assign time frames to your goals. Celebrate your achievements along the way. Reaching milestones will keep you motivated and focused on your financial dreams.

3. Avoid impulse buying

Impulse buying can wreak havoc on your finances and is a good money habit to break. Those small, unplanned purchases add up quickly and derail your budget. Develop strategies for disciplined shopping and avoid falling into the trap of impulse buying.

Start by making a shopping list before entering any store. Stick to your list and avoid getting distracted by sales or tempting displays. Leave your credit card at home and only bring cash with you when you go shopping. This way, you’re limited to spending only what you have budgeted for.

If you’re considering a significant purchase, sleep on it before you buy. Give yourself time to evaluate whether the item is a want or a need. This cooling-off period allows you to make a more rational decision and avoid buyer’s remorse.

Be mindful of joining too many email lists. Signing up for merchant emails can provide discounts and free shipping and expose you to a constant stream of tempting offers. Limit email subscriptions to avoid unnecessary spending.

Finally, incorporate fun money into your budget. Allocate a specific amount for discretionary spending to enjoy life’s pleasures without breaking the bank. Consciously manage your spending habits to gain control over your finances and remove some of the drive to make impulsive purchases.

4. Automate your savings

Saving money is often easier said than done, especially when faced with competing financial demands. However, automating your savings can make the process more manageable and help you build a good financial habit.

Treat your savings like a monthly bill. Set up automated deposits from your paycheck into a designated savings account. This prioritizes saving and ensures it becomes a regular part of your financial routine. Consider opening a high-interest savings account to maximize the growth of your savings.

Take advantage of technology by using online resources like Best Egg Financial Health to automate and track your budget. These tools can help you set savings goals, monitor your expenses, and identify areas where you can save more effectively.

Remember, building an emergency fund and saving for the future are essential components of a strong financial foundation. Automating your savings makes it easier to stay on track and achieve your financial goals.

5. Calculate the cost of your time

Understanding the value of your time can be a powerful motivator for making sound financial decisions. Consider the time you spend earning the money you have, and evaluate whether a purchase is worth it.

Whether you earn a salary, work as a freelancer, or own a business, knowing your hourly rate provides valuable insight into the true cost of a purchase. Before making a significant expense, ask yourself, “How many hours do I need to work to pay for it?” This perspective can help you prioritize your spending and make more informed choices.

Place a value on your time to become more intentional with your financial decisions. You may find some purchases aren’t worth the hours you’d need to work to afford them. This awareness can lead to more mindful spending and a healthier relationship with money.

6. Learn about personal finances

Improving your financial literacy is key to transforming your relationship with money. Educate yourself about personal finance topics to make informed decisions and take control of your financial well-being.

Take advantage of educational resources such as classes at your local community center, podcasts, money management blogs, educational videos, LinkedIn Learning, or conversations with a financial advisor. Seek out reputable and responsible sources that provide accurate and practical information.

By expanding your knowledge of personal finance, you’ll gain the confidence and skills necessary to navigate the complexities of money management. This knowledge empowers you to make wise financial choices, set realistic goals, and build a secure financial future.

Conclusion

Improving your relationship with money requires conscious effort and a commitment to developing healthy financial habits. These simple steps could help you build a stronger and more positive connection with your finances. Start today and embrace the journey toward financial freedom.

Managing personal finances can be challenging. Many struggle to track their spending and progress toward their financial goals. However, a simple and powerful money management tool known as a money diary can help you better understand your financial habits. Continue reading to find out what a money diary is and why keeping one could help you improve your money management to achieve your financial goals faster.

What is a money diary?

A money diary, also known as a spending journal, is a record of your daily spending and financial decisions. It’s a detailed account of your financial habits, capturing both big and small purchases made daily. Money diaries have gained popularity in recent years thanks to platforms like Refinery29, where individuals share in-depth accounts of their financial experiences.

Why keep a money diary?

A money diary can provide valuable insights into your spending patterns and overall financial behavior. Here are 3 compelling reasons why you should consider starting a money diary:

1. Gain a clear understanding of your spending

A money diary offers a daily glimpse into your financial journey and helps you see how you’re actually spending your money. By recording every transaction you make, you can identify areas where you may be overspending or missing opportunities for potential savings. Tracking your everyday expenses provides a realistic view of where your money is truly going.

2. Create a realistic budget

A money diary can help you build a more accurate and realistic budget. Analyzing your weekly spending habits lets you identify areas where you can better allocate your finances. This insight enables you to fine-tune your budget and align your spending categories with your financial priorities.

3. Understand your money habits

A money diary can help you reflect on your money habits and evaluate how they align with your financial goals. By examining your daily entries, you can determine if you’re consciously frugal or prone to impulsive spending. It allows you to assess whether you’re prioritizing the most critical aspects of your life and identify areas where you may need to make changes.

What to include

Every money diary is unique to the individual keeping it, but certain essential elements can contribute to its effectiveness. Here are the key components to include in your money diary:

Your basic financial profile

It’s crucial to take stock of your current financial situation. Document your sources of income, including your weekly or monthly earnings. Additionally, note your savings, assets, and any outstanding debts such as credit card debt, auto loans, or mortgages. Include any upcoming payments or planned expenses to provide a comprehensive overview of your financial landscape.

Daily spending

Record a daily detailed account of your transactions, no matter how small or insignificant they may seem. Include all payments, from your morning coffee to online shopping orders. By capturing every expense, you’ll have an accurate record of your daily spending. Additionally, consider journaling your thoughts, moods, and the reasons behind your financial decisions. This will provide valuable context and help you identify patterns in your behavior.

How a money diary enhances your budget and financial goals

A money diary is a powerful tool to align your spending with your financial goals. Here’s how you can use the insights gained from your money diary to improve your budget and achieve your financial objectives:

Weekly reflection

At the end of each week, take some time to reflect on your entries and evaluate your progress toward your financial goals. Calculate the total amount spent during the week and compare it to your initial expectations. Consider how your spending aligns with your budget and whether any adjustments need to be made. Use this reflection period to set actionable goals based on the insights gained.

Adjust your budget

Make adjustments to your budget based on the patterns and trends observed in your money diary. If your spending habits do not align with your original budget, revise your spending categories to better reflect your actual financial circumstances. This iterative process will help you create a budget tailored to your needs and goals.

Set financial goals

If you haven’t already, use your money diary as a catalyst to set clear financial goals. Reflect on your spending patterns and identify areas where you can cut back or reallocate funds to prioritize your objectives. Whether it’s saving for the future, paying off debt, or investing, integrating your financial goals into your budget will ensure that your money is working toward what matters most to you.

Take action

Once you’ve identified areas for improvement in your money diary, take action to implement the necessary changes. Look out for “money vampires,” such as unnoticed subscription services that drain your funds. Focus on your financial priorities and make significant changes if needed, especially if you find yourself in a challenging financial situation. Remember, small adjustments can make a big difference in the long run.

Overcoming challenges

When you review your money diary, you may not always like what you see. It’s important to approach your money diary with a non-judgmental mindset and resist the urge to compare yourself to others. Instead, focus on the positive aspects of your financial journey and use the insights gained to make meaningful changes.

Final thoughts

Keeping a money diary is a powerful practice that can transform your finances. By deeply understanding your spending habits and aligning them with your financial goals, you can improve your relationship with money. Remember, a money diary is a personal tool; you can keep it private or share it with others. Embrace the opportunity to learn about yourself and make informed decisions that will lead to a more secure financial future. Start your money diary today and take the first step towards achieving your financial goals.