Why Credit Can Be Good For Your Finances

By G Castañeda

Credit can be used as a tool for financial success. Just like other tools, it has its pros and cons and the cons pile up when a tool is used improperly. Taking out a home loan is a good example of using credit to acquire a very useful resource. This is especially beneficial if your monthly home loan payment is lower than your monthly home rental payment.

Taking out a student loan is another example of using credit for a good purpose. While estimates of how much more a college graduate earns compared to someone who graduated high school differ, what is clear is that college graduates earn more over their lifetimes than those who finished high school only.

So while arguments for the general benefits of a home loan and a student loan can be made, the benefits of having a credit card – a more common credit vehicle – can also be laid out. It must be stressed though that using a credit card carries with it certain responsibilities for the lender such as paying the credit card bills diligently. Swiping your credit card to take care of needs and not wants is also critical for the responsible use of credit and good financial management.

Benefits of Having a Credit Card

A credit card can help you build a credit history. This credit history is then used to calculate your credit score which lenders will use among other factors to determine your interest rate when you decide to take out other loans. Getting a good credit score will help you get lower interest rates and this has a huge impact on the amount you pay for the monthly loan payments. This is also where paying for your credit card bills diligently makes an impact because this helps increase your credit score.

Most credit cards also offer a lot of rewards to card holders. Many credit cards out there let the cardholder earn reward points that can be exchanged for a variety of things such as air miles that can go towards an airline ticket to Malaysia for example or gift certificates to many large retailers. Some credit cards will provide cashbacks for purchases.

Having a credit card is also convenient especially for frequent travellers. Credit cards are accepted widely around the world so it’s easy to use your card for your hotel stay. It’s also easy to use your credit card to book for your trip on many online travel websites like Expedia or Orbitz.

Other benefits that credit card holders also get to enjoy are extended warranties for valid purchases, price protection, and other special offers. Credit can be used as a tool for unlocking many benefits. Home loans can help you get a home and save you from the costs of renting while student loans can help you get an education that will help you get a high paying job. Credit cards too have many benefits such as helping you build a credit history that will help you get lower interest rates for larger loans.

G writes for Compare Hero, the most comprehensive financial comparison service in Malaysia.  Compare credit cards, broadband plan, and others at a competitive price.




Is Freelancing Not For You?

On Diversified Finances, the primary topics consist of freelancing, self-employment and other related topics. However, what if freelancing and being your own boss is not for you?

If you’re a reader of this website, then I’m going to assume that most of you are at least somewhat interested in freelancing, making money on the side, and/or becoming your own boss.

However, there are some out there who are not interested in freelancing or owning a business at all.

I really enjoy freelancing, but there are some downsides. I always laugh inside whenever people tell me how easy life must be for me. There are some many things that go into owning a business, and if you aren’t careful then it can easily take over your life.

Below are some reasons for why you might want to rethink making the freelancing switch. Of course not everything applies to everyone, but these are things to think about.

You crave stable income.

One negative of freelancing and/or having your own business is that stable income feels impossible. You never know what you will make, and everything is up to you.

Not everyone feels the greatest about this. Stable income is probably especially important for you if you have financial goals that you are trying to meet, or if you have children or family who depend on your income.

You don’t want all of the trouble of having your own business.

When you are a business owner, it is hard to take a break from work. When you are on vacation, you will most likely work at least a little bit. However, when you are an employee, it is very likely that when the work day is over that you can just go home and enjoy your night,  weekend, or vacation.

I do love what I do, but I am always on call. I have many clients who operate on different time schedules and will e-mail me and expect a response right away. And you know what? That is fine. That’s what I signed up for 🙂

Other things to think about when freelancing is how you will get health insurance, how you will save for retirement, what will happen if you get sick and are unable to work (you might lose a lot of money!), taxes (don’t forget to pay these!), what happens to your business when you have a really bad month, and so on.

You don’t want to work alone or at home.

Freelancing does not always mean that you will be working from home, but for some it does. It might also mean that you work completely alone.

I know of many people who don’t want to work alone and would prefer to work with others at a company.

You hate networking.

I’m sure that there are some freelancing businesses where no networking is required, but for most at least some networking should be expected.

I had someone e-mail me recently asking me for help because they hate networking and they know that their business hasn’t grown because of their hatred of it. I thought this was crazy because networking can be so easy and it can also be a lot of fun.

Read my article The Power of Networking to learn more.

You are horrible at making your own schedule.

Some might think that this would be a stupid reason to not pursue freelancing, however, it is the truth. Some workers really need someone (such as a boss) pushing them to complete tasks. If they aren’t “forced” to do something, then it probably won’t get done.

As a freelancer, you have to be really motivated to do things on your own. There won’t be someone telling you that you need to do something specific each day.

You have no experience.

Everyone has to start from somewhere. I started from the very beginning and worked my way to where I am today. And I get that. However, if you want to switch to full-time self-employment and have absolutely no experience doing what you are doing, then you may want to think about pausing your plans and really thinking about this decision.

If you have no experience, then how do you truly know how things will be? Make sure you have a plan. Maybe you can test the waters first and start it out as a side job. You don’t have to test it out forever, just until you are truly comfortable.

Are you interested in freelancing or owning a business? Why or why not?


How To Become A Full-Time Freelancer Part 1

How To Become A Full-Time Freelancer Part 1Now that I have finally switched to full-time freelancing, I have received many e-mails from others asking how they too can freelance full-time.

This is a loaded question to answer, as there is no right answer for the steps that a person should take before they make the freelancing switch.

I have only been freelancing full-time for a couple of weeks, but I have been building it up for a couple of years and have been working on it for over 40 hours a week for quite some time. I feel very prepared for my freelancing future.

When deciding whether to freelance full-time, there are many things to think about.

Start your freelancing as a side job if you can.

This is what I did. I started my freelancing services on the side, which helped me grow my business but not have to rely on my income in order to survive. It definitely took off the pressure.

However, not everyone can start it as a side job. There may be circumstances where you have to leave your job immediately or you are let go from your job. However, if you can, definitely try to build your freelancing on the side to see if you even like what you are doing (and to see if it is profitable).

See if you can realistically afford it.

If you are thinking about freelancing, figure out if you can truly afford to make the switch. Being your own boss is great, but there are many expenses that may pop up.

Start by creating a realistic budget and realistically totaling your income after taxes each month. Is that enough to survive, save for retirement and live the life that you want to live?

Don’t forget about taxes.

When adding up your budget and expenses, do not forget about taxes. It may be easy to forget about taxes because you only have to pay them quarterly/yearly, but you should be accounting for it once you receive money.

Could you survive if you had a bad month? 

As a freelancer, there are most likely going to be bad months. I don’t know of many freelancers who can say that every single month of freelancing is perfect.

If you had a bad month where your expenses far exceed your income, would you be able to survive?

Have an emergency fund.

That leads to my next point, make sure that you have an emergency plan. This may not be possible for everyone (depending on the reasons for why you are leaving your job), but you should still attempt to build your emergency fund if you can.

We made sure to have a well-funded emergency plan. It helps protect us in case we have a bad month so that we can focus on work and not on how we would scrounge up the next dollar.

Have a business plan.

You might think “Oh, I can just make a business plan later.” However, having a business plan now is important. Maybe your freelancing services are going well now, but are they sustainable into the future? What are your plans for the future? Where do you see your business taking you?

Have experience.

Having meaningful experience is important if you plan on switching to full-time freelancing. It is easier to get work if you have good experience and contacts.

Know how to network.

As a freelancer, networking is very important. Networking can help you land contracts.  Networking can help you find out about future jobs, projects, ideas and so on.

Maybe someone who you have networked with will need your services later on, and they hopefully will think about you and your services. Most people would rather use someone who they know or someone who they know of instead of a stranger, and this is where you come in.

Is your plan to freelance full-time or to be your own boss? What tips do you have?