Find out how to negotiate down your bills, get your credit score up fast and create a budget you’ll actually follow, in this podcast episode with personal finance author and former CreditCards.com contributor Kristin Wong.
Personal finance writer, video producer and CreditCards.com contributor Kristin Wong shares everything she knows about saving money without feeling like it, negotiating down bills and upping your credit in a short amount of time.
In this episode, Wong shares some of her best financial secrets, taken from her new book “Get Money: Live the Life You Want, Not Just the Life You Can Afford.”
So, let’s get Charged Up! about learning money hacks to live well while still saving!
JennyHoff: Kristin, thanks for joining us today. It’s a pleasure to actually get to talk to you and we’ve worked together a lot at CreditCards.com, so it’s fun to talk about your book now.
KristinWong: Yeah, thank you for having me. It’s good to talk to you again.
Hoff: So, let’s hear a little bit about your background, you’ve been covering a lot of financial issues and credit issues for several years now, so talk a little bit about your own background and how this book came to fruition and how it reflects your own money journey.
Dave Ramsey‘s “Total Money Makeover” when I was like in high school maybe even. Growing up my family was poor, and I know a lot of people kind of, that word gets thrown around a lot, but like we qualified for food stamps, we qualified for welfare. And I saw my parents sort of go on this journey from being poor and making it work.Wong: Sure, so I’ve been kind of fascinated with money from a young age. I think I read
And as I got older, they started earning more money, so I had always kind of been in my childhood fascinated with money and how it can hold you back and how it can give you a sense of freedom and options. And so I was always kind of interested in figuring out how to get money because we didn’t have any. So I wanted to know how to get it in like a literal sense, like I wanted more money so I could do things and get it in sort of mentally and emotionally.
So, I started writing about it as I started freelance writing and then I became a financial expert. People started calling me a personal finance expert so to speak. And I guess that kind of just means somebody who was terrible at money and figured out how to get better at it. And I did and I wanted to share what I learned with everybody, so that’s how the book came to be.
Hoff: And your book is great because you do take it through simple steps to also more complicated steps that people can do, but you have exercises throughout the book, so people don’t have to necessarily go find a notebook and get it all figured out and a million excuses as to not do those exercises. They’re right there in the book. So you talk about the concept and immediately someone can put that into practice, and we’re going to talk about some of those concepts that you talk about in the book.
This year a lot of my podcast guests have talked about goals and using different systems to set the right kinds of goals and to take care of those goals. And you have talked about in your book about how you had a goal of going on this trip to Europe or a goal of paying down debt and you were amazing at saving and following that and putting that money away, and then you accomplish the goal, and then you would kind of get back in the cycle of mindlessly spending without really having a goal in mind.
So how do we set the right kinds of goals so that we don’t fall back in the cycle of saving for short amounts of times and then just going back to the bad habits we had before?
Wong: So I think the goal has to be really specific, like you have to really drill down and how much do you want to save, when do you want to save up by, how much can you save each week? Breaking it into smaller milestones is really crucial because it’s a lot easier to save a hundred dollars a week than it is $2,000 in, and I can’t do the math of however long it takes.
It’s easier to save in the short term, but also in addition to being specific I think your goal also has to be meaningful to you. A lot of times I think people want to get better at money so they’re like, “Well, my goal is I just need to start saving for retirement or I just need to start saving, period.” But if you’re not saving for a meaningful purpose then you’re just accumulating money, and that really is, I mean, it’s good, but what is the purpose of that money?
Because money is just a tool, it’s not something you want to accumulate. You want to use it for something, so you have to really ask yourself – what do I want to use this for?
Hoff: So you’re having some kind of a purpose with it. And so when you do have that purpose, let’s say you had that great trip. I want to go to Europe. I want to save $5,000 for a great trip to Europe. OK, I did Europe. Now I go back to kind of what I did before. Do you have to just set another goal immediately or what if your goals are to save more for retirement and put money into kind of an emergency fund and do these kinds of unsexy goals that are not really that motivating? How do you get yourself motivated to do them?
Wong: Well, I think it can still be meaningful like why do you want to retire, why do you want to save for an emergency? I know I wanted to do those things because when I was saving for an emergency fund I wanted to have that so that I felt secure when I went on that trip to Europe. So when I was spending my money on whatever I wanted to spend it on, I knew that I wasn’t going to go back and sort of blow my budget because I had this emergency fund.
So really my goal there, the meaningful goal was security. So I think financial security or just security in general is a great goal to have. If you’re saving for retirement, your meaningful goal is to maybe not work one day; that’s a great goal too.
So I think you have these really specific goals for like, “Oh, I want to save for a trip to Europe,” that’s very specific, you can come up with the numbers, you can do the math. And then you have these overarching, more meaningful goals of what are your goals in life, like what matters to you in life? And I think if you have that in mind then your actions and your behavior with money is only going to support what’s meaningful to you.
Hoff: Yeah, so it seems like something kind of simple to do – just write down why you want to save this money. But what you’re saying is it has a much bigger impact than that, because if you do put a little bit thought into it and you write it down and you kind of make it as a personal goal of yours, it’s something that you will more likely to think about every time you make a purchase or every time you swipe your card.
You did mention emergency fund, let’s talk about the importance of an emergency fund. What should it look like? And let’s also talk about the F-off fund, which you also talk about in your book.
Wong: Yes. So an emergency fund is basically a fund in case of an emergency. So a lot of experts say like you should have six months or three months or twelve months, and I think yes that’s absolutely true. But I think if your discretionary income, the money you have left over after you pay your bills is not that much, well, then saving six months worth of your income is going to be completely overwhelming.
So I think just start small, like my emergency fund I started with $100 because I was really broke back then and I had a hard time paying my bills but I knew I needed to have an emergency fund, I knew $10,000 was I couldn’t fathom that number, so I thought just a hundred dollars. But then once you save that then you get it to about 200 and 500. And so just work in small increments.
And then the idea of an F-off fund is just my friend Paula who had this idea. Her F-off fund idea is basically giving yourself the freedom to be able to, in her case, leave a really terrible relationship. Maybe you’re not in a really terrible relationship, maybe you’re in a really terrible job and you have no way out because you’re so dependent on this relationship or job or whatever the situation is for money.
But with an F-off fund you empower yourself to be able to say, “You know what? F-off. I’m going to go do what I want with my life.” And that goes back to the meaningfulness of money, which I think it sounds really cheesy but you really do have to think about what your relationship with money is.
And she does such a great job in that article of giving some symbolic property and giving some meaning to money beyond just, “Hey, I need to save for an emergency.” She gives it meaning.
Hoff: Absolutely. And I’ll say from personal experience there is nothing that feels as great as the freedom that comes with knowing you have enough money in the bank that you could quit your job any time you wanted.
For some reason even if when you get angry at boss or angry at your colleagues or you just hate waking up at that time every day, you might not quit your job, but it feels good to say, “I can quit this job if I wanted.” Because they have that money in the bank and I think that that is an important just psychological factor in there to make you feel not so beholden to your job but rather you’re choosing to go there every day instead of the other way around.
Hoff: Let’s talk about frugality too, and of course growing up without money that will affect the way you think about money, so you encourage people to use it as a tool. What do you mean by that?
Wong: So a lot of times you can think of frugality in one of two ways. You can think of it as virtue which is my mom is completely that’s her, she thinks of frugality is a virtue, like if my mom was a billionaire she would still be frugal. She saves her take out boxes, she will save ketchup packets and she has a little drawer.
And then there are people who are frugal for the sake of it’s just a practical thing, like that’s kind of me. I am frugal, I cut back, I’m really cheap on certain things in certain areas so that I can spend lavishly in other areas.
So it’s like sometimes my friends will be like, like I have my coupons where I’m going, I go to the grocery store and my friends are like, “Kristin, why are you couponing? You’re so cheap.” But then I spend like crazy on travel, and so they might think like I’m kind of a spendthrift in that area.
So yeah, there are two different ways to think about frugality. And in the book I don’t really talk about the virtues of frugality because I think that’s just up to the individual to figure out. But frugality can still serve a practical purpose even if you’re not super into it.
I see this a lot in the personal finance world where you have this save more versus earn more crowd, like you have some personal finance writers who are like frugality is stupid, I just think you should earn more money. And you have people who are like frugality is everything; we need to stop wasting so much stuff.
Both sides I think have merit but like in my household I grew up where my mom was super frugal and my step-dad was kind of the opposite, he was like he took risks, he was the investor, he was all about earning money. So, I kind of lived in this house where I had earn more and save more, and I saw the merits of both. But in the book, yeah, I talk about more of the practical side of frugality.
Hoff: And so talk about some of the tools of how you can be frugal without having to feel like you’re living cheaply?
Wong: One tip that I have is do a bill haggle day. It does require some effort, right? You have to call your bill providers and ask them for a lower rate on your cell phone bill, on your internet bill, your cable bill, whatever you’re paying for. But you’re going to continue saving every month, so you only have to do the work once and then you save for the entire year.
So just take a few hours out of your day and make a list of all of the bills that you pay for. And in the book, I talk about like exactly what you can say to try to haggle them down and what bills you can haggle down. And just take a few hours out on a Saturday and call every bill provider and ask for a lower rate.
Hoff: And I think a lot people would say, “Wait, wait, wait. I don’t think I’m going to be able to get a lower rate. I signed my deal. I have a contract for my cable or I have my cell phone that I use and I don’t have to go through the hassle of getting another rate.” What are your suggestions like as far as like the easiest bills to change the rate on and kind of how you should approach it?
Wong: One bill I see people over pay for often is their cell phone bill. There are so many discount carriers out there nowadays that you can get like, I mean, I know people who pay $20 or $30 a month for their cell phone bill and they still have data and they still have their minutes.
I think if you just do research, there’s this website called Whistle Out where you can compare different cell phone plans depending on how much data and minutes and text you use. And you don’t even have to switch, you can just call your carrier and ask, “Hey, I saw this other rate.” Even if it’s a major carrier, Verizon or Sprint, they’re offering much lower rates to try to keep up with that competition. So it never hurts to just call and ask.
But even your credit card interest rate, that’s a big one that I think a lot of people don’t even think to negotiate. They just pay the interest and that’s that. And I think CreditCards.com did a study like not too long ago that’s like 78 percent of people who call and negotiate a lower credit card rate get it, but only like I think it was one in five or something like that actually even do it.
So the point is most people don’t do it but when they do it they get what they want. So that’s one of the challenges I have in the book, just call your credit card company and ask for a lower rate, because the worst they can say is no, and, OK, so fine, you’re paying the same amount. But you can really reduce your debt if you call and if you’re paying less in interest.
Hoff: And what do you say, “I just want to reduce my rate,” or do you threaten to go to another card? What if you carry a balance on that card that they know they’ve got you?
Wong: For CreditCards.com we did an experiment in this where I called, and all I said was, “Hey, I’ve been a good customer. I pay my bill on time and I’ve been a customer of you guys for a long time. Would you consider a lower rate?” That’s all I said. And they were immediately like, “OK, yes, here’s what we can do.”
I think I tried to negotiate down further, they knocked off like five points or so, something like that, and I think I tried to negotiate further and they wouldn’t budge. But all I said was, “Hey, I’m a good customer, I pay my bill on time, would you consider this?” And they said yes. That’s not always going to work but it’s worth asking.
Hoff: Absolutely. And hey, if you especially know that you might be carrying a balance in the future because you have a big purchase to make and you definitely need that interest rate to be lowered, that is a good time to call and to negotiate it maybe before you have a massive amount on the card and they’re like, “No. Sorry.”
Hoff: That might be a good time, beforehand, before you might be putting a lot of money on that card.
Hoff: In your book you have how to lay the groundwork for your financial health. And then you move on to optimizing your finances, including learning how to handle credit and making sure your taxes are done right. Can you go into both of these? And what are the things people should know?
Wong: Yeah, OK. So first we’ll talk about credit and how that works. The main thing is you want to pull your credit report. And I think a lot of people don’t do that, they have no idea what their credit looks like, they might not have any idea what their score is. And it’s easier than ever to find out what your score is and whether it’s good or not.
I think it’s important to understand the five FICO factors that go into your credit score. You don’t have control over all of those factors, but many of them you do. Credit utilization is a big one, so the more credit that you’re using basically the worse that is for your score. You want to have a lot of credit available to you but you want to be using less of it.
So that’s why a lot of finance experts, and I talk about this in the book, think twice before you close an old card because ideally you just want to not use it because you want that line of credit open but you want to show that, “hey, look I have all this credit open but I’m not using any of it.” So that’s going to make your credit score go up because it’s going to look like you have control over your money and your credit worthy, but you’re not easily taking on debt.
And for taxes I think there are so many freelancers nowadays, right? I think Intuit estimated that by 2020 like 40 percent of the workforce will be freelance, and so many of us have no idea how that works when it comes to our taxes. It kind of bit me in the butt when I first started freelancing because I didn’t know you had to pay estimated quarterly taxes, and I ended up owing a bunch of money in April.
So I think if you’re freelancing you for sure need to figure out how to navigate your taxes because you don’t have an employer doing that for you. I think it can’t hurt to like talk to a professional. There are some, Turbo Tax is great, it kind of walking self-employed people through all of that. That’s what I use.
But a tax person can really help you break it down and help you understand the nuances of filing your taxes as an independent freelancer and making sure you get all the deductions that you qualify for, because that’s a big one too.
Hoff: OK, absolutely. So those are two really important things to do if you want to like optimize your finances. And when you say optimize that means get past the basics of having a little bit emergency fund and having no debt to actually like going further now and having a little bit financial freedom.
Wong: Yes, exactly. So once you get the basics of finances in order and you’re like, “All right, I got a budget. I can stick to it. I’ve figured out my relationship with money. I’m OK at money now.” Then I think it’s nice to get to the next step where you’ve created the machine now you make it a well-oiled machine.
So the book is broken down into three stages, and the first stage is sort of the power up. It’s called power up and it’s all about the basics of money. And then the second stage is optimized as you said, and that’s kind of all the money hacks and just ways to make your finances even better. Not just pay off your debt but supercharger debt plan. Not just do your taxes but figure out how to squeeze every last deduction that you can, just that sort of thing.
Hoff: And then I also want to talk about, you talk about in the book getting out of a consumption mindset. And I recently interviewed a woman who actually went to the extreme of that. She said, “I’m going to do no shopping for a year.” It turned into no shopping for two years. And she said, “I just want to get to the point where I am no longer just impulse buying or emotionally spending as soon as I have a problem in my life and I don’t want to deal with it.”
And so she kind of took it to that extreme. Now that’s not necessary, you don’t have to cut off all shopping for a year. But in your mind what are the things that we can do to start getting out of the consumption mindset and being just more mindful with whatever we buy?
Wong: Well, I think being aware of some of the cognitive biases that you have toward shopping. And these are your kind of biases to put it in a nutshell is basically just the way your brain works against you when you don’t want to spend, it’s like, “No, no, you should spend.”
For example, one of these biases is a sunk cost fallacy, and that’s when you’re like, “Oh, I need to go to Best Buy and buy this new laptop case.” But the laptop case isn’t there so you’re like, “OK, well, I came all this way. I fought for parking. I’m in the store. I got to spend on something.” So then you look for something else to spend money on.
So I think just figuring out the way that your mind kind of works against you to spend is really important. A lot of us have excuses. Common excuses that keep us from saving our money when we want to is like I deserve this – at the end of a hard week you’ve worked your butt off and you want to buy a 200 pair of jeans because you deserve this so you’re going to go shopping and you kind of going on to shopping spree and you derail your goals.
But I think, yeah, just be paying attention to kind the scripts you use and where your mind is when you’re shopping impulsively helps more than anything.
Hoff: Now I want to get to the part of your book where you talk about getting that credit score into the 800s. What are some of your strategies? And let’s take a couple of different people. One person their credit is shot, it is very low, they do not qualify for credit cards or any decent deals and they want to get their card up. What are some of the strategies they need to employ? And then let’s also take somebody who’s maybe got in the 600s, like high 600s, but they want to get to the excellent credit category. So what are some strategies for both of those people?
Wong: One strategy that’s kind of controversial but that I’ve used with my husband and it’s worked is adding someone as an authorized user. So basically how this works is you have a parent or a spouse or somebody who trusts you and you get them to add you as an authorized user on their card. And that gives you access to the card and the credit line, but ideally then you don’t have the card and you don’t spend it and they have good financial habits and they’re not spending on that card either. There should be no revolving balance on that card.
And what that does is it basically makes it look like you have a good credit history with that card because you’re now linked to it. And that can really boost your score.
How much it boosts your score? It depends on where your score is at already. But that’s one that I actually used with my husband and I just didn’t give him the card and I just added him and his credit score, like his credit score’s better than mine now but that’s not just because of that, that’s because of a lot of reasons. So that’s one hack you can use to improve your credit score.
It really comes down to just paying your bills in full and on time, that’s going to help more than anything. But there are these tips and tricks in between that can kind of help you boost it, but more than anything if you just pay your bills in full and on time that’s really going to improve your score.
Hoff: And what about maybe opening more credit cards? There are people who once they’ve paid off their bills they want nothing to do with credit cards anymore, anything like that. And I know we work with creditcards.com, and so obviously there there’s a lot of information on the credit cards. But in order to have a good credit mix and to have a low credit utilization rate is it important for people to open credit cards and then freeze them or do whatever they need to do so they don’t actually use them but at least have that credit available to them?
Wong: Totally, because it goes back to credit utilization, like you want a lot of credit available and use none of it or as little of it as possible. So if you open more credit cards then yes you’re going to have higher credit utilization.
But I think if you are tempted to use those cards at all and you think that opening this card is going to get you in debt and get you in trouble then just don’t do it, because I really think your financial health is more important than a good credit score. It’s more important to not be in debt than it is to have good credit.
Hoff: OK, but if it is somebody who you feel like you’ve learned your lesson and now you just want to get your credit score up and you can’t control your spending, then opening a credit card or two will help your credit utilization rate, it will help your credit mix if you have maybe also a mortgage or an auto loan.
Hoff: And so those are the things that go into credit scoring. So if you do need a loan that will be available for you. And you go through some of those tips in your book too. What are three things somebody can do right now to start getting their financial life on track? What are the three most important things you think they should do?
Wong: I think number one get clear on your goals. I know that sounds like not money related at all, but I think it’s an important one because you want your money to be working for you not the other way around. And when you have a goal then everything you do with your money is to support you and your goal, you put yourself in the driver seat.
Number two I think tracking your spending is another thing that a lot of people don’t do. Just go through your bank statements and see where your money is going or maybe keep a spending track or worksheet and write down every purchase for a month, and then evaluate it. Was it worth it? Did you really need it? Just kind of get clear on what your spending looks like.
And then number three I want to say budgeting, but people mess up their budgets a lot. But I think it’s because they don’t have a clear goal for it. And one of the experts that I interview in the book Dr. Brad Klontz, he’s a financial psychologist, actually hates the idea of budgeting and he promotes spending plans instead.
Now these are the exact same thing, a spending plan is a budget, the details look the same. But a spending plan is basically you have a clear goal for what you want your money to do. And then you are just budgeting according to this plan to reach your goal. So that’s why I think I will say number three is budgeting but with your goal in mind.
Hoff: OK, so have some sort of a financial plan there of how you’re going to spend your money throughout the month and where your money is going to go, as long with having your goals and tracking your spending which isn’t easy. But I was thinking about when I was young I had my little check book with me everywhere I went and I didn’t care what I bought, I wrote down exactly everything I bought in my check book and I kept a tally there.
And I think that being up by gone era is a little bit of a detriment to us because we’re not keeping track anymore of what we spend. And so maybe even taking a checkbook and using that back part with you and keeping it in your wallet or your purse, and every time you buy something writing it down, just there, that might be the easiest way to keep track of your spending so you know what you’re spending.
Wong: Yeah, totally.
Hoff: And finally, Kristin, what gets you charged up about helping people master the money game?
Wong: I just love empowering people and seeing them feel like they have some control over their finances, because I think a lot of people, most of us don’t feel like we have any control at all. We’re like, “I earn this much, and that’s all I’m ever going to earn, and I can’t pay my bills and I’m stuck in the cycle of paycheck to paycheck and that’s all it’s going to be.” And we feel like we absolutely have no control over that.
But when I get like emails from readers or viewers who are like, “Hey, I watch your channel or I read your blog and I paid off my debt this month because you had these monthly challenges,” like that gets me so excited. It makes me actually want to keep writing about money. It’s very encouraging because it’s just nice to see people feeling like they have some control over their money.
Hoff: Exactly. And it is such an emotional thing for many of us, where we either feel a lot of shame or we feel excitement. And to be able to just handle it and feel in control of it, there’s probably nothing that feels better when it comes to controlling something in your life. Kristin, thank you. It’s a pleasure to talk to you. It was fun to talk about your book.
Wong: Me too.
Hoff: And I really encourage people to check it out, because you’ve got a lot of fantastic tips in there and exercises to get you started on feeling confident in money again. Thanks, Kristin.
Wong: Thank you.
See related: Charged Up! podcast: Making financial goals stick